Revolving Loan Fund Program Changes and General Updates to PWEDA Regulations, 68186-68213 [2016-22287]
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DEPARTMENT OF COMMERCE
Economic Development Administration
13 CFR Parts 300, 301, 302, 303, 304,
305, 307, 309, and 314
[Docket No.: 160519444–6444–01]
RIN 0610–AA69
Revolving Loan Fund Program
Changes and General Updates to
PWEDA Regulations
Economic Development
Administration, U.S. Department of
Commerce.
ACTION: Notice of proposed rulemaking,
request for public comment.
AGENCY:
Through this notice of
proposed rulemaking (‘‘NPRM’’), the
Economic Development Administration
(‘‘EDA’’), U.S. Department of Commerce
(‘‘DOC’’), proposes and requests
comments on updates to the agency’s
regulations implementing the Public
Works and Economic Development Act
of 1965, as amended (‘‘PWEDA’’). In
particular, through this NPRM EDA is
proposing important changes to the
regulations governing the Revolving
Loan Fund (‘‘RLF’’) program that are
intended to reflect current best practices
and strengthen EDA’s efforts to evaluate,
monitor, and improve RLF performance
by establishing the Risk Analysis
System, a risk-based management
framework, to evaluate and manage the
RLF program. The proposed Risk
Analysis System is modeled on the
Uniform Financial Institutions Rating
System, commonly known as the capital
adequacy, assets, management
capability, earnings, liquidity, and
sensitivity (‘‘CAMELS’’) rating system,
which has been used since 1979 to
assess financial institutions on a
uniform basis and to identify those in
need of additional attention. EDA also
proposes to reorganize the RLF
regulations to improve their readability
and clarify the requirements that apply
to the distinct phases of an RLF award.
In addition, EDA proposes specific
changes to RLF requirements to make
RLF awards more efficient for
Recipients to administer and EDA to
monitor.
In addition, through this NPRM EDA
proposes important, but less
comprehensive updates to other parts of
its regulations, including revising
definitions, replacing references to
superseded regulations to reflect the
promulgation of the Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements (2
CFR part 200) (‘‘Uniform Guidance’’),
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SUMMARY:
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streamlining the provisions that outline
EDA’s application process, and
clarifying EDA’s property management
regulations.
DATES: Written comments on this NPRM
must be submitted by December 2, 2016.
ADDRESSES: Comments on the NPRM
may be submitted through any of the
following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
All comments received are a part of the
public record and will generally be
posted for public viewing on
www.regulations.gov without change.
All personal identifying information
(e.g., name, address, etc.), confidential
business information, or otherwise
sensitive information submitted
voluntarily by the sender will be
publicly accessible. EDA will accept
anonymous comments (enter ‘‘N/A’’ in
the required fields if you wish to remain
anonymous).
• Email: regulations@eda.gov.
Include ‘‘Comments on EDA’s
regulations’’ and Docket No.
160519444–6444–01 in the subject line
of the message.
• Fax: (202) 482–5671. Please
indicate ‘‘Attention: Office of Chief
Counsel,’’ ‘‘Comments on EDA’s
regulations,’’ and Docket No.
160519444–6444–01 on the cover page.
• Mail: Office of the Chief Counsel,
Economic Development Administration,
U.S. Department of Commerce, 1401
Constitution Avenue NW., Suite 72023,
Washington, DC 20230. Please indicate
‘‘Comments on EDA’s regulations’’ and
Docket No. 160519444–6444–01 on the
envelope.
FOR FURTHER INFORMATION CONTACT:
Rachel Wallace, Attorney-Advisor,
Office of the Chief Counsel, Economic
Development Administration, U.S.
Department of Commerce, 1401
Constitution Avenue NW., Suite 72023,
Washington, DC 20230; telephone: (202)
482–4687.
SUPPLEMENTARY INFORMATION:
Background on EDA and the RLF
Program
EDA leads the Federal economic
development agenda by promoting
innovation and competitiveness,
preparing American regions for growth
and success in the worldwide economy.
Through strategic investments that
foster job creation and attract private
investment, EDA supports development
in economically distressed areas of the
United States.
Authorized under section 209 of the
Public Works and Economic
Development Act of 1965 (‘‘PWEDA’’)
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(42 U.S.C. 3149) the RLF program has
served as an important pillar of EDA’s
investment programs since the
program’s establishment in 1975. The
goal of the RLF program is to help
communities and regions transform
their economies and propel them
towards economic prosperity through
innovation, entrepreneurship, and
public-private partnerships. Through
the RLF program, EDA provides grants
to eligible Recipients, which include
State and local governments, political
subdivisions, and nonprofit
organizations to operate a lending
program that offers low-interest loans
and flexible repayment terms to
businesses that cannot obtain traditional
bank financing and to governmental
entities for public infrastructure. These
loans enable small businesses to expand
and lead to new employment
opportunities that pay competitive
wages and benefits. They also help
retain jobs that might otherwise be lost,
create wealth, and support minority and
women-owned businesses.
Since the program’s inception, EDA
has funded approximately 800 RLFs
nationwide, investing $550 million in
RLFs that have a combined capital base
of about $813.5 million as of September
30, 2015. These funds currently have a
total of $250 million available for
lending. EDA-funded RLFs have made
more than 27,000 loans to American
small businesses and have leveraged
more than $12 billion non-RLF dollars.
RLF Recipients report that the program
has contributed to creating 340,000 jobs
and retaining 307,000 jobs.
Each RLF Recipient contributes
matching funds in accordance with
EDA’s statutory requirements to
capitalize an RLF. As loans made from
this original pool of EDA and Recipient
funds are repaid, the fund is
replenished and new loans are extended
to qualified businesses. They can also be
provided to governmental entities for
eligible public infrastructure. Each RLF
Recipient must develop and maintain an
RLF Plan to demonstrate how the fund
fits specific economic development
goals and how it will adequately
administer the RLF throughout its
lifecycle. Because RLF funds currently
retain their Federal character in
perpetuity, the RLF Recipient’s
obligation to manage the RLF continues
as long as the Federal Interest in the
RLF exists.
Since February 1, 2011, EDA has
taken a critical and comprehensive lookback at its regulations to reduce burdens
by removing outmoded provisions and
streamlining and clarifying
requirements. On December 19, 2014,
EDA published a Final Rule (79 FR
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76108) (‘‘2014 Final Rule’’) revising the
agency’s regulations and reflecting the
agency’s practices and policies in
administering its economic
development assistance programs.
EDA’s regulations at 13 CFR part 307
set out the requirements for awards
under EDA’s Economic Adjustment
Assistance program, through which
EDA can support a wide-range of
technical assistance, planning, and
infrastructure assistance in Regions
experiencing adverse economic changes
that may occur suddenly or over time.
The types of assistance that EDA can
provide through this program include
strategy development, infrastructure
construction, and RLF capitalization.
Subpart A of part 307 details the general
requirements for Economic Adjustment
Assistance awards; and subpart B sets
out requirements specific to the RLF
program.
Through the 2014 Final Rule, EDA
reorganized part 307 to help clarify
award requirements and incorporate all
RLF program requirements under
subpart B to part 307. When developing
those regulations, EDA received a
number of comments on the RLF
program, including several
recommending that EDA set a time limit
for releasing the Federal Interest in RLF
awards. EDA explained that while some
RLF awards have been operating for a
considerable length of time—some for as
many as three decades—EDA currently
is not authorized to release its interest
in RLF awards; however, EDA continues
to actively work to obtain the necessary
authorities for what is known as ‘‘defederalization’’ or ‘‘local control.’’
Other comments remarked that the
RLF program reporting requirements
were too burdensome. EDA noted that
the semi-annual reporting requirement
for the RLF program is in place to
address an audit report by the DOC’s
Office of Inspector General (‘‘OIG’’),
which recommended that EDA
undertake more rigorous oversight of the
RLF program to ensure the financial
integrity and sustainability of the
program. Because the reporting
requirements are designed to address
past program issues and ensure the
viability and transparency of the
program, EDA declined to make
wholesale changes at that time but
expressed its intent to continue to
improve the RLF Recipient reporting
system to make it more user-friendly. In
the current set of regulatory changes,
EDA proposes to move from the semiannual reporting requirement to a
frequency (either annual or semiannual) that will be determined by each
Recipient’s score in the Risk Analysis
System. In addition, EDA is changing
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the reporting period to be based on each
Recipient’s fiscal year end.
Six comments received from the prior
set of regulatory changes suggested the
establishment of an RLF task force to
address program issues and improve
communications between EDA and
program stakeholders. EDA has
established such a task force, which is
represented by personnel from EDA
Headquarters and all six of EDA’s
Regional Offices and has examined
ways to address challenges that have
been identified by the OIG, program
stakeholders, and EDA management.
Overview of Proposed Changes to the
RLF Program
Given this greater focus on improving
the RLF program and its operations
through a risk-based management
framework, EDA now looks to
strengthen and clarify its RLF
regulations. As further detailed in this
NPRM, EDA seeks to improve the
agency’s ability to monitor RLF
performance and provide targeted
technical assistance through a riskbased management framework, better
organize and clarify the RLF regulations,
and make additional changes designed
to clarify and streamline RLF
requirements. Given the important role
of this program as a driver of small
business growth, job creation, and
economic development, EDA seeks the
public’s input and insight in the
regulatory revision process.
With these goals in mind, the Part-byPart Analysis will describe the changes
to the RLF program in more detail, but
the following provides a high-level
overview of these changes.
• EDA proposes important
definitional revisions, including adding
a definition for Disbursement phase to
go along with the existing definition of
Revolving phase so that it is clear which
requirements apply during the two
phases of an RLF’s lifecycle. We also
define the important term RLF Capital
Base, which is the total value of RLF
Grant assets administered by the RLF
Recipient and is equal to the amount of
Grant funds used to capitalize (and
recapitalize, if applicable) the RLF, plus
Local Share, plus RLF Income, plus
Voluntarily Contributed Capital, less
any loan losses and disallowances.
• EDA proposes simplifying the
language explaining RLF disbursements
to clarify that EDA will disburse funds
in the amount needed to meet the
Federal share of a new RLF loan. For
example, assume an RLF Grant totals
$500 and has a Local Share requirement
of 50 percent. If the RLF Recipient
closes on a loan obligation worth $30,
EDA will disburse $15.
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• We add language to clarify how RLF
Income is treated during the
Disbursement Phase. The current
regulations specify that RLF Income
held to reimburse administrative costs
does not need to be disbursed to draw
additional Grant funds, but do not
address RLF Income not used for
administrative costs. Through this
regulatory revision, EDA is clarifying
that RLF Income earned during the
Disbursement Phase must be placed in
the RLF Capital Base and may be used
to reimburse eligible and reasonable
administrative costs and increase the
RLF Capital Base. However, RLF Income
earned during the Disbursement Phase
need not be disbursed to support new
RLF loans, unless otherwise specified in
the terms and conditions of the RLF
Grant.
• Consistent with EDA’s new
approach to managing RLF Grants, this
NPRM proposes expanding the requisite
period during which RLF Income must
be earned and administrative costs must
be incurred from the same six-month
Reporting Period to the same fiscal year.
We also specify that RLF Recipients
may not use funds in excess of RLF
Income for administrative costs during
the fiscal year unless directed to do so
by EDA and add language advising RLF
Recipients to keep administrative
expenses to a minimum to maintain the
RLF Capital Base and to specify that the
percentage of RLF Income used for
administrative expenses will be one of
the metrics used in EDA’s Risk Analysis
System. In keeping with this program
management change, EDA is removing
the requirement that RLF Recipients
submit an RLF Income and Expense
Statement (i.e., Form ED–209I). The
Risk Analysis System will incentivize
RLF Recipients to manage RLF
administrative expenses and maintain
their RLF Capital Base.
• This NPRM also proposes language
to describe the process of adding
Voluntarily Contributed Capital to the
RLF Capital Base and to clarify that
such capital becomes an irrevocable part
of the RLF Capital Base and may not be
subsequently withdrawn or separated
from the RLF.
• In response to a request from some
existing Recipients, this NPRM proposes
broadening the types of investments that
may serve as appropriate leveraging to
allow Recipients to use funds from State
and local lending programs to meet the
RLF leveraging requirement. Similar to
allowing Federal loans to count as
leveraging, if the managers of State and
local lending programs are willing to
provide financing to a borrower, EDA
believes such financing should count
towards the leveraging requirement.
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• EDA proposes adopting a Risk
Analysis System to evaluate and manage
the performance of RLF Recipients,
which would provide Recipients with a
set of portfolio management and
operations standards to evaluate their
program and improve performance.
Revised § 307.16 includes language on
the proposed system, which will
provide EDA with an internal tool for
assessing the risk of each Recipient’s
loan operations and identifying RLF
Recipients that require additional
monitoring, technical assistance, or
other action. EDA’s proposed risk-based
RLF management framework is modeled
on the Uniform Financial Institutions
Rating System (the CAMELS rating
system), used by regulators to assess
financial institutions and to identify
those in need of extra assistance or
attention. Additional details on the
proposed system are provided below
under the Part-by-Part Analysis. The
technical aspects of this system will be
described in a separate notice that will
be published in the Federal Register at
a later time. This notice will provide
additional agency guidance regarding
the system and the underlying metrics.
• EDA proposes adopting an
Allowable Cash Percentage concept to
replace the capital utilization standard.
Recognizing that different regions face
very different economic and access to
capital conditions and that a one-sizefits-all capital utilization standard can
be difficult for RLF Recipients to meet
and for EDA to implement, EDA
proposes eliminating the capital
utilization standard, which requires
Recipients to provide that at all times at
least 75 percent of their RLF Capital is
loaned or committed. In place of the
capital utilization standard, which is
based on the amount of capital that is
loaned out, EDA proposes to assess RLF
Recipients on the amount of cash
Recipients have on hand available for
lending—defined as the Allowable Cash
Percentage. Each year, each EDA
Regional Office will calculate the
average percentage of RLF Cash
Available for Lending held by each RLF
Recipient in the region’s RLF portfolio
and will notify Recipients by January 1
each year of the Allowable Cash
Percentage to be used during the
ensuing year. RLF Recipients will be
required to manage their repayment and
lending schedules to provide that at all
times, their amount of RLF Cash
Available for Lending does not exceed
the Allowable Cash Percentage. See the
part-by-part analysis below for an
example of how the Allowable Cash
Percentage concept will work and
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proposed revisions to §§ 307.16(c) and
307.17(b).
One feature of the move to the
Allowable Cash Percentage concept is
that EDA will no longer require
automatic sequestration as a remedy for
failure to satisfy the capital utilization
standard. Given the replacement of the
capital utilization standard with the
more flexible Allowable Cash
Percentage and the adoption of a Risk
Analysis System, sequestration will be
considered as one of a range of possible
tools used to ensure compliance with
the terms of the RLF Grant and will also
be considered in EDA’s Risk Analysis
System.
• EDA proposes clarifying the use
restrictions related to RLF Cash
Available for Lending. Specifically, to
address recent concerns EDA has
encountered in administering the RLF
program, EDA is adding language to
make clear that RLF Cash Available for
Lending cannot be used as collateral to
obtain credit or any other type of
financing without EDA’s prior written
approval, cannot be used to support
operations or administration of the RLF
Recipient, and cannot be used for any
purpose that would violate EDA’s
property requirements set out in 13 CFR
part 314.
• EDA is seeking to restructure the
compliance regulations by creating a
regulation that sets out actions (or
failures to act) for which EDA may take
appropriate compliance actions
(§ 307.20) and another section listing
remedies for noncompliance (§ 307.21).
Restructuring the compliance
regulations will help RLF stakeholders
to better understand program
prohibitions and the potential
consequences.
Part-by-Part Analysis of Proposed
Changes
General
Part 300—General Information
Part 300 of the regulations states
EDA’s mission and highlights the
policies and practices that EDA employs
in order to attract private capital
investments and new and better jobs to
those Regions experiencing substantial
and persistent economic distress. This
NPRM proposes several clarifying
revisions to the ‘‘Definitions’’ section of
EDA’s regulations at § 300.3. First, in
the definition of In-kind contribution(s),
EDA replaces references to 15 CFR parts
14 and 24, which set out the Uniform
Administrative Requirements applicable
to grants and agreements with
Institutions of Higher Education,
Hospitals, Other Non-Profit, and
Commercial Organizations and State
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and Local Governments, respectively,
with a reference to the uniform
administrative requirements cost
principles, and audit requirements set
out in the Uniform Guidance. In
addition, EDA proposes revising the
definition of Project by adding a
reference to ‘‘or Stevenson-Wydler’’
between the reference to ‘‘PWEDA’’ and
the word ‘‘and’’ to clarify that EDA may
provide Investment Assistance to
support a Project under StevensonWydler. Please see the explanation of
the proposed definition of StevensonWydler below for more information on
this authority.
EDA proposes to revise the definition
of Recipient by defining separately the
concepts of Co-recipients and
Subrecipients in EDA’s programs. The
term co-recipient has been used in
EDA’s regulations for some time, and
adding a reference to the term in the
Definitions section is designed to clarify
that when EDA awards Investment
Assistance to more than one recipient,
they are known as co-recipients and are
generally jointly and severally
responsible for fulfilling the terms of the
Investment Assistance. We also propose
to introduce the term Subrecipient as
the eligible recipient that receives a
subgrant under 13 CFR part 309. The
definition of Subrecipient in this NPRM
is consistent with the definition of
Subrecipient set out in the Uniform
Guidance at 2 CFR 200.93, which is ‘‘a
non-Federal entity that receives a
subaward from a pass-through entity to
carry out part of a Federal program; but
does not include an individual that is a
beneficiary of such program. A
subrecipient may also be a recipient of
other Federal awards directly from a
Federal awarding agency.’’ Note that the
Uniform Guidance defines ‘‘NonFederal entity’’ as ‘‘a state, local
government, Indian tribe, institution of
higher education (IHE), or nonprofit
organization that carries out a Federal
award as a recipient or subrecipient’’
and ‘‘Pass-through entity’’ as ‘‘a nonFederal entity that provides a subaward
to a subrecipient to carry out part of a
Federal program.’’ See 2 CFR 200.69 and
200.74, respectively.
In addition, EDA proposes adding a
definition of Stevenson-Wydler, which
is the Stevenson-Wydler Technology
Innovation Act of 1980, as amended (15
U.S.C. 3701 et seq.). The America
Creating Opportunities to Meaningfully
Promote Excellence in Technology,
Education, and Science (‘‘COMPETES’’)
Act as reauthorized in 2010 (Pub. L.
111–358 (January 4, 2011)) amended
Stevenson-Wydler to add several
innovation and entrepreneurshipfocused provisions creating EDA offices
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and/or programs, including the Office of
Innovation and Entrepreneurship (15
U.S.C. 3720), the loan guarantees for
innovative technologies in
manufacturing (‘‘ITM’’) program (15
U.S.C. 3721), and the Regional
Innovations Strategies (‘‘RIS’’) program
(15 U.S.C. 3722). EDA is proposing to
add a definition of Stevenson-Wydler in
order to begin incorporating these
programs under its regulations and
proposes adding references to specific
regulations throughout this part to
reflect that they apply to StevensonWydler. Via a future notice, EDA
anticipates publishing proposed
regulations at 13 CFR part 312 to reflect
requirements specific to Projects funded
under Stevenson-Wydler, including
eligibility and matching share
requirements.
Part 301—Eligibility, Investment Rate,
and Application Requirements
Part 301 sets forth eligibility criteria,
the maximum allowable Investment
Rates, and application requirements
common to all PWEDA-enumerated
programs (and thus excludes
Community Trade Adjustment
Assistance at part 313 and Trade
Adjustment Assistance for Firms
(‘‘TAAF’’) at part 315). In general,
subpart A of part 301 presents an
overview of EDA’s eligibility
requirements; subpart B addresses
applicant eligibility; subpart C
addresses Regional economic distress
level requirements; subpart D sets forth
maximum allowable Investment Rates
and Matching Share requirements; and
subpart E addresses application
requirements, as well as the evaluation
criteria used by EDA in selecting
Projects.
EDA proposes adding the phrase ‘‘at
its sole discretion’’ to the second
sentence of § 301.2(b) (‘‘Applicant
eligibility’’). § 301.2(b) requires nonprofit organizations that are applicants
for investment assistance to include in
their applications a resolution or letter
from an authorized representative of a
political subdivision of a State,
acknowledging that the applicants are
acting in cooperation with the officials
of that subdivision. The second
sentence of this paragraph allows EDA
to waive this requirement for Projects of
a significant Regional or national scope.
By adding the phrase, ‘‘at its sole
discretion,’’ to this second sentence,
EDA is seeking to clarify that such a
waiver is solely at EDA’s discretion. In
the second sentence of § 301.5
(‘‘Matching share requirements’’), EDA
proposes replacing the word ‘‘show’’
with the phrase ‘‘provide
documentation to EDA demonstrating’’
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to better explain what applicants are
required to provide to fulfill EDA’s
Matching Share requirements. In
addition, EDA proposes adding a
sentence to § 301.5 to clarify that EDA
retains the discretion to determine
whether Matching Share documentation
adequately addresses the requirements
of the regulation.
This NPRM proposes to simplify
§ 301.7(a) (‘‘Investment assistance
application’’) to state that for all of
EDA’s Investment Assistance programs,
application submission requirements
and evaluation procedures criteria will
be set out in published Federal Funding
Opportunity (‘‘FFO’’) announcements.
In 2011, EDA moved to an application
and selection process that required a
single application that was
competitively evaluated in quarterly
funding cycles under its Public Works
and Economic Adjustment Assistance
programs. After evaluating the impact of
this process on applicants and staff,
EDA is again adjusting the application
and selection process under the Public
Works and Economic Adjustment
Assistance programs to return to a twophase process that requires the
submission of a proposal followed by a
complete application. As more fully
explained in the FY 2016 Economic
Development Assistance Programs
(‘‘EDAP’’) FFO, which is available on
www.grants.gov, there are no
submission deadlines and proposals and
applications are accepted on an ongoing
basis. All submissions under the Public
Works and Economic Adjustment
Assistance programs must proceed
through a two-phase review process
where the first phase allows applicants
to submit a shorter proposal through
which EDA can provide an initial
analysis on whether the applicant’s
project is responsive to the EDAP FFO
and the second phase allows EDA to
evaluate the competitiveness of a
complete application against specified
evaluation criteria. Proposals will be
reviewed by EDA within 30 days of
receipt; and following the proposal
review, complete applications will be
reviewed within 60 days of receipt.
The application procedures for EDA’s
other programs, including the Planning,
Local Technical Assistance, University
Center, and Research and Evaluation
programs, will be specified in
applicable FFOs. To avoid engraining a
particular process in a regulation, EDA
simply revises § 301.7(a) to provide that
for EDA Investment Assistance
programs, application submission
requirements and evaluation procedures
and criteria will be specified in FFOs
published on the EDA Web site and at
www.grants.gov.
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Likewise, EDA revises § 301.8
(‘‘Application evaluation criteria’’) to
remove specific evaluation criteria as
currently set out in subsections (a)
through (f) from the regulation and to
specify that program-specific evaluation
criteria will be set out in applicable
FFOs. EDA has found that including
specific evaluation criteria in the
regulation can be confusing. Providing
that EDA will set appropriate evaluation
criteria in FFOs allows EDA additional
flexibility to respond to changing
economic conditions.
In § 301.11 (‘‘Infrastructure’’), EDA
proposes adding the parenthetical ‘‘(e.g.,
roads, sewers, and water lines)’’ in the
second sentence of § 301.11(a) to
provide several core examples of ‘‘basic
economic development assets’’
referenced in the sentence.
Part 302—General Terms and
Conditions for Investment Assistance
Part 302 sets forth the general terms
and conditions for EDA Investment
Assistance, including environmental
reviews of Projects; relocation assistance
and land acquisition requirements;
inter-governmental review of Projects;
and Recipients’ reporting,
recordkeeping, post-approval, and civil
rights requirements.
As noted above under the description
of changes to part 300, EDA administers
several programs authorized under
Stevenson-Wydler. EDA proposes
revising § 302.5 (‘‘Relocation assistance
and land acquisition policies’’) to add a
reference to Stevenson-Wydler by
adding the phrase ‘‘or any other types of
assistance’’ between ‘‘Investment
Assistance’’ and ‘‘under PWEDA’’ and a
reference to ‘‘, and Stevenson-Wydler’’
between ‘‘Trade Act’’ and ‘‘(States and
political subdivisions of States. . . .)’’.
EDA also corrects a typo by replacing
the phrase ‘‘nonprofits organizations’’
with ‘‘nonprofit organizations’’. EDA
revises § 302.6 (‘‘Additional
requirements; Federal policies and
procedures’’), to replace references to 15
CFR parts 14 and 24 with a reference to
‘‘2 CFR part 200, Uniform
Administrative Requirements, Cost
Principles, and Audit Requirements for
Federal Awards’’. In addition, EDA
proposes adjustments to § 302.20 (‘‘Civil
rights’’) to clarify that
nondiscrimination requirements apply
to any type of assistance provided under
Stevenson-Wydler. Specifically, in
§ 302.20(a), EDA adds a reference to ‘‘or
Stevenson-Wydler’’ between the
reference to ‘‘PWEDA’’ and the phrase
‘‘or by an entity’’, as well as the phrase
‘‘or any other type of assistance under
Stevenson-Wydler’’ between the
reference to ‘‘Trade Act’’ and the phrase
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‘‘in accordance with the following
authorities’’. In § 302.20(d) regarding
written assurances of compliance with
nondiscrimination requirements, EDA
adds a reference to ‘‘and StevensonWydler’’ between ‘‘PWEDA’’ and ‘‘all
Other Parties’’, as well as a reference to
‘‘or any other type of assistance under
Stevenson-Wydler’’ between ‘‘Trade
Act’’ and the phrase that begins with
‘‘must submit to EDA’’.
In addition, in § 302.20(a)(2), EDA
proposes adding a reference to Title IX
of the Education Amendments of 1972,
as amended (20 U.S.C. 1681 et seq.),
which proscribe discrimination on the
basis of sex in any education program or
activity receiving Federal financial
assistance, whether or not such program
or activity is offered or sponsored by an
educational institution. Practically
speaking, such discrimination has long
been prohibited under EDA’s programs,
because various other provisions
prohibit discrimination on this basis,
which have been incorporated under the
regulation at § 302.20(a)(2), as have the
DOC’s regulations as 15 CFR part 8a,
which implement Title IX of the
Education Amendments of 1972, as
amended. However, a direct reference to
Title IX of the Education amendments of
1972, as amended has been missing, and
we add that via this NPRM.
Part 303—Planning Investments and
Comprehensive Economic Development
Strategies
Part 303 sets forth regulations
governing EDA’s Planning program,
through which the agency provides
assistance to help Eligible Applicants
create strategies or plans to stimulate
and guide the economic development
efforts of a community or Region. EDA
has three distinct types of Planning
Investments: (1) Partnership Planning;
(2) State Planning; and (3) Short-Term
Planning. Through EDA’s Partnership
Planning Investments, the agency
facilitates the development,
implementation, revision, or
replacement of Comprehensive
Economic Development Strategies
(‘‘CEDS’’). EDA provides Partnership
Planning awards to Planning
Organizations (e.g., District
Organizations) serving as EDAdesignated Economic Development
Districts (‘‘EDD’’) (as defined in § 300.3)
throughout the U.S. The EDDs are
recognized by the State(s) in which they
reside as multijurisdictional councils of
governments, regional commissions, or
planning and development centers. The
Partnership Planning awards enable
Planning Organizations to manage and
coordinate the development and
implementation of CEDS to address the
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unique needs of their respective
Regions. The CEDS are central to EDA’s
economic development initiatives, and a
proposed Project must be consistent
with a relevant CEDS before EDA makes
a competitive award under the Public
Works or Economic Adjustment
Assistance programs under parts 305 or
307. Finally, part 303 sets forth the
requirements for State and Short-Term
Planning Investments, which can help
distressed Regions strategize to create
and retain new and better jobs and
respond quickly and effectively to
sudden economic dislocations.
In this NPRM, EDA proposes minor
clarifications and modifications to the
Planning program. First, EDA proposes
to modify § 303.6(b)(1) to replace
‘‘including’’ with ‘‘which may include’’
to clarify that the CEDS Strategy
Committee has the discretion to
determine which parties represent the
main economic interests of the Region.
Those parties may include some but not
all of the listed entities. Second, as a
result of the broad discretion conferred
upon the CEDS Strategy Committee to
determine which parties represent the
main economic interests of the Region,
the last sentence of § 303.6(b)(1) is now
superfluous. As such, EDA proposes to
remove the last sentence and to revise
that section to clarify that Indian Tribes
and State officials may be represented
on the CEDS Strategy Committee, along
with all other groups listed, when
representative of the economic interests
of the region. Third, in accordance with
§ 303.6 (‘‘Partnership Planning and the
EDA-funded CEDS process’’), Planning
Organizations of EDDs must submit a
revised CEDS to EDA at least every five
years as specified under § 303.6(b)(3)(ii).
To ensure that participating counties or
other areas within the EDD remain
engaged in the planning process, EDA
proposes to require that Planning
Organizations obtain renewed
commitments to support the economic
development activities of the District
from such counties or areas as part of
the five-year renewal. Therefore, we
propose adding the sentence, ‘‘In
connection with the submission of a
new or revised CEDS, the Planning
Organization must obtain renewed
commitments from participating
counties or other areas within the
District to support the economic
development activities of the District,’’
to § 303.6(b)(3)(ii).
In addition, in accordance with subsection (c)(1) of § 303.7 (‘‘Requirements
for Comprehensive Economic
Development Strategies’’), EDA may
accept a non-EDA funded CEDS, even if
such a strategy does not contain all
elements required of an EDA-funded
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CEDS. The 2011 NPRM and the 2014
Final Rule streamlined the content
requirements of CEDS from a laundrylist of ten detailed items to the following
four essential planning elements in
§ 303.7(b)(1)(i) through (iv): (a) A
summary of economic development
conditions of the Region; (b) an in-depth
analysis of the economic and
community strengths, weaknesses,
opportunities and threats; (c) strategies
and an implementation plan to build
upon the Region’s strengths and
opportunities and resolve or mitigate
the weaknesses and threats facing the
Region, but should not be inconsistent
with applicable State and local
economic development or workforce
development strategies; and (d)
performance measures used to evaluate
the Planning Organization’s successful
development and implementation of the
CEDS. Because EDA has consolidated
required CEDS elements to include
those that are generally considered to be
foundational for a successful planning
process, EDA wants to emphasize that a
non-EDA funded CEDS should include
all elements of an EDA-funded CEDS.
However, in particular circumstances,
such as a natural disaster or sudden and
severe economic dislocation, EDA will
accept a non-EDA funded CEDS that
does not include the foundational CEDS
elements. With this in mind, EDA
proposes revisions to § 303.7(c)(1),
specifically in the first sentence
replacing the phrase ‘‘without fulfilling
all the requirements of paragraph (b) of
this section’’ with the phrase ‘‘so long
as it includes all of the elements listed
in paragraph (b) of this section’’ and
adding the new sentence ‘‘In certain
circumstances, EDA may accept a nonEDA funded CEDS that does not contain
all the elements listed in paragraph (b)
of this section’’ between the existing
first and second sentences of this
provision.
Part 304—Economic Development
Districts
Part 304 on Economic Development
Districts, which also may be referred to
as a ‘‘District’’ or an ‘‘EDD’’ as stated in
§ 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.
In the 2011 NPRM and 2014 Final
Rule, in response to comments that
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organizational requirements applicable
to District Organizations should be more
flexible to allow the groups to focus on
effective strategy development and
implementation rather than meeting
membership thresholds, EDA revised
subsection (c)(2) of § 304.2 (‘‘District
Organizations: Formation,
organizational requirements and
operations’’), to remove the current
membership thresholds, but maintain
the requirement that governing bodies
demonstrate that they are broadly
representative of the principal economic
interests of the Region. However, in
making this change, EDA inadvertently
used language that can be interpreted to
require that all District Organizations
include members from certain sectors;
specifically, the phrase in § 304.2(c)(2)
that reads ‘‘including the private sector,
public officials, community leaders,
representatives of workforce
development boards, institutions of
higher education, minority and labor
groups, and private individuals’’
(emphasis on the word ‘‘including’’
added). EDA proposes replacing the
word ‘‘including’’ in this sentence with
the phrase ‘‘which may include’’ to
indicate that these groups should be
included insofar as they represent
principal economic interests of the
Region. Each District Organization must
continue to demonstrate that its
governing body is broadly
representative of the principal economic
interest of the Region and that it has the
capacity to implement the EDAapproved CEDS.
Part 305—Public Works and Economic
Development Investments
Part 305 provides information about
EDA’s Public Works and Economic
Development Investments. Section
305.1 explains the purpose and scope of
these Investments and § 305.2 specifies
the scope of activities eligible for
consideration under a Public Works
Investment and sets forth a list of
determinations that EDA must reach in
order to award a Public Works
Investment. Specific application
requirements are set forth in § 305.3,
and § 305.4 provides the requirements
for Public Works Investments awarded
solely for design and engineering work.
EDA proposes two minor changes to
Part 305 in this NPRM to reflect the
promulgation of the Uniform Guidance.
Specifically, in sub-section (b) of § 305.6
(‘‘Allowable methods of procurement for
construction services’’) and sub-section
(c) of § 305.8 (‘‘Recipient-furnished
equipment and materials’’), EDA
replaces the references to ‘‘15 CFR parts
14 or 24, as applicable’’ with a reference
to ‘‘2 CFR part 200’’.
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Part 306—Training, Research and
Technical Assistance
Part 306 sets out the requirements for
EDA’s Local and National Technical
Assistance and Research Investments.
Local and National Technical
Assistance Investments help Recipients
fill the knowledge and information gaps
that may prevent leaders in the public
and non-profit sectors in economically
distressed Regions from making optimal
decisions on local economic
development issues. Through the
Research program, EDA invests in
research and technical assistancerelated Projects to promote
competitiveness and innovation in
distressed rural and urban Regions. EDA
does not propose any changes to part
306 through this NPRM.
Part 307—Economic Adjustment
Assistance Investments
Part 307 sets out the requirements for
awards under EDA’s Economic
Adjustment Assistance program, which
can provide a wide-range of technical
assistance, planning, and infrastructure
assistance in Regions experiencing
adverse economic changes that may
occur suddenly or over time, including
strategy development, infrastructure
construction, and Revolving Loan Fund
(‘‘RLF’’) capitalization. Subpart A of
part 307 details the general
requirements for Economic Adjustment
Assistance awards, and subpart B sets
out requirements specific to the RLF
program. As noted above in the
Overview of Proposed Changes to the
RLF Program, a focus of this NPRM is
strengthening and clarifying EDA’s RLF
regulations to improve the agency’s
ability to monitor RLF performance and
provide targeted technical assistance
through a risk-based management
framework and propose changes
designed to clarify and streamline RLF
requirements. Given the important role
of this program as a driver of small
business growth, job creation, and
economic development, EDA seeks the
public’s input and insight in the
regulatory revision process.
Specifically, EDA proposes to clarify
the language in § 307.6 (‘‘Revolving
Loan Funds established for business
lending’’) by removing the reference to
‘‘business’’ lending in the title to that
section, as well as the phrase in the
second sentence of the provision
regarding subpart B’s application to
‘‘business lending activities’’ and the
phrase ‘‘to accommodate non-business
RLF awards’’ regarding the application
of special award conditions in the third
sentence of the provision. By removing
this language, we seek to clarify that
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both public infrastructure and business
lending activities are subject to subpart
B and that special award conditions
may be used to provide appropriate
modifications to either type of lending.
While the current regulations state that
RLFs may be used for business and
other types of lending, the language we
propose to remove created confusion
about the applicability of the RLF
regulations to other types of lending. In
addition, in the second sentence of
§ 307.6, we add the phrase ‘‘EDAfunded’’ between the phrase ‘‘apply to’’
and the acronym ‘‘RLFs’’ to clarify that
the RLF regulations in subpart B to part
307 apply to EDA-funded RLFs.
In § 307.7 (‘‘Revolving Loan Fund
award requirements’’), EDA proposes
additional language to clarify the
compliance obligations for RLF Grants
and update the reference to location of
the Compliance Supplement, which was
changed with the promulgation of the
Uniform Guidance. Specifically, in
addition to part 307, RLF Recipients
must comply with relevant provisions of
parts 300 through 303, 305, and 314 of
13 CFR chapter III, which set forth
EDA’s general definitions, general terms
and conditions for Investment
Assistance, Planning requirements,
Public Works requirements, and
property management requirements.
Therefore, in § 307.7(b), EDA proposes
adding the phrase ‘‘, as well as relevant
provisions of parts 300 through 303,
305, and 314 of this chapter,’’ between
the phrases ‘‘set forth in this part’’ and
‘‘and in the following publications’’. In
addition, in § 307.7(b)(2), we replace the
reference to ‘‘OMB Circular A–133’’ as
the location of the Compliance
Supplement with ‘‘, which is Appendix
XI to 2 CFR part 200’’ and with respect
to the electronic availability of the
Compliance Supplement, we replace the
general reference to the OMB Web site
with the more specific site where all
OMB circulars, including the
Compliance Supplement, are located.
In § 307.8 (‘‘Definitions’’), EDA
proposes adding several new definitions
and revising existing definitions as we
implement the proposed risk-based
framework to manage RLF Grants.
Specifically, we propose adding new
definitions for the following terms:
• Allowable Cash Percentage as ‘‘the
average percentage of the RLF Capital
Base maintained as RLF Cash Available
for Lending by RLF Recipients in each
EDA regional office’s portfolio of RLF
Grants over the previous year.’’ This
defined concept will serve as a
replacement for the concept of the
capital utilization standard, which is
currently found in § 307.16(c) and
requires RLF Recipients to manage their
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repayment and lending schedules to
provide that at all times, at least 75
percent of the RLF Capital is loaned or
committed. The Allowable Cash
Percentage will be defined annually by
each EDA Regional Office for that
region’s RLF Grants based on the
previous year’s average percentage of
unloaned and uncommitted cash held
by the region’s portfolio of RLFs. See the
description of proposed changes to subsection (c) of § 307.16(c) (‘‘Risk Analysis
System’’) and sub-section (b) of § 307.17
(‘‘Requirements for Revolving Lon Fund
Cash Available for Lending’’) below for
more information on how the Allowable
Cash Percentage concept will work.
• Disbursement Phase as ‘‘the period
of loan activity where Grant funds
awarded have not been fully disbursed
to the RLF Recipient.’’ While EDA’s
regulations have indicated that
particular requirements apply during
the time period when EDA is disbursing
funds to an RLF Recipient, the term has
never been defined. EDA proposes
defining Disbursement phase to clarify
the specific requirements that apply
during this phase of an RLF’s life cycle,
including that RLF Income earned
during the Disbursement Phase is not
required to be used for new RLF loans,
unless otherwise specified in the terms
and conditions of the RLF Grant. See the
description of proposed revisions to
§ 307.11 (‘‘Pre-Disbursement
Requirements and Disbursement of
Revolving Loan Funds’’) for
requirements applicable to the
Disbursement Phase.
• Risk Analysis System as ‘‘a set of
metrics defined by EDA to evaluate a
Recipient’s administration of its RLF
Grant and that may include but is not
limited to capital, assets, management,
earnings, liquidity, strategic results, and
financial controls.’’ EDA is introducing
a risk-based management framework
that will be used to evaluate a
Recipient’s administration of its RLF
Grant and that may include the
following metrics: Capital, assets,
management, earnings, liquidity,
strategic results, and financial controls.
This is a new approach based on the
CAMELS rating system used to assess
financial institutions and to identify
those in need of additional attention.
See the discussion of proposed revised
§ 307.16 (‘‘Risk Analysis System’’) for
more information on EDA’s proposed
risk-based approach to managing RLF
Grants.
• RLF Capital Base as ‘‘the total value
of RLF Grant assets administered by the
RLF Recipient. It is equal to the amount
of Grant funds used to capitalize (and
recapitalize, if applicable) the RLF, plus
Local Share, plus RLF Income, plus
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Voluntarily Contributed Capital, less
any loan losses and disallowances.
Except as used to pay for eligible and
reasonable administrative costs
associated with the RLF’s operations,
the RLF Capital Base is maintained in
two forms at all times: As RLF Cash
Available for Lending and as
outstanding loan principal.’’ Currently,
the term RLF Capital is used and
defined as an equation of ‘‘Grant funds
plus Local Share plus RLF Income, less
any amount used for eligible and
reasonable costs necessary to administer
the RLF and any amount of loan
principal written off.’’ While the current
regulations define RLF Capital to
apparently comprise all RLF assets, the
regulations also refer to the ‘‘capital
base of an RLF’’ or the ‘‘RLF Capital
base’’, without defining that concept
(see the current definition of
Recapitalization Grants at § 307.8
(defining Recapitalization Grants as
‘‘additional Grant funds to increase the
capital base of an RLF’’) and the current
regulations at §§ 307.11(a)(1) (requiring
the amount of fidelity bond coverage to
be at least ‘‘25 percent of the RLF
Capital base’’), 307.12(a) (requiring RLF
Income to ‘‘be placed into the RLF
Capital base’’ and providing that RLF
Income earned in one period cannot be
‘‘withdrawn from the RLF Capital base
in a subsequent Reporting Period for
any purpose other than lending without
the prior written consent of EDA’’), and
307.16 (stating that the usual lending
schedule ‘‘requires that the RLF
Recipient lend the entire amount of the
initial RLF Capital base within three
years of Grant award’’ and allowing
different capital utilization rate based
on the size of the ‘‘RLF Capital base’’).
EDA proposes introducing a definition
of RLF Capital Base so that this
important concept is clearly defined.
• RLF Cash Available for Lending as
‘‘the portion of the RLF Capital Base
that is held in cash and available to
make loans.’’ As specified in the
definition of RLF Capital Base, RLF
assets are maintained in two forms at all
times: Held by the RLF Recipient as
cash available for lending and as
outstanding loan principal. EDA is
proposing this new definition to clarify
requirements applicable to the part of
the RLF Capital Base that is currently
unloaned or uncommitted and available
to make loans. See the discussion of
proposed revised § 307.17
(‘‘Requirements for Revolving Loan
Fund Cash Available for Lending’’) for
more information on the requirements
applicable to RLF Cash Available for
Lending.
• RLF Recipient as ‘‘the Eligible
Recipient that receives an RLF Grant to
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manage an RLF in accordance with an
RLF Plan, Prudent Lending Practices,
the terms and conditions of the RLF
Grant, and all applicable policies, laws,
and regulations.’’ While this term is
used throughout the existing
regulations, it was not previously
defined and EDA thinks it will be useful
as a defined term.
• Voluntarily Contributed Capital as
‘‘an RLF Recipient’s voluntary infusion
of additional non-EDA funds into the
RLF Capital Base that is separate from
and exceeds any Local Share that is
required as a condition of the RLF
Grant. Voluntarily Contributed Capital
is an irrevocable addition to the RLF
Capital Base and must be administered
in accordance with EDA regulations and
policies.’’ EDA proposes adding this
definition to clarify that, as of the
effective date of these regulations,
Voluntarily Contributed Capital is an
RLF Recipient’s voluntary infusion of
additional RLF capital that is separate
from and exceeds any Matching Share
that is required as a condition of the
RLF Grant. This definition is being
added to clarify the process for
contributing additional capital to an
RLF and to explain how the additional
capital is treated once added to the RLF
Capital Base. In particular, once added,
such capital will be considered
irrevocable and will become part of the
RLF Capital Base.
In addition, we propose revising the
definitions of the following existing
terms:
• In the existing definition of
Recapitalization Grants, we propose
replacing the phrase ‘‘capital base of an
RLF’’ within the proposed defined term
‘‘RLF Capital Base’’ for clarity.
• In the existing definition of
Reporting Period, EDA proposes to
change the Reporting Period to align
with each RLF Recipient’s fiscal year
end in order to ensure consistency
between RLF reports using Form ED–
209 and annual audit reports by
replacing the phrase ‘‘means the period
from April 1st to September 30th or the
period from October 1st to March 31st’’
with the phrase ‘‘is based on the RLF
Recipient’s fiscal year end and is on an
annual or semi-annual basis as
determined by EDA.’’ EDA will specify
an RLF Recipient’s reporting frequency
as either on an annual or semi-annual
basis, which will be based in part on the
Recipient’s score under the Risk
Analysis System. See also § 307.14(a)
(‘‘Revolving Loan Fund report’’) for
revisions regarding the frequency of
reports.
• In the definition of RLF Income, we
propose clarifying the language
excluding repayments of principal and
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interest earned on excess funds that are
remitted to the U.S. Treasury by noting
that these are excluded pursuant to
§ 307.20(h). Therefore, we delete as
repetitive the parenthetical ‘‘(excluding
interest earned on excess funds
pursuant to § 307.16(c)(2))’’ in the first
sentence of the definition and correct a
citation in the final sentence of the
definition by replacing the reference to
‘‘§ 307.16(c)(2)(i)’’ with a reference to
‘‘§ 307.20(h)’’.
In addition, EDA proposes to better
organize the regulations by placing all
pre-disbursement and Disbursement
Phase requirements into § 307.11. To
accomplish this, EDA revises the title of
the section to read ‘‘Pre-Disbursement
Requirements and Disbursement of
funds to Revolving Loan Funds’’ from
‘‘Disbursement of funds to Revolving
Loan Funds’’. The timing language in
§ 307.11(a) that currently reads ‘‘Prior to
any disbursement of EDA funds, RLF
Recipients are required to provide in a
form acceptable to EDA’’ is revised to
read ‘‘Within 60 calendar days before
the initial disbursement of EDA funds,
the RLF Recipient must provide the
following in a form acceptable to EDA’’,
and then we revise the regulations to list
the certifications and evidence required
before EDA will make an initial
disbursement of Grant funds. Currently,
the regulations place different and
sometimes conflicting timing
requirements on these certifications.
Specifically, under current § 307.11(a),
RLF Recipients must submit evidence of
fidelity bond coverage and the
independent accountant’s certification
regarding the RLF Recipient’s
accounting system, respectively, before
any disbursement of EDA funds. In
contrast, current § 307.15(b)(1) requires
the Recipient to submit the independent
accountant’s certification regarding the
RLF Recipient’s accounting system
within 60 days prior to the initial
disbursement of EDA funds, and current
§ 307.15(b)(2) requires the RLF
Recipient’s certification regarding
standard loan documents before the
disbursement of any EDA funds). In
practice, while RLF Recipients must
maintain these standards throughout the
duration of an RLF’s operations, the
certifications and evidence are only
required before the initial disbursement
of EDA funds. Therefore, EDA is
reconciling the timing of the
requirements and clarifying that these
items are required within 60 calendar
days before the initial disbursement of
EDA funds by revising the language of
§ 307.11(a).
In addition, we propose moving the
following two provisions from
§ 307.15(b), which currently sets out
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pre-disbursement requirements
regarding loan and accounting system
documents, to § 307.11(a) titled ‘‘Predisbursement requirements’’: (1) The
requirement that a qualified
independent accountant certify as to the
adequacy of the RLF Recipient’s
accounting system to identify,
safeguard, and account for the entire
RLF Capital Base, outstanding RLF
loans, and other RLF operations (as
proposed § 307.11(a)(1)); and (2) the
requirement that the Recipient certify
that the standard loan documents are in
place and have been reviewed by legal
counsel (as proposed § 307.11(a)(2)). See
the proposed deletions at § 307.15(b)
and appropriate re-lettering of that
provision.
With respect to the certification
regarding legal counsel review of
standard RLF loan documents currently
set out at § 307.15(b)(2), in relocating
the requirement to § 307.15(a)(2), EDA
proposes a revision to require the
certification that standard loan
documents are adequate and comply
with the terms and conditions of the
RLF Grant, RLF Plan, and applicable
State and local law to come directly
from the RLF Recipient’s legal counsel
rather than have the Recipient certify as
to counsel review. This change will not
only streamline this process but also
ensure that the Recipient’s legal counsel
reviewed the standard loan documents
and verified that those documents are
adequate and in compliance with the
applicable requirements. Therefore, in
rewording this provision, we propose
replacing the phrase ‘‘the Recipient
shall certify that standard RLF loan
documents reasonably necessary or
advisable for lending are in place and
that these documents have been
reviewed by legal counsel’’ with ‘‘The
RLF Recipient’s certification that
standard RLF loan documents
reasonably necessary or advisable for
lending are in place and a certification
from the RLF Recipient’s legal counsel.’’
In the same section, we also propose
removing the requirement that a signed
bank turn-down letter be included in
each loan package. We propose
replacing the requirement that RLF
Recipients obtain and borrowers
provide a signed bank turn-down letter
to demonstrate that credit is not
otherwise available with the more
general requirement for evidence
demonstrating that credit is not
otherwise available on terms and
conditions that permit the completion
or successful operation of the activity to
be financed. This revision allows EDA
to remove the requirement that
alternative evidence to a signed bank
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turn-down letter be allowed in the RLF
Plan.
The provision regarding evidence of
fidelity bond coverage will remain in
place in § 307.11(a), but will be relettered as § 307.11(a)(3). In addition,
EDA revises the provision to establish
minimum amount of coverage required
as the maximum loan amount allowed
for the EDA-approved RLF Plan. The
existing regulation allows the minimum
amount of coverage to be equal to the
greater of the maximum permissible
loan amount or 25 percent of the RLF
Capital base. In practice, the alternative
approach permitting coverage of at least
25 percent of the RLF Capital Base
requires Recipients to regularly change
the amount of fidelity bond coverage to
remain in compliance. Also, the two
alternative approaches to determining
the amount of required coverage are
likely to yield approximately the same
amount. EDA seeks to simplify this
requirement and reduce the burden on
Recipients by removing the phrases ‘‘the
greater of’’ and ‘‘, or 25 percent of the
RLF Capital base’’ from re-lettered
§ 307.11(a)(3).
We also add language following
§ 307.11(a)(3) to clarify that the RLF
Recipient must maintain the adequacy
of the RLF’s accounting system and
standard RLF loan documents, as well
as records and documentation to
demonstrate that these requirements are
met, throughout the RLF’s operation.
This maintenance language includes a
cross-reference to proposed
§ 307.13(b)(3) where we underscore that
the RLF Recipient must maintain
records to document compliance with
these requirements. This NPRM also
proposes conforming language changes
to incorporate these requirements into a
list format. Because we are moving the
language regarding the accountant
certification from § 307.15 to § 307.11,
this NPRM removes the language in
§ 307.11(a)(2) that cited to the
certification required under § 307.15.
Finally, we make a minor change to relettered § 307.11(a)(1) to reflect the
promulgation of the Uniform Guidance,
replacing the reference to ‘‘OMB
Circular A–133 requirements’’ with ‘‘the
audit requirements set out as subpart F
to 2 CFR part 200’’. See proposed
revisions to §§ 307.11(a) and 307.15.
In § 307.11(c), we simplify the
language regarding the amount of Grant
fund disbursements. EDA believes that
the current language is overly
complicated and causes undue
confusion. The revised language
clarifies that EDA will disburse funds in
the amount needed to meet the Federal
share of a new RLF loan. EDA will
continue to disburse Grant funds as the
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RLF Recipient closes on loan
obligations. For example, assume an
RLF Grant has a Matching Share
requirement of 50 percent. If the RLF
Recipient closes on a loan obligation
worth $30, EDA will disburse $15.
Therefore, EDA proposes replacing the
phrase ‘‘not to exceed the difference, if
any, between the RLF Capital and the
amount of a new RLF loan, less the
amount, if any, of the Local Share
required to be disbursed concurrent
with Grant funds’’ with the phrase ‘‘be
the amount required to meet the Federal
share requirement of a new RLF loan’’
in the first sentence of § 307.11(c).
In addition, EDA proposes new
language to § 307.11(c) to clarify how
RLF Income is treated during the
Disbursement Phase. The current
regulations specify that RLF Income
held to reimburse administrative costs
does not need to be disbursed to draw
additional Grant funds, but do not
address RLF Income not used for
administrative costs. Through this
regulatory revision, EDA is clarifying
that RLF Income earned during the
Disbursement Phase must be placed in
the RLF Capital Base and may be used
to reimburse eligible and reasonable
administrative costs and increase the
RLF Capital Base; however, RLF Income
earned during the Disbursement Phase
need not be disbursed to support new
RLF loans, unless otherwise specified in
the terms and conditions of the RLF
Grant. See proposed revisions to
§ 307.11(c).
In addition, EDA proposes a nonsubstantive revision to § 307.11(d) to
capitalize the word ‘‘Grant.’’
This NPRM locates all provisions that
set out Local Share requirements in
§ 307.11(f), which requires re-locating
the substance of the provision at
§ 307.17(d) regarding use of In-Kind
Contributions to satisfy Local Share
requirements. Accordingly, EDA
proposes removing current § 307.17(d)
and re-numbering the regulation
accordingly. In revised § 307.11(f), EDA
adds the phrase ‘‘, which must be
specifically authorized in the terms and
conditions of the RLF Grant and may be
used to provide technical assistance to
borrowers or for eligible RLF
administrative costs,’’ between the term
‘‘In-Kind Contributions’’ and the phrase
‘‘and cash Local Share’’ in the first
sentence of § 307.11(f)(2). EDA notes
that because the purpose of the RLF
program is to provide capital to
borrowers that cannot otherwise access
credit, EDA rarely determines that InKind Contributions are necessary and
reasonable for accomplishment of the
RLF program and, therefore, most RLF
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Local Share is cash. See proposed
revisions to §§ 307.11(f) and 307.17(d).
In addition, to consolidate all predisbursement and disbursement
requirements into § 307.11, EDA
proposes relocating the provisions
regarding loan closing and disbursement
schedules, as well as time schedule
extensions, from § 307.16(a) and (b),
respectively, to § 307.11 and re-lettering
them as § 307.11(g) and (h),
respectively. We also propose nonsubstantive conforming changes to
reflect defined terms and correct crossreferences because of this
reorganization. Specifically, EDA
replaces the phrase ‘‘initial RLF Capital
Base’’ with ‘‘RLF Grant’’ in the final
sentence of re-lettered § 307.11(g)(1) to
clarify the corpus of funds to which the
lending schedule applies; replaces the
cross-reference to ‘‘§ 307.16(b)’’ in relettered § 307.11(g)(2)(iii) with a
reference to ‘‘paragraph (h) of this
section’’ to reflect the reorganization of
these provisions; corrects a typo by
replacing the plural ‘‘requests’’ with a
singular ‘‘request’’ in the last sentence
of re-lettered § 307.11(h)(1); and breaks
re-lettered § 307.11(h)(2) into two
sentences for clarity and emphasis. See
proposed revisions to §§ 307.11(g),
307.11(h), and 307.16(a) and (b).
In keeping with EDA’s effort to clarify
the distinct requirements that apply
during the Disbursement and Revolving
Phases of an RLF, we propose to rename
the title of § 307.12 ‘‘Revolving Loan
Fund Income requirements during the
Revolving Phase; payments on defaulted
and written off Revolving Loan Fund
loans; Voluntarily Contributed Capital’’
to clarify that the provision describes
certain requirements that apply during
the Revolving Phase of the RLF and
addresses other topics, rather than
solely setting out RLF Income
requirements. We also add the
introductory phrase ‘‘During the
Revolving Phase,’’ to the first sentence
of § 307.12(a). In addition, EDA is
providing additional flexibilities in
using RLF Income to cover
administrative costs. Currently, RLF
Income earned during one six-month
Reporting Period must be used to cover
administrative costs accrued during that
same six-month period. EDA is
extending the time period during which
RLF Income must be used to cover
accrued administrative costs to a full
fiscal year. Accordingly, EDA proposes
revising § 307.12(a) to clarify that RLF
Income earned in one fiscal year of the
RLF Recipient must be used to cover
administrative costs accrued during the
same fiscal year, instead of the same sixmonth Reporting Period. Accordingly,
in § 307.12(a)(1), we replace the word,
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‘‘incurred’’ with ‘‘accrued,’’ and, in
§ 307.12(a)(1) and (2), we replace the
phrase ‘‘six-month Reporting Period’’
with the phrase ‘‘fiscal year of the RLF
Recipient.’’ In § 307.12(a)(3), we replace
the phrase ‘‘Reporting Period’’ with
‘‘fiscal year.’’ In addition, we make a
non-substantive change in § 307.12(a)(1)
to add the phrase ‘‘is earned’’ after
‘‘Such RLF Income’’ to clarify that RLF
Income is earned by the RLF Recipient
as opposed to administrative costs,
which are incurred by the RLF
Recipient. In addition, in § 307.12(a)(3),
we replace the phrase ‘‘RLF Capital
base’’ with the proposed defined term
‘‘RLF Capital Base.’’
Furthermore, under EDA’s current
regulations, an RLF Recipient may use
100 percent of RLF Income incurred in
a six-month Reporting Period to cover
administrative expenses by submitting
an RLF Income and Expense Statement
(i.e., Form ED–209I). EDA proposes to
no longer require the RLF Income and
Expense Statement, but to clearly
specify that RLF Recipients may not use
funds in excess of RLF Income for
administrative costs during the RLF
Recipient’s fiscal year unless directed to
do so by EDA. While EDA would no
longer require Recipients to submit the
RLF Income and Expense Statement,
Recipients would continue to account
for their RLF Income and administrative
expenses through their regular ED–209
reporting. EDA also proposes language
advising that RLF Recipients are
expected to keep administrative
expenses to a minimum to maintain the
RLF Capital Base available for lending
and to specify that the percentage of
RLF Income used for administrative
expenses will be one of the performance
metrics used in EDA’s Risk Analysis
System. Under the proposed Risk
Analysis System, RLF Recipients will be
incentivized to manage their expenses
in order to maintain their RLF Capital
Base, and EDA will work proactively
with Recipients to help maintain their
RLF Capital Base and, through the
annual report and audit, to monitor use
of RLF Income. Given EDA’s proposal to
move to a risk-based management
framework and the agency’s efforts to
encourage Recipients to use RLF Income
to maintain the RLF Capital Base, as
described above, EDA will no longer
require the RLF Income and Expense
Statement, which will reduce the
reporting burden on Recipients.
Accordingly, EDA replaces current
§ 307.12(a)(4), which requires the
submission of an RLF Income and
Expense Statement, with proposed
language that prohibits RLF Recipients
from using funds in excess of RLF
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Income for administrative costs in a
Recipient’s fiscal year, sets the
expectation that administrative costs
should be kept to a minimum, and states
that the percentage of RLF Income used
for administrative costs will be a metric
under the Risk Analysis System. See
proposed revisions to § 307.12(a)(4) and
the deletion of the current provision at
§ 307.14(c), which sets out the
requirement for the RLF Income and
Expense Statement.
In § 307.12(b), which sets out
compliance guidance for charging costs
against RLF Income, EDA proposes
revisions to reflect the promulgation of
the Uniform Guidance. Specifically, in
revised § 307.12(b)(1), EDA specifies
that for RLF Grants made or
recapitalized on or after December 26,
2014, the RLF Recipient must comply
with the administrative and cost
principles set out in 2 CFR part 200. In
revised § 307.12(b)(2), EDA specifies
that for RLF Grants awarded before
December 26, 2014, unless otherwise
indicated in the terms of the Grant, the
RLF Recipient must comply with the
cost principles set out in 2 CFR parts
225 (for State, local, and Indian tribal
governments); 230 (for non-profit
organizations other than institutions of
higher education, hospitals, and other
organizations); or 220 (for educational
institutions), as applicable. EDA
proposes a new § 307.12(b)(3) to specify
that regardless of when an RLF Grant
was awarded or recapitalized, the audit
requirements set out as subpart F to 2
CFR part 200 apply to audits of the RLF
Recipient for fiscal years beginning on
or after December 26, 2014, as does the
Compliance Supplement, as
appropriate.
In § 307.12(c), we propose minor
adjustments to clarify that the
prioritization of payments on RLF loans
includes payments on both defaulted
RLF loans and those that have been
written off, adding the phrase ‘‘and
written off’’ to the heading of § 307.12(c)
and the first sentence of the provision
between the word ‘‘defaulted’’ and the
phrase ‘‘RLF loan’’. In addition, we
propose revising the cross reference to
‘‘§ 307.20’’ in the provision to
‘‘§ 307.21’’ to reflect the proposed
reorganization of the noncompliance
provisions. See proposed revisions to
§ 307.12(c).
We also propose adding new
§ 307.12(d) to introduce additional
clarifying language regarding the
treatment of the proposed defined term
Voluntarily Contributed Capital. As
noted above, in addition to proposing a
definition to clarify the process for
contributing additional capital to an
RLF and to explain how the additional
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capital is treated once added to the RLF
Capital Base, we also propose adding a
provision within the section on predisbursement and disbursement
requirements to specify that when an
RLF Recipient wishes to add additional
capital to the RLF Capital Base, the
Recipient must submit a written request
that specifies the source of the funds to
be added. Upon approval by EDA, the
Voluntarily Contributed Capital
becomes an irrevocable part of the RLF
Capital Base and may not be
subsequently withdrawn or separated
from the RLF. This should help prevent
situations when the sources of
Voluntarily Contributed Capital
subsequently seek to retrieve the funds
that were, in effect, commingled with
the rest of the Capital Base, making it
difficult—if not impossible—to separate
out those additional funds and to
determine the local and Federal shares.
See proposed revisions to §§ 307.8 and
307.12(d).
EDA proposes to revise RLF reporting
requirements to specify that records for
administrative expenses must be kept
for three years from the submission date
of the last report that covers the fiscal
year in which the costs were recorded,
rather than the last semi-annual report
that covers the Reporting Period in
which the costs were incurred.
Therefore, in § 307.13(b)(2), we propose
deleting the phrase ‘‘last semi-annual’’
between the phrase ‘‘date of the’’ and
the word ‘‘report’’ and replace the
defined term ‘‘Reporting Period’’ with
‘‘fiscal year’’. In addition, we propose
revising § 307.13(a)(3) to specify that,
consistent with the requirements of
§ 307.11(a), for the duration of RLF
operations, Recipients must retain
records to demonstrate the adequacy of
the RLF’s accounting system, that
standard RLF loan documents are in
place, and that sufficient fidelity bond
coverage is maintained. In addition, the
existing requirement to make records
available for inspection is re-lettered as
new § 307.13(a)(4). See proposed
revisions to § 307.13.
This NPRM proposes removing the
stipulation that all RLF reports be
submitted to EDA on a semi-annual
basis, which will permit EDA to
establish a reporting frequency (annual
or semi-annual) based on the objective
risk presented by a given RLF, allowing
EDA to more closely monitor RLF
program performance and engage with
RLF Recipients to identify and address
existing and potential challenges.
Accordingly, EDA proposes revising the
title of § 307.14 to read ‘‘Revolving Loan
Fund report’’ and in § 307.14(a),
replaces the phrase ‘‘must complete and
submit a semi-annual report in
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electronic format, unless EDA approves
a paper submission’’ with ‘‘must
complete and submit an RLF report,
using Form ED–209 or any successor
form, in a format and frequency as
required by EDA.’’
To improve the accuracy and quality
of the information provided during the
regular reporting process, EDA proposes
requiring that RLF Recipients certify as
part of their regular reporting to EDA
that the RLF is operating in accordance
with their RLF Plan and that the
information being provided is complete
and accurate. In § 307.14(b), we remove
the adjective ‘‘semi-annual’’ and add the
phrase ‘‘and that the information
provided is complete and accurate.’’ In
addition, EDA proposes deleting the
second sentence of § 307.14(b) to clarify
that proposals to modify RLF Plans
cannot be made through the reporting
process. Such modifications can only be
done by separate notification to EDA as
described in § 307.9(c). Finally, as noted
previously in this NPRM, because EDA
proposes to no longer required the
submission of an RLF Income and
Expense Statement, EDA removes
§ 307.14(c) in its entirety.
EDA proposes clarifying the provision
permitting the inclusion of a loan loss
reserve in an RLF Recipient’s financial
statements, in accordance with
generally accepted accounting
principles (‘‘GAAP’’) to show the fair
market value of an RLF loan portfolio.
This provision has created confusion on
the part of some RLF Recipients, who
understood it to mean that the inclusion
of a loan loss reserve also applied to the
Schedule of Expenditures of Federal
Awards (‘‘SEFA’’), which is the list of
expenditures for each Federal award
covered by the Recipient’s financial
statements and must be reviewed as part
of the audit process. While GAAP
permits the inclusion of a loan loss
reserve in financial statements, subpart
F to 2 CFR part 200, which sets out the
requirements for handling audits of
Federal grant programs, specifically
prohibits the inclusion of a loan loss
reserve in the SEFA. As a result, RLF
Recipients that understood the loan loss
reserve provision of the RLF regulations
to apply to the SEFA ultimately
provided inaccurate (and undervalued)
RLF valuations in the SEFA. EDA hopes
to resolve this confusion by adding a
sentence to the end of § 307.15(a)(2) that
clearly provides that loan loss reserves
are non-cash entries only and shall not
be used to reduce the nominal value of
the RLF in the SEFA. In addition, the
current regulations allow a loan loss
reserve to be recorded to ‘‘show the fair
market value of the RLF’s loan
portfolio’’. In the first sentence of
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§ 307.15(a)(2), EDA proposes replacing
the phrase ‘‘fair market’’ with ‘‘adjusted
current’’ to allow a loan loss reserve to
be recorded as a non-cash entry to show
the adjusted current value, which will
more accurately reflect how RLF
portfolios are valued. In addition, EDA
revises § 307.15(a)(1) to reflect the
promulgation of the Uniform Guidance,
replacing the reference to ‘‘in OMB
Circular A–133’’ with ‘‘the audit
requirements set out as subpart F to 2
CFR part 200’’ and, after the reference
to the Compliance Supplement, adding
the phrase ‘‘which is Appendix XI to 2
CFR part 200,’’ to help the reader locate
the Supplement.
Proposed § 307.15(c), which was relettered from § 307.15(d) to reflect the
relocation of loan and accounting
systems certification requirements to
§ 307.11(a), sets out the requirements for
RLF leveraging and enumerates
investments that qualify as leverage.
Recipients are currently required to
ensure funding from additional sources
at a ratio of $2 of additional funding to
every $1 of RLF loans. This applies to
the whole RLF portfolio, rather than for
individual loans, and is effective for the
duration of the RLF. EDA proposes to
broaden RLF leveraging requirements to
enable Recipients to use funds from
State and local lending programs, in
addition to the non-guaranteed portions
and 90 percent of the guaranteed
portions of Federal loan programs.
Similar to allowing Federal loans to
count as leveraging, if the managers of
State and local lending programs are
willing to provide financing to a
borrower, EDA believes that such
financing should count towards the
leveraging requirement. To better reflect
the content of this provision, EDA
proposes renaming § 307.15(c) ‘‘RLF
leveraging’’ and replacing the phrase
‘‘private investment’’ with ‘‘additional
investment’’ in § 307.15(c)(1). In
addition, we propose adding new
§ 307.15(c)(1)(iv) to read ‘‘Loans from
other State and local lending programs.’’
As noted throughout the NPRM, EDA
proposes adopting a Risk Analysis
System to evaluate and manage the
performance of RLF Recipients to make
the RLF program more effective and
efficient. Such an approach is designed
to provide Recipients with a set of
portfolio management and operations
standards to evaluate their RLF program
and improve performance. It will also
provide EDA with an internal tool for
assessing the risk of each Recipient’s
loan operations and identifying RLF
Recipients that require additional
monitoring, technical assistance, or
other action. This approach to riskbased analysis and management is
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modeled on the Uniform Financial
Institutions Rating System (the
‘‘CAMELS’’ rating system), used by
regulators to assess financial institutions
and to identify those in need of extra
assistance or attention. The CAMELS
system produces a composite rating by
examining six components: Capital
adequacy, asset quality, management,
earnings, liquidity, and sensitivity to
market risk. EDA proposes using factors
that will likely include capital, assets,
management, earnings, liquidity,
strategic results, and financial controls,
and to use the information and data
currently required to be submitted by
RLF Recipients in regular reporting to
assign risk analysis ratings to each RLF.
Scores will be assigned for each factor
on a numerical scale of one to three,
with three being the highest score. The
scores will be totaled to determine each
RLF Recipient’s classification as A, B, or
C, with an A classification describing
the highest performers, B identifying
those who are generally managing their
program well but who may need some
assistance on one or more areas, and C
labelling those Recipients that face
serious challenges with their programs
and require significant improvement.
Recipients classified as B or C will
generally be given a reasonable amount
of time to become compliant with the
relevant requirements and improve their
score. However, persistent
noncompliance may result in EDA
undertaking appropriate compliance
actions, including requiring a corrective
action plan, disallowing Grant funds, or
suspending or terminating the RLF
Grant. As such, EDA proposes replacing
EDA’s current management scheme,
which mainly consists of the capital
utilization standard (see additional
details on changes to this standard
below) and monitoring loan default
rates, with the Risk Analysis System.
Accordingly, through this NPRM we
propose completely revising § 307.16 to
name it ‘‘Risk Analysis System’’ and to
locate the description of the Risk
Analysis System in paragraph (a) and its
compliance framework in paragraph (b).
As noted above, this NPRM proposes
relocating current paragraphs (a) and (b)
of § 307.16, which set out requirements
for loan closing and disbursement
schedules and time schedule
extensions, respectively, as proposed
paragraphs (g) and (h) to § 307.11. We
also propose removing paragraphs (c)
and (d) of § 307.16, which set out the
capital utilization standard (to be
replaced by the proposed concept of the
Allowable Cash Percentage, as more
fully explained below) and EDA’s
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system for monitoring loan default rates,
respectively.
Consistent with EDA’s revisions to its
Definitions section, this NPRM revises
§ 307.17 to incorporate proposed
defined terms and better specify EDA’s
requirements related to the proposed
defined term ‘‘RLF Cash Available for
Lending.’’ As such, EDA proposes
revising the title of § 307.17 to read
‘‘Requirements for Revolving Loan Fund
Cash Available for Lending’’ and
replacing the term RLF Capital with the
proposed defined term RLF Cash
Available for Lending in the first
sentence of § 307.17(a) and the heading
and first sentence of paragraph (c) and
paragraph (c)(6)(ii) of § 307.17. In
addition, we add the phrase ‘‘shall be
deposited and held in an interestbearing account by the Recipient and’’
following ‘‘RLF Cash Available for
Lending shall be’’ in the first sentence
of § 307.17(a) to clarify how RLF
Recipients must maintain RLF Cash
Available for Lending.
In addition, through this NPRM, EDA
proposes adopting the concept of an
Allowable Cash Percentage, which will
be considered in the Risk Analysis
System, to replace the capital utilization
standard, which requires Recipients to
manage their lending and repayment
schedules so that at all times at least 75
percent of their RLF Capital is loaned or
committed. Noncompliance with the
capital utilization standard frequently
triggered sequestration as a remedy.
Although EDA encourages RLF
Recipients to prudently make capital
available as much as possible, EDA
recognizes that different regions face
very different economic and access to
capital conditions and that a one-sizefits-all capital utilization standard can
be difficult for RLF Recipients to meet
and for EDA to implement. To help
resolve this, EDA proposes to reverse
the standard on which RLF Recipients
will be assessed from the amount of
capital that is loaned or committed to
the amount of cash Recipients have on
hand available for lending—defined as
the Allowable Cash Percentage.
Each year, each EDA Regional Office
will calculate the average percentage of
RLF Cash Available for Lending across
their RLF portfolio and will notify RLF
Recipients by January 1 of each year of
the Allowable Cash Percentage to be
used during the ensuing year. RLF
Recipients will be required to manage
their repayment and lending schedules
to provide that at all times, their amount
of RLF Cash Available for Lending does
not exceed the Allowable Cash
Percentage. For example, assume an
EDA Regional Office’s RLF portfolio is
made up of five awards. Based on their
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2015 RLF reports, the percentage of each
RLF’s RLF Capital Base that was held as
RLF Cash Available for Lending was as
follows:
RLF 1—RLF Capital Base of
$4,500,000, of which $1,200,000 was
held as RLF Cash Available for Lending;
RLF 2—RLF Capital Base of
$7,600,000, of which $2,800,000 was
held as RLF Cash Available for Lending;
RLF 3—RLF Capital Base of
$1,670,000, of which $630,000 was held
as RLF Cash Available for Lending;
RLF 4—RLF Capital Base of
$13,872,930, of which $2,974,025 was
held as RLF Cash Available for Lending;
and
RLF 5—RLF Capital Base of
$5,423,000, of which $900,000 was held
as RLF Cash Available for Lending.
Based on these numbers, on January
1, 2016, the EDA Regional Office would
inform all RLF Recipients in the region’s
RLF portfolio that the Allowable Cash
Percentage is 26 percent (the sum of
RLF Cash Available for Lending for the
5 RLFs ($8,504,025) divided by the sum
of the RLF Capital Base for the 5 RLFs
($33,065,930) and that they must
manage their lending and repayment
schedules throughout 2016 so that at all
times their RLF Cash Available for
Lending does not exceed 26 percent.
EDA also proposes to revise its
compliance framework on this issue. As
noted above, noncompliance with the
capital utilization standard frequently
triggered automatic sequestration. Given
the replacement of the capital
utilization standard with the more
flexible Allowable Cash Percentage and
the adoption of a Risk Analysis System,
EDA proposes to no longer require
automatic sequestration of what is
currently referred to as ‘‘excess funds,’’
the difference between the actual
percentage of RLF Capital loaned and
the capital utilization standard. With
this change, noncompliance with the
Allowable Cash Percentage will be
considered in EDA’s Risk Analysis
System and may affect the RLF
Recipient’s ranking in the system. In
addition, rather than being applied
automatically, sequestration will be
considered as one of a range of possible
tools used to ensure compliance with
the terms of the RLF Grant.
Accordingly, EDA revises § 307.17 (b)
to set out the requirements for the
Allowable Cash Percentage and reletters existing § 307.17(b), which has
been revised to set out restrictions on
RLF Cash Available for Lending, as
§ 307.17(c) and existing § 307.17(c),
which provides that EDA may require
an independent third party to conduct
a compliance and loan quality review,
as new § 307.17(d).
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In addition, to address recent
concerns EDA has encountered in
administering the RLF program, we
propose clearly stating that RLF Cash
Available for Lending may not be used
to: (1) Serve as collateral to obtain credit
or any other type of financing without
EDA’s prior written approval; (2)
support operations or administration of
the RLF Recipient; or (3) undertake any
activity that would violate the
requirements found in 13 CFR part 314,
including § 314.3 (‘‘Authorized Use of
Property’’) and § 314.4 (‘‘Unauthorized
Use of Property’’). Using RLF funds in
these ways has long been prohibited by
EDA’s regulations; however, EDA
proposes to clearly state these
prohibitions and add them as new
paragraphs (c)(7), (8), and (9) to
§ 307.17.
Finally, we propose minor clarifying
changes to the list of transactions for
which RLF Cash Available for Lending
may not be used. Specifically, in relettered § 307.17(c)(3), we replace the
sentence ‘‘Provide for borrowers’
required equity contributions under
other Federal Agencies’ loan programs’’
with ‘‘Provide a loan to a borrower for
the purpose of meeting the requirements
of equity contributions under another
Federal Agency’s loan program’’. In
addition, in the second sentence of relettered § 307.17(c)(6)(ii), we replace the
phrase ‘‘RLF Capital’’ with ‘‘RLF funds’’
and the phrase ‘‘reasonable period of
time, as determined by EDA’’ with
‘‘reasonable time frame approved by
EDA’’. As noted above, current
§ 307.17(d) is being removed to locate
all provisions regarding In-Kind
Contributions within proposed
§ 307.11(f).
This NPRM clarifies that EDA can
approve multiple New Lending Area
requests with respect to a given RLF.
Recipients may request changes to their
original or approved Lending Areas to
address changes within the local
economy or to respond to a burgeoning
need. Currently, the regulations state
that once EDA approves a New Lending
Area, it remains in place indefinitely.
EDA is simply adding language to
specify that the New Lending Area
remains in place until EDA approves a
subsequent request for a New Lending
Area. In § 307.18(a)(2), we add the
introductory phrase ‘‘Following EDA
approval,’’ and replace the concluding
phrase ‘‘shall remain in place
indefinitely following EDA approval’’
with ‘‘shall remain in place until EDA
approves a subsequent request for a
New Lending Area’’.
We also propose clarifying language
to distinguish between the addition of
lending areas and mergers of RLFs. EDA
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proposes removing the word, ‘‘merged,’’
from the discussion of additional
lending areas in the second sentence of
§ 307.18(a)(1) to clarify that merging
RLFs and adding lending areas are two
different transactions. EDA is also
clarifying the terminology in
§ 307.18(b)(1) used to describe a
consolidated RLF by replacing the word
‘‘surviving’’ with the word ‘‘combined’’.
This change is designed to make clearer
the distinction between consolidations,
which involve a single RLF Recipient,
and mergers, which involve multiple
RLF Recipients.
For clarity, this NPRM completely
reorganizes the compliance regulations
by separating them into one section
describing what actions are considered
noncompliance (§ 307.20 with the
proposed title ‘‘Noncompliance’’) and
another section listing remedies for
noncompliance (§ 307.21 with the
proposed title ‘‘Remedies for
noncompliance’’). This reorganization is
designed to help all RLF stakeholders
understand problematic practices and
appropriate remedies. See proposed
revisions to §§ 307.20 and 307.21. In
connection with this, we propose
revising the list of problematic practices
that could result in disallowances of a
portion of an RLF. EDA proposes to
remove the following from this list to
reflect their incorporation into the Risk
Analysis System: (1) Having RLF loans
that are more than 120 days delinquent;
and (2) having excess cash sequestered
for 12 months or longer without an
EDA-approved extension request.
Procedures for dealing with delinquent
loans are also covered in Part 2 of the
RLF Plan. With regards to excess
sequestered cash, as discussed above,
the automatic sequestration of funds is
now being addressed by the Risk
Analysis System and the use of an
Allowable Cash Percentage. However,
EDA does reserve the right to take
appropriate compliance action if an RLF
Recipient holds RLF Cash Available for
Lending so that it is 50 percent or more
of the RLF Capital Base without an
EDA-approved extension request.
We also clarify the provision
regarding a Recipient’s duty to
compensate the Federal Government for
the Federal Share of the RLF Grant in
the event that the Recipient requests
termination of the Grant. The current
regulations state that the Recipient
requesting termination must
compensate the Federal Government for
the Federal share of the RLF ‘‘property,
including the current value of all
outstanding RLF loans.’’ EDA seeks to
make this regulation clearer and easier
to comply with by requiring the
Recipient to compensate for the Federal
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share of the RLF Capital Base, including
the monetary value of all outstanding
loan principal. See proposed revisions
to § 307.21(d).
We also remove the provision that
required Recipients, after termination of
an RLF Grant, to seek EDA approval to
retain and use for other economic
development activities the RLF
Recipients’ share of RLF Income
generated by the RLF. By removing this
provision, EDA is clarifying that
Recipients do not need to seek EDA
approval to use their share of funds
returned to them following termination
of an RLF. See proposed revisions to
§ 307.21(d).
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Part 308—Performance Incentives
Part 308 sets out EDA’s performance
incentives for Recipients. When a
Project is constructed under projected
cost, EDA may allow the Recipient to
use the excess funds to either increase
the Investment Rate of the Project to the
maximum percentage allowable under
§ 301.4 for which the Project was
eligible at the time of the Investment
award, or further improve the Project
consistent with its purpose. The terms
for performance awards under EDA’s
Public Works and Economic Adjustment
Assistance programs are set out in
§ 308.2 and the terms for performance
awards under EDA’s Planning program
are set out under § 308.3. EDA does not
propose any changes to part 308.
Part 309—Redistributions of Investment
Assistance
Part 309 sets out EDA’s policies
regarding redistributing grant funds in
the form of subgrants, loans, or other
appropriate assistance. Information with
respect to redistributions of Investment
funds for Planning, Public Works, and
Training, Research, and Technical
Assistance Investments is presented in
§ 309.1 (‘‘Redistributions under parts
303, 305, and 306’’). Specifically,
§ 309.1(a) provides that a Recipient
under any program governed by parts
303, 305, and 306 may directly expend
the Investment Assistance, or, with
prior EDA approval, redistribute such
funds in the form of a subgrant to
another Eligible Recipient that qualifies
for EDA Investment Assistance under
the same program part as the Recipient.
All subgrants must be subject to the
same terms and conditions applicable to
the Recipient under the original
Investment award. Subsection 309.1(b)
stipulates that Investment Assistance
received under parts 303 or 305 may not
be redistributed to a for-profit entity.
Section 309.2 (‘‘Redistributions under
part 307’’) addresses redistributions
under part 307 for Economic
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Adjustment Assistance Investments.
This section reads similarly to § 309.1.
However, a Recipient under part 307
may redistribute Investment funds to
another Eligible Recipient in the form of
a grant or to a non-profit and private forprofit entity in the form of a loan or
other appropriate assistance under
subpart B of part 307.
In both §§ 309.1 and 309.2, EDA
proposes language to clarify EDA’s
practice of requiring the Eligible
Recipient under the original award to
comply with special award conditions
and Subrecipient (in accordance with
the proposed defined term at § 300.3) to
provide appropriate certifications of
compliance with relevant legal
requirements. Accordingly, EDA
proposes adding the sentence ‘‘EDA
may require the Eligible Recipient under
the original Investment award to agree
to special award conditions and the
Subrecipient to provide appropriate
certifications to ensure the
Subrecipient’s compliance with legal
requirements’’ to §§ 309.1(a) and
309.2(b). In addition, we propose adding
language to refer to the proposed
defined term Subrecipient in § 300.3 by
adding the phrase ‘‘, generally referred
to as a Subrecipient,’’ to the first
sentence of § 309.1(a) and § 309.2(a)(1).
Part 310—Special Impact Areas
Part 310 implements section 214 of
PWEDA (42 U.S.C. 3154), which
authorizes the Assistant Secretary to
waive the CEDS requirements of section
302 of PWEDA (42 U.S.C. 3162) for a
Project that will fulfill a ‘‘pressing
need’’ of the Region or prominently
address or alleviate Regional
underemployment or unemployment.
Section 310.1 outlines the process for
designating a Region as a Special Impact
Area and § 310.2 defines what may be
considered a pressing need. EDA does
not propose any changes to part 310.
Parts 311 and 312 [Reserved]
Part 313—Community Trade
Adjustment Assistance
Part 313 sets forth regulations to
implement the Trade Adjustment
Assistance for Communities program
authorized under chapter 4 of title II of
the Trade Act of 1974, as amended (19
U.S.C. 2371 et seq.). EDA does not
propose any revisions to part 313.
Part 314—Property
Part 314 sets forth the rules governing
Property acquired or improved, in
whole or in part, with EDA Investment
Assistance. As proposed in the 2011
NPRM and finalized in the 2014 Final
Rule, EDA revised part 314 to make it
easier to navigate and understand,
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including clarifying EDA’s requirements
on encumbrances in § 314.6 and
streamlining the procedures for the
release of the Federal Interest in
connection with EDA-assisted Property
in § 314.10. Through this NPRM, EDA
proposes minor revisions to further
clarify terminology and its authority to
release the Federal Interest 20 years
after the date of the award of Investment
Assistance.
Specifically, for clarity and to
conform to the proposed changes to the
RLF program, EDA adds a phrase to
clarify that Personal Property includes
the RLF Capital Base, adding the phrase
‘‘, including the RLF Capital Base as
defined at § 307.8’’ to the definition of
Personal Property set out at § 314.1. In
addition, for clarity and to avoid
repetitive language throughout part 314,
we propose adding a definition of
Project Property. The 2011 NPRM
introduced the concept of Project
Property, but did not define it.
Therefore, in the definitions section at
§ 314.1, this NPRM adds a definition of
Project Property to read as follows:
‘‘Project Property means all Property
that is acquired or improved, in whole
or in part, with Investment Assistance
and is required, as determined by EDA,
for the successful completion and
operation of a Project and/or serves as
the economic justification of a Project.
As appropriate to specify the type of
Property to which they are referring,
subparts B and C of this part refer to
Project Property as ‘Project Real
Property’ or ‘Project Personal
Property’.’’ In addition, this NPRM
proposes simplifying the definition of
Real Property to clarify that, in the
context of part 314 and for the purposes
of EDA Investment Assistance, Real
Property may include Property that is
served by the construction of Project
infrastructure, where such infrastructure
is not located on or under the Property.
Accordingly, we replace the word
‘‘improved’’ in the second sentence of
the definition with the word ‘‘served’’
and remove the phrase ‘‘that are not
situated on or under the land’’. We also
propose putting the exemplar list of
infrastructure projects ‘‘such as roads,
sewer, and water lines’’ in parentheses
and removing the phrase ‘‘, but not
limited to’’ from the exemplar list
because it is unnecessary. Removing
‘‘but not limited to’’ is not substantive
and does not make the list exclusive.
In § 314.2 (‘‘Federal Interest’’), we add
a sentence to the beginning of paragraph
(a) to set out the general expectation that
title to Project Property vests upon
acquisition with the Recipient. In
addition, in the now second sentence of
§ 314.2(a), we propose replacing the
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phrase ‘‘Property that is acquired or
improved, in whole or in part, with
Investment Assistance’’ with the newly
defined term Project Property. For
clarity, we split the sentence regarding
the purpose of the Federal Interest and
how it is secured into two sentences and
replace the word ‘‘secures’’ in the now
third sentence with the word ‘‘ensures’’
and also add the phrase ‘‘EDA Project
requirements, including those related
to’’ between ‘‘ensures compliance with’’
and ‘‘the purpose, scope, and use of a
Project’’. With respect to the method by
which Recipients must secure the
Federal Interest, we replace the phrase
‘‘and is often reflected by’’ with the
phrase ‘‘The Recipient typically must
secure the Federal Interest through’’.
In § 314.2(b), we replace the phrase
‘‘Property acquired or improved, in
whole or in part, with Investment
Assistance’’ with the newly defined
term Project Property. In addition, to
flag that nondiscrimination
requirements continue to apply even if
the Federal Government is compensated
for the Federal Share, we add the phrase
‘‘except as provided in § 314.10(e)(3)
regarding nondiscrimination
requirements’’ to the end of § 314.2(b).
In § 314.3 (‘‘Authorized Use of
Property’’), we propose revising the title
of the regulation to read ‘‘Authorized
Use of Project Property’’ to reflect the
newly defined term Project Property.
We also break current paragraph (e),
which addresses requirements for
replacement Personal Property and Real
Property into two separate paragraphs
that address the requirements of the
different types of Property. Accordingly,
we move the sentence that addresses
replacement Real Property that is
currently the final sentence of § 314.3(e)
into new § 314.3(f) and re-number the
regulation accordingly, re-designating
current § 314.3(f) as new § 314.3(g). In
addition, EDA adds helpful paragraph
headings to help the reader better
navigate the section and find
information more quickly. Accordingly,
we add the heading ‘‘General’’ to
§ 314.3(a), ‘‘Project Property that is no
longer needed for Project purposes’’ to
§ 314.3(b), ‘‘Real Property for sale or
lease’’ to § 314.3(c), ‘‘Property transfers
and Successor Recipients’’ to § 314.3(d),
‘‘Replacement Personal Property’’ to
§ 314.3(e), ‘‘Replacement Real Property’’
to § 314.3(f), and ‘‘Incidental use of
Project Property’’ to § 314.3(g).
In both § 314.3(a) and (b), we replace
the phrase ‘‘Property acquired or
improved, in whole or in part, with
Investment Assistance’’ with the newly
defined term Project Property and in the
first sentence of both § 314.3(d) and (g),
we add the word ‘‘Project’’ before
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‘‘Property’’ to incorporate the newly
defined term Project Property. Finally,
in § 314.3(g), which addresses under
what circumstances EDA can approve
an incidental use of Project Property, we
add the phrase ‘‘undermine the
economic purpose for which the
Investment was made’’ between
‘‘otherwise’’ and ‘‘or adversely’’ to
clarify that as well as not adversely
affecting the economic useful life of the
Property, an approved incidental use of
Project Property must not undermine
the purpose of the Investment.
In § 314.4 (‘‘Unauthorized Use of
Property’’), we propose revising the title
of the regulation to read ‘‘Unauthorized
Use of Project Property’’ to reflect the
newly defined term ‘‘Project Property’’.
In addition, EDA proposes adding
helpful paragraph headings to help the
reader navigate the regulation, adding
the heading ‘‘Compensation of Federal
Share upon an Unauthorized Use of
Project Property’’ to § 314.4(a),
‘‘Additional Unauthorized Uses of
Project Property’’ to § 314.4(b), and
‘‘Recovery of the Federal Share’’ to
§ 314.4(c). In § 314.4(a), this NPRM
proposes minor clarifying changes,
specifically replacing ‘‘EDA’s interest’’
with ‘‘the Federal Interest’’, capitalizing
the word ‘‘Government’’ as used in the
term ‘‘Federal Government’’, replacing
‘‘Property acquired or improved in
whole or in part with Investment
Assistance’’ with the newly defined
term ‘‘Project Property’’, and replacing a
reference to 15 CFR parts 14 or 24 with
2 CFR part 200. We make similar
clarifying changes to § 314.4(b),
replacing ‘‘EDA’s interest’’ with ‘‘the
Federal Interest’’ and ‘‘Real Property or
tangible personal property acquired or
improved with EDA Investment
Assistance’’ with the phrase ‘‘Project
Real Property or tangible Project
Personal Property’’. Finally, in
§ 314.4(c), in the first sentence we add
the word ‘‘Project’’ before two instances
of the word ‘‘Property’’, replace ‘‘its
interest’’ with ‘‘the Federal Interest’’,
and capitalize the word ‘‘Government’’
in ‘‘Federal Government’’. In the final
sentence of the paragraph, EDA
proposes capitalizing ‘‘Government’’ in
‘‘Federal Government’’ and adding a
reference to the ongoing requirement
that Project Property not be used in
violation of nondiscrimination
requirements even after the
compensation of the Federal Share by
adding the phrase ‘‘, except for the
nondiscrimination requirements set
forth in § 314.10(d)(3)’’ to the end of the
paragraph.
Section 314.5 (‘‘Federal Share’’)
addresses the portion of Project Property
attributable to EDA’s Investment
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Assistance. In § 314.5(a), EDA proposes
adding two new sentences to explain
EDA’s usual practice of relying on a
certified appraisal prepared by a
licensed appraiser to determine the fair
market value of Project Property and
also provide that in certain
extraordinary circumstances, and at the
agency’s sole discretion, EDA may rely
on an alternative method to determine
the fair market value, such as the
amount of the award of Investment
Assistance or the amount paid by a
transferee. EDA recognizes that in
certain, very unusual circumstances,
such as when Property is located in an
extremely remote location or, for
whatever reasons, there are no buyers
for similar Property, it may be
impossible or cost prohibitive to obtain
a certified appraisal and wishes to
provide for this situation. Therefore,
EDA proposes adding the following
sentences to the paragraph: ‘‘EDA may
rely on a current certified appraisal of
the Project Property prepared by an
appraiser licensed in the State where
the Project Property is located to
determine the fair market value. In
extraordinary circumstances and at
EDA’s sole discretion, where EDA is
unable to determine the current fair
market value, EDA may use other
methods of determining the value of
Project Property, including the amount
of the award of Investment Assistance or
the amount paid by a transferee.’’ In
addition, EDA adds the word ‘‘Project’’
before ‘‘Property’’ in the first sentence of
the paragraph and the phrase ‘‘or other
valuation as determined by EDA’’
between ‘‘fair market value’’ and ‘‘of the
Property’’ in the final sentence of the
paragraph.
In § 314.6 (‘‘Encumbrances’’), this
NPRM proposes revising paragraph (a)
to replace the phrase ‘‘Recipient-owned
Property acquired or improved in whole
or improved in whole or in part with
Investment Assistance’’ with the newly
proposed defined term ‘‘Project
Property’’. In addition, in the exception
provision to the requirement that there
be no encumbrances on Project Property
regarding encumbrances to secure a
grant or loan made by a governmental
body, EDA proposes adding the phrase
‘‘so long as the Recipient discloses such
an encumbrance in writing as part of its
application for Investment Assistance or
as soon as practicable after learning of
the encumbrance’’ to reflect the
requirement that the Recipient
expeditiously disclose any such
encumbrance to EDA. In § 314.6(b)(3) on
pre-existing encumbrances, we add the
phrase ‘‘and disclosed to EDA’’ between
‘‘in place’’ and ‘‘at the time’’ to
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underscore that the Recipient must
disclose pre-existing encumbrances to
EDA and add ‘‘, in its sole discretion,’’
to underscore that the approval of preexisting encumbrances is at EDA’s
discretion. In addition, because preexisting encumbrances pose the same
risks to Project Property as other types
of encumbrances, EDA revises
§ 314.6(b)(3) to incorporate certain
requirements from the subparagraphs
setting out requirements for
encumbrances proposed both proximate
to and after Project approval: Namely,
for EDA to approve a pre-existing
encumbrance, in addition to the
requirement that EDA determine that
the requirements of § 314.7(b) are met,
EDA must determine that the terms and
conditions of the encumbrance are
satisfactory and that there is a
reasonable expectation that the
Recipient will not default on its
obligations. EDA renumbers these three
requirements as § 314.6(b)(1)(i), (ii), and
(iii), respectively.
With respect to § 314.6(b)(4) and (5),
which set out the requirements for
EDA’s approval of encumbrances
proposed proximate to Project approval
and encumbrances proposed after
Project approval, respectively, while
EDA does not propose any changes to
the regulatory text, in the preamble to
the 2011 NPRM and the 2015 Final
Rule, EDA repeatedly referred to
revisions to § 314.6 to clarify the
requirements for EDA to subordinate its
interest in Project Property. However,
the regulatory text sets out the
requirements for EDA to approve any
type of encumbrance on Project
Property, regardless of the priority of the
Federal Interest and whether EDA
agrees to subordinate or not, and
through this preamble, EDA confirms
that this read is correct. EDA must
undertake the analyses required under
§ 314.6(b) for encumbrances proposed
on Project Property regardless of
whether EDA’s position in such
Property changes.
In addition, we propose minor style
changes to § 314.6(b)(4)(v)(B) and
(5)(v)(B) to add the phrase ‘‘A Recipient
that is a’’ to the beginning of the
subparagraph to maintain the parallel
nature of the list. In addition, in
§ 314.5(c), we replace the phrase
‘‘Recipient-owned Property’’ with
‘‘Project Property’’. As specified in the
government-wide grant regulations set
out at 2 CFR part 200 and noted in the
proposed revisions to § 314.2(a), Project
Property generally vests upon
acquisition in the Recipient, and so the
adjective ‘‘Recipient-owned’’ is
unnecessary.
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In § 314.7 (‘‘Title’’), EDA proposes
adding language to paragraph (a) to flag
that certain limited exceptions apply to
the title requirement, make the
provision more readable, and refer
directly to the definition of Real
Property set out in § 314.1. As such,
EDA adds the introductory phrase
‘‘Except in those limited circumstances
identified in paragraph (c) of this
section’’ to the first sentence. In
addition, we relocate the temporal
requirement of when title must be
obtained to the beginning of the
sentence by adding ‘‘, at the time
Investment Assistance is awarded’’
between ‘‘in paragraph (c) of this
section’’ and ‘‘the Recipient’’. For clarity
with respect to EDA’s requirements, we
include a reference to the definition of
Real Property in § 314.1 by adding the
clause ‘‘, which, as noted in § 314.1 in
the definition of ‘Real Property’
includes land that is served by the
construction of Project infrastructure
(such as roads, sewers, and water lines)
and where the infrastructure contributes
to the value of such land as a specific
purpose of the Project’’ to the first
sentence of the paragraph. We also
break the requirement that the Recipient
maintain title at all times during the
Estimated Useful Life of the Project into
a separate sentence, which we place as
the second sentence of the paragraph.
This NPRM proposes replacing the
phrase ‘‘Real Property required for a
project’’ with the proposed defined term
‘‘Project Real Property’’ in both the first
and third sentences of § 314.7(a).
Throughout paragraph (c) of § 314.7,
which sets out the exceptions to EDA’s
title requirement, we replace the phrase
‘‘the Real Property required for a
Project’’ with ‘‘Project Real Property’’.
EDA proposes adding the clause ‘‘at the
time Investment Assistance is awarded
and at all times during the Estimated
Useful Life of the Project’’ to the
introductory sentence at § 314.7(c), add
‘‘Project’’ before ‘‘Real Property’’ twice
in § 314.7(c)(1), and capitalize
‘‘Government’’ in ‘‘Federal
Government’’ in § 314.7(c)(1)(i). In
§ 314.7(c)(4), which clarifies the
exception for the title requirement when
a Project includes construction on a
government-owned roads, EDA
proposes clarifying changes to replace
the phrase ‘‘public highway’’ with the
more descriptive ‘‘State or local
government owned roadway or
highway’’ in the heading, first sentence
of § 314.7(c)(4), and first clause of
§ 314.7(c)(4)(ii)(B). To avoid excessive
wordiness, we maintain the phrase
‘‘public highway’’ where it exists in the
remainder of the provision, but revise it
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to read ‘‘public roadway or highway’’
and note that the exception in this
provision is intended to apply to State
or local government owned roadways or
highways.
In § 314.7(c)(5)(i), which sets out
EDA’s requirements when the purpose
of a Project is to construct facilities to
serve Recipient or privately owned Real
Property, we propose clarifying syntax
changes to revise the phrase ‘‘Real
Property, including industrial or
commercial parks, for sale or lease’’ to
read ‘‘Project Real Property, including
industrial or commercial parks, so that
the Recipient or Owner may sell or
lease’’. In subparagraph (i)(A) of the
provision, we replace the phrase
‘‘required for such Project’’ with the
clarifying phrase ‘‘intended for sale or
lease’’ and add a cross-reference to the
appropriate title requirements by adding
the phrase ‘‘in accordance with
paragraphs (C), (D), and (E) of this
section’’ to the end of the subparagraph.
In subparagraph (i)(B), EDA replaces
‘‘required for such Project’’ with
‘‘intended for lease’’, and in
subparagraph (iii) we capitalize
‘‘Owner’’.
Section 314.8 (‘‘Recorded Statement
for Project Real Property’’) sets out
requirements for recording the Federal
Interest in Project Real Property.
Throughout the provision we replace
three instances of ‘‘EDA’s interest’’ with
‘‘the Federal Interest’’ and use the
defined term ‘‘Project Real Property’’ as
appropriate, using the term in the
heading of the regulation and replacing
‘‘the Property acquired or improved in
whole or in part with the EDA Invest
Assistance’’ in paragraph (a), ‘‘Real
Property’’ in paragraph (b), and ‘‘Project
Property’’ in paragraph (d).
In § 314.9 (‘‘Recorded statement for
Personal Property’’), EDA revises the
provision to clarify that the recorded
statement, which is generally a Uniform
Commercial Code Financing Statement
(‘‘Form UCC–1’’), provides notice of the
Federal Interest in Project Personal
Property, but does not create a lien on
the Property by inserting the phrase
‘‘provide notice of the Federal Interest
in all Project Personal Property by
executing’’ between ‘‘the Recipient
shall’’ and ‘‘a Uniform Commercial
Code Financing Statement’’ in the first
sentence of the regulation. In addition,
we use the term ‘‘Project Personal
Property’’ appropriately throughout the
provision, including in the title to the
regulation, inserting ‘‘Project’’ before the
phrase ‘‘Personal Property, acceptable in
form and substance to EDA’’ in the first
sentence of the regulation, and replacing
‘‘Personal Property acquired or
improved as part of the Project’’ with
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‘‘all Project Personal Property’’ in the
second sentence of the regulation, and
replace ‘‘EDA’s interest’’ with ‘‘the
Federal Interest’’ in the first sentence to
the regulation.
Section 314.10 (‘‘Release of EDA’s
Property Interest’’) sets out EDA’s
procedures for releasing the agency’s
interest in Project Property. This NPRM
proposes replacing the term ‘‘EDA’s
Property Interest’’ with ‘‘the Federal
Interest’’ in the titles of both subpart D
and § 314.10 and throughout § 314.10
for clarity and consistency. This change
does not implicate any substantive
change to the Federal Government’s
undivided equitable reversionary
interest in award property, but is
intended for consistency throughout
these regulations and with 2 CFR part
200. In addition, in § 314.10(a), EDA
replaces the phrase ‘‘Property acquired
or improved with Investment
Assistance’’ with ‘‘Project Property’’ for
consistency with the proposed defined
term at § 314.1 and its usage throughout
part 314. In addition, EDA proposes
removing the portions of paragraph (a)
that provide background on EDA’s
historical practice for establishing the
Estimated Useful Life of specific
Projects. It is accurate that since 1999,
EDA has typically established useful
lives of between 15 and 20 years,
depending on the nature of the asset. As
EDA noted in the 2011 NPRM, the
Economic Development Administration
and Appalachian Regional Development
Reform Act of 1998 (Pub. L. 105–393)
added section 601(d) to PWEDA (42
U.S.C. 3211(d)) to allow EDA to release
its interest in Real or Personal Property
after 20 years. This amendment was
designed to provide EDA with
additional flexibilities to release its
interest in Project Property, particularly
as some Projects implicated 40-year
Estimated Useful Lives, not to mandate
a minimum 20-year useful life for all
Project Property. Although these
regulatory provisions provided useful
background, they were not necessary for
the regulation and we believe
maintaining this history in the preamble
is sufficient. Accordingly, we remove
the concluding clause of the second
sentence and the third sentence of
paragraph (a) and combine the first and
second sentence of the paragraph to
read ‘‘As provided in § 314.2 of this
chapter, the Federal Interest in Project
Property extends for the duration of the
Estimated Useful Life of the Project,
which is determined by EDA at the time
of Investment award.’’ We also simplify
the final sentence in paragraph (a),
replacing the phrase ‘‘govern the
manner of obtaining’’ with the word
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‘‘obtain’’ and adding the phrase ‘‘in
Project Property’’ at the end of the
sentence following the phrase ‘‘of the
Federal Interest’’.
In paragraph (b), which sets out EDA’s
procedures for releasing the Federal
Interest after the expiration of the
Estimated Useful Life, we revise the
paragraph heading to read ‘‘Release of
the Federal Interest’’ instead of ‘‘Release
of Property’’ to more accurately reflect
the content of the provision, correct a
typo in the second sentence by adding
the word ‘‘the’’ between ‘‘in writing by’’
and ‘‘Recipient’’, and add a sentence to
the end of the paragraph that provides
a helpful cross reference to § 314.10(e),
which sets out the limitations and
covenants of use that are applicable to
any release of the Federal Interest.
In paragraph (c), which sets out the
EDA’s procedures for releasing the
Federal Interest before the expiration of
the Estimated Useful Life, which release
requires compensation of the Federal
Interest, we correct a typo in the
paragraph heading by adding the word
‘‘the’’ between ‘‘prior to’’ and
‘‘expiration’’. In addition, as more fully
explained in the description of revisions
to paragraph (e) below, we add a clause
to clarify that when EDA releases the
Federal Interest after receiving
compensation for such interest, EDA has
no further interest in the property,
except for specific nondiscrimination
requirements. Accordingly, we add a
concluding clause to the final sentence
of the paragraph to read ‘‘and will have
no further interest in the ownership,
use, or Disposition of the Property,
except for the nondiscrimination
requirements set forth in paragraph
(e)(3) of this section.’’
Paragraph (d) of § 314.10 sets out
EDA’s procedures for releasing the
Federal Interest before the expiration of
the Estimated Useful Life, but at least 20
years after the award of Investment
Assistance, as authorized under section
601(d)(2) of PWEDA. This authority is
generally applicable when the Estimated
Useful Life is long (i.e., 30 or 40 years)
and when the Recipient has complied
with all terms of the award of
Investment Assistance and the
economic development benefits of the
award have been achieved. To clarify
the intent of this paragraph, EDA revises
the heading to read ‘‘Release of the
Federal Interest before the expiration of
the Estimated Useful Life, but 20 years
after the award of Investment
Assistance’’. In addition, we make
additional clarifying changes
throughout the paragraph. In the first
sentence of the paragraph, we replace
the phrase ‘‘that exceeds 20 years’’ with
‘‘, but where 20 years have elapsed since
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the award of Investment Assistance’’. In
addition, to clarify the determinations
that EDA will make in this situation,
EDA adds the following concluding
phrase to the paragraph ‘‘if EDA
determines: (1) The Recipient has made
a good faith effort to fulfill all terms and
conditions of the of the award of
Investment Assistance; and (2) The
economic development benefits as set
out in the award of Investment
Assistance have been achieved.’’ As
with paragraph (b), EDA has added a
sentence to the end of this paragraph
that provides a necessary cross reference
to § 314.10(e), which sets out the
limitations and covenants of use that are
applicable to any release of the Federal
Interest.
Finally, in paragraph (e), EDA makes
needed corrections and clarifications to
limitations of use and required
covenants applicable to a release of the
Federal Interest. When EDA releases its
interest at the expiration of the
Estimated Useful Life under § 314.10(b)
or releases its interest before the
expiration of the Estimated Useful Life
but after at least 20 years have elapsed
since the award of Investment
Assistance under § 314.10(d), two use
limitations on Project Property survive
the release: (1) Such Property may not
be used for explicitly religious
purposes; and (2) such Property may not
be used in violation of the
nondiscrimination requirements set out
in § 302.20. However, in the above two
scenarios, if compensation is made to
EDA of the Federal Interest at the time
of the release or anytime thereafter, the
requirement that Project Property not be
used for explicitly religious purposes
will be extinguished. Similarly, when
EDA releases the Federal Interest before
the expiration of the Estimated Useful
Life and upon compensation of the
Federal Interest, the requirement that
Project Property not be used for
explicitly religious purposes no longer
remains. Note that while § 314.10
currently makes references to
‘‘inherently religious purposes,’’ EDA is
proposing changing these references to
‘‘explicitly religious purposes’’ to be
consistent with recent rulemakings by
nine other Federal agencies
implementing Executive Order 13559.
See, e.g., 28 CFR 38.5(a) (Department of
Justice); 81 FR 19358–59. The term
‘‘explicitly religious activities’’ clarifies
that the prohibition is against external,
observable activities, and not directed
against the religious motivation an
entity may have in providing services.
Through this NPRM, EDA proposes
revisions to subparagraphs (e)(2) and (3)
to make the points above clear.
Specifically, we add a final sentence to
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paragraph (e)(2) clarifying that when
requesting release of the Federal
Interest, the Recipient must disclose the
future intended use of the Real Property.
New subparagraph (e)(2)(i) clarifies that
a Recipient not intending to use the Real
Property or tangible Personal Property
for explicitly religious activities will be
required to execute and record a
covenant prohibiting use of the Real
Property for explicitly religious
activities. New subparagraph (e)(2)(ii)
clarifies the requirements for a
Recipient that intends or foresees the
use of Real Property or tangible Personal
Property for explicitly religious
activities. In this case, EDA may require
the Recipient to compensate the agency
for the Federal Interest to obtain a
release and resulting waiver of the
‘‘explicitly religious activities’’
prohibition, and recommends that any
such Recipient contact EDA well in
advance of requesting a release. It is
important to recognize that the structure
now proposed—payment of the Federal
Interest excusing the Recipient from
having to comply with the religious use
prohibition but not excusing continued
compliance with the non-discrimination
prohibition—was actually in place
before EDA’s most recent Final Rule
became effective on January 20, 2015.
As became clear in the past year when
the agency was confronted with several
situations involving the religious use
prohibition, the January 20, 2015 Final
Rule appears to have inadvertently
amended certain language in § 314.10
that created ambiguity and unintended
consequences that necessitates the
proposed changes. Subparagraph (e)(3)
is revised so that it specifies the
requirement that Real Property or
tangible Personal Property not be used
in violation of the nondiscrimination
requirements of § 302.20. Therefore, we
add the clause ‘‘, including a release
upon a Recipient’s compensation for the
Federal Share’’ between ‘‘under this
section’’ and ‘‘a Recipient must’’ in the
first sentence of (e)(3). In addition,
where (e)(3) specifies the requirements
for avoiding any discriminatory use of
Project Property, we remove two
instances of the phrase ‘‘for inherently
religious activities prohibited by
applicable Federal law and’’ from the
first and second sentences. EDA
emphasizes that the differing treatments
of the religious use covenant and nondiscrimination covenant, which has
been part of EDA’s regulatory
framework for a number of years, is in
our view justified by the fact that
different legal authorities control the
agency’s obligations in each situation.
Part 315—Trade Adjustment Assistance
for Firms
Part 315 sets forth regulations to
implement the Trade Adjustment
Assistance for Firms program
authorized under chapters 3 and 5 of
title II of the Trade Act of 1974, as
amended (19 U.S.C. 2341 et seq.). EDA
does not propose any revisions to part
315.
Classification
Prior notice and opportunity for
public comment are not required for
rules concerning public property, loans,
grants, benefits, and contracts (5 U.S.C.
553(a)(2)). Because prior notice and an
opportunity for public comment are not
required pursuant to 5 U.S.C. 553, or
any other law, the analytical
requirements of the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) are
inapplicable. Therefore, a regulatory
flexibility analysis has not been
prepared.
Executive Order No. 12866 and No.
13563
This proposed rule was drafted in
accordance with Executive Orders
12866 and 13563. The Office of
Management and Budget (OMB) has
determined that this proposed rule is
significant for purposes of Executive
Order 12866 and Executive Order
13563. Accordingly, the rule has
undergone interagency review.
Congressional Review Act
This NPRM is not major under the
Congressional Review Act (5 U.S.C. 801
et seq.).
Executive Order No. 13132
Executive Order 13132 requires
agencies to develop an accountable
process to ensure ‘‘meaningful and
timely input by State and local officials
in the development of regulatory
policies that have federalism
implications.’’ ‘‘Policies that have
federalism implications’’ is defined in
Executive Order 13132 to include
regulations that 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.’’ It has
been determined that this proposed rule
does not contain policies that have
federalism implications.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (‘‘PRA’’)
requires that a Federal agency consider
the impact of paperwork and other
information collection burdens imposed
on the public and, under the provisions
of PRA section 3507(d), obtain approval
from OMB for each collection of
information it conducts, sponsors, or
requires through regulations.
Notwithstanding any other provision of
law, no person is required to respond to,
nor shall any person be subject to a
penalty for failure to comply with a
collection of information subject to the
PRA unless that collection displays a
currently valid OMB Control Number.
The following table provides a
complete list of the collections of
information (and corresponding OMB
Control Numbers) set forth in this
proposed rule. These collections of
information are necessary for the proper
performance and functions of EDA.
Part or section of this
proposed rule
Nature of request
307.14(a) .................................
All RLF Recipients must submit reports to EDA in a format designated by
EDA.
All Recipients must certify as part of the report that the RLF is operating in
accordance with the RLF Plan and that the information provided is complete and accurate.
sradovich on DSK3GMQ082PROD with PROPOSALS4
307.14(b) .................................
Form/title/OMB control number
List of Subjects
13 CFR Part 301
13 CFR Part 300
Distressed region, Financial
assistance, Headquarters, Regional
offices.
Applicant and application
requirements, Economic distress levels,
Eligibility requirements, Grant
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ED–209,
0095).
ED–209,
0095).
RLF
Report
(0610–
RLF
Report
(0610–
administration, Grant programs,
Investment rates.
13 CFR Part 302
Civil rights, Conflicts-of-interest,
Environmental review, Federal policy
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and procedures, Fees,
Intergovernmental review, Postapproval requirements, Pre-approval
requirements, Project administration,
Reporting and audit requirements.
13 CFR Part 303
Award and application requirements,
Comprehensive economic development
strategy, Planning, Short-term planning
investments, State plans.
13 CFR Part 304
District modification and termination,
Economic development district,
Organizational requirements,
Performance evaluations.
13 CFR Part 305
Award and application requirements,
Economic development, Public works,
Requirements for approved projects.
13 CFR Part 307
Award and application requirements,
Economic adjustment assistance,
Income, Liquidation, Merger, Revolving
loan fund, Pre-loan requirements,
Record and reporting requirements,
Sales and securitizations, Termination.
13 CFR Part 309
Redistributions of investment
assistance, Subgrants, Subrecipients.
13 CFR Part 314
Authorized use, Federal interest,
Federal share, Property, Property
interest, Release, Title.
Regulatory Text
For the reasons discussed above, EDA
proposes to amend 13 CFR, chapter III
as follows:
PART 300—GENERAL INFORMATION
1. Revise the authority citation of part
300 to read as follows:
■
Authority: 42 U.S.C. 3121; 42 U.S.C. 3122;
42 U.S.C. 3211; 15 U.S.C. 3701; Department
of Commerce Organization Order 10–4.
2. Amend § 300.3 by:
a. Adding a definition for CoRecipient in alphabetical order;
■ b. Revising the definitions of In-Kind
Contribution(s), Project, and Recipient;
and
■ c. Adding definitions for StevensonWydler and Sub-Recipient in
alphabetical order.
The revisions and additions read as
follows:
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■
■
§ 300.3
Definitions.
*
*
*
*
*
Co-Recipient means one of multiple
Recipients awarded Investment
Assistance under a single award. Unless
otherwise provided in the terms and
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conditions of the Investment Assistance,
each Co-Recipient is jointly and
severally liable for fulfilling the terms of
the Investment Assistance.
*
*
*
*
*
In-Kind Contribution(s) means noncash contributions, which may include
contributions of space, equipment,
services and assumptions of debt that
are fairly evaluated by EDA and that
satisfy applicable Federal Uniform
Administrative Requirements and cost
principles as set out in 2 CFR part 200.
*
*
*
*
*
Project means the proposed or
authorized activity (or activities) the
purpose of which fulfills EDA’s mission
and program requirements as set forth in
PWEDA or Stevenson-Wydler and this
chapter and which may be funded in
whole or in part by EDA Investment
Assistance.
*
*
*
*
*
Recipient means an entity receiving
EDA Investment Assistance, including
any EDA-approved successor to the
entity.
*
*
*
*
*
Stevenson-Wydler, for purposes of
EDA, means the Stevenson-Wydler
Technology Innovation Act of 1980, as
amended (15 U.S.C. 3701 et seq.).
Subrecipient means an Eligible
Recipient that receives a redistribution
of Investment Assistance in the form of
a subgrant, under part 309 of this
chapter, from another Eligible Recipient
to carry out part of a Federal program.
*
*
*
*
*
PART 301—ELIGIBILITY, INVESTMENT
RATE AND APPLICATION
REQUIREMENTS
3. The authority section for part 301
continues to read as follows:
■
Authority: 42 U.S.C. 3121; 42 U.S.C. 3141–
3147; 42 U.S.C. 3149; 42 U.S.C. 3161; 42
U.S.C. 3175; 42 U.S.C. 3192; 42 U.S.C. 3194;
42 U.S.C. 3211; 42 U.S.C. 3233; Department
of Commerce Delegation Order 10–4.
4. Revise paragraph (b) of § 301.2 to
read as follows:
■
§ 301.2
Applicant eligibility.
*
*
*
*
*
(b) An Eligible Applicant that is a
non-profit organization must include in
its application for Investment
Assistance a resolution passed by (or a
letter signed by) an authorized
representative of a general purpose
political subdivision of a State,
acknowledging that it is acting in
cooperation with officials of such
political subdivision. EDA, at its sole
discretion, may waive this cooperation
requirement for certain Projects of a
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68203
significant Regional or national scope
under parts 306 or 307 of this chapter.
See §§ 306.3(b), 306.6(b), and 307.5(b) of
this chapter.
■ 5. Revise § 301.5 to read as follows:
§ 301.5
Matching share requirements.
The required Matching Share of a
Project’s eligible costs may consist of
cash or In-Kind Contributions. In
addition, the Eligible Applicant must
provide documentation to EDA
demonstrating that the Matching Share
is committed to the Project, will be
available as needed and is not or will
not be conditioned or encumbered in
any way that would preclude its use
consistent with the requirements of the
Investment Assistance. EDA shall
determine at its sole discretion whether
the Matching Share documentation
adequately addresses the requirements
of this section.
■ 6. Revise paragraph (a) of § 301.7 to
read as follows:
§ 301.7
Investment Assistance application.
(a) For all EDA Investment Assistance
programs, including the Public Works,
Economic Adjustment Assistance,
Planning, Local Technical Assistance,
Research and National Technical
Assistance, and University Center
programs, EDA will publish an FFO that
specifies application submission
requirements and evaluation procedures
and criteria. Each FFO will be published
on the EDA Web site and at https://
www.grants.gov. All forms required for
EDA Investment Assistance may be
obtained electronically from https://
www.grants.gov or from the appropriate
regional office.
*
*
*
*
*
■ 7. Revise § 301.8 to read as follows:
§ 301.8
Application evaluation criteria.
EDA will screen all applications for
the feasibility of the budget presented
and conformance with EDA’s statutory
and regulatory requirements. EDA will
assess the economic development needs
of the affected Region in which the
proposed Project will be located (or will
service), as well as the capability of the
Eligible Applicant to implement the
proposed Project. EDA will also review
applications for conformance with
program-specific evaluation criteria set
out in the applicable FFO.
■ 8. Revise the introductory text of
paragraph (a) to § 301.11 to read as
follows:
§ 301.11
Infrastructure.
(a) EDA will fund both construction
and non-construction infrastructure
necessary to meet a Region’s strategic
economic development goals and needs,
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which in turn results in job creation.
This includes infrastructure used to
develop basic economic development
assets as described in §§ 305.1 and 305.2
of this chapter (e.g., roads, sewers, and
water lines), as well as infrastructure
that supports innovation and
entrepreneurship. The following are
examples of innovation and
entrepreneurship-related infrastructure
that support job creation:
*
*
*
*
*
PART 302—GENERAL TERMS AND
CONDITIONS FOR INVESTMENT
ASSISTANCE
9. Revise the authority citation of part
302 to read as follows:
■
Authority: 19 U.S.C. 2341 et seq.; 42 U.S.C.
3150; 42 U.S.C. 3152; 42 U.S.C. 3153; 42
U.S.C. 3192; 42 U.S.C. 3193; 42 U.S.C. 3194;
42 U.S.C. 3211; 42 U.S.C. 3212; 42 U.S.C.
3216; 42 U.S.C. 3218; 42 U.S.C. 3220; 42
U.S.C. 5141; 15 U.S.C. 3701; Department of
Commerce Delegation Order 10–4.
■
10. Revise § 302.5 to read as follows:
§ 302.5 Relocation assistance and land
acquisition policies.
Recipients of EDA Investment
Assistance or any other types of
assistance under PWEDA, the Trade
Act, and Stevenson-Wydler (States and
political subdivisions of States and nonprofit organizations, as applicable) are
subject to the Uniform Relocation
Assistance and Real Property
Acquisition Policies Act of 1970, as
amended (Pub. L. 91–646; 42 U.S.C.
4601 et seq.). See 15 CFR part 11 and
49 CFR part 24 for specific compliance
requirements.
■ 11. Revise § 302.6 to read as follows:
§ 302.6 Additional requirements; Federal
policies and procedures.
Recipients are subject to all Federal
laws and to Federal, Department, and
EDA policies, regulations, and
procedures applicable to Federal
financial assistance awards, including 2
CFR part 200, Uniform Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal Awards.
■ 12. Revise the introductory text to
paragraph (a) and paragraphs (a)(2) and
(d) of § 302.20 to read as follows:
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§ 302.20
Civil rights.
(a) Discrimination is prohibited by a
Recipient or Other Party (as defined in
paragraph (b) of this section) with
respect to a Project receiving Investment
Assistance under PWEDA or StevensonWydler or by an entity receiving
Adjustment Assistance (as defined in
§ 315.2 of this chapter) under the Trade
Act or any other type of assistance
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under Stevenson-Wydler, in accordance
with the following authorities:
*
*
*
*
*
(2) 42 U.S.C. 3123 (proscribing
discrimination on the basis of sex in
Investment Assistance provided under
PWEDA), 42 U.S.C. 6709 (proscribing
discrimination on the basis of sex under
the Local Public Works Program), Title
IX of the Education Amendments of
1972, as amended (20 U.S.C. 1681 et
seq.) (proscribing discrimination on the
basis of sex in any education program or
activity receiving Federal financial
assistance, whether or not such program
or activity is offered or sponsored by an
educational institution), and the
Department’s implementing regulations
found at 15 CFR part 8a;
*
*
*
*
*
(d) All Recipients of Investment
Assistance under PWEDA and
Stevenson-Wydler, all Other Parties,
and all entities receiving Adjustment
Assistance under the Trade Act or any
other type of assistance under
Stevenson-Wydler must submit to EDA
written assurances that they will
comply with applicable laws, EDA
regulations, Department regulations,
and such other requirements as may be
applicable, prohibiting discrimination.
*
*
*
*
*
PART 303—PLANNING INVESTMENTS
AND COMPREHENSIVE ECONOMIC
DEVELOPMENT STRATEGIES
13. The authority citation for part 303
continues to read as follows:
■
Authority: 42 U.S.C. 3143; 42 U.S.C. 3162;
42 U.S.C. 3174; 42 U.S.C. 3211; Department
of Commerce Organization Order 10–4.
14. Revise paragraphs (b)(1) and
(b)(3)(ii) of § 303.6 to read as follows:
■
§ 303.6 Partnership Planning and the EDAfunded CEDS process.
*
*
*
*
*
(b) * * *
(1) CEDS Strategy Committee. The
Planning Organization must appoint a
Strategy Committee. The Strategy
Committee must represent the main
economic interests of the Region, which
may include Indian tribes, the private
sector, State and other public officials,
community leaders, private individuals,
representatives of workforce
development boards, institutions of
higher education, minority and labor
groups, and others who can contribute
to and benefit from improved economic
development in the relevant Region. In
addition, the Strategy Committee must
demonstrate the capacity to undertake a
collaborative and effective planning
process.
*
*
*
*
*
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(3) * * *
(ii) The Planning Organization must
submit a new or revised CEDS to EDA
at least every five years, unless EDA or
the Planning Organization determines
that a new or revised CEDS is required
earlier due to changed circumstances. In
connection with the submission of a
new or revised CEDS, the Planning
Organization must obtain renewed
commitments from participating
counties or other areas within the
District to support the economic
development activities of the District.
*
*
*
*
*
■ 15. Revise paragraph (c)(1) of § 303.7
to read as follows:
§ 303.7 Requirements for Comprehensive
Economic Development Strategies.
*
*
*
*
*
(c) * * *
(1) In determining the acceptability of
a CEDS prepared independently of EDA
Investment Assistance or oversight for
Projects under parts 305 and 307 of this
chapter, EDA may in its discretion
determine that the CEDS is acceptable
so long as it includes all of the elements
listed in paragraph (b) of this section. In
certain circumstances, EDA may accept
a non-EDA funded CEDS that does not
contain all the elements listed in
paragraph (b) of this section. In doing
so, EDA shall consider the
circumstances surrounding the
application for Investment Assistance,
including emergencies or natural
disasters and the fulfillment of the
requirements of section 302 of PWEDA.
*
*
*
*
*
PART 304—ECONOMIC
DEVELOPMENT DISTRICTS
16. The authority citation for part 304
continues to read as follows:
■
Authority: 42 U.S.C. 3122; 42 U.S.C. 3171;
42 U.S.C. 3172; 42 U.S.C. 3196; Department
of Commerce Organization Order 10–4.
17. Revise paragraph (c)(2) of § 304.2
to read as follows:
■
§ 304.2 District Organizations: Formation,
organizational requirements and
operations.
*
*
*
*
*
(c) * * *
(2) The District Organization must
demonstrate that its governing body is
broadly representative of the principal
economic interests of the Region, which
may include the private sector, public
officials, community leaders,
representatives of workforce
development boards, institutions of
higher education, minority and labor
groups, and private individuals. In
addition, the governing body must
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§ 305.8 Recipient-furnished equipment and
materials.
(1) * * *
(2) The Compliance Supplement,
which is appendix XI to 2 CFR part 200
and is available on the OMB Web site
at https://www.whitehouse.gov/omb/
circulars_default.
■ 23. Amend § 307.8 as follows:
■ a. Add definitions for Allowable Cash
Percentage and Disbursement Phase in
alphabetical order;
■ b. Revise the definitions of
Recapitalization Grants and Reporting
Period;
■ c. Add a definition for Risk Analysis
System in alphabetical order;
■ d. Remove the definition of RLF
Capital;
■ e. Add definitions for RLF Capital
Base and RLF Cash Available for
Lending in alphabetical order;
■ f. Revise the definition of RLF Income;
and
■ g. Add definitions for RLF Recipient
and Voluntarily Contributed Capital in
alphabetical order.
The additions and revisions read as
follows:
*
§ 307.8
demonstrate the capacity to implement
the EDA-approved CEDS.
*
*
*
*
*
PART 305—PUBLIC WORKS AND
ECONOMIC DEVELOPMENT
DISTRICTS
17. The authority citation for part 305
continues to read as follows:
■
Authority: 42 U.S.C. 3211; 42 U.S.C. 3141;
Department of Commerce Organization Order
10–4.
18. Revise paragraph (b) of § 305.6 to
read as follows:
■
§ 305.6 Allowable methods for
procurement of construction services.
*
*
*
*
*
(b) For all procurement methods, the
Recipient must comply with the
procedures and standards set forth in 2
CFR part 200.
■ 19. Revise paragraph (c) of § 305.8 to
read as follows:
*
*
*
*
(c) Acquisition of Recipient-furnished
equipment or materials under this
section also is subject to the
requirements of 2 CFR part 200.
PART 307—ECONOMIC ADJUSTMENT
ASSISTANCE INVESTMENTS
20. The authority citation of part 307
continues to read as follows:
■
Authority: 42 U.S.C. 3211; 42 U.S.C. 3149;
42 U.S.C. 3161; 42 U.S.C. 3162; 42 U.S.C.
3233; Department of Commerce Organization
Order 10–4.
■
21. Revise § 307.6 to read as follows:
§ 307.6 Revolving Loan Funds established
for lending.
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Economic Adjustment Assistance
Grants to capitalize or recapitalize RLFs
most commonly fund business lending,
but also may fund public infrastructure
or other authorized lending activities.
The requirements in this subpart B
apply to EDA-funded RLFs. Special
award conditions may contain
appropriate modifications of these
requirements.
■ 22. Revise the introductory text of
paragraph (b) and paragraph (b)(2) of
§ 307.7 to read as follows:
§ 307.7 Revolving Loan Fund award
requirements.
*
*
*
*
*
(b) RLF Grants shall comply with the
requirements set forth in this part, as
well as relevant provisions of parts 300
through 303, 305, and 314 of this
chapter and in the following
publications:
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Definitions.
*
*
*
*
*
Allowable Cash Percentage means the
average percentage of the RLF Capital
Base maintained as RLF Cash Available
for Lending by RLF Recipients in each
EDA regional office’s portfolio of RLF
Grants over the previous year.
*
*
*
*
*
Disbursement Phase means the period
of loan activity where Grant funds
awarded have not been fully disbursed
to the RLF Recipient.
*
*
*
*
*
Recapitalization Grants are
Investments of additional Grant funds to
increase the RLF Capital Base.
Reporting Period, for purposes of this
subpart B only, is based on the RLF
Recipient’s fiscal year end and is on an
annual or semi-annual basis as
determined by EDA.
*
*
*
*
*
Risk Analysis System refers to a set of
metrics defined by EDA to evaluate a
Recipient’s administration of its RLF
Grant and that may include but is not
limited to capital, assets, management,
earnings, liquidity, strategic results, and
financial controls.
RLF Capital Base means the total
value of RLF Grant assets administered
by the RLF Recipient. It is equal to the
amount of Grant funds used to
capitalize (and recapitalize, if
applicable), the RLF, plus Local Share,
plus RLF Income, plus Voluntarily
Contributed Capital, less any loan losses
and disallowances. Except as used to
pay for eligible and reasonable
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administrative costs associated with the
RLF’s operations, the RLF Capital Base
is maintained in two forms at all times:
As RLF Cash Available for Lending and
as outstanding loan principal.
RLF Cash Available for Lending
means the portion of the RLF Capital
Base that is held in cash and available
to make loans.
RLF Income means interest earned on
outstanding loan principal and RLF
accounts holding RLF funds, all fees
and charges received by the RLF, and
other income generated from RLF
operations. An RLF Recipient may use
RLF Income only to capitalize the RLF
for financing activities and to cover
eligible and reasonable costs necessary
to administer the RLF, unless otherwise
provided for in the Grant agreement or
approved in writing by EDA. RLF
Income excludes repayments of
principal and any interest remitted to
the U.S. Treasury pursuant to generally
accepted accounting principles (GAAP)
and § 307.20(h).
RLF Recipient means the Eligible
Recipient that receives an RLF Grant to
manage an RLF in accordance with an
RLF Plan, Prudent Lending Practices,
the terms and conditions of the RLF
Grant, and all applicable policies, laws,
and regulations.
*
*
*
*
*
Voluntary Contributed Capital means
an RLF Recipient’s voluntary infusion of
additional non-EDA funds into the RLF
Capital Base that is separate from and
exceeds any Local Share that is required
as a condition of the RLF Grant.
Voluntary Contributed Capital is an
irrevocable addition to the RLF Capital
Base and must be administered in
accordance with EDA regulations and
policies.
■ 24. In § 307.11, revise the section
heading and paragraphs (a), (c), (d), and
(f)(2) and add paragraphs (g) and (h) to
read as follows:
§ 307.11 Pre-disbursement requirements
and disbursement of funds to Revolving
Loan Funds.
(a) Pre-disbursement requirements. (1)
Within 60 calendar days before the
initial disbursement of EDA funds, the
RLF Recipient must provide the
following in a form acceptable to EDA:
(i) A certification from a qualified
independent accountant who preferably
has audited the RLF Recipient’s
accounting system in accordance with
the audit requirements set out as
subpart F to 2 CFR part 200 that such
system is adequate to identify,
safeguard, and account for the entire
RLF Capital Base, outstanding RLF
loans, and other RLF operations.
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(ii) The RLF Recipient’s certification
that standard RLF loan documents
reasonably necessary or advisable for
lending are in place and a certification
from the RLF Recipient’s legal counsel
that the loan documents are adequate
and comply with the terms and
conditions of the RLF Grant, RLF Plan,
and applicable State and local law. The
standard loan documents must include,
at a minimum, the following:
(A) Loan application;
(B) Loan agreement;
(C) Board of directors’ meeting
minutes approving the RLF loan;
(D) Promissory note;
(E) Security agreement(s);
(F) Deed of trust or mortgage (as
applicable);
(G) Agreement of prior lien holder (as
applicable); and
(H) Evidence demonstrating that
credit is not otherwise available on
terms and conditions that permit the
completion or successful operation of
the activity to be financed.
(iii) Evidence of fidelity bond
coverage for persons authorized to
handle funds under the RLF Grant
award in an amount sufficient to protect
the interests of EDA and the RLF. At a
minimum, the amount of coverage shall
be the maximum loan amount allowed
for in the EDA-approved RLF Plan.
(2) The RLF Recipient is required to
maintain the adequacy of the RLF’s
accounting system and maintain and
update standard RLF loan documents at
all times during the duration of the
RLF’s operation. In addition, the RLF
recipient must maintain sufficient
fidelity bond coverage as described in
this subsection for the duration of the
RLF’s operation. The RLF Recipient
shall maintain records and
documentation to demonstrate the
requirements set out in this paragraph
(a) are maintained for the duration of
the RLF’s operation. See also
§ 307.13(b)(3).
*
*
*
*
*
(c) Amount of disbursement. The
amount of a disbursement of Grant
funds shall be the amount required to
meet the Federal share requirement of a
new RLF loan. RLF Income held during
the disbursement phase may be used to
reimburse eligible administrative costs.
RLF Income earned during the
Disbursement Phase must be placed in
the RLF Capital Base and may be used
to reimburse eligible and reasonable
administrative costs, provide the
requirements of § 307.12(a) and (b) are
met, and increase the RLF Capital Base.
RLF Income earned during the
Disbursement Phase is not required to
be used for new RLF loans, unless
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otherwise specified in the terms and
conditions of an RLF Grant.
(d) Interest-bearing account. All Grant
funds disbursed by EDA to the RLF
Recipient for loan obligations incurred
but not yet disbursed to an eligible RLF
borrower must be deposited and held in
an interest-bearing account by the
Recipient until an RLF loan is made to
a borrower.
*
*
*
*
*
(f) * * *
(2) When an RLF has a combination
of In-Kind Contributions, which must be
specifically authorized in the terms and
conditions of the RLF Grant and may be
used to provide technical assistance to
borrowers or for eligible RLF
administrative costs, and cash Local
Share, the cash Local Share and the
Grant funds will be disbursed
proportionately as needed for lending
activities, provided that the last 20
percent of the Grant funds may not be
disbursed until all cash Local Share has
been expended. The full amount of the
cash Local Share shall remain for use in
the RLF.
(g) Loan closing and disbursement
schedule. (1) RLF loan activity must be
sufficient to draw down Grant funds in
accordance with the schedule
prescribed in the award conditions for
loan closings and disbursements to
eligible RLF borrowers. The schedule
usually requires that the RLF Recipient
lend the entire amount of the RLF Grant
within three years of the Grant award.
(2) If an RLF Recipient fails to meet
the prescribed lending schedule, EDA
may de-obligate the non-disbursed
balance of the RLF Grant. EDA may
allow exceptions where:
(i) Closed Loans approved prior to the
schedule deadline will commence and
complete disbursements within 45 days
of the deadline;
(ii) Closed Loans have commenced
(but not completed) disbursement
obligations prior to the deadline; or
(iii) EDA has approved a time
schedule extension pursuant to
paragraph (h) of this section.
(h) Time schedule extensions. (1) RLF
Recipients shall promptly inform EDA
in writing of any condition that may
adversely affect their ability to meet the
prescribed schedule deadlines. RLF
Recipients must submit a written
request to EDA for continued use of
Grant funds beyond a missed deadline
for disbursement of RLF funds. RLF
Recipients must provide good reason for
the delay in their extension request by
demonstrating that:
(i) The delay was unforeseen or
beyond the control of the RLF Recipient;
(ii) The financial need for the RLF
still exists;
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(iii) The current and planned use and
the anticipated benefits of the RLF will
remain consistent with the current
CEDS and the RLF Plan; and
(iv) The proposal of a revised time
schedule is reasonable. An extension
request must also provide an
explanation as to why no further delays
are anticipated.
(2) EDA is under no obligation to
grant a time extension. In the event an
extension is denied, EDA may deobligate all or part of the unused Grant
funds and terminate the Grant.
■ 25. In § 307.12, revise the section
heading, paragraphs (a) and (b), and the
paragraph heading and introductory text
of paragraph (c), and add paragraph (d)
to read as follows:
§ 307.12 Revolving Loan Fund Income
requirements during the Revolving Phase;
payments on defaulted and written off
Revolving Loan Fund loans; Voluntarily
Contributed Capital.
(a) During the Revolving Phase, 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.
RLF Income may fund administrative
costs, provided:
(1) Such RLF Income is earned and
the administrative costs are accrued in
the same fiscal year of the RLF
Recipient;
(2) RLF Income earned, but not used
for administrative costs during the same
fiscal year of the RLF Recipient is made
available for lending activities;
(3) RLF Income shall not be
withdrawn from the RLF Capital Base in
a subsequent fiscal year for any purpose
other than lending without the prior
written consent of EDA; and
(4) An RLF Recipient shall not use
funds in excess of RLF Income for
administrative costs unless directed
otherwise in writing by EDA. In
accordance with EDA’s RLF Risk
Analysis System, RLF Recipients are
expected to keep administrative costs to
a minimum in order to maintain the
RLF Capital Base. The percentage of
RLF Income used for administrative
expenses will be one of the metrics used
in EDA’s RLF Risk Analysis System to
evaluate RLF Recipients. See also
§ 307.16.
(b) Compliance guidance. When
charging costs against RLF Income, RLF
Recipients must comply with applicable
Federal Uniform Administrative
Requirements, cost principles, and audit
requirements as detailed in this
provision and in the terms and
conditions of the RLF Grant.
(1) For RLF Grants made on or after
December 26, 2014. For RLFs awarded
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on or after December 26, 2014 or for
RLFs that have received one or more
Recapitalization Grants on or after
December 26, 2014, the RLF Recipient
must comply with the administrative
and cost principles in 2 CFR part 200
(‘‘Uniform Administrative
Requirements, Cost Principles, and
Audit Requirements for Federal
Awards’’).
(2) For RLF Grants made before
December 26, 2014. For RLFs awarded
before December 26, 2014, unless
otherwise indicated in the terms of the
Grant, the RLF Recipient must comply
with the following cost principles:
(i) 2 CFR part 225 (OMB Circular A–
87 for State, local, and Indian tribal
governments),
(ii) 2 CFR part 230 (OMB Circular A–
122 for non-profit organizations other
than institutions of higher education,
hospitals or organizations named in
OMB Circular A–122 as not subject to
such Circular), and
(iii) 2 CFR part 220 (OMB Circular A–
21 for educational institutions).
(3) For all RLF Grants. For all RLF
Grants, regardless of when they were
awarded, the audit requirements set out
as subpart F to 2 CFR part 200 apply to
audits of the RLF Recipient fiscal years
beginning on or after December 26,
2014. In addition, the Compliance
Supplement, which is appendix XI to 2
CFR part 200, applies as appropriate.
(c) Priority of payments on defaulted
and written off RLF loans. When an RLF
Recipient receives proceeds on a
defaulted or written off RLF loan that is
not subject to liquidation pursuant to
§ 307.21, such proceeds shall be applied
in the following order of priority:
*
*
*
*
*
(d) Voluntarily Contributed Capital.
An RLF Recipient that wishes to inject
additional capital into the RLF Capital
Base to augment the amount of
resources available to lend must submit
a written request that specifies the
source of the funds to be added. Once
an RLF Recipient elects to commit
Voluntarily Contributed Capital and
upon approval by EDA, the Voluntarily
Contributed Capital becomes an
irrevocable part of the RLF Capital Base
and may not be subsequently
withdrawn or separated from the RLF.
■ 26. Revise § 307.13 as follows:
■ a. Revise paragraph (b)(2);
■ b. Redesignate paragraph (b)(3) as
paragraph (b)(4); and
■ c. Add new paragraph (b)(3).
The revisions and additions read as
follows:
§ 307.13
*
Records and retention.
*
*
(b) * * *
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*
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(2) Retain records of administrative
expenses incurred for activities and
equipment relating to the operation of
the RLF for three years from the actual
submission date of the report that covers
the fiscal year in which such costs were
claimed.
(3) Consistent with § 307.11(a), for the
duration of RLF operations, maintain
records to demonstrate:
(i) The adequacy of the RLF’s
accounting system to identify,
safeguard, and account for the entire
RLF Capital Base, outstanding RLF
loans, and other RLF operations;
(ii) That standard RLF loan
documents reasonably necessary or
advisable for lending are in place; and
(iii) Evidence of fidelity bond
coverage for persons authorized to
handle funds under the Grant award in
an amount sufficient to protect the
interests of EDA and the RLF.
*
*
*
*
*
■ 27. Revise § 307.14 to read as follows:
§ 307.14
Revolving Loan Fund report.
(a) Frequency of reports. All RLF
Recipients, including those receiving
Recapitalization Grants for existing
RLFs, must complete and submit an RLF
report, using Form ED–209 or any
successor form, in a format and at a
frequency as required by EDA.
(b) Report contents. RLF Recipients
must certify as part of the RLF report to
EDA that the RLF is operating in
accordance with the applicable RLF
Plan and that the information provided
is complete and accurate.
■ 28. Amend § 307.15 as follows:
■ a. Revise paragraph (a);
■ b. Remove paragraph (b);
■ b. Redesignate paragraphs (c) and (d)
as paragraphs (b) and (c), respectively;
and
■ c. Revise the paragraph heading of
newly redesignated paragraph (c) and
paragraph (c)(1).
The revisions and additions read as
follows:
§ 307.15 Prudent management of
Revolving Loan Funds.
(a) Accounting principles. (1) RLFs
shall operate in accordance with
generally accepted accounting
principles (‘‘GAAP’’) as in effect in the
United States and the provisions
outlined in the audit requirements set
out as subpart F to 2 CFR part 200 and
the Compliance Supplement, which is
appendix XI to 2 CFR part 200, as
applicable.
(2) In accordance with GAAP, a loan
loss reserve may be recorded in the RLF
Recipient’s financial statements to show
the adjusted current value of an RLF’s
loan portfolio, provided this loan loss
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68207
reserve is non-funded and is
represented by a non-cash entry.
However, loan loss reserves shall not be
used to reduce the value of the RLF in
the Schedule of Expenditures of Federal
Awards (‘‘SEFA’’) required as part of the
RLF Recipient’s audit requirements
under 2 CFR part 200.
*
*
*
*
*
(c) RLF leveraging. (1) RLF loans must
leverage additional investment of at
least two dollars for every one dollar of
such RLF loans. This leveraging
requirement applies to the RLF portfolio
as a whole rather than to individual
loans and is effective for the duration of
the RLF’s operation. To be classified as
leveraged, additional investment must
be made within 12 months of approval
of an RLF loan, as part of the same
business development project, and may
include:
(i) Capital invested by the borrower or
others;
(ii) Financing from private entities;
(iii) The non-guaranteed portions and
90 percent of the guaranteed portions of
any Federal loan; or
(iv) Loans from other State and local
lending programs.
*
*
*
*
*
■ 29. Revise § 307.16 to read as follows:
§ 307.16
Risk Analysis System.
(a) EDA shall evaluate and manage
RLF recipients using a Risk Analysis
System that will focus on such risk
factors as: Capital, assets, management,
earnings, liquidity, strategic results, and
financial controls. Risk analysis ratings
of each RLF Recipient’s RLF program
shall be conducted at least annually and
will be based on the most recently
submitted Form ED–209 RLF report.
(b) An RLF Recipient generally will be
allowed a reasonable period of time to
achieve compliance with risk factors as
defined by EDA. However, persistent
noncompliance with these factors and
their limits as identified through EDA’s
Risk Analysis System over multiple
Reporting Periods may result in EDA
taking appropriate remedies for
noncompliance as detailed in § 307.21.
■ 30. Revise § 307.17 to read as follows:
§ 307.17 Requirements for Revolving Loan
Fund Cash Available for Lending.
(a) General. RLF Cash Available for
Lending shall be deposited and held in
an interest-bearing account by the
Recipient and used for the purpose of
making RLF loans that are consistent
with an RLF Plan or such other
purposes approved by EDA. To ensure
that RLF funds are used as intended,
each loan agreement must clearly state
the purpose of each loan.
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(b) Allowable Cash Percentage. EDA
shall notify each RLF recipient by
January 1 of each year of the Allowable
Cash Percentage that is applicable to
lending during the ensuing calendar
year. During the Revolving Phase, RLF
Recipients must manage their
repayment and lending schedules so
that at all times they do not exceed the
Allowable Cash Percentage.
(c) Restrictions on use of RLF Cash
Available for Lending. RLF Cash
Available for Lending shall not be used
to:
(1) Acquire an equity position in a
private business;
(2) Subsidize interest payments on an
existing RLF loan;
(3) Provide a loan to a borrower for
the purpose of meeting the requirements
of equity contributions under another
Federal Agency’s loan programs;
(4) Enable borrowers to acquire an
interest in a business either through the
purchase of stock or through the
acquisition of assets, unless sufficient
justification is provided in the loan
documentation. Sufficient justification
may include acquiring a business to
save it from imminent closure or to
acquire a business to facilitate a
significant expansion or increase in
investment with a significant increase in
jobs. The potential economic benefits
must be clearly consistent with the
strategic objectives of the RLF;
(5) Provide RLF loans to a borrower
for the purpose of investing in interestbearing accounts, certificates of deposit,
or any investment unrelated to the RLF;
or
(6) Refinance existing debt, unless:
(i) The RLF Recipient sufficiently
demonstrates in the loan documentation
a ‘‘sound economic justification’’ for the
refinancing (e.g., the refinancing will
support additional capital investment
intended to increase business activities).
For this purpose, reducing the risk of
loss to an existing lender(s) or lowering
the cost of financing to a borrower shall
not, without other indicia, constitute a
sound economic justification; or
(ii) RLF Cash Available for Lending
will finance the purchase of the rights
of a prior lien holder during a
foreclosure action which is necessary to
preclude a significant loss on an RLF
loan. RLF funds may be used for this
purpose only if there is a high
probability of receiving compensation
from the sale of assets sufficient to cover
an RLF’s costs plus a reasonable portion
of the outstanding RLF loan within a
reasonable time frame approved by EDA
following the date of refinancing.
(7) Serve as collateral to obtain credit
or any other type of financing without
EDA’s prior written approval;
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(8) Support operations or
administration of the RLF Recipient; or
(9) Undertake any activity that would
violate the requirements found in part
314 of this chapter, including § 314.3
(‘‘Authorized Use of Property’’) and
§ 314.4 (‘‘Unauthorized Use of
Property’’).
(d) Compliance and loan quality
review. To ensure that the RLF recipient
makes eligible RLF loans consistent
with its RLF Plan or such other
purposes approved by EDA, EDA may
require an independent third party to
conduct a compliance and loan quality
review for the RLF Grant every three
years. The RLF Recipient may undertake
this review as an administrative cost
associated with the RLF’s operations
provided the requirements set forth in
§ 307.12 are satisfied.
■ 31. Revise paragraphs (a)(1)
introductory text, (a)(2), (b)(1), (b)(1)(i),
and (b)(2)(i) of § 307.18 to read as
follows:
§ 307.18 Addition of lending areas;
consolidation and merger of RLFs.
(a)(1) An RLF Recipient shall make
loans only within its EDA-approved
lending area, as set forth and defined in
the RLF Grant and the RLF Plan. An
RLF Recipient may add a lending area
(an ‘‘Additional Lending Area’’) to its
existing lending area to create a new
lending area (the ‘‘New Lending Area’’)
only with EDA’s prior written approval
and subject to the following provisions
and conditions:
*
*
*
*
*
(2) Following EDA approval, the New
Lending Area designation shall remain
in place until EDA approves a
subsequent request for a New Lending
Area.
(b) * * *
(1) Single RLF Recipient. An RLF
Recipient with more than one EDAfunded RLF Grant may consolidate two
or more EDA-funded RLFs into one
combined RLF with EDA’s prior written
approval and provided:
(i) It is up-to-date with all reports in
accordance with § 307.14;
*
*
*
*
*
(2) * * *
(i) The replacement RLF Recipient is
up-to-date with all reports in
accordance with § 307.14;
*
*
*
*
*
■ 32. Revise § 307.20 to read as follows:
§ 307.20
Noncompliance.
EDA will take appropriate compliance
actions as detailed in § 307.21 for the
RLF Recipient’s failure to operate the
RLF in accordance with the RLF Plan,
the terms and conditions of the RLF
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Grant, or this subpart, including but not
limited to:
(a) Failing to obtain prior EDA
approval for material changes to the RLF
Plan, including provisions for
administering the RLF;
(b) Failing to submit an updated RLF
Plan to EDA in accordance with
§ 307.9(c);
(c) Failing to submit timely progress,
financial, and audit reports in the
format required by the RLF Grant and
§ 307.14, including the Form ED–209
RLF report;
(d) Failing to manage the RLF Grant
in accordance with Prudent Lending
Practices, as defined in § 307.8;
(e) Holding RLF Cash Available for
Lending so that it is 50 percent or more
of the RLF Capital Base for 24 months
without an EDA-approved extension
request based on other EDA risk
analysis factors or other extenuating
circumstances;
(f) Making an ineligible loan;
(g) Failing to disburse the EDA funds
in accordance with the time schedule
prescribed in the RLF Grant;
(h) Failing to sequester funds or remit
the interest on EDA’s portion of the
sequestered funds to the U.S. Treasury,
as directed by EDA;
(i) Failing to comply with the audit
requirements set forth in subpart F to 2
CFR part 200 and the related
Compliance Supplement, including
reference to the correctly valued EDA
RLF Federal expenditures in the SEFA,
timely submission of audit reports to the
Federal Audit Clearinghouse, and the
inclusion of the RLF program as an
appropriately audited program;
(j) Failing to implement timely
resolutions to audit findings or
questioned costs contained in the
annual audit, as applicable;
(k) Failing to comply with an EDAapproved corrective action plan to
remedy persistent noncompliance with
RLF-related findings;
(l) Failing to comply with the
conflicts of interest provisions set forth
in § 302.17; and
(m) Making unauthorized use of RLF
Cash Available for Lending in violation
of § 307.18(c).
■ 33. Revise § 307.21 to read as follows:
§ 307.21
Remedies for noncompliance.
(a) General. If an RLF Recipient fails
to operate the RLF in accordance with
the RLF Plan, the terms and conditions
of the RLF Grant, or this subpart, as
detailed in § 307.20, as appropriate in
the circumstances, EDA may require one
or more of the following actions, as
appropriate in the circumstances:
(1) Increased reporting requirements;
(2) Implementation of a corrective
action plan;
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(3) A special audit;
(4) Sequestration of RLF funds;
(5) Repayment of ineligible loans or
other costs to the RLF;
(6) Transfer or merger of the RLF in
accordance with § 307.18;
(7) Suspension of the RLF Grant; or
(8) Termination of the RLF Grant, in
whole or in part.
(b) Disallowance of a portion of an
RLF Grant, liquidation. If the RLF
Recipient engages in certain problematic
practices, EDA may disallow a
corresponding proportion of the Grant
or direct the RLF Recipient to transfer
loans to an RLF Third Party for
liquidation. Problematic practices for
which EDA may disallow a portion of
an RLF Grant and recover the pro-rata
Federal Share (as defined in § 314.5 of
this chapter) include the RLF Recipient:
(1) Holding RLF Cash Available for
Lending so that it is 50 percent or more
of the RLF Capital Base for 24 months
without an EDA-approved extension
request;
(2) Failing to disburse the EDA funds
in accordance with the time schedule
prescribed in the RLF Grant; or
(3) Determining that it does not wish
to further invest in the RLF or cannot
maintain operations at the degree
originally contemplated upon receipt of
the RLF Grant and requests that a
portion of the RLF Grant be disallowed,
and EDA agrees to the disallowance.
(c) Termination or suspension. To
maintain effective control over and
accountability of RLF Grant funds and
assets, EDA shall determine the manner
and timing of any suspension or
termination action. EDA may require the
RLF Recipient to repay the Federal
Share in a lump-sum payment or enter
into a Sale, or EDA may agree to enter
into a repayment agreement with the
RLF Recipient for repayment of the
Federal Share.
(d) Termination, liquidation upon
termination. When EDA approves the
termination of an RLF Grant, EDA must
make all efforts to recover the pro rata
Federal Share (as defined in § 314.5 of
this chapter). EDA may assign or
transfer assets of the RLF to an RLF
Third Party for liquidation. The
following terms will govern any
liquidation:
(1) EDA shall have sole discretion in
choosing the RLF Third Party;
(2) The RLF Third Party may be an
Eligible Applicant or a for-profit
organization not otherwise eligible for
Investment Assistance;
(3) EDA may enter into an agreement
with the RLF Third Party to liquidate
the assets of one or more RLFs or RLF
Recipients;
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68209
(4) EDA may allow the RLF Third
Party to retain a portion of the RLF
assets, consistent with the agreement
referenced in paragraph (d)(3) of this
section, as reasonable compensation for
services rendered in the liquidation; and
(5) EDA may require additional
reasonable terms and conditions.
(e) Distribution of proceeds. The
proceeds resulting from any liquidation
upon termination shall be distributed in
the following order of priority:
(i) First, for any third party
liquidation costs;
(ii) Second, for the payment of EDA’s
Federal Share; and
(iii) Third, if any proceeds remain, to
the RLF Recipient.
(f) RLF Recipient’s request to
terminate. EDA may approve a request
from an RLF Recipient to terminate an
RLF Grant. The RLF Recipient must
compensate the Federal Government for
the pro rata Federal Share of the RLF
Capital Base.
(g) Upon termination, distribution of
proceeds shall occur in accordance with
§ 307.21(e).
ensure the Subrecipient’s compliance
with legal requirements.
*
*
*
*
*
■ 36. Revise paragraphs (a)(1) and (b) of
§ 309.2 to read as follows:
PART 309—REDISTRIBUTIONS OF
INVESTMENT ASSISTANCE
PART 314—PROPERTY
34. The authority citation of part 309
continues to read as follows:
■
Authority: 42 U.S.C. 3154c; 42 U.S.C. 3211;
Department of Commerce Delegation Order
10–4.
35. Revise § 309.1(a) to read as
follows:
■
§ 309.1 Redistributions under parts 303,
305 and 306.
(a) General. Except as provided in
paragraph (b) of this section, a Recipient
of Investment Assistance under parts
303, 305 or 306 of this chapter may
directly expend such Investment
Assistance or, with prior EDA approval,
may redistribute such Investment
Assistance in the form of a subgrant to
another Eligible Recipient, generally
referred to as a Subrecipient, that
qualifies for Investment Assistance
under the same part of this chapter as
the Recipient, to fund required
components of the scope of work
approved for the Project. All subgrants
made pursuant to this section shall be
subject to the same terms and
conditions applicable to the Recipient
under the original Investment
Assistance award and must satisfy the
requirements of PWEDA and of this
chapter. EDA may require the Eligible
Recipient under the original Investment
award to agree to special award
conditions and the Subrecipient to
provide appropriate certifications to
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§ 309.2
Redistributions under part 307.
(a) * * *
(1) A subgrant to another Eligible
Recipient, generally referred to a
Subrecipient, that qualifies for
Investment Assistance under part 307 of
this chapter; or
*
*
*
*
*
(b) All redistributions of Investment
Assistance made pursuant to this
section shall be subject to the same
terms and conditions applicable to the
Recipient under the original Investment
Assistance award and must satisfy the
requirements of PWEDA and of this
chapter. EDA may require the Eligible
Recipient under the original Investment
Award to agree to special award
conditions and the Subrecipient to
provide appropriate certifications to
ensure the Subrecipient’s compliance
with legal requirements.
37. The authority citation for part 314
continues to read as follows:
■
Authority: 42 U.S.C. 3211; Department of
Commerce Organization Order 10–4.
38. Amend § 314.1 by:
a. Revising the definition of Personal
Property;
■ b. Adding the definition of Project
Property in alphabetical order; and
■ c. Revising the definition of Real
Property.
The revisions and additions read as
follows:
■
■
§ 314.1
Definitions.
*
*
*
*
*
Personal Property means all tangible
and intangible property other than Real
Property, including the RLF Capital
Base as defined at § 307.8.
Project Property means all Property
that is acquired or improved, in whole
or in part, with Investment Assistance
and is required, as determined by EDA,
for the successful completion and
operation of a Project and/or serves as
the economic justification of a Project.
As appropriate to specify the type of
Property to which they are referring,
subparts B and C of this part refer to
Project Property as ‘‘Project Real
Property’’ or ‘‘Project Personal
Property’’.
*
*
*
*
*
Real Property means any land,
whether raw or improved, and includes
structures, fixtures, appurtenances and
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other permanent improvements,
excluding moveable machinery and
equipment. Real Property includes land
that is served by the construction of
Project infrastructure (such as roads,
sewers and water lines) where the
infrastructure contributes to the value of
such land as a specific purpose of the
Project.
*
*
*
*
*
■ 39. Revise § 314.2 to read as follows:
§ 314.2
Federal Interest.
(a) Subject to the obligations and
conditions set forth in this part and in
relevant provisions of 2 CFR part 200,
Project Property vests upon acquisition
in the recipient (or, if approved by EDA,
in a Co-recipient or Subrecipient).
Project Property shall be held in trust by
the Recipient for the benefit of the
Project for the Estimated Useful Life of
the Project, during which period EDA
retains an undivided equitable
reversionary interest in the Property (the
‘‘Federal Interest’’). The Federal Interest
ensures compliance with EDA Project
requirements, including those related to
the purpose, scope, and use of a Project.
The Recipient typically must secure the
Federal Interest through a recorded lien,
statement, or other recordable
instrument setting forth EDA’s Property
interest in a Project (e.g., a mortgage,
covenant, or other statement of EDA’s
Real Property interest in the case of a
Project involving the acquisition,
construction, or improvement of a
building. See § 314.8.).
(b) When the Federal government is
fully compensated for the Federal Share
of Project Property, the Federal Interest
is extinguished and the Federal
Government has no further interest in
the Property, except as provided in
§ 314.10(e)(3) regarding
nondiscrimination requirements.
■ 40. Revise § 314.3 to read as follows:
sradovich on DSK3GMQ082PROD with PROPOSALS4
§ 314.3
Authorized use of Project Property.
(a) General. During the Estimated
Useful Life of the Project, the Recipient
or Owner must use any Project Property
only for authorized Project purposes as
set out in the terms of the Investment
Assistance. Such Property must not be
Disposed of or encumbered without
EDA’s prior written authorization.
(b) Project Property that is no longer
needed for Project purposes. Where
EDA and the Recipient determine
during the Estimated Useful Life of the
Project that Project Property is longer
needed for the original purpose of the
Investment Assistance, EDA, in its sole
discretion, may approve the use of such
Property in other Federal grant
programs or in programs that have
purposes consistent with those
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authorized by PWEDA and by this
chapter.
(c) Real Property for sale or lease.
Where EDA determines that the
authorized purpose of the Investment
Assistance is to develop Real Property
to be leased or sold, such sale or lease
is permitted provided it is for Adequate
Consideration and the sale is consistent
with the authorized purpose of the
Investment Assistance and with all
applicable Investment Assistance
requirements, including
nondiscrimination and environmental
compliance.
(d) Property transfers and Successor
Recipients. EDA, in its sole discretion,
may approve the transfer of any Project
Property from a Recipient to a Successor
Recipient (or from one Successor
Recipient to another Successor
Recipient). The Recipient will remain
responsible for complying with the rules
of this part and the terms and
conditions of the Investment Assistance
for the period in which it is the
Recipient. Thereafter, the Successor
Recipient must comply with the rules of
this part and with the same terms and
conditions as were applicable to the
Recipient (unless such terms and
conditions are otherwise amended by
EDA). The same rules apply to EDAapproved transfers of Property between
Successor Recipients.
(e) Replacement Personal Property.
When acquiring replacement Personal
Property of equal or greater value than
Personal Property originally acquired
with Investment Assistance, the
Recipient may, with EDA’s approval,
trade in such Personal Property
originally acquired or sell the original
Personal Property and use the proceeds
for the acquisition of the replacement
Personal Property; provided that the
replacement Personal Property is for use
in the Project. The replacement Personal
Property is subject to the same
requirements as the original Personal
Property.
(f) Replacement Real Property. In
extraordinary and compelling
circumstances, the Assistant Secretary
may approve the replacement of Real
Property used in a Project.
(g) Incidental use of Project Property.
With EDA’s prior written approval, a
Recipient may undertake an incidental
use of Project Property that does not
interfere with the scope of the Project or
the economic purpose for which the
Investment was made; provided that the
Recipient is in compliance with
applicable law and the terms and
conditions of the Investment Assistance,
and the incidental use of the Property
will not violate the terms and
conditions of the Investment Assistance
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or otherwise undermine the economic
purpose for which the Investment was
made or adversely affect the economic
useful life of the Property. Eligible
Applicants and Recipients should
contact the appropriate regional office
(whose contact information is available
via the Internet at https://www.eda.gov)
for guidelines on obtaining approval for
incidental use of Property under this
section.
■ 41. Revise the section heading,
paragraph (a), the introductory text of
paragraph (b) and paragraph (c) of
§ 314.4 to read as follows:
§ 314.4 Unauthorized Use of Project
Property.
(a) Compensation of Federal Share
upon an Unauthorized Use of Project
Property. Except as provided in §§ 314.3
(regarding the authorized use of
Property) or 314.10 (regarding the
release of the Federal Interest in certain
Property), or as otherwise authorized by
EDA, the Federal Government must be
compensated by the Recipient for the
Federal Share whenever, during the
Estimated Useful Life of the Project, any
Project Property is Disposed of,
encumbered, or no longer used for the
purpose of the Project; provided that for
equipment and supplies, the
requirements of 2 CFR part 200,
including any supplements or
amendments thereto, shall apply.
(b) Additional Unauthorized Uses of
Project Property. Additionally, prior to
the release of the Federal Interest,
Project Real Property or tangible Project
Personal Property may not be used:
*
*
*
*
*
(c) Recovery of the Federal Share.
Where the Disposition, encumbrance, or
use of any Project Property violates
paragraphs (a) or (b) of this section, EDA
may assert the Federal Interest in the
Project Property to recover the Federal
Share for the Federal Government and
may take such actions as authorized by
PWEDA and this chapter, including the
actions provided in §§ 302.3, 302.16,
and 307.21 of this chapter. EDA may
pursue its rights under paragraph (a) of
this section and this paragraph (c) to
recover the Federal Share, plus costs
and interest. When the Federal
Government is fully compensated for
the Federal Share, the Federal Interest is
extinguished as provided in § 314.2(b),
and EDA will have no further interest in
the ownership, use, or Disposition of the
Property, except for the
nondiscrimination requirements set
forth in § 314.10(d)(3).
■ 42. Revise § 314.5(a) to read as
follows:
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§ 314.5
Federal Share.
(a) For purposes of this part, ‘‘Federal
Share’’ means that portion of the current
fair market value of any Project Property
attributable to EDA’s participation in
the Project. EDA may rely on a current
certified appraisal of the Project
Property prepared by an appraiser
licensed in the State where the Project
Property is located to determine the fair
market value. In extraordinary
circumstances and at EDA’s sole
discretion, where EDA is unable to
determine the current fair market value,
EDA may use other methods of
determining the value of Project
Property, including the amount of the
award of Investment Assistance or the
amount paid by a transferee. The
Federal Share shall be the current fair
market value or other valuation as
determined by EDA of the Property after
deducting:
*
*
*
*
*
■ 43. Revise paragraphs (a), (b)(3),
(b)(4)(v)(B), (b)(5)(v)(B), and (c) of
§ 314.6 to read as follows:
sradovich on DSK3GMQ082PROD with PROPOSALS4
§ 314.6
Encumbrances.
(a) General. Except as provided in
paragraph (b) of this section or as
otherwise authorized by EDA, Project
Property must not be used to secure a
mortgage or deed of trust or in any way
otherwise encumbered, except to secure
a grant or loan made by a Federal
Agency or State agency or other public
body participating in the same Project,
so long as the Recipient discloses such
an encumbrance in writing as part of its
application for Investment Assistance or
as soon as practicable after learning of
the encumbrance.
(b) * * *
(3) Pre-existing encumbrances.
Encumbrances already in place and
disclosed to EDA at the time EDA
approves the Project where EDA, in its
sole discretion, determines that:
(i) The requirements of § 314.7(b) are
met;
(ii) Consistent with paragraphs
(b)(4)(iv) and (b)(5)(iv) of this section,
the terms and conditions of the
encumbrance are satisfactory; and
(iii) Consistent with paragraphs
(b)(4)(v) and (b)(5)(v), there is a
reasonable expectation that the
Recipient will not default on its
obligations.
(4) * * *
(v) * * *
(B) A Recipient that is a non-profit
organization is financially strong and is
an established organization with
sufficient organizational life to
demonstrate stability over time;
*
*
*
*
*
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(5) * * *
(v) * * *
(B) A Recipient that is a non-profit
organization is financially strong and is
an established organization with
sufficient organizational life to
demonstrate stability over time;
*
*
*
*
*
(c) Encumbering Project Property,
other than as permitted in this section,
is an Unauthorized Use of the Property
under § 314.4.
■ 44. Revise paragraphs (a), (c)
introductory text, (c)(1), (c)(1)(ii), (c)(2)
introductory text, (c)(4) introductory
text, (c)(4)(ii)(B), (c)(4)(iii), (c)(5)(i), and
(c)(5)(iii) of § 314.7 to read as follows:
§ 314.7
Title.
(a) General title requirement. Except
in those limited circumstances
identified in paragraph (c) of this
section, at the time Investment
Assistance is awarded, the Recipient
must hold title to Project Real Property,
which, as noted in § 314.1 in the
definition of ‘‘Real Property’’ includes
land that is served by the construction
of Project infrastructure (such as roads,
sewers, and water lines) and where the
infrastructure contributes to the value of
such land as a specific purpose of the
Project. The Recipient must maintain
title to Project Real Property at all times
during the Estimated Useful Life of the
Project, except in those limited
circumstances as provided in paragraph
(c) of this section. The Recipient also
must furnish evidence, satisfactory in
form and substance to EDA, that title to
Project Real Property (other than
property of the United States) is vested
in the Recipient and that any easements,
rights-of-way, State or local government
permits, long-term leases, or other items
required for the Project have been or
will be obtained by the Recipient within
an acceptable time, as determined by
EDA.
*
*
*
*
*
(c) Exceptions. The following are
exceptions to the requirements of
paragraph (a) of this section that the
Recipient hold title to Project Real
Property at the time Investment
Assistance is awarded and at all times
during the Estimated Useful Life of the
Project.
(1) Project Real Property acquisition.
Where the acquisition of Project Real
Property is contemplated as part of an
Investment Assistance award, EDA may
determine that an agreement for the
Recipient to purchase the Project Real
Property will be acceptable for purposes
of paragraph (a) of this section if:
*
*
*
*
*
(ii) EDA, in its sole discretion,
determines that the terms and
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68211
conditions of the purchase agreement
adequately safeguard the Federal
Government’s interest in the Project
Real Property.
(2) Leasehold interests. EDA may
determine that a long-term leasehold
interest for a period not less than the
Estimated Useful Life of Project Real
Property will be acceptable for purposes
of paragraph (a) of this section if:
*
*
*
*
*
(4) State or local government owned
roadway or highway construction. When
the Project includes construction on a
State or local government owned
roadway or highway the owner of which
is not the Recipient, EDA may allow the
Project to be constructed in whole or in
part in the right-of-way of such public
roadway or highway, provided that:
*
*
*
*
*
(ii) * * *
(B) If at any time during the Estimated
Useful Life of the Project any or all of
the improvements in the Project within
the State or local government owned
roadway or highway are relocated for
any reason pursuant to requirements of
the owner of the public roadway or
highway, the Recipient shall be
responsible for accomplishing such
relocation, including expending the
Recipient’s own funds as necessary, so
that the Project continues as authorized
by the Investment Assistance; and
(iii) The Recipient obtains all written
authorizations (i.e., State or county
permit(s)) necessary for the Project to be
constructed within the public roadway
or highway, copies of which shall be
submitted to EDA. Such authorizations
shall contain no time limits that EDA
determines substantially restrict the use
of the public roadway or highway for
the Project during the Estimated Useful
Life of the Project.
(5) * * *
(i) General. At EDA’s discretion, when
an authorized purpose of the Project is
to construct Recipient-owned facilities
to serve Recipient or privately owned
Project Real Property, including
industrial or commercial parks, so that
the Recipient or Owner may sell or lease
parcels of the Project Real Property to
private parties, such ownership, sale, or
lease, as applicable, is permitted so long
as:
(A) In cases where an authorized
purpose of the Project is to sell Project
Real Property, the Recipient or Owner,
as applicable, provides evidence
sufficient to EDA that it holds title to
the Project Real Property intended for
sale or lease prior to the disbursement
of any portion of the Investment
Assistance and will retain title until the
sale of the Property in accordance with
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paragraphs (c)(5)(i)(C) through (E) of this
section;
(B) In cases where an authorized
purpose of the Project is to lease Project
Real Property, the Recipient or Owner,
as applicable, provides evidence
sufficient to EDA that it holds title to
the Project Real Property intended for
lease prior to the disbursement of any
portion of the Investment Assistance
and will retain title for the entire
Estimated Useful Life of the Project;
(C) The Recipient provides adequate
assurances that the Project and the
development of land and improvements
on the Recipient or privately owned
Project Real Property to be served by or
that provides the economic justification
for the Project will be completed
according to the terms of the Investment
Assistance;
(D) The sale or lease of any portion of
the Project or of Project Real Property
served by the Project or that provides
the economic justification for the Project
during the Project’s Estimated Useful
Life must be for Adequate Consideration
and the terms and conditions of the
Investment Assistance and the
purpose(s) of the Project must continue
to be fulfilled after such sale or lease;
and
*
*
*
*
*
(iii) Agreement between Recipient and
Owner. In addition to paragraphs
(c)(5)(i) and (ii) of this section, when an
authorized purpose of the Project is to
construct facilities to serve privately
owned Real Property, the Recipient and
the Owner must agree to use the Real
Property improved or benefitted by the
EDA Investment Assistance only for the
authorized purposes of the Project and
in a manner consistent with the terms
and conditions of the EDA Investment
Assistance for the Estimated Useful Life
of the Project.
*
*
*
*
*
■ 45. Revise paragraphs (a), (b), and (d)
of § 314.8 to read as follows:
sradovich on DSK3GMQ082PROD with PROPOSALS4
§ 314.8 Recorded statement for Real
Property.
(a) For all Projects involving the
acquisition, construction, or
improvement of a building, as
determined by EDA, the Recipient shall
execute a lien, covenant, or other
statement of the Federal Interest in such
Project Real Property. The statement
shall specify the Estimated Useful Life
of the Project and shall include, but not
be limited to, the Disposition,
encumbrance and Federal Share
requirements. The statement shall be
satisfactory in form and substance to
EDA.
(b) The statement of the Federal
Interest must be perfected and placed of
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record in the Real Property records of
the jurisdiction in which the Project
Real Property is located, all in
accordance with applicable law.
*
*
*
*
*
(d) In extraordinary circumstances
and at EDA’s sole discretion, EDA may
choose to accept another instrument to
protect the Federal Interest in Project
Real Property, such as an escrow
agreement or letter of credit, provided
that EDA determines such instrument is
adequate and a recorded statement in
accord with paragraph (a) of this section
is not reasonably available. The terms
and provisions of the relevant
instrument shall be satisfactory to EDA
in EDA’s sole judgment. The costs and
fees for escrow services and letters of
credit shall be paid by the Recipient.
■ 46. Revise § 314.9 to read as follows:
§ 314.9 Recorded statement for Project
Personal Property.
For all Projects which EDA
determines involve the acquisition or
improvement of significant items of
Personal Property, including ships,
machinery, equipment, removable
fixtures, or structural components of
buildings, the Recipient shall provide
notice of the Federal Interest all Project
Personal Property by executing a
Uniform Commercial Code Financing
Statement (Form UCC–1, as provided by
State law) or other statement of the
Federal Interest in the Project Personal
Property, acceptable in form and
substance to EDA, which statement
must be perfected and placed of record
in accordance with applicable law, with
continuances re-filed as appropriate.
Whether or not a statement is required
by EDA to be recorded, the Recipient
must hold title to all Project Personal
Property, except as otherwise provided
in this part.
■ 47. Revise the section heading and
paragraphs (a) through (d), (e)(2), and
the introductory text to paragraph (e)(3)
to read as follows:
§ 314.10 Procedures for release of the
Federal Interest.
(a) General. As provided in § 314.2 of
this chapter, the Federal Interest in
Project Property extends for the
duration of the Estimated Useful Life of
the Project, which is determined by
EDA at the time of Investment award.
Upon request of the Recipient, EDA will
release the Federal Interest in Project
Property upon expiration of the
Estimated Useful Life as established in
the terms and conditions of the
Investment Assistance and in accord
with the requirements of this section
and part. This section provides
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procedures to obtain a release of the
Federal Interest in Project Property.
(b) Release of the Federal Interest
after the expiration of the Estimated
Useful Life. At the expiration of a
Project’s Estimated Useful Life and
upon the written request of a recipient,
the Assistant Secretary may release the
Federal Interest in Project Property if
EDA determines that the Recipient has
made a good faith effort to fulfill all
terms and conditions of the Investment
Assistance. The determination provided
for in this paragraph shall be established
at the time of Recipient’s written request
and shall be based, at least in part, on
the facts and circumstances provided in
writing by the Recipient. For a Project
in which a Recorded Statement as
provided for in §§ 314.8 and 314.9 of
this chapter has been recorded, EDA
will provide for the release by executing
an instrument in recordable form. The
release will terminate the Investment as
of the date of its execution and satisfy
the Recorded Statement. See paragraph
(e) of this section for limitations and
covenants of use that are applicable to
any release of the Federal Interest.
(c) Release prior to the expiration of
the Estimated Useful Life. If the
Recipient will no longer use the Project
Property in accord with the
requirements of the terms and
conditions of the Investment within the
time period of the Estimated Useful Life,
EDA will determine if such use by the
Recipient constitutes an Unauthorized
Use of Property and require
compensation for the Federal Interest as
provided in § 314.4 and this section.
EDA may release the Federal Interest in
connection with such Property only
upon receipt of full payment in
compensation of the Federal Interest
and thereafter will have no further
interest in the ownership, use, or
Disposition of the Property, except for
the nondiscrimination requirements set
forth in paragraph (e)(3) of this section.
(d) Release of the Federal Interest
before the expiration of the Estimated
Useful Life, but 20 years after the award
of Investment Assistance. In accord with
section 601(d)(2) of PWEDA, upon the
request of a Recipient and before the
expiration of the Estimated Useful Life
of a Project, but where 20 years have
elapsed since the award of Investment
Assistance, EDA may release any Real
Property or tangible Personal Property
interest held by EDA, if EDA
determines:
(1) The Recipient has made a good
faith effort to fulfill all terms and
conditions of the award of Investment
Assistance; and
(2) The economic development
benefits as set out in the award of
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Investment Assistance have been
achieved.
(3) See paragraph (e) of this section
for limitations and covenants of use that
are applicable to any release of the
Federal Interest.
(e) * * *
(2) In determining whether to release
the Federal Interest, EDA will review
EDA’s legal authority to release its
interest, including the Recipient’s
performance under and conformance
with the terms and conditions of the
Investment Assistance; any use of
Project Property in violation of § 314.3
or § 314.4; and other such factors as
EDA deems appropriate. When
requesting a release of the Federal
Interest pursuant to this section, the
Recipient will be required to disclose to
EDA the intended future use of the Real
Property or the tangible Personal
Property for which the release is
requested.
(i) A Recipient not intending to use
the Real Property or tangible Personal
Property for explicitly religious
activities following EDA’s release will
be required to execute a covenant of use.
VerDate Sep<11>2014
19:30 Sep 30, 2016
Jkt 241001
A covenant of use with respect to Real
Property shall be recorded in the
jurisdiction where the Real Property is
located in accordance with § 314.8. A
covenant of use with respect to items of
tangible Personal Property shall be
perfected and recorded in accordance
with applicable law, with continuances
re-filed as appropriate. See § 314.9. A
covenant of use shall (at a minimum)
prohibit the use of the Real Property or
the tangible Personal Property for
explicitly religious activities in
violation of applicable Federal law.
(ii) EDA may require a Recipient (or
its successors in interest) that intends or
foresees the use of Real Property or
tangible Personal Property for explicitly
religious activities following the release
of the Federal Interest to compensate
EDA for the Federal Share of such
Property. If such compensation is made,
no covenant with respect to explicitly
religious activities will be required as a
condition of the release. EDA
recommends that any Recipient who
intends or foresees the use of Real
Property or tangible Personal Property
(including by successors of the
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68213
Recipient) for explicitly religious
activities to contact EDA well in
advance of requesting a release pursuant
to this section.
(3) Notwithstanding any release of the
Federal Interest under this section,
including a release upon a Recipient’s
compensation for the Federal Share, a
Recipient must ensure that Project
Property is not used in violation of
nondiscrimination requirements set
forth in § 302.20 of this chapter.
Accordingly, upon the release of the
Federal Interest, the Recipient must
execute a covenant of use that prohibits
use of Real Property or tangible Personal
Property for any purpose that would
violate the nondiscrimination
requirements set forth in § 302.20 of this
chapter.
*
*
*
*
*
Dated: September 12, 2016.
Roy K.J. Williams,
Assistant Secretary of Commerce for
Economic Development.
[FR Doc. 2016–22287 Filed 9–30–16; 8:45 am]
BILLING CODE 3510–24–P
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]]>Agencies
[Federal Register Volume 81, Number 191 (Monday, October 3, 2016)]
[Proposed Rules]
[Pages 68186-68213]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22287]
[[Page 68185]]
Vol. 81
Monday,
No. 191
October 3, 2016
Part IV
Department of Commerce
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13 CFR Parts 300, 301, 302, et al.
Revolving Loan Fund Program Changes and General Updates to PWEDA
Regulations; Proposed Rule
Federal Register / Vol. 81 , No. 191 / Monday, October 3, 2016 /
Proposed Rules
[[Page 68186]]
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DEPARTMENT OF COMMERCE
Economic Development Administration
13 CFR Parts 300, 301, 302, 303, 304, 305, 307, 309, and 314
[Docket No.: 160519444-6444-01]
RIN 0610-AA69
Revolving Loan Fund Program Changes and General Updates to PWEDA
Regulations
AGENCY: Economic Development Administration, U.S. Department of
Commerce.
ACTION: Notice of proposed rulemaking, request for public comment.
-----------------------------------------------------------------------
SUMMARY: Through this notice of proposed rulemaking (``NPRM''), the
Economic Development Administration (``EDA''), U.S. Department of
Commerce (``DOC''), proposes and requests comments on updates to the
agency's regulations implementing the Public Works and Economic
Development Act of 1965, as amended (``PWEDA''). In particular, through
this NPRM EDA is proposing important changes to the regulations
governing the Revolving Loan Fund (``RLF'') program that are intended
to reflect current best practices and strengthen EDA's efforts to
evaluate, monitor, and improve RLF performance by establishing the Risk
Analysis System, a risk-based management framework, to evaluate and
manage the RLF program. The proposed Risk Analysis System is modeled on
the Uniform Financial Institutions Rating System, commonly known as the
capital adequacy, assets, management capability, earnings, liquidity,
and sensitivity (``CAMELS'') rating system, which has been used since
1979 to assess financial institutions on a uniform basis and to
identify those in need of additional attention. EDA also proposes to
reorganize the RLF regulations to improve their readability and clarify
the requirements that apply to the distinct phases of an RLF award. In
addition, EDA proposes specific changes to RLF requirements to make RLF
awards more efficient for Recipients to administer and EDA to monitor.
In addition, through this NPRM EDA proposes important, but less
comprehensive updates to other parts of its regulations, including
revising definitions, replacing references to superseded regulations to
reflect the promulgation of the Uniform Administrative Requirements,
Cost Principles, and Audit Requirements (2 CFR part 200) (``Uniform
Guidance''), streamlining the provisions that outline EDA's application
process, and clarifying EDA's property management regulations.
DATES: Written comments on this NPRM must be submitted by December 2,
2016.
ADDRESSES: Comments on the NPRM may be submitted through any of the
following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. All comments received
are a part of the public record and will generally be posted for public
viewing on www.regulations.gov without change. All personal identifying
information (e.g., name, address, etc.), confidential business
information, or otherwise sensitive information submitted voluntarily
by the sender will be publicly accessible. EDA will accept anonymous
comments (enter ``N/A'' in the required fields if you wish to remain
anonymous).
Email: regulations@eda.gov. Include ``Comments on EDA's
regulations'' and Docket No. 160519444-6444-01 in the subject line of
the message.
Fax: (202) 482-5671. Please indicate ``Attention: Office
of Chief Counsel,'' ``Comments on EDA's regulations,'' and Docket No.
160519444-6444-01 on the cover page.
Mail: Office of the Chief Counsel, Economic Development
Administration, U.S. Department of Commerce, 1401 Constitution Avenue
NW., Suite 72023, Washington, DC 20230. Please indicate ``Comments on
EDA's regulations'' and Docket No. 160519444-6444-01 on the envelope.
FOR FURTHER INFORMATION CONTACT: Rachel Wallace, Attorney-Advisor,
Office of the Chief Counsel, Economic Development Administration, U.S.
Department of Commerce, 1401 Constitution Avenue NW., Suite 72023,
Washington, DC 20230; telephone: (202) 482-4687.
SUPPLEMENTARY INFORMATION:
Background on EDA and the RLF Program
EDA leads the Federal economic development agenda by promoting
innovation and competitiveness, preparing American regions for growth
and success in the worldwide economy. Through strategic investments
that foster job creation and attract private investment, EDA supports
development in economically distressed areas of the United States.
Authorized under section 209 of the Public Works and Economic
Development Act of 1965 (``PWEDA'') (42 U.S.C. 3149) the RLF program
has served as an important pillar of EDA's investment programs since
the program's establishment in 1975. The goal of the RLF program is to
help communities and regions transform their economies and propel them
towards economic prosperity through innovation, entrepreneurship, and
public-private partnerships. Through the RLF program, EDA provides
grants to eligible Recipients, which include State and local
governments, political subdivisions, and nonprofit organizations to
operate a lending program that offers low-interest loans and flexible
repayment terms to businesses that cannot obtain traditional bank
financing and to governmental entities for public infrastructure. These
loans enable small businesses to expand and lead to new employment
opportunities that pay competitive wages and benefits. They also help
retain jobs that might otherwise be lost, create wealth, and support
minority and women-owned businesses.
Since the program's inception, EDA has funded approximately 800
RLFs nationwide, investing $550 million in RLFs that have a combined
capital base of about $813.5 million as of September 30, 2015. These
funds currently have a total of $250 million available for lending.
EDA-funded RLFs have made more than 27,000 loans to American small
businesses and have leveraged more than $12 billion non-RLF dollars.
RLF Recipients report that the program has contributed to creating
340,000 jobs and retaining 307,000 jobs.
Each RLF Recipient contributes matching funds in accordance with
EDA's statutory requirements to capitalize an RLF. As loans made from
this original pool of EDA and Recipient funds are repaid, the fund is
replenished and new loans are extended to qualified businesses. They
can also be provided to governmental entities for eligible public
infrastructure. Each RLF Recipient must develop and maintain an RLF
Plan to demonstrate how the fund fits specific economic development
goals and how it will adequately administer the RLF throughout its
lifecycle. Because RLF funds currently retain their Federal character
in perpetuity, the RLF Recipient's obligation to manage the RLF
continues as long as the Federal Interest in the RLF exists.
Since February 1, 2011, EDA has taken a critical and comprehensive
look-back at its regulations to reduce burdens by removing outmoded
provisions and streamlining and clarifying requirements. On December
19, 2014, EDA published a Final Rule (79 FR
[[Page 68187]]
76108) (``2014 Final Rule'') revising the agency's regulations and
reflecting the agency's practices and policies in administering its
economic development assistance programs.
EDA's regulations at 13 CFR part 307 set out the requirements for
awards under EDA's Economic Adjustment Assistance program, through
which EDA can support a wide-range of technical assistance, planning,
and infrastructure assistance in Regions experiencing adverse economic
changes that may occur suddenly or over time. The types of assistance
that EDA can provide through this program include strategy development,
infrastructure construction, and RLF capitalization. Subpart A of part
307 details the general requirements for Economic Adjustment Assistance
awards; and subpart B sets out requirements specific to the RLF
program.
Through the 2014 Final Rule, EDA reorganized part 307 to help
clarify award requirements and incorporate all RLF program requirements
under subpart B to part 307. When developing those regulations, EDA
received a number of comments on the RLF program, including several
recommending that EDA set a time limit for releasing the Federal
Interest in RLF awards. EDA explained that while some RLF awards have
been operating for a considerable length of time--some for as many as
three decades--EDA currently is not authorized to release its interest
in RLF awards; however, EDA continues to actively work to obtain the
necessary authorities for what is known as ``de-federalization'' or
``local control.''
Other comments remarked that the RLF program reporting requirements
were too burdensome. EDA noted that the semi-annual reporting
requirement for the RLF program is in place to address an audit report
by the DOC's Office of Inspector General (``OIG''), which recommended
that EDA undertake more rigorous oversight of the RLF program to ensure
the financial integrity and sustainability of the program. Because the
reporting requirements are designed to address past program issues and
ensure the viability and transparency of the program, EDA declined to
make wholesale changes at that time but expressed its intent to
continue to improve the RLF Recipient reporting system to make it more
user-friendly. In the current set of regulatory changes, EDA proposes
to move from the semi-annual reporting requirement to a frequency
(either annual or semi-annual) that will be determined by each
Recipient's score in the Risk Analysis System. In addition, EDA is
changing the reporting period to be based on each Recipient's fiscal
year end.
Six comments received from the prior set of regulatory changes
suggested the establishment of an RLF task force to address program
issues and improve communications between EDA and program stakeholders.
EDA has established such a task force, which is represented by
personnel from EDA Headquarters and all six of EDA's Regional Offices
and has examined ways to address challenges that have been identified
by the OIG, program stakeholders, and EDA management.
Overview of Proposed Changes to the RLF Program
Given this greater focus on improving the RLF program and its
operations through a risk-based management framework, EDA now looks to
strengthen and clarify its RLF regulations. As further detailed in this
NPRM, EDA seeks to improve the agency's ability to monitor RLF
performance and provide targeted technical assistance through a risk-
based management framework, better organize and clarify the RLF
regulations, and make additional changes designed to clarify and
streamline RLF requirements. Given the important role of this program
as a driver of small business growth, job creation, and economic
development, EDA seeks the public's input and insight in the regulatory
revision process.
With these goals in mind, the Part-by-Part Analysis will describe
the changes to the RLF program in more detail, but the following
provides a high-level overview of these changes.
EDA proposes important definitional revisions, including
adding a definition for Disbursement phase to go along with the
existing definition of Revolving phase so that it is clear which
requirements apply during the two phases of an RLF's lifecycle. We also
define the important term RLF Capital Base, which is the total value of
RLF Grant assets administered by the RLF Recipient and is equal to the
amount of Grant funds used to capitalize (and recapitalize, if
applicable) the RLF, plus Local Share, plus RLF Income, plus
Voluntarily Contributed Capital, less any loan losses and
disallowances.
EDA proposes simplifying the language explaining RLF
disbursements to clarify that EDA will disburse funds in the amount
needed to meet the Federal share of a new RLF loan. For example, assume
an RLF Grant totals $500 and has a Local Share requirement of 50
percent. If the RLF Recipient closes on a loan obligation worth $30,
EDA will disburse $15.
We add language to clarify how RLF Income is treated
during the Disbursement Phase. The current regulations specify that RLF
Income held to reimburse administrative costs does not need to be
disbursed to draw additional Grant funds, but do not address RLF Income
not used for administrative costs. Through this regulatory revision,
EDA is clarifying that RLF Income earned during the Disbursement Phase
must be placed in the RLF Capital Base and may be used to reimburse
eligible and reasonable administrative costs and increase the RLF
Capital Base. However, RLF Income earned during the Disbursement Phase
need not be disbursed to support new RLF loans, unless otherwise
specified in the terms and conditions of the RLF Grant.
Consistent with EDA's new approach to managing RLF Grants,
this NPRM proposes expanding the requisite period during which RLF
Income must be earned and administrative costs must be incurred from
the same six-month Reporting Period to the same fiscal year. We also
specify that RLF Recipients may not use funds in excess of RLF Income
for administrative costs during the fiscal year unless directed to do
so by EDA and add language advising RLF Recipients to keep
administrative expenses to a minimum to maintain the RLF Capital Base
and to specify that the percentage of RLF Income used for
administrative expenses will be one of the metrics used in EDA's Risk
Analysis System. In keeping with this program management change, EDA is
removing the requirement that RLF Recipients submit an RLF Income and
Expense Statement (i.e., Form ED-209I). The Risk Analysis System will
incentivize RLF Recipients to manage RLF administrative expenses and
maintain their RLF Capital Base.
This NPRM also proposes language to describe the process
of adding Voluntarily Contributed Capital to the RLF Capital Base and
to clarify that such capital becomes an irrevocable part of the RLF
Capital Base and may not be subsequently withdrawn or separated from
the RLF.
In response to a request from some existing Recipients,
this NPRM proposes broadening the types of investments that may serve
as appropriate leveraging to allow Recipients to use funds from State
and local lending programs to meet the RLF leveraging requirement.
Similar to allowing Federal loans to count as leveraging, if the
managers of State and local lending programs are willing to provide
financing to a borrower, EDA believes such financing should count
towards the leveraging requirement.
[[Page 68188]]
EDA proposes adopting a Risk Analysis System to evaluate
and manage the performance of RLF Recipients, which would provide
Recipients with a set of portfolio management and operations standards
to evaluate their program and improve performance. Revised Sec. 307.16
includes language on the proposed system, which will provide EDA with
an internal tool for assessing the risk of each Recipient's loan
operations and identifying RLF Recipients that require additional
monitoring, technical assistance, or other action. EDA's proposed risk-
based RLF management framework is modeled on the Uniform Financial
Institutions Rating System (the CAMELS rating system), used by
regulators to assess financial institutions and to identify those in
need of extra assistance or attention. Additional details on the
proposed system are provided below under the Part-by-Part Analysis. The
technical aspects of this system will be described in a separate notice
that will be published in the Federal Register at a later time. This
notice will provide additional agency guidance regarding the system and
the underlying metrics.
EDA proposes adopting an Allowable Cash Percentage concept
to replace the capital utilization standard. Recognizing that different
regions face very different economic and access to capital conditions
and that a one-size-fits-all capital utilization standard can be
difficult for RLF Recipients to meet and for EDA to implement, EDA
proposes eliminating the capital utilization standard, which requires
Recipients to provide that at all times at least 75 percent of their
RLF Capital is loaned or committed. In place of the capital utilization
standard, which is based on the amount of capital that is loaned out,
EDA proposes to assess RLF Recipients on the amount of cash Recipients
have on hand available for lending--defined as the Allowable Cash
Percentage. Each year, each EDA Regional Office will calculate the
average percentage of RLF Cash Available for Lending held by each RLF
Recipient in the region's RLF portfolio and will notify Recipients by
January 1 each year of the Allowable Cash Percentage to be used during
the ensuing year. RLF Recipients will be required to manage their
repayment and lending schedules to provide that at all times, their
amount of RLF Cash Available for Lending does not exceed the Allowable
Cash Percentage. See the part-by-part analysis below for an example of
how the Allowable Cash Percentage concept will work and proposed
revisions to Sec. Sec. 307.16(c) and 307.17(b).
One feature of the move to the Allowable Cash Percentage concept is
that EDA will no longer require automatic sequestration as a remedy for
failure to satisfy the capital utilization standard. Given the
replacement of the capital utilization standard with the more flexible
Allowable Cash Percentage and the adoption of a Risk Analysis System,
sequestration will be considered as one of a range of possible tools
used to ensure compliance with the terms of the RLF Grant and will also
be considered in EDA's Risk Analysis System.
EDA proposes clarifying the use restrictions related to
RLF Cash Available for Lending. Specifically, to address recent
concerns EDA has encountered in administering the RLF program, EDA is
adding language to make clear that RLF Cash Available for Lending
cannot be used as collateral to obtain credit or any other type of
financing without EDA's prior written approval, cannot be used to
support operations or administration of the RLF Recipient, and cannot
be used for any purpose that would violate EDA's property requirements
set out in 13 CFR part 314.
EDA is seeking to restructure the compliance regulations
by creating a regulation that sets out actions (or failures to act) for
which EDA may take appropriate compliance actions (Sec. 307.20) and
another section listing remedies for noncompliance (Sec. 307.21).
Restructuring the compliance regulations will help RLF stakeholders to
better understand program prohibitions and the potential consequences.
Part-by-Part Analysis of Proposed Changes
General
Part 300--General Information
Part 300 of the regulations states EDA's mission and highlights the
policies and practices that EDA employs in order to attract private
capital investments and new and better jobs to those Regions
experiencing substantial and persistent economic distress. This NPRM
proposes several clarifying revisions to the ``Definitions'' section of
EDA's regulations at Sec. 300.3. First, in the definition of In-kind
contribution(s), EDA replaces references to 15 CFR parts 14 and 24,
which set out the Uniform Administrative Requirements applicable to
grants and agreements with Institutions of Higher Education, Hospitals,
Other Non-Profit, and Commercial Organizations and State and Local
Governments, respectively, with a reference to the uniform
administrative requirements cost principles, and audit requirements set
out in the Uniform Guidance. In addition, EDA proposes revising the
definition of Project by adding a reference to ``or Stevenson-Wydler''
between the reference to ``PWEDA'' and the word ``and'' to clarify that
EDA may provide Investment Assistance to support a Project under
Stevenson-Wydler. Please see the explanation of the proposed definition
of Stevenson-Wydler below for more information on this authority.
EDA proposes to revise the definition of Recipient by defining
separately the concepts of Co-recipients and Subrecipients in EDA's
programs. The term co-recipient has been used in EDA's regulations for
some time, and adding a reference to the term in the Definitions
section is designed to clarify that when EDA awards Investment
Assistance to more than one recipient, they are known as co-recipients
and are generally jointly and severally responsible for fulfilling the
terms of the Investment Assistance. We also propose to introduce the
term Subrecipient as the eligible recipient that receives a subgrant
under 13 CFR part 309. The definition of Subrecipient in this NPRM is
consistent with the definition of Subrecipient set out in the Uniform
Guidance at 2 CFR 200.93, which is ``a non-Federal entity that receives
a subaward from a pass-through entity to carry out part of a Federal
program; but does not include an individual that is a beneficiary of
such program. A subrecipient may also be a recipient of other Federal
awards directly from a Federal awarding agency.'' Note that the Uniform
Guidance defines ``Non-Federal entity'' as ``a state, local government,
Indian tribe, institution of higher education (IHE), or nonprofit
organization that carries out a Federal award as a recipient or
subrecipient'' and ``Pass-through entity'' as ``a non-Federal entity
that provides a subaward to a subrecipient to carry out part of a
Federal program.'' See 2 CFR 200.69 and 200.74, respectively.
In addition, EDA proposes adding a definition of Stevenson-Wydler,
which is the Stevenson-Wydler Technology Innovation Act of 1980, as
amended (15 U.S.C. 3701 et seq.). The America Creating Opportunities to
Meaningfully Promote Excellence in Technology, Education, and Science
(``COMPETES'') Act as reauthorized in 2010 (Pub. L. 111-358 (January 4,
2011)) amended Stevenson-Wydler to add several innovation and
entrepreneurship-focused provisions creating EDA offices
[[Page 68189]]
and/or programs, including the Office of Innovation and
Entrepreneurship (15 U.S.C. 3720), the loan guarantees for innovative
technologies in manufacturing (``ITM'') program (15 U.S.C. 3721), and
the Regional Innovations Strategies (``RIS'') program (15 U.S.C. 3722).
EDA is proposing to add a definition of Stevenson-Wydler in order to
begin incorporating these programs under its regulations and proposes
adding references to specific regulations throughout this part to
reflect that they apply to Stevenson-Wydler. Via a future notice, EDA
anticipates publishing proposed regulations at 13 CFR part 312 to
reflect requirements specific to Projects funded under Stevenson-
Wydler, including eligibility and matching share requirements.
Part 301--Eligibility, Investment Rate, and Application Requirements
Part 301 sets forth eligibility criteria, the maximum allowable
Investment Rates, and application requirements common to all PWEDA-
enumerated programs (and thus excludes Community Trade Adjustment
Assistance at part 313 and Trade Adjustment Assistance for Firms
(``TAAF'') at part 315). In general, subpart A of part 301 presents an
overview of EDA's eligibility requirements; subpart B addresses
applicant eligibility; subpart C addresses Regional economic distress
level requirements; subpart D sets forth maximum allowable Investment
Rates and Matching Share requirements; and subpart E addresses
application requirements, as well as the evaluation criteria used by
EDA in selecting Projects.
EDA proposes adding the phrase ``at its sole discretion'' to the
second sentence of Sec. 301.2(b) (``Applicant eligibility''). Sec.
301.2(b) requires non-profit organizations that are applicants for
investment assistance to include in their applications a resolution or
letter from an authorized representative of a political subdivision of
a State, acknowledging that the applicants are acting in cooperation
with the officials of that subdivision. The second sentence of this
paragraph allows EDA to waive this requirement for Projects of a
significant Regional or national scope. By adding the phrase, ``at its
sole discretion,'' to this second sentence, EDA is seeking to clarify
that such a waiver is solely at EDA's discretion. In the second
sentence of Sec. 301.5 (``Matching share requirements''), EDA proposes
replacing the word ``show'' with the phrase ``provide documentation to
EDA demonstrating'' to better explain what applicants are required to
provide to fulfill EDA's Matching Share requirements. In addition, EDA
proposes adding a sentence to Sec. 301.5 to clarify that EDA retains
the discretion to determine whether Matching Share documentation
adequately addresses the requirements of the regulation.
This NPRM proposes to simplify Sec. 301.7(a) (``Investment
assistance application'') to state that for all of EDA's Investment
Assistance programs, application submission requirements and evaluation
procedures criteria will be set out in published Federal Funding
Opportunity (``FFO'') announcements. In 2011, EDA moved to an
application and selection process that required a single application
that was competitively evaluated in quarterly funding cycles under its
Public Works and Economic Adjustment Assistance programs. After
evaluating the impact of this process on applicants and staff, EDA is
again adjusting the application and selection process under the Public
Works and Economic Adjustment Assistance programs to return to a two-
phase process that requires the submission of a proposal followed by a
complete application. As more fully explained in the FY 2016 Economic
Development Assistance Programs (``EDAP'') FFO, which is available on
www.grants.gov, there are no submission deadlines and proposals and
applications are accepted on an ongoing basis. All submissions under
the Public Works and Economic Adjustment Assistance programs must
proceed through a two-phase review process where the first phase allows
applicants to submit a shorter proposal through which EDA can provide
an initial analysis on whether the applicant's project is responsive to
the EDAP FFO and the second phase allows EDA to evaluate the
competitiveness of a complete application against specified evaluation
criteria. Proposals will be reviewed by EDA within 30 days of receipt;
and following the proposal review, complete applications will be
reviewed within 60 days of receipt.
The application procedures for EDA's other programs, including the
Planning, Local Technical Assistance, University Center, and Research
and Evaluation programs, will be specified in applicable FFOs. To avoid
engraining a particular process in a regulation, EDA simply revises
Sec. 301.7(a) to provide that for EDA Investment Assistance programs,
application submission requirements and evaluation procedures and
criteria will be specified in FFOs published on the EDA Web site and at
www.grants.gov.
Likewise, EDA revises Sec. 301.8 (``Application evaluation
criteria'') to remove specific evaluation criteria as currently set out
in subsections (a) through (f) from the regulation and to specify that
program-specific evaluation criteria will be set out in applicable
FFOs. EDA has found that including specific evaluation criteria in the
regulation can be confusing. Providing that EDA will set appropriate
evaluation criteria in FFOs allows EDA additional flexibility to
respond to changing economic conditions.
In Sec. 301.11 (``Infrastructure''), EDA proposes adding the
parenthetical ``(e.g., roads, sewers, and water lines)'' in the second
sentence of Sec. 301.11(a) to provide several core examples of ``basic
economic development assets'' referenced in the sentence.
Part 302--General Terms and Conditions for Investment Assistance
Part 302 sets forth the general terms and conditions for EDA
Investment Assistance, including environmental reviews of Projects;
relocation assistance and land acquisition requirements; inter-
governmental review of Projects; and Recipients' reporting,
recordkeeping, post-approval, and civil rights requirements.
As noted above under the description of changes to part 300, EDA
administers several programs authorized under Stevenson-Wydler. EDA
proposes revising Sec. 302.5 (``Relocation assistance and land
acquisition policies'') to add a reference to Stevenson-Wydler by
adding the phrase ``or any other types of assistance'' between
``Investment Assistance'' and ``under PWEDA'' and a reference to ``,
and Stevenson-Wydler'' between ``Trade Act'' and ``(States and
political subdivisions of States. . . .)''. EDA also corrects a typo by
replacing the phrase ``nonprofits organizations'' with ``nonprofit
organizations''. EDA revises Sec. 302.6 (``Additional requirements;
Federal policies and procedures''), to replace references to 15 CFR
parts 14 and 24 with a reference to ``2 CFR part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements
for Federal Awards''. In addition, EDA proposes adjustments to Sec.
302.20 (``Civil rights'') to clarify that nondiscrimination
requirements apply to any type of assistance provided under Stevenson-
Wydler. Specifically, in Sec. 302.20(a), EDA adds a reference to ``or
Stevenson-Wydler'' between the reference to ``PWEDA'' and the phrase
``or by an entity'', as well as the phrase ``or any other type of
assistance under Stevenson-Wydler'' between the reference to ``Trade
Act'' and the phrase
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``in accordance with the following authorities''. In Sec. 302.20(d)
regarding written assurances of compliance with nondiscrimination
requirements, EDA adds a reference to ``and Stevenson-Wydler'' between
``PWEDA'' and ``all Other Parties'', as well as a reference to ``or any
other type of assistance under Stevenson-Wydler'' between ``Trade Act''
and the phrase that begins with ``must submit to EDA''.
In addition, in Sec. 302.20(a)(2), EDA proposes adding a reference
to Title IX of the Education Amendments of 1972, as amended (20 U.S.C.
1681 et seq.), which proscribe discrimination on the basis of sex in
any education program or activity receiving Federal financial
assistance, whether or not such program or activity is offered or
sponsored by an educational institution. Practically speaking, such
discrimination has long been prohibited under EDA's programs, because
various other provisions prohibit discrimination on this basis, which
have been incorporated under the regulation at Sec. 302.20(a)(2), as
have the DOC's regulations as 15 CFR part 8a, which implement Title IX
of the Education Amendments of 1972, as amended. However, a direct
reference to Title IX of the Education amendments of 1972, as amended
has been missing, and we add that via this NPRM.
Part 303--Planning Investments and Comprehensive Economic Development
Strategies
Part 303 sets forth regulations governing EDA's Planning program,
through which the agency provides assistance to help Eligible
Applicants create strategies or plans to stimulate and guide the
economic development efforts of a community or Region. EDA has three
distinct types of Planning Investments: (1) Partnership Planning; (2)
State Planning; and (3) Short-Term Planning. Through EDA's Partnership
Planning Investments, the agency facilitates the development,
implementation, revision, or replacement of Comprehensive Economic
Development Strategies (``CEDS''). EDA provides Partnership Planning
awards to Planning Organizations (e.g., District Organizations) serving
as EDA-designated Economic Development Districts (``EDD'') (as defined
in Sec. 300.3) throughout the U.S. The EDDs are recognized by the
State(s) in which they reside as multijurisdictional councils of
governments, regional commissions, or planning and development centers.
The Partnership Planning awards enable Planning Organizations to manage
and coordinate the development and implementation of CEDS to address
the unique needs of their respective Regions. The CEDS are central to
EDA's economic development initiatives, and a proposed Project must be
consistent with a relevant CEDS before EDA makes a competitive award
under the Public Works or Economic Adjustment Assistance programs under
parts 305 or 307. Finally, part 303 sets forth the requirements for
State and Short-Term Planning Investments, which can help distressed
Regions strategize to create and retain new and better jobs and respond
quickly and effectively to sudden economic dislocations.
In this NPRM, EDA proposes minor clarifications and modifications
to the Planning program. First, EDA proposes to modify Sec.
303.6(b)(1) to replace ``including'' with ``which may include'' to
clarify that the CEDS Strategy Committee has the discretion to
determine which parties represent the main economic interests of the
Region. Those parties may include some but not all of the listed
entities. Second, as a result of the broad discretion conferred upon
the CEDS Strategy Committee to determine which parties represent the
main economic interests of the Region, the last sentence of Sec.
303.6(b)(1) is now superfluous. As such, EDA proposes to remove the
last sentence and to revise that section to clarify that Indian Tribes
and State officials may be represented on the CEDS Strategy Committee,
along with all other groups listed, when representative of the economic
interests of the region. Third, in accordance with Sec. 303.6
(``Partnership Planning and the EDA-funded CEDS process''), Planning
Organizations of EDDs must submit a revised CEDS to EDA at least every
five years as specified under Sec. 303.6(b)(3)(ii). To ensure that
participating counties or other areas within the EDD remain engaged in
the planning process, EDA proposes to require that Planning
Organizations obtain renewed commitments to support the economic
development activities of the District from such counties or areas as
part of the five-year renewal. Therefore, we propose adding the
sentence, ``In connection with the submission of a new or revised CEDS,
the Planning Organization must obtain renewed commitments from
participating counties or other areas within the District to support
the economic development activities of the District,'' to Sec.
303.6(b)(3)(ii).
In addition, in accordance with sub-section (c)(1) of Sec. 303.7
(``Requirements for Comprehensive Economic Development Strategies''),
EDA may accept a non-EDA funded CEDS, even if such a strategy does not
contain all elements required of an EDA-funded CEDS. The 2011 NPRM and
the 2014 Final Rule streamlined the content requirements of CEDS from a
laundry-list of ten detailed items to the following four essential
planning elements in Sec. 303.7(b)(1)(i) through (iv): (a) A summary
of economic development conditions of the Region; (b) an in-depth
analysis of the economic and community strengths, weaknesses,
opportunities and threats; (c) strategies and an implementation plan to
build upon the Region's strengths and opportunities and resolve or
mitigate the weaknesses and threats facing the Region, but should not
be inconsistent with applicable State and local economic development or
workforce development strategies; and (d) performance measures used to
evaluate the Planning Organization's successful development and
implementation of the CEDS. Because EDA has consolidated required CEDS
elements to include those that are generally considered to be
foundational for a successful planning process, EDA wants to emphasize
that a non-EDA funded CEDS should include all elements of an EDA-funded
CEDS. However, in particular circumstances, such as a natural disaster
or sudden and severe economic dislocation, EDA will accept a non-EDA
funded CEDS that does not include the foundational CEDS elements. With
this in mind, EDA proposes revisions to Sec. 303.7(c)(1), specifically
in the first sentence replacing the phrase ``without fulfilling all the
requirements of paragraph (b) of this section'' with the phrase ``so
long as it includes all of the elements listed in paragraph (b) of this
section'' and adding the new sentence ``In certain circumstances, EDA
may accept a non-EDA funded CEDS that does not contain all the elements
listed in paragraph (b) of this section'' between the existing first
and second sentences of this provision.
Part 304--Economic Development Districts
Part 304 on Economic Development Districts, which also may be
referred to as a ``District'' or an ``EDD'' as stated 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.
In the 2011 NPRM and 2014 Final Rule, in response to comments that
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organizational requirements applicable to District Organizations should
be more flexible to allow the groups to focus on effective strategy
development and implementation rather than meeting membership
thresholds, EDA revised subsection (c)(2) of Sec. 304.2 (``District
Organizations: Formation, organizational requirements and
operations''), to remove the current membership thresholds, but
maintain the requirement that governing bodies demonstrate that they
are broadly representative of the principal economic interests of the
Region. However, in making this change, EDA inadvertently used language
that can be interpreted to require that all District Organizations
include members from certain sectors; specifically, the phrase in Sec.
304.2(c)(2) that reads ``including the private sector, public
officials, community leaders, representatives of workforce development
boards, institutions of higher education, minority and labor groups,
and private individuals'' (emphasis on the word ``including'' added).
EDA proposes replacing the word ``including'' in this sentence with the
phrase ``which may include'' to indicate that these groups should be
included insofar as they represent principal economic interests of the
Region. Each District Organization must continue to demonstrate that
its governing body is broadly representative of the principal economic
interest of the Region and that it has the capacity to implement the
EDA-approved CEDS.
Part 305--Public Works and Economic Development Investments
Part 305 provides information about EDA's Public Works and Economic
Development Investments. Section 305.1 explains the purpose and scope
of these Investments and Sec. 305.2 specifies the scope of activities
eligible for consideration under a Public Works Investment and sets
forth a list of determinations that EDA must reach in order to award a
Public Works Investment. Specific application requirements are set
forth in Sec. 305.3, and Sec. 305.4 provides the requirements for
Public Works Investments awarded solely for design and engineering
work.
EDA proposes two minor changes to Part 305 in this NPRM to reflect
the promulgation of the Uniform Guidance. Specifically, in sub-section
(b) of Sec. 305.6 (``Allowable methods of procurement for construction
services'') and sub-section (c) of Sec. 305.8 (``Recipient-furnished
equipment and materials''), EDA replaces the references to ``15 CFR
parts 14 or 24, as applicable'' with a reference to ``2 CFR part 200''.
Part 306--Training, Research and Technical Assistance
Part 306 sets out the requirements for EDA's Local and National
Technical Assistance and Research Investments. Local and National
Technical Assistance Investments help Recipients fill the knowledge and
information gaps that may prevent leaders in the public and non-profit
sectors in economically distressed Regions from making optimal
decisions on local economic development issues. Through the Research
program, EDA invests in research and technical assistance-related
Projects to promote competitiveness and innovation in distressed rural
and urban Regions. EDA does not propose any changes to part 306 through
this NPRM.
Part 307--Economic Adjustment Assistance Investments
Part 307 sets out the requirements for awards under EDA's Economic
Adjustment Assistance program, which can provide a wide-range of
technical assistance, planning, and infrastructure assistance in
Regions experiencing adverse economic changes that may occur suddenly
or over time, including strategy development, infrastructure
construction, and Revolving Loan Fund (``RLF'') capitalization. Subpart
A of part 307 details the general requirements for Economic Adjustment
Assistance awards, and subpart B sets out requirements specific to the
RLF program. As noted above in the Overview of Proposed Changes to the
RLF Program, a focus of this NPRM is strengthening and clarifying EDA's
RLF regulations to improve the agency's ability to monitor RLF
performance and provide targeted technical assistance through a risk-
based management framework and propose changes designed to clarify and
streamline RLF requirements. Given the important role of this program
as a driver of small business growth, job creation, and economic
development, EDA seeks the public's input and insight in the regulatory
revision process.
Specifically, EDA proposes to clarify the language in Sec. 307.6
(``Revolving Loan Funds established for business lending'') by removing
the reference to ``business'' lending in the title to that section, as
well as the phrase in the second sentence of the provision regarding
subpart B's application to ``business lending activities'' and the
phrase ``to accommodate non-business RLF awards'' regarding the
application of special award conditions in the third sentence of the
provision. By removing this language, we seek to clarify that both
public infrastructure and business lending activities are subject to
subpart B and that special award conditions may be used to provide
appropriate modifications to either type of lending. While the current
regulations state that RLFs may be used for business and other types of
lending, the language we propose to remove created confusion about the
applicability of the RLF regulations to other types of lending. In
addition, in the second sentence of Sec. 307.6, we add the phrase
``EDA-funded'' between the phrase ``apply to'' and the acronym ``RLFs''
to clarify that the RLF regulations in subpart B to part 307 apply to
EDA-funded RLFs.
In Sec. 307.7 (``Revolving Loan Fund award requirements''), EDA
proposes additional language to clarify the compliance obligations for
RLF Grants and update the reference to location of the Compliance
Supplement, which was changed with the promulgation of the Uniform
Guidance. Specifically, in addition to part 307, RLF Recipients must
comply with relevant provisions of parts 300 through 303, 305, and 314
of 13 CFR chapter III, which set forth EDA's general definitions,
general terms and conditions for Investment Assistance, Planning
requirements, Public Works requirements, and property management
requirements. Therefore, in Sec. 307.7(b), EDA proposes adding the
phrase ``, as well as relevant provisions of parts 300 through 303,
305, and 314 of this chapter,'' between the phrases ``set forth in this
part'' and ``and in the following publications''. In addition, in Sec.
307.7(b)(2), we replace the reference to ``OMB Circular A-133'' as the
location of the Compliance Supplement with ``, which is Appendix XI to
2 CFR part 200'' and with respect to the electronic availability of the
Compliance Supplement, we replace the general reference to the OMB Web
site with the more specific site where all OMB circulars, including the
Compliance Supplement, are located.
In Sec. 307.8 (``Definitions''), EDA proposes adding several new
definitions and revising existing definitions as we implement the
proposed risk-based framework to manage RLF Grants. Specifically, we
propose adding new definitions for the following terms:
Allowable Cash Percentage as ``the average percentage of
the RLF Capital Base maintained as RLF Cash Available for Lending by
RLF Recipients in each EDA regional office's portfolio of RLF Grants
over the previous year.'' This defined concept will serve as a
replacement for the concept of the capital utilization standard, which
is currently found in Sec. 307.16(c) and requires RLF Recipients to
manage their
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repayment and lending schedules to provide that at all times, at least
75 percent of the RLF Capital is loaned or committed. The Allowable
Cash Percentage will be defined annually by each EDA Regional Office
for that region's RLF Grants based on the previous year's average
percentage of unloaned and uncommitted cash held by the region's
portfolio of RLFs. See the description of proposed changes to sub-
section (c) of Sec. 307.16(c) (``Risk Analysis System'') and sub-
section (b) of Sec. 307.17 (``Requirements for Revolving Lon Fund Cash
Available for Lending'') below for more information on how the
Allowable Cash Percentage concept will work.
Disbursement Phase as ``the period of loan activity where
Grant funds awarded have not been fully disbursed to the RLF
Recipient.'' While EDA's regulations have indicated that particular
requirements apply during the time period when EDA is disbursing funds
to an RLF Recipient, the term has never been defined. EDA proposes
defining Disbursement phase to clarify the specific requirements that
apply during this phase of an RLF's life cycle, including that RLF
Income earned during the Disbursement Phase is not required to be used
for new RLF loans, unless otherwise specified in the terms and
conditions of the RLF Grant. See the description of proposed revisions
to Sec. 307.11 (``Pre-Disbursement Requirements and Disbursement of
Revolving Loan Funds'') for requirements applicable to the Disbursement
Phase.
Risk Analysis System as ``a set of metrics defined by EDA
to evaluate a Recipient's administration of its RLF Grant and that may
include but is not limited to capital, assets, management, earnings,
liquidity, strategic results, and financial controls.'' EDA is
introducing a risk-based management framework that will be used to
evaluate a Recipient's administration of its RLF Grant and that may
include the following metrics: Capital, assets, management, earnings,
liquidity, strategic results, and financial controls. This is a new
approach based on the CAMELS rating system used to assess financial
institutions and to identify those in need of additional attention. See
the discussion of proposed revised Sec. 307.16 (``Risk Analysis
System'') for more information on EDA's proposed risk-based approach to
managing RLF Grants.
RLF Capital Base as ``the total value of RLF Grant assets
administered by the RLF Recipient. It is equal to the amount of Grant
funds used to capitalize (and recapitalize, if applicable) the RLF,
plus Local Share, plus RLF Income, plus Voluntarily Contributed
Capital, less any loan losses and disallowances. Except as used to pay
for eligible and reasonable administrative costs associated with the
RLF's operations, the RLF Capital Base is maintained in two forms at
all times: As RLF Cash Available for Lending and as outstanding loan
principal.'' Currently, the term RLF Capital is used and defined as an
equation of ``Grant funds plus Local Share plus RLF Income, less any
amount used for eligible and reasonable costs necessary to administer
the RLF and any amount of loan principal written off.'' While the
current regulations define RLF Capital to apparently comprise all RLF
assets, the regulations also refer to the ``capital base of an RLF'' or
the ``RLF Capital base'', without defining that concept (see the
current definition of Recapitalization Grants at Sec. 307.8 (defining
Recapitalization Grants as ``additional Grant funds to increase the
capital base of an RLF'') and the current regulations at Sec. Sec.
307.11(a)(1) (requiring the amount of fidelity bond coverage to be at
least ``25 percent of the RLF Capital base''), 307.12(a) (requiring RLF
Income to ``be placed into the RLF Capital base'' and providing that
RLF Income earned in one period cannot be ``withdrawn from the RLF
Capital base in a subsequent Reporting Period for any purpose other
than lending without the prior written consent of EDA''), and 307.16
(stating that the usual lending schedule ``requires that the RLF
Recipient lend the entire amount of the initial RLF Capital base within
three years of Grant award'' and allowing different capital utilization
rate based on the size of the ``RLF Capital base''). EDA proposes
introducing a definition of RLF Capital Base so that this important
concept is clearly defined.
RLF Cash Available for Lending as ``the portion of the RLF
Capital Base that is held in cash and available to make loans.'' As
specified in the definition of RLF Capital Base, RLF assets are
maintained in two forms at all times: Held by the RLF Recipient as cash
available for lending and as outstanding loan principal. EDA is
proposing this new definition to clarify requirements applicable to the
part of the RLF Capital Base that is currently unloaned or uncommitted
and available to make loans. See the discussion of proposed revised
Sec. 307.17 (``Requirements for Revolving Loan Fund Cash Available for
Lending'') for more information on the requirements applicable to RLF
Cash Available for Lending.
RLF Recipient as ``the Eligible Recipient that receives an
RLF Grant to manage an RLF in accordance with an RLF Plan, Prudent
Lending Practices, the terms and conditions of the RLF Grant, and all
applicable policies, laws, and regulations.'' While this term is used
throughout the existing regulations, it was not previously defined and
EDA thinks it will be useful as a defined term.
Voluntarily Contributed Capital as ``an RLF Recipient's
voluntary infusion of additional non-EDA funds into the RLF Capital
Base that is separate from and exceeds any Local Share that is required
as a condition of the RLF Grant. Voluntarily Contributed Capital is an
irrevocable addition to the RLF Capital Base and must be administered
in accordance with EDA regulations and policies.'' EDA proposes adding
this definition to clarify that, as of the effective date of these
regulations, Voluntarily Contributed Capital is an RLF Recipient's
voluntary infusion of additional RLF capital that is separate from and
exceeds any Matching Share that is required as a condition of the RLF
Grant. This definition is being added to clarify the process for
contributing additional capital to an RLF and to explain how the
additional capital is treated once added to the RLF Capital Base. In
particular, once added, such capital will be considered irrevocable and
will become part of the RLF Capital Base.
In addition, we propose revising the definitions of the following
existing terms:
In the existing definition of Recapitalization Grants, we
propose replacing the phrase ``capital base of an RLF'' within the
proposed defined term ``RLF Capital Base'' for clarity.
In the existing definition of Reporting Period, EDA
proposes to change the Reporting Period to align with each RLF
Recipient's fiscal year end in order to ensure consistency between RLF
reports using Form ED-209 and annual audit reports by replacing the
phrase ``means the period from April 1st to September 30th or the
period from October 1st to March 31st'' with the phrase ``is based on
the RLF Recipient's fiscal year end and is on an annual or semi-annual
basis as determined by EDA.'' EDA will specify an RLF Recipient's
reporting frequency as either on an annual or semi-annual basis, which
will be based in part on the Recipient's score under the Risk Analysis
System. See also Sec. 307.14(a) (``Revolving Loan Fund report'') for
revisions regarding the frequency of reports.
In the definition of RLF Income, we propose clarifying the
language excluding repayments of principal and
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interest earned on excess funds that are remitted to the U.S. Treasury
by noting that these are excluded pursuant to Sec. 307.20(h).
Therefore, we delete as repetitive the parenthetical ``(excluding
interest earned on excess funds pursuant to Sec. 307.16(c)(2))'' in
the first sentence of the definition and correct a citation in the
final sentence of the definition by replacing the reference to ``Sec.
307.16(c)(2)(i)'' with a reference to ``Sec. 307.20(h)''.
In addition, EDA proposes to better organize the regulations by
placing all pre-disbursement and Disbursement Phase requirements into
Sec. 307.11. To accomplish this, EDA revises the title of the section
to read ``Pre-Disbursement Requirements and Disbursement of funds to
Revolving Loan Funds'' from ``Disbursement of funds to Revolving Loan
Funds''. The timing language in Sec. 307.11(a) that currently reads
``Prior to any disbursement of EDA funds, RLF Recipients are required
to provide in a form acceptable to EDA'' is revised to read ``Within 60
calendar days before the initial disbursement of EDA funds, the RLF
Recipient must provide the following in a form acceptable to EDA'', and
then we revise the regulations to list the certifications and evidence
required before EDA will make an initial disbursement of Grant funds.
Currently, the regulations place different and sometimes conflicting
timing requirements on these certifications. Specifically, under
current Sec. 307.11(a), RLF Recipients must submit evidence of
fidelity bond coverage and the independent accountant's certification
regarding the RLF Recipient's accounting system, respectively, before
any disbursement of EDA funds. In contrast, current Sec. 307.15(b)(1)
requires the Recipient to submit the independent accountant's
certification regarding the RLF Recipient's accounting system within 60
days prior to the initial disbursement of EDA funds, and current Sec.
307.15(b)(2) requires the RLF Recipient's certification regarding
standard loan documents before the disbursement of any EDA funds). In
practice, while RLF Recipients must maintain these standards throughout
the duration of an RLF's operations, the certifications and evidence
are only required before the initial disbursement of EDA funds.
Therefore, EDA is reconciling the timing of the requirements and
clarifying that these items are required within 60 calendar days before
the initial disbursement of EDA funds by revising the language of Sec.
307.11(a).
In addition, we propose moving the following two provisions from
Sec. 307.15(b), which currently sets out pre-disbursement requirements
regarding loan and accounting system documents, to Sec. 307.11(a)
titled ``Pre-disbursement requirements'': (1) The requirement that a
qualified independent accountant certify as to the adequacy of the RLF
Recipient's accounting system to identify, safeguard, and account for
the entire RLF Capital Base, outstanding RLF loans, and other RLF
operations (as proposed Sec. 307.11(a)(1)); and (2) the requirement
that the Recipient certify that the standard loan documents are in
place and have been reviewed by legal counsel (as proposed Sec.
307.11(a)(2)). See the proposed deletions at Sec. 307.15(b) and
appropriate re-lettering of that provision.
With respect to the certification regarding legal counsel review of
standard RLF loan documents currently set out at Sec. 307.15(b)(2), in
relocating the requirement to Sec. 307.15(a)(2), EDA proposes a
revision to require the certification that standard loan documents are
adequate and comply with the terms and conditions of the RLF Grant, RLF
Plan, and applicable State and local law to come directly from the RLF
Recipient's legal counsel rather than have the Recipient certify as to
counsel review. This change will not only streamline this process but
also ensure that the Recipient's legal counsel reviewed the standard
loan documents and verified that those documents are adequate and in
compliance with the applicable requirements. Therefore, in rewording
this provision, we propose replacing the phrase ``the Recipient shall
certify that standard RLF loan documents reasonably necessary or
advisable for lending are in place and that these documents have been
reviewed by legal counsel'' with ``The RLF Recipient's certification
that standard RLF loan documents reasonably necessary or advisable for
lending are in place and a certification from the RLF Recipient's legal
counsel.''
In the same section, we also propose removing the requirement that
a signed bank turn-down letter be included in each loan package. We
propose replacing the requirement that RLF Recipients obtain and
borrowers provide a signed bank turn-down letter to demonstrate that
credit is not otherwise available with the more general requirement for
evidence demonstrating that credit is not otherwise available on terms
and conditions that permit the completion or successful operation of
the activity to be financed. This revision allows EDA to remove the
requirement that alternative evidence to a signed bank turn-down letter
be allowed in the RLF Plan.
The provision regarding evidence of fidelity bond coverage will
remain in place in Sec. 307.11(a), but will be re-lettered as Sec.
307.11(a)(3). In addition, EDA revises the provision to establish
minimum amount of coverage required as the maximum loan amount allowed
for the EDA-approved RLF Plan. The existing regulation allows the
minimum amount of coverage to be equal to the greater of the maximum
permissible loan amount or 25 percent of the RLF Capital base. In
practice, the alternative approach permitting coverage of at least 25
percent of the RLF Capital Base requires Recipients to regularly change
the amount of fidelity bond coverage to remain in compliance. Also, the
two alternative approaches to determining the amount of required
coverage are likely to yield approximately the same amount. EDA seeks
to simplify this requirement and reduce the burden on Recipients by
removing the phrases ``the greater of'' and ``, or 25 percent of the
RLF Capital base'' from re-lettered Sec. 307.11(a)(3).
We also add language following Sec. 307.11(a)(3) to clarify that
the RLF Recipient must maintain the adequacy of the RLF's accounting
system and standard RLF loan documents, as well as records and
documentation to demonstrate that these requirements are met,
throughout the RLF's operation. This maintenance language includes a
cross-reference to proposed Sec. 307.13(b)(3) where we underscore that
the RLF Recipient must maintain records to document compliance with
these requirements. This NPRM also proposes conforming language changes
to incorporate these requirements into a list format. Because we are
moving the language regarding the accountant certification from Sec.
307.15 to Sec. 307.11, this NPRM removes the language in Sec.
307.11(a)(2) that cited to the certification required under Sec.
307.15. Finally, we make a minor change to re-lettered Sec.
307.11(a)(1) to reflect the promulgation of the Uniform Guidance,
replacing the reference to ``OMB Circular A-133 requirements'' with
``the audit requirements set out as subpart F to 2 CFR part 200''. See
proposed revisions to Sec. Sec. 307.11(a) and 307.15.
In Sec. 307.11(c), we simplify the language regarding the amount
of Grant fund disbursements. EDA believes that the current language is
overly complicated and causes undue confusion. The revised language
clarifies that EDA will disburse funds in the amount needed to meet the
Federal share of a new RLF loan. EDA will continue to disburse Grant
funds as the
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RLF Recipient closes on loan obligations. For example, assume an RLF
Grant has a Matching Share requirement of 50 percent. If the RLF
Recipient closes on a loan obligation worth $30, EDA will disburse $15.
Therefore, EDA proposes replacing the phrase ``not to exceed the
difference, if any, between the RLF Capital and the amount of a new RLF
loan, less the amount, if any, of the Local Share required to be
disbursed concurrent with Grant funds'' with the phrase ``be the amount
required to meet the Federal share requirement of a new RLF loan'' in
the first sentence of Sec. 307.11(c).
In addition, EDA proposes new language to Sec. 307.11(c) to
clarify how RLF Income is treated during the Disbursement Phase. The
current regulations specify that RLF Income held to reimburse
administrative costs does not need to be disbursed to draw additional
Grant funds, but do not address RLF Income not used for administrative
costs. Through this regulatory revision, EDA is clarifying that RLF
Income earned during the Disbursement Phase must be placed in the RLF
Capital Base and may be used to reimburse eligible and reasonable
administrative costs and increase the RLF Capital Base; however, RLF
Income earned during the Disbursement Phase need not be disbursed to
support new RLF loans, unless otherwise specified in the terms and
conditions of the RLF Grant. See proposed revisions to Sec. 307.11(c).
In addition, EDA proposes a non-substantive revision to Sec.
307.11(d) to capitalize the word ``Grant.''
This NPRM locates all provisions that set out Local Share
requirements in Sec. 307.11(f), which requires re-locating the
substance of the provision at Sec. 307.17(d) regarding use of In-Kind
Contributions to satisfy Local Share requirements. Accordingly, EDA
proposes removing current Sec. 307.17(d) and re-numbering the
regulation accordingly. In revised Sec. 307.11(f), EDA adds the phrase
``, which must be specifically authorized in the terms and conditions
of the RLF Grant and may be used to provide technical assistance to
borrowers or for eligible RLF administrative costs,'' between the term
``In-Kind Contributions'' and the phrase ``and cash Local Share'' in
the first sentence of Sec. 307.11(f)(2). EDA notes that because the
purpose of the RLF program is to provide capital to borrowers that
cannot otherwise access credit, EDA rarely determines that In-Kind
Contributions are necessary and reasonable for accomplishment of the
RLF program and, therefore, most RLF Local Share is cash. See proposed
revisions to Sec. Sec. 307.11(f) and 307.17(d).
In addition, to consolidate all pre-disbursement and disbursement
requirements into Sec. 307.11, EDA proposes relocating the provisions
regarding loan closing and disbursement schedules, as well as time
schedule extensions, from Sec. 307.16(a) and (b), respectively, to
Sec. 307.11 and re-lettering them as Sec. 307.11(g) and (h),
respectively. We also propose non-substantive conforming changes to
reflect defined terms and correct cross-references because of this
reorganization. Specifically, EDA replaces the phrase ``initial RLF
Capital Base'' with ``RLF Grant'' in the final sentence of re-lettered
Sec. 307.11(g)(1) to clarify the corpus of funds to which the lending
schedule applies; replaces the cross-reference to ``Sec. 307.16(b)''
in re-lettered Sec. 307.11(g)(2)(iii) with a reference to ``paragraph
(h) of this section'' to reflect the reorganization of these
provisions; corrects a typo by replacing the plural ``requests'' with a
singular ``request'' in the last sentence of re-lettered Sec.
307.11(h)(1); and breaks re-lettered Sec. 307.11(h)(2) into two
sentences for clarity and emphasis. See proposed revisions to
Sec. Sec. 307.11(g), 307.11(h), and 307.16(a) and (b).
In keeping with EDA's effort to clarify the distinct requirements
that apply during the Disbursement and Revolving Phases of an RLF, we
propose to rename the title of Sec. 307.12 ``Revolving Loan Fund
Income requirements during the Revolving Phase; payments on defaulted
and written off Revolving Loan Fund loans; Voluntarily Contributed
Capital'' to clarify that the provision describes certain requirements
that apply during the Revolving Phase of the RLF and addresses other
topics, rather than solely setting out RLF Income requirements. We also
add the introductory phrase ``During the Revolving Phase,'' to the
first sentence of Sec. 307.12(a). In addition, EDA is providing
additional flexibilities in using RLF Income to cover administrative
costs. Currently, RLF Income earned during one six-month Reporting
Period must be used to cover administrative costs accrued during that
same six-month period. EDA is extending the time period during which
RLF Income must be used to cover accrued administrative costs to a full
fiscal year. Accordingly, EDA proposes revising Sec. 307.12(a) to
clarify that RLF Income earned in one fiscal year of the RLF Recipient
must be used to cover administrative costs accrued during the same
fiscal year, instead of the same six-month Reporting Period.
Accordingly, in Sec. 307.12(a)(1), we replace the word, ``incurred''
with ``accrued,'' and, in Sec. 307.12(a)(1) and (2), we replace the
phrase ``six-month Reporting Period'' with the phrase ``fiscal year of
the RLF Recipient.'' In Sec. 307.12(a)(3), we replace the phrase
``Reporting Period'' with ``fiscal year.'' In addition, we make a non-
substantive change in Sec. 307.12(a)(1) to add the phrase ``is
earned'' after ``Such RLF Income'' to clarify that RLF Income is earned
by the RLF Recipient as opposed to administrative costs, which are
incurred by the RLF Recipient. In addition, in Sec. 307.12(a)(3), we
replace the phrase ``RLF Capital base'' with the proposed defined term
``RLF Capital Base.''
Furthermore, under EDA's current regulations, an RLF Recipient may
use 100 percent of RLF Income incurred in a six-month Reporting Period
to cover administrative expenses by submitting an RLF Income and
Expense Statement (i.e., Form ED-209I). EDA proposes to no longer
require the RLF Income and Expense Statement, but to clearly specify
that RLF Recipients may not use funds in excess of RLF Income for
administrative costs during the RLF Recipient's fiscal year unless
directed to do so by EDA. While EDA would no longer require Recipients
to submit the RLF Income and Expense Statement, Recipients would
continue to account for their RLF Income and administrative expenses
through their regular ED-209 reporting. EDA also proposes language
advising that RLF Recipients are expected to keep administrative
expenses to a minimum to maintain the RLF Capital Base available for
lending and to specify that the percentage of RLF Income used for
administrative expenses will be one of the performance metrics used in
EDA's Risk Analysis System. Under the proposed Risk Analysis System,
RLF Recipients will be incentivized to manage their expenses in order
to maintain their RLF Capital Base, and EDA will work proactively with
Recipients to help maintain their RLF Capital Base and, through the
annual report and audit, to monitor use of RLF Income. Given EDA's
proposal to move to a risk-based management framework and the agency's
efforts to encourage Recipients to use RLF Income to maintain the RLF
Capital Base, as described above, EDA will no longer require the RLF
Income and Expense Statement, which will reduce the reporting burden on
Recipients. Accordingly, EDA replaces current Sec. 307.12(a)(4), which
requires the submission of an RLF Income and Expense Statement, with
proposed language that prohibits RLF Recipients from using funds in
excess of RLF
[[Page 68195]]
Income for administrative costs in a Recipient's fiscal year, sets the
expectation that administrative costs should be kept to a minimum, and
states that the percentage of RLF Income used for administrative costs
will be a metric under the Risk Analysis System. See proposed revisions
to Sec. 307.12(a)(4) and the deletion of the current provision at
Sec. 307.14(c), which sets out the requirement for the RLF Income and
Expense Statement.
In Sec. 307.12(b), which sets out compliance guidance for charging
costs against RLF Income, EDA proposes revisions to reflect the
promulgation of the Uniform Guidance. Specifically, in revised Sec.
307.12(b)(1), EDA specifies that for RLF Grants made or recapitalized
on or after December 26, 2014, the RLF Recipient must comply with the
administrative and cost principles set out in 2 CFR part 200. In
revised Sec. 307.12(b)(2), EDA specifies that for RLF Grants awarded
before December 26, 2014, unless otherwise indicated in the terms of
the Grant, the RLF Recipient must comply with the cost principles set
out in 2 CFR parts 225 (for State, local, and Indian tribal
governments); 230 (for non-profit organizations other than institutions
of higher education, hospitals, and other organizations); or 220 (for
educational institutions), as applicable. EDA proposes a new Sec.
307.12(b)(3) to specify that regardless of when an RLF Grant was
awarded or recapitalized, the audit requirements set out as subpart F
to 2 CFR part 200 apply to audits of the RLF Recipient for fiscal years
beginning on or after December 26, 2014, as does the Compliance
Supplement, as appropriate.
In Sec. 307.12(c), we propose minor adjustments to clarify that
the prioritization of payments on RLF loans includes payments on both
defaulted RLF loans and those that have been written off, adding the
phrase ``and written off'' to the heading of Sec. 307.12(c) and the
first sentence of the provision between the word ``defaulted'' and the
phrase ``RLF loan''. In addition, we propose revising the cross
reference to ``Sec. 307.20'' in the provision to ``Sec. 307.21'' to
reflect the proposed reorganization of the noncompliance provisions.
See proposed revisions to Sec. 307.12(c).
We also propose adding new Sec. 307.12(d) to introduce additional
clarifying language regarding the treatment of the proposed defined
term Voluntarily Contributed Capital. As noted above, in addition to
proposing a definition to clarify the process for contributing
additional capital to an RLF and to explain how the additional capital
is treated once added to the RLF Capital Base, we also propose adding a
provision within the section on pre-disbursement and disbursement
requirements to specify that when an RLF Recipient wishes to add
additional capital to the RLF Capital Base, the Recipient must submit a
written request that specifies the source of the funds to be added.
Upon approval by EDA, the Voluntarily Contributed Capital becomes an
irrevocable part of the RLF Capital Base and may not be subsequently
withdrawn or separated from the RLF. This should help prevent
situations when the sources of Voluntarily Contributed Capital
subsequently seek to retrieve the funds that were, in effect,
commingled with the rest of the Capital Base, making it difficult--if
not impossible--to separate out those additional funds and to determine
the local and Federal shares. See proposed revisions to Sec. Sec.
307.8 and 307.12(d).
EDA proposes to revise RLF reporting requirements to specify that
records for administrative expenses must be kept for three years from
the submission date of the last report that covers the fiscal year in
which the costs were recorded, rather than the last semi-annual report
that covers the Reporting Period in which the costs were incurred.
Therefore, in Sec. 307.13(b)(2), we propose deleting the phrase ``last
semi-annual'' between the phrase ``date of the'' and the word
``report'' and replace the defined term ``Reporting Period'' with
``fiscal year''. In addition, we propose revising Sec. 307.13(a)(3) to
specify that, consistent with the requirements of Sec. 307.11(a), for
the duration of RLF operations, Recipients must retain records to
demonstrate the adequacy of the RLF's accounting system, that standard
RLF loan documents are in place, and that sufficient fidelity bond
coverage is maintained. In addition, the existing requirement to make
records available for inspection is re-lettered as new Sec.
307.13(a)(4). See proposed revisions to Sec. 307.13.
This NPRM proposes removing the stipulation that all RLF reports be
submitted to EDA on a semi-annual basis, which will permit EDA to
establish a reporting frequency (annual or semi-annual) based on the
objective risk presented by a given RLF, allowing EDA to more closely
monitor RLF program performance and engage with RLF Recipients to
identify and address existing and potential challenges. Accordingly,
EDA proposes revising the title of Sec. 307.14 to read ``Revolving
Loan Fund report'' and in Sec. 307.14(a), replaces the phrase ``must
complete and submit a semi-annual report in electronic format, unless
EDA approves a paper submission'' with ``must complete and submit an
RLF report, using Form ED-209 or any successor form, in a format and
frequency as required by EDA.''
To improve the accuracy and quality of the information provided
during the regular reporting process, EDA proposes requiring that RLF
Recipients certify as part of their regular reporting to EDA that the
RLF is operating in accordance with their RLF Plan and that the
information being provided is complete and accurate. In Sec.
307.14(b), we remove the adjective ``semi-annual'' and add the phrase
``and that the information provided is complete and accurate.'' In
addition, EDA proposes deleting the second sentence of Sec. 307.14(b)
to clarify that proposals to modify RLF Plans cannot be made through
the reporting process. Such modifications can only be done by separate
notification to EDA as described in Sec. 307.9(c). Finally, as noted
previously in this NPRM, because EDA proposes to no longer required the
submission of an RLF Income and Expense Statement, EDA removes Sec.
307.14(c) in its entirety.
EDA proposes clarifying the provision permitting the inclusion of a
loan loss reserve in an RLF Recipient's financial statements, in
accordance with generally accepted accounting principles (``GAAP'') to
show the fair market value of an RLF loan portfolio. This provision has
created confusion on the part of some RLF Recipients, who understood it
to mean that the inclusion of a loan loss reserve also applied to the
Schedule of Expenditures of Federal Awards (``SEFA''), which is the
list of expenditures for each Federal award covered by the Recipient's
financial statements and must be reviewed as part of the audit process.
While GAAP permits the inclusion of a loan loss reserve in financial
statements, subpart F to 2 CFR part 200, which sets out the
requirements for handling audits of Federal grant programs,
specifically prohibits the inclusion of a loan loss reserve in the
SEFA. As a result, RLF Recipients that understood the loan loss reserve
provision of the RLF regulations to apply to the SEFA ultimately
provided inaccurate (and undervalued) RLF valuations in the SEFA. EDA
hopes to resolve this confusion by adding a sentence to the end of
Sec. 307.15(a)(2) that clearly provides that loan loss reserves are
non-cash entries only and shall not be used to reduce the nominal value
of the RLF in the SEFA. In addition, the current regulations allow a
loan loss reserve to be recorded to ``show the fair market value of the
RLF's loan portfolio''. In the first sentence of
[[Page 68196]]
Sec. 307.15(a)(2), EDA proposes replacing the phrase ``fair market''
with ``adjusted current'' to allow a loan loss reserve to be recorded
as a non-cash entry to show the adjusted current value, which will more
accurately reflect how RLF portfolios are valued. In addition, EDA
revises Sec. 307.15(a)(1) to reflect the promulgation of the Uniform
Guidance, replacing the reference to ``in OMB Circular A-133'' with
``the audit requirements set out as subpart F to 2 CFR part 200'' and,
after the reference to the Compliance Supplement, adding the phrase
``which is Appendix XI to 2 CFR part 200,'' to help the reader locate
the Supplement.
Proposed Sec. 307.15(c), which was re-lettered from Sec.
307.15(d) to reflect the relocation of loan and accounting systems
certification requirements to Sec. 307.11(a), sets out the
requirements for RLF leveraging and enumerates investments that qualify
as leverage. Recipients are currently required to ensure funding from
additional sources at a ratio of $2 of additional funding to every $1
of RLF loans. This applies to the whole RLF portfolio, rather than for
individual loans, and is effective for the duration of the RLF. EDA
proposes to broaden RLF leveraging requirements to enable Recipients to
use funds from State and local lending programs, in addition to the
non-guaranteed portions and 90 percent of the guaranteed portions of
Federal loan programs. Similar to allowing Federal loans to count as
leveraging, if the managers of State and local lending programs are
willing to provide financing to a borrower, EDA believes that such
financing should count towards the leveraging requirement. To better
reflect the content of this provision, EDA proposes renaming Sec.
307.15(c) ``RLF leveraging'' and replacing the phrase ``private
investment'' with ``additional investment'' in Sec. 307.15(c)(1). In
addition, we propose adding new Sec. 307.15(c)(1)(iv) to read ``Loans
from other State and local lending programs.''
As noted throughout the NPRM, EDA proposes adopting a Risk Analysis
System to evaluate and manage the performance of RLF Recipients to make
the RLF program more effective and efficient. Such an approach is
designed to provide Recipients with a set of portfolio management and
operations standards to evaluate their RLF program and improve
performance. It will also provide EDA with an internal tool for
assessing the risk of each Recipient's loan operations and identifying
RLF Recipients that require additional monitoring, technical
assistance, or other action. This approach to risk-based analysis and
management is modeled on the Uniform Financial Institutions Rating
System (the ``CAMELS'' rating system), used by regulators to assess
financial institutions and to identify those in need of extra
assistance or attention. The CAMELS system produces a composite rating
by examining six components: Capital adequacy, asset quality,
management, earnings, liquidity, and sensitivity to market risk. EDA
proposes using factors that will likely include capital, assets,
management, earnings, liquidity, strategic results, and financial
controls, and to use the information and data currently required to be
submitted by RLF Recipients in regular reporting to assign risk
analysis ratings to each RLF. Scores will be assigned for each factor
on a numerical scale of one to three, with three being the highest
score. The scores will be totaled to determine each RLF Recipient's
classification as A, B, or C, with an A classification describing the
highest performers, B identifying those who are generally managing
their program well but who may need some assistance on one or more
areas, and C labelling those Recipients that face serious challenges
with their programs and require significant improvement. Recipients
classified as B or C will generally be given a reasonable amount of
time to become compliant with the relevant requirements and improve
their score. However, persistent noncompliance may result in EDA
undertaking appropriate compliance actions, including requiring a
corrective action plan, disallowing Grant funds, or suspending or
terminating the RLF Grant. As such, EDA proposes replacing EDA's
current management scheme, which mainly consists of the capital
utilization standard (see additional details on changes to this
standard below) and monitoring loan default rates, with the Risk
Analysis System. Accordingly, through this NPRM we propose completely
revising Sec. 307.16 to name it ``Risk Analysis System'' and to locate
the description of the Risk Analysis System in paragraph (a) and its
compliance framework in paragraph (b). As noted above, this NPRM
proposes relocating current paragraphs (a) and (b) of Sec. 307.16,
which set out requirements for loan closing and disbursement schedules
and time schedule extensions, respectively, as proposed paragraphs (g)
and (h) to Sec. 307.11. We also propose removing paragraphs (c) and
(d) of Sec. 307.16, which set out the capital utilization standard (to
be replaced by the proposed concept of the Allowable Cash Percentage,
as more fully explained below) and EDA's system for monitoring loan
default rates, respectively.
Consistent with EDA's revisions to its Definitions section, this
NPRM revises Sec. 307.17 to incorporate proposed defined terms and
better specify EDA's requirements related to the proposed defined term
``RLF Cash Available for Lending.'' As such, EDA proposes revising the
title of Sec. 307.17 to read ``Requirements for Revolving Loan Fund
Cash Available for Lending'' and replacing the term RLF Capital with
the proposed defined term RLF Cash Available for Lending in the first
sentence of Sec. 307.17(a) and the heading and first sentence of
paragraph (c) and paragraph (c)(6)(ii) of Sec. 307.17. In addition, we
add the phrase ``shall be deposited and held in an interest-bearing
account by the Recipient and'' following ``RLF Cash Available for
Lending shall be'' in the first sentence of Sec. 307.17(a) to clarify
how RLF Recipients must maintain RLF Cash Available for Lending.
In addition, through this NPRM, EDA proposes adopting the concept
of an Allowable Cash Percentage, which will be considered in the Risk
Analysis System, to replace the capital utilization standard, which
requires Recipients to manage their lending and repayment schedules so
that at all times at least 75 percent of their RLF Capital is loaned or
committed. Noncompliance with the capital utilization standard
frequently triggered sequestration as a remedy. Although EDA encourages
RLF Recipients to prudently make capital available as much as possible,
EDA recognizes that different regions face very different economic and
access to capital conditions and that a one-size-fits-all capital
utilization standard can be difficult for RLF Recipients to meet and
for EDA to implement. To help resolve this, EDA proposes to reverse the
standard on which RLF Recipients will be assessed from the amount of
capital that is loaned or committed to the amount of cash Recipients
have on hand available for lending--defined as the Allowable Cash
Percentage.
Each year, each EDA Regional Office will calculate the average
percentage of RLF Cash Available for Lending across their RLF portfolio
and will notify RLF Recipients by January 1 of each year of the
Allowable Cash Percentage to be used during the ensuing year. RLF
Recipients will be required to manage their repayment and lending
schedules to provide that at all times, their amount of RLF Cash
Available for Lending does not exceed the Allowable Cash Percentage.
For example, assume an EDA Regional Office's RLF portfolio is made up
of five awards. Based on their
[[Page 68197]]
2015 RLF reports, the percentage of each RLF's RLF Capital Base that
was held as RLF Cash Available for Lending was as follows:
RLF 1--RLF Capital Base of $4,500,000, of which $1,200,000 was held
as RLF Cash Available for Lending;
RLF 2--RLF Capital Base of $7,600,000, of which $2,800,000 was held
as RLF Cash Available for Lending;
RLF 3--RLF Capital Base of $1,670,000, of which $630,000 was held
as RLF Cash Available for Lending;
RLF 4--RLF Capital Base of $13,872,930, of which $2,974,025 was
held as RLF Cash Available for Lending; and
RLF 5--RLF Capital Base of $5,423,000, of which $900,000 was held
as RLF Cash Available for Lending.
Based on these numbers, on January 1, 2016, the EDA Regional Office
would inform all RLF Recipients in the region's RLF portfolio that the
Allowable Cash Percentage is 26 percent (the sum of RLF Cash Available
for Lending for the 5 RLFs ($8,504,025) divided by the sum of the RLF
Capital Base for the 5 RLFs ($33,065,930) and that they must manage
their lending and repayment schedules throughout 2016 so that at all
times their RLF Cash Available for Lending does not exceed 26 percent.
EDA also proposes to revise its compliance framework on this issue. As
noted above, noncompliance with the capital utilization standard
frequently triggered automatic sequestration. Given the replacement of
the capital utilization standard with the more flexible Allowable Cash
Percentage and the adoption of a Risk Analysis System, EDA proposes to
no longer require automatic sequestration of what is currently referred
to as ``excess funds,'' the difference between the actual percentage of
RLF Capital loaned and the capital utilization standard. With this
change, noncompliance with the Allowable Cash Percentage will be
considered in EDA's Risk Analysis System and may affect the RLF
Recipient's ranking in the system. In addition, rather than being
applied automatically, sequestration will be considered as one of a
range of possible tools used to ensure compliance with the terms of the
RLF Grant.
Accordingly, EDA revises Sec. 307.17 (b) to set out the
requirements for the Allowable Cash Percentage and re-letters existing
Sec. 307.17(b), which has been revised to set out restrictions on RLF
Cash Available for Lending, as Sec. 307.17(c) and existing Sec.
307.17(c), which provides that EDA may require an independent third
party to conduct a compliance and loan quality review, as new Sec.
307.17(d).
In addition, to address recent concerns EDA has encountered in
administering the RLF program, we propose clearly stating that RLF Cash
Available for Lending may not be used to: (1) Serve as collateral to
obtain credit or any other type of financing without EDA's prior
written approval; (2) support operations or administration of the RLF
Recipient; or (3) undertake any activity that would violate the
requirements found in 13 CFR part 314, including Sec. 314.3
(``Authorized Use of Property'') and Sec. 314.4 (``Unauthorized Use of
Property''). Using RLF funds in these ways has long been prohibited by
EDA's regulations; however, EDA proposes to clearly state these
prohibitions and add them as new paragraphs (c)(7), (8), and (9) to
Sec. 307.17.
Finally, we propose minor clarifying changes to the list of
transactions for which RLF Cash Available for Lending may not be used.
Specifically, in re-lettered Sec. 307.17(c)(3), we replace the
sentence ``Provide for borrowers' required equity contributions under
other Federal Agencies' loan programs'' with ``Provide a loan to a
borrower for the purpose of meeting the requirements of equity
contributions under another Federal Agency's loan program''. In
addition, in the second sentence of re-lettered Sec. 307.17(c)(6)(ii),
we replace the phrase ``RLF Capital'' with ``RLF funds'' and the phrase
``reasonable period of time, as determined by EDA'' with ``reasonable
time frame approved by EDA''. As noted above, current Sec. 307.17(d)
is being removed to locate all provisions regarding In-Kind
Contributions within proposed Sec. 307.11(f).
This NPRM clarifies that EDA can approve multiple New Lending Area
requests with respect to a given RLF. Recipients may request changes to
their original or approved Lending Areas to address changes within the
local economy or to respond to a burgeoning need. Currently, the
regulations state that once EDA approves a New Lending Area, it remains
in place indefinitely. EDA is simply adding language to specify that
the New Lending Area remains in place until EDA approves a subsequent
request for a New Lending Area. In Sec. 307.18(a)(2), we add the
introductory phrase ``Following EDA approval,'' and replace the
concluding phrase ``shall remain in place indefinitely following EDA
approval'' with ``shall remain in place until EDA approves a subsequent
request for a New Lending Area''.
We also propose clarifying language to distinguish between the
addition of lending areas and mergers of RLFs. EDA proposes removing
the word, ``merged,'' from the discussion of additional lending areas
in the second sentence of Sec. 307.18(a)(1) to clarify that merging
RLFs and adding lending areas are two different transactions. EDA is
also clarifying the terminology in Sec. 307.18(b)(1) used to describe
a consolidated RLF by replacing the word ``surviving'' with the word
``combined''. This change is designed to make clearer the distinction
between consolidations, which involve a single RLF Recipient, and
mergers, which involve multiple RLF Recipients.
For clarity, this NPRM completely reorganizes the compliance
regulations by separating them into one section describing what actions
are considered noncompliance (Sec. 307.20 with the proposed title
``Noncompliance'') and another section listing remedies for
noncompliance (Sec. 307.21 with the proposed title ``Remedies for
noncompliance''). This reorganization is designed to help all RLF
stakeholders understand problematic practices and appropriate remedies.
See proposed revisions to Sec. Sec. 307.20 and 307.21. In connection
with this, we propose revising the list of problematic practices that
could result in disallowances of a portion of an RLF. EDA proposes to
remove the following from this list to reflect their incorporation into
the Risk Analysis System: (1) Having RLF loans that are more than 120
days delinquent; and (2) having excess cash sequestered for 12 months
or longer without an EDA-approved extension request. Procedures for
dealing with delinquent loans are also covered in Part 2 of the RLF
Plan. With regards to excess sequestered cash, as discussed above, the
automatic sequestration of funds is now being addressed by the Risk
Analysis System and the use of an Allowable Cash Percentage. However,
EDA does reserve the right to take appropriate compliance action if an
RLF Recipient holds RLF Cash Available for Lending so that it is 50
percent or more of the RLF Capital Base without an EDA-approved
extension request.
We also clarify the provision regarding a Recipient's duty to
compensate the Federal Government for the Federal Share of the RLF
Grant in the event that the Recipient requests termination of the
Grant. The current regulations state that the Recipient requesting
termination must compensate the Federal Government for the Federal
share of the RLF ``property, including the current value of all
outstanding RLF loans.'' EDA seeks to make this regulation clearer and
easier to comply with by requiring the Recipient to compensate for the
Federal
[[Page 68198]]
share of the RLF Capital Base, including the monetary value of all
outstanding loan principal. See proposed revisions to Sec. 307.21(d).
We also remove the provision that required Recipients, after
termination of an RLF Grant, to seek EDA approval to retain and use for
other economic development activities the RLF Recipients' share of RLF
Income generated by the RLF. By removing this provision, EDA is
clarifying that Recipients do not need to seek EDA approval to use
their share of funds returned to them following termination of an RLF.
See proposed revisions to Sec. 307.21(d).
Part 308--Performance Incentives
Part 308 sets out EDA's performance incentives for Recipients. When
a Project is constructed under projected cost, EDA may allow the
Recipient to use the excess funds to either increase the Investment
Rate of the Project to the maximum percentage allowable under Sec.
301.4 for which the Project was eligible at the time of the Investment
award, or further improve the Project consistent with its purpose. The
terms for performance awards under EDA's Public Works and Economic
Adjustment Assistance programs are set out in Sec. 308.2 and the terms
for performance awards under EDA's Planning program are set out under
Sec. 308.3. EDA does not propose any changes to part 308.
Part 309--Redistributions of Investment Assistance
Part 309 sets out EDA's policies regarding redistributing grant
funds in the form of subgrants, loans, or other appropriate assistance.
Information with respect to redistributions of Investment funds for
Planning, Public Works, and Training, Research, and Technical
Assistance Investments is presented in Sec. 309.1 (``Redistributions
under parts 303, 305, and 306''). Specifically, Sec. 309.1(a) provides
that a Recipient under any program governed by parts 303, 305, and 306
may directly expend the Investment Assistance, or, with prior EDA
approval, redistribute such funds in the form of a subgrant to another
Eligible Recipient that qualifies for EDA Investment Assistance under
the same program part as the Recipient. All subgrants must be subject
to the same terms and conditions applicable to the Recipient under the
original Investment award. Subsection 309.1(b) stipulates that
Investment Assistance received under parts 303 or 305 may not be
redistributed to a for-profit entity.
Section 309.2 (``Redistributions under part 307'') addresses
redistributions under part 307 for Economic Adjustment Assistance
Investments. This section reads similarly to Sec. 309.1. However, a
Recipient under part 307 may redistribute Investment funds to another
Eligible Recipient in the form of a grant or to a non-profit and
private for-profit entity in the form of a loan or other appropriate
assistance under subpart B of part 307.
In both Sec. Sec. 309.1 and 309.2, EDA proposes language to
clarify EDA's practice of requiring the Eligible Recipient under the
original award to comply with special award conditions and Subrecipient
(in accordance with the proposed defined term at Sec. 300.3) to
provide appropriate certifications of compliance with relevant legal
requirements. Accordingly, EDA proposes adding the sentence ``EDA may
require the Eligible Recipient under the original Investment award to
agree to special award conditions and the Subrecipient to provide
appropriate certifications to ensure the Subrecipient's compliance with
legal requirements'' to Sec. Sec. 309.1(a) and 309.2(b). In addition,
we propose adding language to refer to the proposed defined term
Subrecipient in Sec. 300.3 by adding the phrase ``, generally referred
to as a Subrecipient,'' to the first sentence of Sec. 309.1(a) and
Sec. 309.2(a)(1).
Part 310--Special Impact Areas
Part 310 implements section 214 of PWEDA (42 U.S.C. 3154), which
authorizes the Assistant Secretary to waive the CEDS requirements of
section 302 of PWEDA (42 U.S.C. 3162) for a Project that will fulfill a
``pressing need'' of the Region or prominently address or alleviate
Regional underemployment or unemployment. Section 310.1 outlines the
process for designating a Region as a Special Impact Area and Sec.
310.2 defines what may be considered a pressing need. EDA does not
propose any changes to part 310.
Parts 311 and 312 [Reserved]
Part 313--Community Trade Adjustment Assistance
Part 313 sets forth regulations to implement the Trade Adjustment
Assistance for Communities program authorized under chapter 4 of title
II of the Trade Act of 1974, as amended (19 U.S.C. 2371 et seq.). EDA
does not propose any revisions to part 313.
Part 314--Property
Part 314 sets forth the rules governing Property acquired or
improved, in whole or in part, with EDA Investment Assistance. As
proposed in the 2011 NPRM and finalized in the 2014 Final Rule, EDA
revised part 314 to make it easier to navigate and understand,
including clarifying EDA's requirements on encumbrances in Sec. 314.6
and streamlining the procedures for the release of the Federal Interest
in connection with EDA-assisted Property in Sec. 314.10. Through this
NPRM, EDA proposes minor revisions to further clarify terminology and
its authority to release the Federal Interest 20 years after the date
of the award of Investment Assistance.
Specifically, for clarity and to conform to the proposed changes to
the RLF program, EDA adds a phrase to clarify that Personal Property
includes the RLF Capital Base, adding the phrase ``, including the RLF
Capital Base as defined at Sec. 307.8'' to the definition of Personal
Property set out at Sec. 314.1. In addition, for clarity and to avoid
repetitive language throughout part 314, we propose adding a definition
of Project Property. The 2011 NPRM introduced the concept of Project
Property, but did not define it. Therefore, in the definitions section
at Sec. 314.1, this NPRM adds a definition of Project Property to read
as follows: ``Project Property means all Property that is acquired or
improved, in whole or in part, with Investment Assistance and is
required, as determined by EDA, for the successful completion and
operation of a Project and/or serves as the economic justification of a
Project. As appropriate to specify the type of Property to which they
are referring, subparts B and C of this part refer to Project Property
as `Project Real Property' or `Project Personal Property'.'' In
addition, this NPRM proposes simplifying the definition of Real
Property to clarify that, in the context of part 314 and for the
purposes of EDA Investment Assistance, Real Property may include
Property that is served by the construction of Project infrastructure,
where such infrastructure is not located on or under the Property.
Accordingly, we replace the word ``improved'' in the second sentence of
the definition with the word ``served'' and remove the phrase ``that
are not situated on or under the land''. We also propose putting the
exemplar list of infrastructure projects ``such as roads, sewer, and
water lines'' in parentheses and removing the phrase ``, but not
limited to'' from the exemplar list because it is unnecessary. Removing
``but not limited to'' is not substantive and does not make the list
exclusive.
In Sec. 314.2 (``Federal Interest''), we add a sentence to the
beginning of paragraph (a) to set out the general expectation that
title to Project Property vests upon acquisition with the Recipient. In
addition, in the now second sentence of Sec. 314.2(a), we propose
replacing the
[[Page 68199]]
phrase ``Property that is acquired or improved, in whole or in part,
with Investment Assistance'' with the newly defined term Project
Property. For clarity, we split the sentence regarding the purpose of
the Federal Interest and how it is secured into two sentences and
replace the word ``secures'' in the now third sentence with the word
``ensures'' and also add the phrase ``EDA Project requirements,
including those related to'' between ``ensures compliance with'' and
``the purpose, scope, and use of a Project''. With respect to the
method by which Recipients must secure the Federal Interest, we replace
the phrase ``and is often reflected by'' with the phrase ``The
Recipient typically must secure the Federal Interest through''.
In Sec. 314.2(b), we replace the phrase ``Property acquired or
improved, in whole or in part, with Investment Assistance'' with the
newly defined term Project Property. In addition, to flag that
nondiscrimination requirements continue to apply even if the Federal
Government is compensated for the Federal Share, we add the phrase
``except as provided in Sec. 314.10(e)(3) regarding nondiscrimination
requirements'' to the end of Sec. 314.2(b).
In Sec. 314.3 (``Authorized Use of Property''), we propose
revising the title of the regulation to read ``Authorized Use of
Project Property'' to reflect the newly defined term Project Property.
We also break current paragraph (e), which addresses requirements for
replacement Personal Property and Real Property into two separate
paragraphs that address the requirements of the different types of
Property. Accordingly, we move the sentence that addresses replacement
Real Property that is currently the final sentence of Sec. 314.3(e)
into new Sec. 314.3(f) and re-number the regulation accordingly, re-
designating current Sec. 314.3(f) as new Sec. 314.3(g). In addition,
EDA adds helpful paragraph headings to help the reader better navigate
the section and find information more quickly. Accordingly, we add the
heading ``General'' to Sec. 314.3(a), ``Project Property that is no
longer needed for Project purposes'' to Sec. 314.3(b), ``Real Property
for sale or lease'' to Sec. 314.3(c), ``Property transfers and
Successor Recipients'' to Sec. 314.3(d), ``Replacement Personal
Property'' to Sec. 314.3(e), ``Replacement Real Property'' to Sec.
314.3(f), and ``Incidental use of Project Property'' to Sec. 314.3(g).
In both Sec. 314.3(a) and (b), we replace the phrase ``Property
acquired or improved, in whole or in part, with Investment Assistance''
with the newly defined term Project Property and in the first sentence
of both Sec. 314.3(d) and (g), we add the word ``Project'' before
``Property'' to incorporate the newly defined term Project Property.
Finally, in Sec. 314.3(g), which addresses under what circumstances
EDA can approve an incidental use of Project Property, we add the
phrase ``undermine the economic purpose for which the Investment was
made'' between ``otherwise'' and ``or adversely'' to clarify that as
well as not adversely affecting the economic useful life of the
Property, an approved incidental use of Project Property must not
undermine the purpose of the Investment.
In Sec. 314.4 (``Unauthorized Use of Property''), we propose
revising the title of the regulation to read ``Unauthorized Use of
Project Property'' to reflect the newly defined term ``Project
Property''. In addition, EDA proposes adding helpful paragraph headings
to help the reader navigate the regulation, adding the heading
``Compensation of Federal Share upon an Unauthorized Use of Project
Property'' to Sec. 314.4(a), ``Additional Unauthorized Uses of Project
Property'' to Sec. 314.4(b), and ``Recovery of the Federal Share'' to
Sec. 314.4(c). In Sec. 314.4(a), this NPRM proposes minor clarifying
changes, specifically replacing ``EDA's interest'' with ``the Federal
Interest'', capitalizing the word ``Government'' as used in the term
``Federal Government'', replacing ``Property acquired or improved in
whole or in part with Investment Assistance'' with the newly defined
term ``Project Property'', and replacing a reference to 15 CFR parts 14
or 24 with 2 CFR part 200. We make similar clarifying changes to Sec.
314.4(b), replacing ``EDA's interest'' with ``the Federal Interest''
and ``Real Property or tangible personal property acquired or improved
with EDA Investment Assistance'' with the phrase ``Project Real
Property or tangible Project Personal Property''. Finally, in Sec.
314.4(c), in the first sentence we add the word ``Project'' before two
instances of the word ``Property'', replace ``its interest'' with ``the
Federal Interest'', and capitalize the word ``Government'' in ``Federal
Government''. In the final sentence of the paragraph, EDA proposes
capitalizing ``Government'' in ``Federal Government'' and adding a
reference to the ongoing requirement that Project Property not be used
in violation of nondiscrimination requirements even after the
compensation of the Federal Share by adding the phrase ``, except for
the nondiscrimination requirements set forth in Sec. 314.10(d)(3)'' to
the end of the paragraph.
Section 314.5 (``Federal Share'') addresses the portion of Project
Property attributable to EDA's Investment Assistance. In Sec.
314.5(a), EDA proposes adding two new sentences to explain EDA's usual
practice of relying on a certified appraisal prepared by a licensed
appraiser to determine the fair market value of Project Property and
also provide that in certain extraordinary circumstances, and at the
agency's sole discretion, EDA may rely on an alternative method to
determine the fair market value, such as the amount of the award of
Investment Assistance or the amount paid by a transferee. EDA
recognizes that in certain, very unusual circumstances, such as when
Property is located in an extremely remote location or, for whatever
reasons, there are no buyers for similar Property, it may be impossible
or cost prohibitive to obtain a certified appraisal and wishes to
provide for this situation. Therefore, EDA proposes adding the
following sentences to the paragraph: ``EDA may rely on a current
certified appraisal of the Project Property prepared by an appraiser
licensed in the State where the Project Property is located to
determine the fair market value. In extraordinary circumstances and at
EDA's sole discretion, where EDA is unable to determine the current
fair market value, EDA may use other methods of determining the value
of Project Property, including the amount of the award of Investment
Assistance or the amount paid by a transferee.'' In addition, EDA adds
the word ``Project'' before ``Property'' in the first sentence of the
paragraph and the phrase ``or other valuation as determined by EDA''
between ``fair market value'' and ``of the Property'' in the final
sentence of the paragraph.
In Sec. 314.6 (``Encumbrances''), this NPRM proposes revising
paragraph (a) to replace the phrase ``Recipient-owned Property acquired
or improved in whole or improved in whole or in part with Investment
Assistance'' with the newly proposed defined term ``Project Property''.
In addition, in the exception provision to the requirement that there
be no encumbrances on Project Property regarding encumbrances to secure
a grant or loan made by a governmental body, EDA proposes adding the
phrase ``so long as the Recipient discloses such an encumbrance in
writing as part of its application for Investment Assistance or as soon
as practicable after learning of the encumbrance'' to reflect the
requirement that the Recipient expeditiously disclose any such
encumbrance to EDA. In Sec. 314.6(b)(3) on pre-existing encumbrances,
we add the phrase ``and disclosed to EDA'' between ``in place'' and
``at the time'' to
[[Page 68200]]
underscore that the Recipient must disclose pre-existing encumbrances
to EDA and add ``, in its sole discretion,'' to underscore that the
approval of pre-existing encumbrances is at EDA's discretion. In
addition, because pre-existing encumbrances pose the same risks to
Project Property as other types of encumbrances, EDA revises Sec.
314.6(b)(3) to incorporate certain requirements from the subparagraphs
setting out requirements for encumbrances proposed both proximate to
and after Project approval: Namely, for EDA to approve a pre-existing
encumbrance, in addition to the requirement that EDA determine that the
requirements of Sec. 314.7(b) are met, EDA must determine that the
terms and conditions of the encumbrance are satisfactory and that there
is a reasonable expectation that the Recipient will not default on its
obligations. EDA renumbers these three requirements as Sec.
314.6(b)(1)(i), (ii), and (iii), respectively.
With respect to Sec. 314.6(b)(4) and (5), which set out the
requirements for EDA's approval of encumbrances proposed proximate to
Project approval and encumbrances proposed after Project approval,
respectively, while EDA does not propose any changes to the regulatory
text, in the preamble to the 2011 NPRM and the 2015 Final Rule, EDA
repeatedly referred to revisions to Sec. 314.6 to clarify the
requirements for EDA to subordinate its interest in Project Property.
However, the regulatory text sets out the requirements for EDA to
approve any type of encumbrance on Project Property, regardless of the
priority of the Federal Interest and whether EDA agrees to subordinate
or not, and through this preamble, EDA confirms that this read is
correct. EDA must undertake the analyses required under Sec. 314.6(b)
for encumbrances proposed on Project Property regardless of whether
EDA's position in such Property changes.
In addition, we propose minor style changes to Sec.
314.6(b)(4)(v)(B) and (5)(v)(B) to add the phrase ``A Recipient that is
a'' to the beginning of the subparagraph to maintain the parallel
nature of the list. In addition, in Sec. 314.5(c), we replace the
phrase ``Recipient-owned Property'' with ``Project Property''. As
specified in the government-wide grant regulations set out at 2 CFR
part 200 and noted in the proposed revisions to Sec. 314.2(a), Project
Property generally vests upon acquisition in the Recipient, and so the
adjective ``Recipient-owned'' is unnecessary.
In Sec. 314.7 (``Title''), EDA proposes adding language to
paragraph (a) to flag that certain limited exceptions apply to the
title requirement, make the provision more readable, and refer directly
to the definition of Real Property set out in Sec. 314.1. As such, EDA
adds the introductory phrase ``Except in those limited circumstances
identified in paragraph (c) of this section'' to the first sentence. In
addition, we relocate the temporal requirement of when title must be
obtained to the beginning of the sentence by adding ``, at the time
Investment Assistance is awarded'' between ``in paragraph (c) of this
section'' and ``the Recipient''. For clarity with respect to EDA's
requirements, we include a reference to the definition of Real Property
in Sec. 314.1 by adding the clause ``, which, as noted in Sec. 314.1
in the definition of `Real Property' includes land that is served by
the construction of Project infrastructure (such as roads, sewers, and
water lines) and where the infrastructure contributes to the value of
such land as a specific purpose of the Project'' to the first sentence
of the paragraph. We also break the requirement that the Recipient
maintain title at all times during the Estimated Useful Life of the
Project into a separate sentence, which we place as the second sentence
of the paragraph. This NPRM proposes replacing the phrase ``Real
Property required for a project'' with the proposed defined term
``Project Real Property'' in both the first and third sentences of
Sec. 314.7(a).
Throughout paragraph (c) of Sec. 314.7, which sets out the
exceptions to EDA's title requirement, we replace the phrase ``the Real
Property required for a Project'' with ``Project Real Property''. EDA
proposes adding the clause ``at the time Investment Assistance is
awarded and at all times during the Estimated Useful Life of the
Project'' to the introductory sentence at Sec. 314.7(c), add
``Project'' before ``Real Property'' twice in Sec. 314.7(c)(1), and
capitalize ``Government'' in ``Federal Government'' in Sec.
314.7(c)(1)(i). In Sec. 314.7(c)(4), which clarifies the exception for
the title requirement when a Project includes construction on a
government-owned roads, EDA proposes clarifying changes to replace the
phrase ``public highway'' with the more descriptive ``State or local
government owned roadway or highway'' in the heading, first sentence of
Sec. 314.7(c)(4), and first clause of Sec. 314.7(c)(4)(ii)(B). To
avoid excessive wordiness, we maintain the phrase ``public highway''
where it exists in the remainder of the provision, but revise it to
read ``public roadway or highway'' and note that the exception in this
provision is intended to apply to State or local government owned
roadways or highways.
In Sec. 314.7(c)(5)(i), which sets out EDA's requirements when the
purpose of a Project is to construct facilities to serve Recipient or
privately owned Real Property, we propose clarifying syntax changes to
revise the phrase ``Real Property, including industrial or commercial
parks, for sale or lease'' to read ``Project Real Property, including
industrial or commercial parks, so that the Recipient or Owner may sell
or lease''. In subparagraph (i)(A) of the provision, we replace the
phrase ``required for such Project'' with the clarifying phrase
``intended for sale or lease'' and add a cross-reference to the
appropriate title requirements by adding the phrase ``in accordance
with paragraphs (C), (D), and (E) of this section'' to the end of the
subparagraph. In subparagraph (i)(B), EDA replaces ``required for such
Project'' with ``intended for lease'', and in subparagraph (iii) we
capitalize ``Owner''.
Section 314.8 (``Recorded Statement for Project Real Property'')
sets out requirements for recording the Federal Interest in Project
Real Property. Throughout the provision we replace three instances of
``EDA's interest'' with ``the Federal Interest'' and use the defined
term ``Project Real Property'' as appropriate, using the term in the
heading of the regulation and replacing ``the Property acquired or
improved in whole or in part with the EDA Invest Assistance'' in
paragraph (a), ``Real Property'' in paragraph (b), and ``Project
Property'' in paragraph (d).
In Sec. 314.9 (``Recorded statement for Personal Property''), EDA
revises the provision to clarify that the recorded statement, which is
generally a Uniform Commercial Code Financing Statement (``Form UCC-
1''), provides notice of the Federal Interest in Project Personal
Property, but does not create a lien on the Property by inserting the
phrase ``provide notice of the Federal Interest in all Project Personal
Property by executing'' between ``the Recipient shall'' and ``a Uniform
Commercial Code Financing Statement'' in the first sentence of the
regulation. In addition, we use the term ``Project Personal Property''
appropriately throughout the provision, including in the title to the
regulation, inserting ``Project'' before the phrase ``Personal
Property, acceptable in form and substance to EDA'' in the first
sentence of the regulation, and replacing ``Personal Property acquired
or improved as part of the Project'' with
[[Page 68201]]
``all Project Personal Property'' in the second sentence of the
regulation, and replace ``EDA's interest'' with ``the Federal
Interest'' in the first sentence to the regulation.
Section 314.10 (``Release of EDA's Property Interest'') sets out
EDA's procedures for releasing the agency's interest in Project
Property. This NPRM proposes replacing the term ``EDA's Property
Interest'' with ``the Federal Interest'' in the titles of both subpart
D and Sec. 314.10 and throughout Sec. 314.10 for clarity and
consistency. This change does not implicate any substantive change to
the Federal Government's undivided equitable reversionary interest in
award property, but is intended for consistency throughout these
regulations and with 2 CFR part 200. In addition, in Sec. 314.10(a),
EDA replaces the phrase ``Property acquired or improved with Investment
Assistance'' with ``Project Property'' for consistency with the
proposed defined term at Sec. 314.1 and its usage throughout part 314.
In addition, EDA proposes removing the portions of paragraph (a) that
provide background on EDA's historical practice for establishing the
Estimated Useful Life of specific Projects. It is accurate that since
1999, EDA has typically established useful lives of between 15 and 20
years, depending on the nature of the asset. As EDA noted in the 2011
NPRM, the Economic Development Administration and Appalachian Regional
Development Reform Act of 1998 (Pub. L. 105-393) added section 601(d)
to PWEDA (42 U.S.C. 3211(d)) to allow EDA to release its interest in
Real or Personal Property after 20 years. This amendment was designed
to provide EDA with additional flexibilities to release its interest in
Project Property, particularly as some Projects implicated 40-year
Estimated Useful Lives, not to mandate a minimum 20-year useful life
for all Project Property. Although these regulatory provisions provided
useful background, they were not necessary for the regulation and we
believe maintaining this history in the preamble is sufficient.
Accordingly, we remove the concluding clause of the second sentence and
the third sentence of paragraph (a) and combine the first and second
sentence of the paragraph to read ``As provided in Sec. 314.2 of this
chapter, the Federal Interest in Project Property extends for the
duration of the Estimated Useful Life of the Project, which is
determined by EDA at the time of Investment award.'' We also simplify
the final sentence in paragraph (a), replacing the phrase ``govern the
manner of obtaining'' with the word ``obtain'' and adding the phrase
``in Project Property'' at the end of the sentence following the phrase
``of the Federal Interest''.
In paragraph (b), which sets out EDA's procedures for releasing the
Federal Interest after the expiration of the Estimated Useful Life, we
revise the paragraph heading to read ``Release of the Federal
Interest'' instead of ``Release of Property'' to more accurately
reflect the content of the provision, correct a typo in the second
sentence by adding the word ``the'' between ``in writing by'' and
``Recipient'', and add a sentence to the end of the paragraph that
provides a helpful cross reference to Sec. 314.10(e), which sets out
the limitations and covenants of use that are applicable to any release
of the Federal Interest.
In paragraph (c), which sets out the EDA's procedures for releasing
the Federal Interest before the expiration of the Estimated Useful
Life, which release requires compensation of the Federal Interest, we
correct a typo in the paragraph heading by adding the word ``the''
between ``prior to'' and ``expiration''. In addition, as more fully
explained in the description of revisions to paragraph (e) below, we
add a clause to clarify that when EDA releases the Federal Interest
after receiving compensation for such interest, EDA has no further
interest in the property, except for specific nondiscrimination
requirements. Accordingly, we add a concluding clause to the final
sentence of the paragraph to read ``and will have no further interest
in the ownership, use, or Disposition of the Property, except for the
nondiscrimination requirements set forth in paragraph (e)(3) of this
section.''
Paragraph (d) of Sec. 314.10 sets out EDA's procedures for
releasing the Federal Interest before the expiration of the Estimated
Useful Life, but at least 20 years after the award of Investment
Assistance, as authorized under section 601(d)(2) of PWEDA. This
authority is generally applicable when the Estimated Useful Life is
long (i.e., 30 or 40 years) and when the Recipient has complied with
all terms of the award of Investment Assistance and the economic
development benefits of the award have been achieved. To clarify the
intent of this paragraph, EDA revises the heading to read ``Release of
the Federal Interest before the expiration of the Estimated Useful
Life, but 20 years after the award of Investment Assistance''. In
addition, we make additional clarifying changes throughout the
paragraph. In the first sentence of the paragraph, we replace the
phrase ``that exceeds 20 years'' with ``, but where 20 years have
elapsed since the award of Investment Assistance''. In addition, to
clarify the determinations that EDA will make in this situation, EDA
adds the following concluding phrase to the paragraph ``if EDA
determines: (1) The Recipient has made a good faith effort to fulfill
all terms and conditions of the of the award of Investment Assistance;
and (2) The economic development benefits as set out in the award of
Investment Assistance have been achieved.'' As with paragraph (b), EDA
has added a sentence to the end of this paragraph that provides a
necessary cross reference to Sec. 314.10(e), which sets out the
limitations and covenants of use that are applicable to any release of
the Federal Interest.
Finally, in paragraph (e), EDA makes needed corrections and
clarifications to limitations of use and required covenants applicable
to a release of the Federal Interest. When EDA releases its interest at
the expiration of the Estimated Useful Life under Sec. 314.10(b) or
releases its interest before the expiration of the Estimated Useful
Life but after at least 20 years have elapsed since the award of
Investment Assistance under Sec. 314.10(d), two use limitations on
Project Property survive the release: (1) Such Property may not be used
for explicitly religious purposes; and (2) such Property may not be
used in violation of the nondiscrimination requirements set out in
Sec. 302.20. However, in the above two scenarios, if compensation is
made to EDA of the Federal Interest at the time of the release or
anytime thereafter, the requirement that Project Property not be used
for explicitly religious purposes will be extinguished. Similarly, when
EDA releases the Federal Interest before the expiration of the
Estimated Useful Life and upon compensation of the Federal Interest,
the requirement that Project Property not be used for explicitly
religious purposes no longer remains. Note that while Sec. 314.10
currently makes references to ``inherently religious purposes,'' EDA is
proposing changing these references to ``explicitly religious
purposes'' to be consistent with recent rulemakings by nine other
Federal agencies implementing Executive Order 13559. See, e.g., 28 CFR
38.5(a) (Department of Justice); 81 FR 19358-59. The term ``explicitly
religious activities'' clarifies that the prohibition is against
external, observable activities, and not directed against the religious
motivation an entity may have in providing services.
Through this NPRM, EDA proposes revisions to subparagraphs (e)(2)
and (3) to make the points above clear. Specifically, we add a final
sentence to
[[Page 68202]]
paragraph (e)(2) clarifying that when requesting release of the Federal
Interest, the Recipient must disclose the future intended use of the
Real Property. New subparagraph (e)(2)(i) clarifies that a Recipient
not intending to use the Real Property or tangible Personal Property
for explicitly religious activities will be required to execute and
record a covenant prohibiting use of the Real Property for explicitly
religious activities. New subparagraph (e)(2)(ii) clarifies the
requirements for a Recipient that intends or foresees the use of Real
Property or tangible Personal Property for explicitly religious
activities. In this case, EDA may require the Recipient to compensate
the agency for the Federal Interest to obtain a release and resulting
waiver of the ``explicitly religious activities'' prohibition, and
recommends that any such Recipient contact EDA well in advance of
requesting a release. It is important to recognize that the structure
now proposed--payment of the Federal Interest excusing the Recipient
from having to comply with the religious use prohibition but not
excusing continued compliance with the non-discrimination prohibition--
was actually in place before EDA's most recent Final Rule became
effective on January 20, 2015. As became clear in the past year when
the agency was confronted with several situations involving the
religious use prohibition, the January 20, 2015 Final Rule appears to
have inadvertently amended certain language in Sec. 314.10 that
created ambiguity and unintended consequences that necessitates the
proposed changes. Subparagraph (e)(3) is revised so that it specifies
the requirement that Real Property or tangible Personal Property not be
used in violation of the nondiscrimination requirements of Sec.
302.20. Therefore, we add the clause ``, including a release upon a
Recipient's compensation for the Federal Share'' between ``under this
section'' and ``a Recipient must'' in the first sentence of (e)(3). In
addition, where (e)(3) specifies the requirements for avoiding any
discriminatory use of Project Property, we remove two instances of the
phrase ``for inherently religious activities prohibited by applicable
Federal law and'' from the first and second sentences. EDA emphasizes
that the differing treatments of the religious use covenant and non-
discrimination covenant, which has been part of EDA's regulatory
framework for a number of years, is in our view justified by the fact
that different legal authorities control the agency's obligations in
each situation.
Part 315--Trade Adjustment Assistance for Firms
Part 315 sets forth regulations to implement the Trade Adjustment
Assistance for Firms program authorized under chapters 3 and 5 of title
II of the Trade Act of 1974, as amended (19 U.S.C. 2341 et seq.). EDA
does not propose any revisions to part 315.
Classification
Prior notice and opportunity for public comment are not required
for rules concerning public property, loans, grants, benefits, and
contracts (5 U.S.C. 553(a)(2)). Because prior notice and an opportunity
for public comment are not required pursuant to 5 U.S.C. 553, or any
other law, the analytical requirements of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) are inapplicable. Therefore, a regulatory
flexibility analysis has not been prepared.
Executive Order No. 12866 and No. 13563
This proposed rule was drafted in accordance with Executive Orders
12866 and 13563. The Office of Management and Budget (OMB) has
determined that this proposed rule is significant for purposes of
Executive Order 12866 and Executive Order 13563. Accordingly, the rule
has undergone interagency review.
Congressional Review Act
This NPRM is not major under the Congressional Review Act (5 U.S.C.
801 et seq.).
Executive Order No. 13132
Executive Order 13132 requires agencies to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' ``Policies that have federalism
implications'' is defined in Executive Order 13132 to include
regulations that 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.'' It has been determined that this proposed rule does
not contain policies that have federalism implications.
Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.)
(``PRA'') requires that a Federal agency consider the impact of
paperwork and other information collection burdens imposed on the
public and, under the provisions of PRA section 3507(d), obtain
approval from OMB for each collection of information it conducts,
sponsors, or requires through regulations. Notwithstanding any other
provision of law, no person is required to respond to, nor shall any
person be subject to a penalty for failure to comply with a collection
of information subject to the PRA unless that collection displays a
currently valid OMB Control Number.
The following table provides a complete list of the collections of
information (and corresponding OMB Control Numbers) set forth in this
proposed rule. These collections of information are necessary for the
proper performance and functions of EDA.
----------------------------------------------------------------------------------------------------------------
Part or section of this proposed rule Nature of request Form/title/OMB control number
----------------------------------------------------------------------------------------------------------------
307.14(a)............................ All RLF Recipients must ED-209, RLF Report (0610-0095).
submit reports to EDA
in a format designated
by EDA.
307.14(b)............................ All Recipients must ED-209, RLF Report (0610-0095).
certify as part of the
report that the RLF is
operating in
accordance with the
RLF Plan and that the
information provided
is complete and
accurate.
----------------------------------------------------------------------------------------------------------------
List of Subjects
13 CFR Part 300
Distressed region, Financial assistance, Headquarters, Regional
offices.
13 CFR Part 301
Applicant and application requirements, Economic distress levels,
Eligibility requirements, Grant administration, Grant programs,
Investment rates.
13 CFR Part 302
Civil rights, Conflicts-of-interest, Environmental review, Federal
policy
[[Page 68203]]
and procedures, Fees, Intergovernmental review, Post-approval
requirements, Pre-approval requirements, Project administration,
Reporting and audit requirements.
13 CFR Part 303
Award and application requirements, Comprehensive economic
development strategy, Planning, Short-term planning investments, State
plans.
13 CFR Part 304
District modification and termination, Economic development
district, Organizational requirements, Performance evaluations.
13 CFR Part 305
Award and application requirements, Economic development, Public
works, Requirements for approved projects.
13 CFR Part 307
Award and application requirements, Economic adjustment assistance,
Income, Liquidation, Merger, Revolving loan fund, Pre-loan
requirements, Record and reporting requirements, Sales and
securitizations, Termination.
13 CFR Part 309
Redistributions of investment assistance, Subgrants, Subrecipients.
13 CFR Part 314
Authorized use, Federal interest, Federal share, Property, Property
interest, Release, Title.
Regulatory Text
For the reasons discussed above, EDA proposes to amend 13 CFR,
chapter III as follows:
PART 300--GENERAL INFORMATION
0
1. Revise the authority citation of part 300 to read as follows:
Authority: 42 U.S.C. 3121; 42 U.S.C. 3122; 42 U.S.C. 3211; 15
U.S.C. 3701; Department of Commerce Organization Order 10-4.
0
2. Amend Sec. 300.3 by:
0
a. Adding a definition for Co-Recipient in alphabetical order;
0
b. Revising the definitions of In-Kind Contribution(s), Project, and
Recipient; and
0
c. Adding definitions for Stevenson-Wydler and Sub-Recipient in
alphabetical order.
The revisions and additions read as follows:
Sec. 300.3 Definitions.
* * * * *
Co-Recipient means one of multiple Recipients awarded Investment
Assistance under a single award. Unless otherwise provided in the terms
and conditions of the Investment Assistance, each Co-Recipient is
jointly and severally liable for fulfilling the terms of the Investment
Assistance.
* * * * *
In-Kind Contribution(s) means non-cash contributions, which may
include contributions of space, equipment, services and assumptions of
debt that are fairly evaluated by EDA and that satisfy applicable
Federal Uniform Administrative Requirements and cost principles as set
out in 2 CFR part 200.
* * * * *
Project means the proposed or authorized activity (or activities)
the purpose of which fulfills EDA's mission and program requirements as
set forth in PWEDA or Stevenson-Wydler and this chapter and which may
be funded in whole or in part by EDA Investment Assistance.
* * * * *
Recipient means an entity receiving EDA Investment Assistance,
including any EDA-approved successor to the entity.
* * * * *
Stevenson-Wydler, for purposes of EDA, means the Stevenson-Wydler
Technology Innovation Act of 1980, as amended (15 U.S.C. 3701 et seq.).
Subrecipient means an Eligible Recipient that receives a
redistribution of Investment Assistance in the form of a subgrant,
under part 309 of this chapter, from another Eligible Recipient to
carry out part of a Federal program.
* * * * *
PART 301--ELIGIBILITY, INVESTMENT RATE AND APPLICATION REQUIREMENTS
0
3. The authority section for part 301 continues to read as follows:
Authority: 42 U.S.C. 3121; 42 U.S.C. 3141-3147; 42 U.S.C. 3149;
42 U.S.C. 3161; 42 U.S.C. 3175; 42 U.S.C. 3192; 42 U.S.C. 3194; 42
U.S.C. 3211; 42 U.S.C. 3233; Department of Commerce Delegation Order
10-4.
0
4. Revise paragraph (b) of Sec. 301.2 to read as follows:
Sec. 301.2 Applicant eligibility.
* * * * *
(b) An Eligible Applicant that is a non-profit organization must
include in its application for Investment Assistance a resolution
passed by (or a letter signed by) an authorized representative of a
general purpose political subdivision of a State, acknowledging that it
is acting in cooperation with officials of such political subdivision.
EDA, at its sole discretion, may waive this cooperation requirement for
certain Projects of a significant Regional or national scope under
parts 306 or 307 of this chapter. See Sec. Sec. 306.3(b), 306.6(b),
and 307.5(b) of this chapter.
0
5. Revise Sec. 301.5 to read as follows:
Sec. 301.5 Matching share requirements.
The required Matching Share of a Project's eligible costs may
consist of cash or In-Kind Contributions. In addition, the Eligible
Applicant must provide documentation to EDA demonstrating that the
Matching Share is committed to the Project, will be available as needed
and is not or will not be conditioned or encumbered in any way that
would preclude its use consistent with the requirements of the
Investment Assistance. EDA shall determine at its sole discretion
whether the Matching Share documentation adequately addresses the
requirements of this section.
0
6. Revise paragraph (a) of Sec. 301.7 to read as follows:
Sec. 301.7 Investment Assistance application.
(a) For all EDA Investment Assistance programs, including the
Public Works, Economic Adjustment Assistance, Planning, Local Technical
Assistance, Research and National Technical Assistance, and University
Center programs, EDA will publish an FFO that specifies application
submission requirements and evaluation procedures and criteria. Each
FFO will be published on the EDA Web site and at https://www.grants.gov.
All forms required for EDA Investment Assistance may be obtained
electronically from https://www.grants.gov or from the appropriate
regional office.
* * * * *
0
7. Revise Sec. 301.8 to read as follows:
Sec. 301.8 Application evaluation criteria.
EDA will screen all applications for the feasibility of the budget
presented and conformance with EDA's statutory and regulatory
requirements. EDA will assess the economic development needs of the
affected Region in which the proposed Project will be located (or will
service), as well as the capability of the Eligible Applicant to
implement the proposed Project. EDA will also review applications for
conformance with program-specific evaluation criteria set out in the
applicable FFO.
0
8. Revise the introductory text of paragraph (a) to Sec. 301.11 to
read as follows:
Sec. 301.11 Infrastructure.
(a) EDA will fund both construction and non-construction
infrastructure necessary to meet a Region's strategic economic
development goals and needs,
[[Page 68204]]
which in turn results in job creation. This includes infrastructure
used to develop basic economic development assets as described in
Sec. Sec. 305.1 and 305.2 of this chapter (e.g., roads, sewers, and
water lines), as well as infrastructure that supports innovation and
entrepreneurship. The following are examples of innovation and
entrepreneurship-related infrastructure that support job creation:
* * * * *
PART 302--GENERAL TERMS AND CONDITIONS FOR INVESTMENT ASSISTANCE
0
9. Revise the authority citation of part 302 to read as follows:
Authority: 19 U.S.C. 2341 et seq.; 42 U.S.C. 3150; 42 U.S.C.
3152; 42 U.S.C. 3153; 42 U.S.C. 3192; 42 U.S.C. 3193; 42 U.S.C.
3194; 42 U.S.C. 3211; 42 U.S.C. 3212; 42 U.S.C. 3216; 42 U.S.C.
3218; 42 U.S.C. 3220; 42 U.S.C. 5141; 15 U.S.C. 3701; Department of
Commerce Delegation Order 10-4.
0
10. Revise Sec. 302.5 to read as follows:
Sec. 302.5 Relocation assistance and land acquisition policies.
Recipients of EDA Investment Assistance or any other types of
assistance under PWEDA, the Trade Act, and Stevenson-Wydler (States and
political subdivisions of States and non-profit organizations, as
applicable) are subject to the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970, as amended (Pub. L. 91-646;
42 U.S.C. 4601 et seq.). See 15 CFR part 11 and 49 CFR part 24 for
specific compliance requirements.
0
11. Revise Sec. 302.6 to read as follows:
Sec. 302.6 Additional requirements; Federal policies and procedures.
Recipients are subject to all Federal laws and to Federal,
Department, and EDA policies, regulations, and procedures applicable to
Federal financial assistance awards, including 2 CFR part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements
for Federal Awards.
0
12. Revise the introductory text to paragraph (a) and paragraphs (a)(2)
and (d) of Sec. 302.20 to read as follows:
Sec. 302.20 Civil rights.
(a) Discrimination is prohibited by a Recipient or Other Party (as
defined in paragraph (b) of this section) with respect to a Project
receiving Investment Assistance under PWEDA or Stevenson-Wydler or by
an entity receiving Adjustment Assistance (as defined in Sec. 315.2 of
this chapter) under the Trade Act or any other type of assistance under
Stevenson-Wydler, in accordance with the following authorities:
* * * * *
(2) 42 U.S.C. 3123 (proscribing discrimination on the basis of sex
in Investment Assistance provided under PWEDA), 42 U.S.C. 6709
(proscribing discrimination on the basis of sex under the Local Public
Works Program), Title IX of the Education Amendments of 1972, as
amended (20 U.S.C. 1681 et seq.) (proscribing discrimination on the
basis of sex in any education program or activity receiving Federal
financial assistance, whether or not such program or activity is
offered or sponsored by an educational institution), and the
Department's implementing regulations found at 15 CFR part 8a;
* * * * *
(d) All Recipients of Investment Assistance under PWEDA and
Stevenson-Wydler, all Other Parties, and all entities receiving
Adjustment Assistance under the Trade Act or any other type of
assistance under Stevenson-Wydler must submit to EDA written assurances
that they will comply with applicable laws, EDA regulations, Department
regulations, and such other requirements as may be applicable,
prohibiting discrimination.
* * * * *
PART 303--PLANNING INVESTMENTS AND COMPREHENSIVE ECONOMIC
DEVELOPMENT STRATEGIES
0
13. The authority citation for part 303 continues to read as follows:
Authority: 42 U.S.C. 3143; 42 U.S.C. 3162; 42 U.S.C. 3174; 42
U.S.C. 3211; Department of Commerce Organization Order 10-4.
0
14. Revise paragraphs (b)(1) and (b)(3)(ii) of Sec. 303.6 to read as
follows:
Sec. 303.6 Partnership Planning and the EDA-funded CEDS process.
* * * * *
(b) * * *
(1) CEDS Strategy Committee. The Planning Organization must appoint
a Strategy Committee. The Strategy Committee must represent the main
economic interests of the Region, which may include Indian tribes, the
private sector, State and other public officials, community leaders,
private individuals, representatives of workforce development boards,
institutions of higher education, minority and labor groups, and others
who can contribute to and benefit from improved economic development in
the relevant Region. In addition, the Strategy Committee must
demonstrate the capacity to undertake a collaborative and effective
planning process.
* * * * *
(3) * * *
(ii) The Planning Organization must submit a new or revised CEDS to
EDA at least every five years, unless EDA or the Planning Organization
determines that a new or revised CEDS is required earlier due to
changed circumstances. In connection with the submission of a new or
revised CEDS, the Planning Organization must obtain renewed commitments
from participating counties or other areas within the District to
support the economic development activities of the District.
* * * * *
0
15. Revise paragraph (c)(1) of Sec. 303.7 to read as follows:
Sec. 303.7 Requirements for Comprehensive Economic Development
Strategies.
* * * * *
(c) * * *
(1) In determining the acceptability of a CEDS prepared
independently of EDA Investment Assistance or oversight for Projects
under parts 305 and 307 of this chapter, EDA may in its discretion
determine that the CEDS is acceptable so long as it includes all of the
elements listed in paragraph (b) of this section. In certain
circumstances, EDA may accept a non-EDA funded CEDS that does not
contain all the elements listed in paragraph (b) of this section. In
doing so, EDA shall consider the circumstances surrounding the
application for Investment Assistance, including emergencies or natural
disasters and the fulfillment of the requirements of section 302 of
PWEDA.
* * * * *
PART 304--ECONOMIC DEVELOPMENT DISTRICTS
0
16. The authority citation for part 304 continues to read as follows:
Authority: 42 U.S.C. 3122; 42 U.S.C. 3171; 42 U.S.C. 3172; 42
U.S.C. 3196; Department of Commerce Organization Order 10-4.
0
17. Revise paragraph (c)(2) of Sec. 304.2 to read as follows:
Sec. 304.2 District Organizations: Formation, organizational
requirements and operations.
* * * * *
(c) * * *
(2) The District Organization must demonstrate that its governing
body is broadly representative of the principal economic interests of
the Region, which may include the private sector, public officials,
community leaders, representatives of workforce development boards,
institutions of higher education, minority and labor groups, and
private individuals. In addition, the governing body must
[[Page 68205]]
demonstrate the capacity to implement the EDA-approved CEDS.
* * * * *
PART 305--PUBLIC WORKS AND ECONOMIC DEVELOPMENT DISTRICTS
0
17. The authority citation for part 305 continues to read as follows:
Authority: 42 U.S.C. 3211; 42 U.S.C. 3141; Department of
Commerce Organization Order 10-4.
0
18. Revise paragraph (b) of Sec. 305.6 to read as follows:
Sec. 305.6 Allowable methods for procurement of construction
services.
* * * * *
(b) For all procurement methods, the Recipient must comply with the
procedures and standards set forth in 2 CFR part 200.
0
19. Revise paragraph (c) of Sec. 305.8 to read as follows:
Sec. 305.8 Recipient-furnished equipment and materials.
* * * * *
(c) Acquisition of Recipient-furnished equipment or materials under
this section also is subject to the requirements of 2 CFR part 200.
PART 307--ECONOMIC ADJUSTMENT ASSISTANCE INVESTMENTS
0
20. The authority citation of part 307 continues to read as follows:
Authority: 42 U.S.C. 3211; 42 U.S.C. 3149; 42 U.S.C. 3161; 42
U.S.C. 3162; 42 U.S.C. 3233; Department of Commerce Organization
Order 10-4.
0
21. Revise Sec. 307.6 to read as follows:
Sec. 307.6 Revolving Loan Funds established for lending.
Economic Adjustment Assistance Grants to capitalize or recapitalize
RLFs most commonly fund business lending, but also may fund public
infrastructure or other authorized lending activities. The requirements
in this subpart B apply to EDA-funded RLFs. Special award conditions
may contain appropriate modifications of these requirements.
0
22. Revise the introductory text of paragraph (b) and paragraph (b)(2)
of Sec. 307.7 to read as follows:
Sec. 307.7 Revolving Loan Fund award requirements.
* * * * *
(b) RLF Grants shall comply with the requirements set forth in this
part, as well as relevant provisions of parts 300 through 303, 305, and
314 of this chapter and in the following publications:
(1) * * *
(2) The Compliance Supplement, which is appendix XI to 2 CFR part
200 and is available on the OMB Web site at https://www.whitehouse.gov/omb/circulars_default.
0
23. Amend Sec. 307.8 as follows:
0
a. Add definitions for Allowable Cash Percentage and Disbursement Phase
in alphabetical order;
0
b. Revise the definitions of Recapitalization Grants and Reporting
Period;
0
c. Add a definition for Risk Analysis System in alphabetical order;
0
d. Remove the definition of RLF Capital;
0
e. Add definitions for RLF Capital Base and RLF Cash Available for
Lending in alphabetical order;
0
f. Revise the definition of RLF Income; and
0
g. Add definitions for RLF Recipient and Voluntarily Contributed
Capital in alphabetical order.
The additions and revisions read as follows:
Sec. 307.8 Definitions.
* * * * *
Allowable Cash Percentage means the average percentage of the RLF
Capital Base maintained as RLF Cash Available for Lending by RLF
Recipients in each EDA regional office's portfolio of RLF Grants over
the previous year.
* * * * *
Disbursement Phase means the period of loan activity where Grant
funds awarded have not been fully disbursed to the RLF Recipient.
* * * * *
Recapitalization Grants are Investments of additional Grant funds
to increase the RLF Capital Base.
Reporting Period, for purposes of this subpart B only, is based on
the RLF Recipient's fiscal year end and is on an annual or semi-annual
basis as determined by EDA.
* * * * *
Risk Analysis System refers to a set of metrics defined by EDA to
evaluate a Recipient's administration of its RLF Grant and that may
include but is not limited to capital, assets, management, earnings,
liquidity, strategic results, and financial controls.
RLF Capital Base means the total value of RLF Grant assets
administered by the RLF Recipient. It is equal to the amount of Grant
funds used to capitalize (and recapitalize, if applicable), the RLF,
plus Local Share, plus RLF Income, plus Voluntarily Contributed
Capital, less any loan losses and disallowances. Except as used to pay
for eligible and reasonable administrative costs associated with the
RLF's operations, the RLF Capital Base is maintained in two forms at
all times: As RLF Cash Available for Lending and as outstanding loan
principal.
RLF Cash Available for Lending means the portion of the RLF Capital
Base that is held in cash and available to make loans.
RLF Income means interest earned on outstanding loan principal and
RLF accounts holding RLF funds, all fees and charges received by the
RLF, and other income generated from RLF operations. An RLF Recipient
may use RLF Income only to capitalize the RLF for financing activities
and to cover eligible and reasonable costs necessary to administer the
RLF, unless otherwise provided for in the Grant agreement or approved
in writing by EDA. RLF Income excludes repayments of principal and any
interest remitted to the U.S. Treasury pursuant to generally accepted
accounting principles (GAAP) and Sec. 307.20(h).
RLF Recipient means the Eligible Recipient that receives an RLF
Grant to manage an RLF in accordance with an RLF Plan, Prudent Lending
Practices, the terms and conditions of the RLF Grant, and all
applicable policies, laws, and regulations.
* * * * *
Voluntary Contributed Capital means an RLF Recipient's voluntary
infusion of additional non-EDA funds into the RLF Capital Base that is
separate from and exceeds any Local Share that is required as a
condition of the RLF Grant. Voluntary Contributed Capital is an
irrevocable addition to the RLF Capital Base and must be administered
in accordance with EDA regulations and policies.
0
24. In Sec. 307.11, revise the section heading and paragraphs (a),
(c), (d), and (f)(2) and add paragraphs (g) and (h) to read as follows:
Sec. 307.11 Pre-disbursement requirements and disbursement of funds
to Revolving Loan Funds.
(a) Pre-disbursement requirements. (1) Within 60 calendar days
before the initial disbursement of EDA funds, the RLF Recipient must
provide the following in a form acceptable to EDA:
(i) A certification from a qualified independent accountant who
preferably has audited the RLF Recipient's accounting system in
accordance with the audit requirements set out as subpart F to 2 CFR
part 200 that such system is adequate to identify, safeguard, and
account for the entire RLF Capital Base, outstanding RLF loans, and
other RLF operations.
[[Page 68206]]
(ii) The RLF Recipient's certification that standard RLF loan
documents reasonably necessary or advisable for lending are in place
and a certification from the RLF Recipient's legal counsel that the
loan documents are adequate and comply with the terms and conditions of
the RLF Grant, RLF Plan, and applicable State and local law. The
standard loan documents must include, at a minimum, the following:
(A) Loan application;
(B) Loan agreement;
(C) Board of directors' meeting minutes approving the RLF loan;
(D) Promissory note;
(E) Security agreement(s);
(F) Deed of trust or mortgage (as applicable);
(G) Agreement of prior lien holder (as applicable); and
(H) Evidence demonstrating that credit is not otherwise available
on terms and conditions that permit the completion or successful
operation of the activity to be financed.
(iii) Evidence of fidelity bond coverage for persons authorized to
handle funds under the RLF Grant award in an amount sufficient to
protect the interests of EDA and the RLF. At a minimum, the amount of
coverage shall be the maximum loan amount allowed for in the EDA-
approved RLF Plan.
(2) The RLF Recipient is required to maintain the adequacy of the
RLF's accounting system and maintain and update standard RLF loan
documents at all times during the duration of the RLF's operation. In
addition, the RLF recipient must maintain sufficient fidelity bond
coverage as described in this subsection for the duration of the RLF's
operation. The RLF Recipient shall maintain records and documentation
to demonstrate the requirements set out in this paragraph (a) are
maintained for the duration of the RLF's operation. See also Sec.
307.13(b)(3).
* * * * *
(c) Amount of disbursement. The amount of a disbursement of Grant
funds shall be the amount required to meet the Federal share
requirement of a new RLF loan. RLF Income held during the disbursement
phase may be used to reimburse eligible administrative costs. RLF
Income earned during the Disbursement Phase must be placed in the RLF
Capital Base and may be used to reimburse eligible and reasonable
administrative costs, provide the requirements of Sec. 307.12(a) and
(b) are met, and increase the RLF Capital Base. RLF Income earned
during the Disbursement Phase is not required to be used for new RLF
loans, unless otherwise specified in the terms and conditions of an RLF
Grant.
(d) Interest-bearing account. All Grant funds disbursed by EDA to
the RLF Recipient for loan obligations incurred but not yet disbursed
to an eligible RLF borrower must be deposited and held in an interest-
bearing account by the Recipient until an RLF loan is made to a
borrower.
* * * * *
(f) * * *
(2) When an RLF has a combination of In-Kind Contributions, which
must be specifically authorized in the terms and conditions of the RLF
Grant and may be used to provide technical assistance to borrowers or
for eligible RLF administrative costs, and cash Local Share, the cash
Local Share and the Grant funds will be disbursed proportionately as
needed for lending activities, provided that the last 20 percent of the
Grant funds may not be disbursed until all cash Local Share has been
expended. The full amount of the cash Local Share shall remain for use
in the RLF.
(g) Loan closing and disbursement schedule. (1) RLF loan activity
must be sufficient to draw down Grant funds in accordance with the
schedule prescribed in the award conditions for loan closings and
disbursements to eligible RLF borrowers. The schedule usually requires
that the RLF Recipient lend the entire amount of the RLF Grant within
three years of the Grant award.
(2) If an RLF Recipient fails to meet the prescribed lending
schedule, EDA may de-obligate the non-disbursed balance of the RLF
Grant. EDA may allow exceptions where:
(i) Closed Loans approved prior to the schedule deadline will
commence and complete disbursements within 45 days of the deadline;
(ii) Closed Loans have commenced (but not completed) disbursement
obligations prior to the deadline; or
(iii) EDA has approved a time schedule extension pursuant to
paragraph (h) of this section.
(h) Time schedule extensions. (1) RLF Recipients shall promptly
inform EDA in writing of any condition that may adversely affect their
ability to meet the prescribed schedule deadlines. RLF Recipients must
submit a written request to EDA for continued use of Grant funds beyond
a missed deadline for disbursement of RLF funds. RLF Recipients must
provide good reason for the delay in their extension request by
demonstrating that:
(i) The delay was unforeseen or beyond the control of the RLF
Recipient;
(ii) The financial need for the RLF still exists;
(iii) The current and planned use and the anticipated benefits of
the RLF will remain consistent with the current CEDS and the RLF Plan;
and
(iv) The proposal of a revised time schedule is reasonable. An
extension request must also provide an explanation as to why no further
delays are anticipated.
(2) EDA is under no obligation to grant a time extension. In the
event an extension is denied, EDA may de-obligate all or part of the
unused Grant funds and terminate the Grant.
0
25. In Sec. 307.12, revise the section heading, paragraphs (a) and
(b), and the paragraph heading and introductory text of paragraph (c),
and add paragraph (d) to read as follows:
Sec. 307.12 Revolving Loan Fund Income requirements during the
Revolving Phase; payments on defaulted and written off Revolving Loan
Fund loans; Voluntarily Contributed Capital.
(a) During the Revolving Phase, 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. RLF Income may fund administrative costs, provided:
(1) Such RLF Income is earned and the administrative costs are
accrued in the same fiscal year of the RLF Recipient;
(2) RLF Income earned, but not used for administrative costs during
the same fiscal year of the RLF Recipient is made available for lending
activities;
(3) RLF Income shall not be withdrawn from the RLF Capital Base in
a subsequent fiscal year for any purpose other than lending without the
prior written consent of EDA; and
(4) An RLF Recipient shall not use funds in excess of RLF Income
for administrative costs unless directed otherwise in writing by EDA.
In accordance with EDA's RLF Risk Analysis System, RLF Recipients are
expected to keep administrative costs to a minimum in order to maintain
the RLF Capital Base. The percentage of RLF Income used for
administrative expenses will be one of the metrics used in EDA's RLF
Risk Analysis System to evaluate RLF Recipients. See also Sec. 307.16.
(b) Compliance guidance. When charging costs against RLF Income,
RLF Recipients must comply with applicable Federal Uniform
Administrative Requirements, cost principles, and audit requirements as
detailed in this provision and in the terms and conditions of the RLF
Grant.
(1) For RLF Grants made on or after December 26, 2014. For RLFs
awarded
[[Page 68207]]
on or after December 26, 2014 or for RLFs that have received one or
more Recapitalization Grants on or after December 26, 2014, the RLF
Recipient must comply with the administrative and cost principles in 2
CFR part 200 (``Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards'').
(2) For RLF Grants made before December 26, 2014. For RLFs awarded
before December 26, 2014, unless otherwise indicated in the terms of
the Grant, the RLF Recipient must comply with the following cost
principles:
(i) 2 CFR part 225 (OMB Circular A-87 for State, local, and Indian
tribal governments),
(ii) 2 CFR part 230 (OMB Circular A-122 for non-profit
organizations other than institutions of higher education, hospitals or
organizations named in OMB Circular A-122 as not subject to such
Circular), and
(iii) 2 CFR part 220 (OMB Circular A-21 for educational
institutions).
(3) For all RLF Grants. For all RLF Grants, regardless of when they
were awarded, the audit requirements set out as subpart F to 2 CFR part
200 apply to audits of the RLF Recipient fiscal years beginning on or
after December 26, 2014. In addition, the Compliance Supplement, which
is appendix XI to 2 CFR part 200, applies as appropriate.
(c) Priority of payments on defaulted and written off RLF loans.
When an RLF Recipient receives proceeds on a defaulted or written off
RLF loan that is not subject to liquidation pursuant to Sec. 307.21,
such proceeds shall be applied in the following order of priority:
* * * * *
(d) Voluntarily Contributed Capital. An RLF Recipient that wishes
to inject additional capital into the RLF Capital Base to augment the
amount of resources available to lend must submit a written request
that specifies the source of the funds to be added. Once an RLF
Recipient elects to commit Voluntarily Contributed Capital and upon
approval by EDA, the Voluntarily Contributed Capital becomes an
irrevocable part of the RLF Capital Base and may not be subsequently
withdrawn or separated from the RLF.
0
26. Revise Sec. 307.13 as follows:
0
a. Revise paragraph (b)(2);
0
b. Redesignate paragraph (b)(3) as paragraph (b)(4); and
0
c. Add new paragraph (b)(3).
The revisions and additions read as follows:
Sec. 307.13 Records and retention.
* * * * *
(b) * * *
(2) Retain records of administrative expenses incurred for
activities and equipment relating to the operation of the RLF for three
years from the actual submission date of the report that covers the
fiscal year in which such costs were claimed.
(3) Consistent with Sec. 307.11(a), for the duration of RLF
operations, maintain records to demonstrate:
(i) The adequacy of the RLF's accounting system to identify,
safeguard, and account for the entire RLF Capital Base, outstanding RLF
loans, and other RLF operations;
(ii) That standard RLF loan documents reasonably necessary or
advisable for lending are in place; and
(iii) Evidence of fidelity bond coverage for persons authorized to
handle funds under the Grant award in an amount sufficient to protect
the interests of EDA and the RLF.
* * * * *
0
27. Revise Sec. 307.14 to read as follows:
Sec. 307.14 Revolving Loan Fund report.
(a) Frequency of reports. All RLF Recipients, including those
receiving Recapitalization Grants for existing RLFs, must complete and
submit an RLF report, using Form ED-209 or any successor form, in a
format and at a frequency as required by EDA.
(b) Report contents. RLF Recipients must certify as part of the RLF
report to EDA that the RLF is operating in accordance with the
applicable RLF Plan and that the information provided is complete and
accurate.
0
28. Amend Sec. 307.15 as follows:
0
a. Revise paragraph (a);
0
b. Remove paragraph (b);
0
b. Redesignate paragraphs (c) and (d) as paragraphs (b) and (c),
respectively; and
0
c. Revise the paragraph heading of newly redesignated paragraph (c) and
paragraph (c)(1).
The revisions and additions read as follows:
Sec. 307.15 Prudent management of Revolving Loan Funds.
(a) Accounting principles. (1) RLFs shall operate in accordance
with generally accepted accounting principles (``GAAP'') as in effect
in the United States and the provisions outlined in the audit
requirements set out as subpart F to 2 CFR part 200 and the Compliance
Supplement, which is appendix XI to 2 CFR part 200, as applicable.
(2) In accordance with GAAP, a loan loss reserve may be recorded in
the RLF Recipient's financial statements to show the adjusted current
value of an RLF's loan portfolio, provided this loan loss reserve is
non-funded and is represented by a non-cash entry. However, loan loss
reserves shall not be used to reduce the value of the RLF in the
Schedule of Expenditures of Federal Awards (``SEFA'') required as part
of the RLF Recipient's audit requirements under 2 CFR part 200.
* * * * *
(c) RLF leveraging. (1) RLF loans must leverage additional
investment of at least two dollars for every one dollar of such RLF
loans. This leveraging requirement applies to the RLF portfolio as a
whole rather than to individual loans and is effective for the duration
of the RLF's operation. To be classified as leveraged, additional
investment must be made within 12 months of approval of an RLF loan, as
part of the same business development project, and may include:
(i) Capital invested by the borrower or others;
(ii) Financing from private entities;
(iii) The non-guaranteed portions and 90 percent of the guaranteed
portions of any Federal loan; or
(iv) Loans from other State and local lending programs.
* * * * *
0
29. Revise Sec. 307.16 to read as follows:
Sec. 307.16 Risk Analysis System.
(a) EDA shall evaluate and manage RLF recipients using a Risk
Analysis System that will focus on such risk factors as: Capital,
assets, management, earnings, liquidity, strategic results, and
financial controls. Risk analysis ratings of each RLF Recipient's RLF
program shall be conducted at least annually and will be based on the
most recently submitted Form ED-209 RLF report.
(b) An RLF Recipient generally will be allowed a reasonable period
of time to achieve compliance with risk factors as defined by EDA.
However, persistent noncompliance with these factors and their limits
as identified through EDA's Risk Analysis System over multiple
Reporting Periods may result in EDA taking appropriate remedies for
noncompliance as detailed in Sec. 307.21.
0
30. Revise Sec. 307.17 to read as follows:
Sec. 307.17 Requirements for Revolving Loan Fund Cash Available for
Lending.
(a) General. RLF Cash Available for Lending shall be deposited and
held in an interest-bearing account by the Recipient and used for the
purpose of making RLF loans that are consistent with an RLF Plan or
such other purposes approved by EDA. To ensure that RLF funds are used
as intended, each loan agreement must clearly state the purpose of each
loan.
[[Page 68208]]
(b) Allowable Cash Percentage. EDA shall notify each RLF recipient
by January 1 of each year of the Allowable Cash Percentage that is
applicable to lending during the ensuing calendar year. During the
Revolving Phase, RLF Recipients must manage their repayment and lending
schedules so that at all times they do not exceed the Allowable Cash
Percentage.
(c) Restrictions on use of RLF Cash Available for Lending. RLF Cash
Available for Lending shall not be used to:
(1) Acquire an equity position in a private business;
(2) Subsidize interest payments on an existing RLF loan;
(3) Provide a loan to a borrower for the purpose of meeting the
requirements of equity contributions under another Federal Agency's
loan programs;
(4) Enable borrowers to acquire an interest in a business either
through the purchase of stock or through the acquisition of assets,
unless sufficient justification is provided in the loan documentation.
Sufficient justification may include acquiring a business to save it
from imminent closure or to acquire a business to facilitate a
significant expansion or increase in investment with a significant
increase in jobs. The potential economic benefits must be clearly
consistent with the strategic objectives of the RLF;
(5) Provide RLF loans to a borrower for the purpose of investing in
interest-bearing accounts, certificates of deposit, or any investment
unrelated to the RLF; or
(6) Refinance existing debt, unless:
(i) The RLF Recipient sufficiently demonstrates in the loan
documentation a ``sound economic justification'' for the refinancing
(e.g., the refinancing will support additional capital investment
intended to increase business activities). For this purpose, reducing
the risk of loss to an existing lender(s) or lowering the cost of
financing to a borrower shall not, without other indicia, constitute a
sound economic justification; or
(ii) RLF Cash Available for Lending will finance the purchase of
the rights of a prior lien holder during a foreclosure action which is
necessary to preclude a significant loss on an RLF loan. RLF funds may
be used for this purpose only if there is a high probability of
receiving compensation from the sale of assets sufficient to cover an
RLF's costs plus a reasonable portion of the outstanding RLF loan
within a reasonable time frame approved by EDA following the date of
refinancing.
(7) Serve as collateral to obtain credit or any other type of
financing without EDA's prior written approval;
(8) Support operations or administration of the RLF Recipient; or
(9) Undertake any activity that would violate the requirements
found in part 314 of this chapter, including Sec. 314.3 (``Authorized
Use of Property'') and Sec. 314.4 (``Unauthorized Use of Property'').
(d) Compliance and loan quality review. To ensure that the RLF
recipient makes eligible RLF loans consistent with its RLF Plan or such
other purposes approved by EDA, EDA may require an independent third
party to conduct a compliance and loan quality review for the RLF Grant
every three years. The RLF Recipient may undertake this review as an
administrative cost associated with the RLF's operations provided the
requirements set forth in Sec. 307.12 are satisfied.
0
31. Revise paragraphs (a)(1) introductory text, (a)(2), (b)(1),
(b)(1)(i), and (b)(2)(i) of Sec. 307.18 to read as follows:
Sec. 307.18 Addition of lending areas; consolidation and merger of
RLFs.
(a)(1) An RLF Recipient shall make loans only within its EDA-
approved lending area, as set forth and defined in the RLF Grant and
the RLF Plan. An RLF Recipient may add a lending area (an ``Additional
Lending Area'') to its existing lending area to create a new lending
area (the ``New Lending Area'') only with EDA's prior written approval
and subject to the following provisions and conditions:
* * * * *
(2) Following EDA approval, the New Lending Area designation shall
remain in place until EDA approves a subsequent request for a New
Lending Area.
(b) * * *
(1) Single RLF Recipient. An RLF Recipient with more than one EDA-
funded RLF Grant may consolidate two or more EDA-funded RLFs into one
combined RLF with EDA's prior written approval and provided:
(i) It is up-to-date with all reports in accordance with Sec.
307.14;
* * * * *
(2) * * *
(i) The replacement RLF Recipient is up-to-date with all reports in
accordance with Sec. 307.14;
* * * * *
0
32. Revise Sec. 307.20 to read as follows:
Sec. 307.20 Noncompliance.
EDA will take appropriate compliance actions as detailed in Sec.
307.21 for the RLF Recipient's failure to operate the RLF in accordance
with the RLF Plan, the terms and conditions of the RLF Grant, or this
subpart, including but not limited to:
(a) Failing to obtain prior EDA approval for material changes to
the RLF Plan, including provisions for administering the RLF;
(b) Failing to submit an updated RLF Plan to EDA in accordance with
Sec. 307.9(c);
(c) Failing to submit timely progress, financial, and audit reports
in the format required by the RLF Grant and Sec. 307.14, including the
Form ED-209 RLF report;
(d) Failing to manage the RLF Grant in accordance with Prudent
Lending Practices, as defined in Sec. 307.8;
(e) Holding RLF Cash Available for Lending so that it is 50 percent
or more of the RLF Capital Base for 24 months without an EDA-approved
extension request based on other EDA risk analysis factors or other
extenuating circumstances;
(f) Making an ineligible loan;
(g) Failing to disburse the EDA funds in accordance with the time
schedule prescribed in the RLF Grant;
(h) Failing to sequester funds or remit the interest on EDA's
portion of the sequestered funds to the U.S. Treasury, as directed by
EDA;
(i) Failing to comply with the audit requirements set forth in
subpart F to 2 CFR part 200 and the related Compliance Supplement,
including reference to the correctly valued EDA RLF Federal
expenditures in the SEFA, timely submission of audit reports to the
Federal Audit Clearinghouse, and the inclusion of the RLF program as an
appropriately audited program;
(j) Failing to implement timely resolutions to audit findings or
questioned costs contained in the annual audit, as applicable;
(k) Failing to comply with an EDA-approved corrective action plan
to remedy persistent noncompliance with RLF-related findings;
(l) Failing to comply with the conflicts of interest provisions set
forth in Sec. 302.17; and
(m) Making unauthorized use of RLF Cash Available for Lending in
violation of Sec. 307.18(c).
0
33. Revise Sec. 307.21 to read as follows:
Sec. 307.21 Remedies for noncompliance.
(a) General. If an RLF Recipient fails to operate the RLF in
accordance with the RLF Plan, the terms and conditions of the RLF
Grant, or this subpart, as detailed in Sec. 307.20, as appropriate in
the circumstances, EDA may require one or more of the following
actions, as appropriate in the circumstances:
(1) Increased reporting requirements;
(2) Implementation of a corrective action plan;
[[Page 68209]]
(3) A special audit;
(4) Sequestration of RLF funds;
(5) Repayment of ineligible loans or other costs to the RLF;
(6) Transfer or merger of the RLF in accordance with Sec. 307.18;
(7) Suspension of the RLF Grant; or
(8) Termination of the RLF Grant, in whole or in part.
(b) Disallowance of a portion of an RLF Grant, liquidation. If the
RLF Recipient engages in certain problematic practices, EDA may
disallow a corresponding proportion of the Grant or direct the RLF
Recipient to transfer loans to an RLF Third Party for liquidation.
Problematic practices for which EDA may disallow a portion of an RLF
Grant and recover the pro-rata Federal Share (as defined in Sec. 314.5
of this chapter) include the RLF Recipient:
(1) Holding RLF Cash Available for Lending so that it is 50 percent
or more of the RLF Capital Base for 24 months without an EDA-approved
extension request;
(2) Failing to disburse the EDA funds in accordance with the time
schedule prescribed in the RLF Grant; or
(3) Determining that it does not wish to further invest in the RLF
or cannot maintain operations at the degree originally contemplated
upon receipt of the RLF Grant and requests that a portion of the RLF
Grant be disallowed, and EDA agrees to the disallowance.
(c) Termination or suspension. To maintain effective control over
and accountability of RLF Grant funds and assets, EDA shall determine
the manner and timing of any suspension or termination action. EDA may
require the RLF Recipient to repay the Federal Share in a lump-sum
payment or enter into a Sale, or EDA may agree to enter into a
repayment agreement with the RLF Recipient for repayment of the Federal
Share.
(d) Termination, liquidation upon termination. When EDA approves
the termination of an RLF Grant, EDA must make all efforts to recover
the pro rata Federal Share (as defined in Sec. 314.5 of this chapter).
EDA may assign or transfer assets of the RLF to an RLF Third Party for
liquidation. The following terms will govern any liquidation:
(1) EDA shall have sole discretion in choosing the RLF Third Party;
(2) The RLF Third Party may be an Eligible Applicant or a for-
profit organization not otherwise eligible for Investment Assistance;
(3) EDA may enter into an agreement with the RLF Third Party to
liquidate the assets of one or more RLFs or RLF Recipients;
(4) EDA may allow the RLF Third Party to retain a portion of the
RLF assets, consistent with the agreement referenced in paragraph
(d)(3) of this section, as reasonable compensation for services
rendered in the liquidation; and
(5) EDA may require additional reasonable terms and conditions.
(e) Distribution of proceeds. The proceeds resulting from any
liquidation upon termination shall be distributed in the following
order of priority:
(i) First, for any third party liquidation costs;
(ii) Second, for the payment of EDA's Federal Share; and
(iii) Third, if any proceeds remain, to the RLF Recipient.
(f) RLF Recipient's request to terminate. EDA may approve a request
from an RLF Recipient to terminate an RLF Grant. The RLF Recipient must
compensate the Federal Government for the pro rata Federal Share of the
RLF Capital Base.
(g) Upon termination, distribution of proceeds shall occur in
accordance with Sec. 307.21(e).
PART 309--REDISTRIBUTIONS OF INVESTMENT ASSISTANCE
0
34. The authority citation of part 309 continues to read as follows:
Authority: 42 U.S.C. 3154c; 42 U.S.C. 3211; Department of
Commerce Delegation Order 10-4.
0
35. Revise Sec. 309.1(a) to read as follows:
Sec. 309.1 Redistributions under parts 303, 305 and 306.
(a) General. Except as provided in paragraph (b) of this section, a
Recipient of Investment Assistance under parts 303, 305 or 306 of this
chapter may directly expend such Investment Assistance or, with prior
EDA approval, may redistribute such Investment Assistance in the form
of a subgrant to another Eligible Recipient, generally referred to as a
Subrecipient, that qualifies for Investment Assistance under the same
part of this chapter as the Recipient, to fund required components of
the scope of work approved for the Project. All subgrants made pursuant
to this section shall be subject to the same terms and conditions
applicable to the Recipient under the original Investment Assistance
award and must satisfy the requirements of PWEDA and of this chapter.
EDA may require the Eligible Recipient under the original Investment
award to agree to special award conditions and the Subrecipient to
provide appropriate certifications to ensure the Subrecipient's
compliance with legal requirements.
* * * * *
0
36. Revise paragraphs (a)(1) and (b) of Sec. 309.2 to read as follows:
Sec. 309.2 Redistributions under part 307.
(a) * * *
(1) A subgrant to another Eligible Recipient, generally referred to
a Subrecipient, that qualifies for Investment Assistance under part 307
of this chapter; or
* * * * *
(b) All redistributions of Investment Assistance made pursuant to
this section shall be subject to the same terms and conditions
applicable to the Recipient under the original Investment Assistance
award and must satisfy the requirements of PWEDA and of this chapter.
EDA may require the Eligible Recipient under the original Investment
Award to agree to special award conditions and the Subrecipient to
provide appropriate certifications to ensure the Subrecipient's
compliance with legal requirements.
PART 314--PROPERTY
0
37. The authority citation for part 314 continues to read as follows:
Authority: 42 U.S.C. 3211; Department of Commerce Organization
Order 10-4.
0
38. Amend Sec. 314.1 by:
0
a. Revising the definition of Personal Property;
0
b. Adding the definition of Project Property in alphabetical order; and
0
c. Revising the definition of Real Property.
The revisions and additions read as follows:
Sec. 314.1 Definitions.
* * * * *
Personal Property means all tangible and intangible property other
than Real Property, including the RLF Capital Base as defined at Sec.
307.8.
Project Property means all Property that is acquired or improved,
in whole or in part, with Investment Assistance and is required, as
determined by EDA, for the successful completion and operation of a
Project and/or serves as the economic justification of a Project. As
appropriate to specify the type of Property to which they are
referring, subparts B and C of this part refer to Project Property as
``Project Real Property'' or ``Project Personal Property''.
* * * * *
Real Property means any land, whether raw or improved, and includes
structures, fixtures, appurtenances and
[[Page 68210]]
other permanent improvements, excluding moveable machinery and
equipment. Real Property includes land that is served by the
construction of Project infrastructure (such as roads, sewers and water
lines) where the infrastructure contributes to the value of such land
as a specific purpose of the Project.
* * * * *
0
39. Revise Sec. 314.2 to read as follows:
Sec. 314.2 Federal Interest.
(a) Subject to the obligations and conditions set forth in this
part and in relevant provisions of 2 CFR part 200, Project Property
vests upon acquisition in the recipient (or, if approved by EDA, in a
Co-recipient or Subrecipient). Project Property shall be held in trust
by the Recipient for the benefit of the Project for the Estimated
Useful Life of the Project, during which period EDA retains an
undivided equitable reversionary interest in the Property (the
``Federal Interest''). The Federal Interest ensures compliance with EDA
Project requirements, including those related to the purpose, scope,
and use of a Project. The Recipient typically must secure the Federal
Interest through a recorded lien, statement, or other recordable
instrument setting forth EDA's Property interest in a Project (e.g., a
mortgage, covenant, or other statement of EDA's Real Property interest
in the case of a Project involving the acquisition, construction, or
improvement of a building. See Sec. 314.8.).
(b) When the Federal government is fully compensated for the
Federal Share of Project Property, the Federal Interest is extinguished
and the Federal Government has no further interest in the Property,
except as provided in Sec. 314.10(e)(3) regarding nondiscrimination
requirements.
0
40. Revise Sec. 314.3 to read as follows:
Sec. 314.3 Authorized use of Project Property.
(a) General. During the Estimated Useful Life of the Project, the
Recipient or Owner must use any Project Property only for authorized
Project purposes as set out in the terms of the Investment Assistance.
Such Property must not be Disposed of or encumbered without EDA's prior
written authorization.
(b) Project Property that is no longer needed for Project purposes.
Where EDA and the Recipient determine during the Estimated Useful Life
of the Project that Project Property is longer needed for the original
purpose of the Investment Assistance, EDA, in its sole discretion, may
approve the use of such Property in other Federal grant programs or in
programs that have purposes consistent with those authorized by PWEDA
and by this chapter.
(c) Real Property for sale or lease. Where EDA determines that the
authorized purpose of the Investment Assistance is to develop Real
Property to be leased or sold, such sale or lease is permitted provided
it is for Adequate Consideration and the sale is consistent with the
authorized purpose of the Investment Assistance and with all applicable
Investment Assistance requirements, including nondiscrimination and
environmental compliance.
(d) Property transfers and Successor Recipients. EDA, in its sole
discretion, may approve the transfer of any Project Property from a
Recipient to a Successor Recipient (or from one Successor Recipient to
another Successor Recipient). The Recipient will remain responsible for
complying with the rules of this part and the terms and conditions of
the Investment Assistance for the period in which it is the Recipient.
Thereafter, the Successor Recipient must comply with the rules of this
part and with the same terms and conditions as were applicable to the
Recipient (unless such terms and conditions are otherwise amended by
EDA). The same rules apply to EDA-approved transfers of Property
between Successor Recipients.
(e) Replacement Personal Property. When acquiring replacement
Personal Property of equal or greater value than Personal Property
originally acquired with Investment Assistance, the Recipient may, with
EDA's approval, trade in such Personal Property originally acquired or
sell the original Personal Property and use the proceeds for the
acquisition of the replacement Personal Property; provided that the
replacement Personal Property is for use in the Project. The
replacement Personal Property is subject to the same requirements as
the original Personal Property.
(f) Replacement Real Property. In extraordinary and compelling
circumstances, the Assistant Secretary may approve the replacement of
Real Property used in a Project.
(g) Incidental use of Project Property. With EDA's prior written
approval, a Recipient may undertake an incidental use of Project
Property that does not interfere with the scope of the Project or the
economic purpose for which the Investment was made; provided that the
Recipient is in compliance with applicable law and the terms and
conditions of the Investment Assistance, and the incidental use of the
Property will not violate the terms and conditions of the Investment
Assistance or otherwise undermine the economic purpose for which the
Investment was made or adversely affect the economic useful life of the
Property. Eligible Applicants and Recipients should contact the
appropriate regional office (whose contact information is available via
the Internet at https://www.eda.gov) for guidelines on obtaining
approval for incidental use of Property under this section.
0
41. Revise the section heading, paragraph (a), the introductory text of
paragraph (b) and paragraph (c) of Sec. 314.4 to read as follows:
Sec. 314.4 Unauthorized Use of Project Property.
(a) Compensation of Federal Share upon an Unauthorized Use of
Project Property. Except as provided in Sec. Sec. 314.3 (regarding the
authorized use of Property) or 314.10 (regarding the release of the
Federal Interest in certain Property), or as otherwise authorized by
EDA, the Federal Government must be compensated by the Recipient for
the Federal Share whenever, during the Estimated Useful Life of the
Project, any Project Property is Disposed of, encumbered, or no longer
used for the purpose of the Project; provided that for equipment and
supplies, the requirements of 2 CFR part 200, including any supplements
or amendments thereto, shall apply.
(b) Additional Unauthorized Uses of Project Property. Additionally,
prior to the release of the Federal Interest, Project Real Property or
tangible Project Personal Property may not be used:
* * * * *
(c) Recovery of the Federal Share. Where the Disposition,
encumbrance, or use of any Project Property violates paragraphs (a) or
(b) of this section, EDA may assert the Federal Interest in the Project
Property to recover the Federal Share for the Federal Government and
may take such actions as authorized by PWEDA and this chapter,
including the actions provided in Sec. Sec. 302.3, 302.16, and 307.21
of this chapter. EDA may pursue its rights under paragraph (a) of this
section and this paragraph (c) to recover the Federal Share, plus costs
and interest. When the Federal Government is fully compensated for the
Federal Share, the Federal Interest is extinguished as provided in
Sec. 314.2(b), and EDA will have no further interest in the ownership,
use, or Disposition of the Property, except for the nondiscrimination
requirements set forth in Sec. 314.10(d)(3).
0
42. Revise Sec. 314.5(a) to read as follows:
[[Page 68211]]
Sec. 314.5 Federal Share.
(a) For purposes of this part, ``Federal Share'' means that portion
of the current fair market value of any Project Property attributable
to EDA's participation in the Project. EDA may rely on a current
certified appraisal of the Project Property prepared by an appraiser
licensed in the State where the Project Property is located to
determine the fair market value. In extraordinary circumstances and at
EDA's sole discretion, where EDA is unable to determine the current
fair market value, EDA may use other methods of determining the value
of Project Property, including the amount of the award of Investment
Assistance or the amount paid by a transferee. The Federal Share shall
be the current fair market value or other valuation as determined by
EDA of the Property after deducting:
* * * * *
0
43. Revise paragraphs (a), (b)(3), (b)(4)(v)(B), (b)(5)(v)(B), and (c)
of Sec. 314.6 to read as follows:
Sec. 314.6 Encumbrances.
(a) General. Except as provided in paragraph (b) of this section or
as otherwise authorized by EDA, Project Property must not be used to
secure a mortgage or deed of trust or in any way otherwise encumbered,
except to secure a grant or loan made by a Federal Agency or State
agency or other public body participating in the same Project, so long
as the Recipient discloses such an encumbrance in writing as part of
its application for Investment Assistance or as soon as practicable
after learning of the encumbrance.
(b) * * *
(3) Pre-existing encumbrances. Encumbrances already in place and
disclosed to EDA at the time EDA approves the Project where EDA, in its
sole discretion, determines that:
(i) The requirements of Sec. 314.7(b) are met;
(ii) Consistent with paragraphs (b)(4)(iv) and (b)(5)(iv) of this
section, the terms and conditions of the encumbrance are satisfactory;
and
(iii) Consistent with paragraphs (b)(4)(v) and (b)(5)(v), there is
a reasonable expectation that the Recipient will not default on its
obligations.
(4) * * *
(v) * * *
(B) A Recipient that is a non-profit organization is financially
strong and is an established organization with sufficient
organizational life to demonstrate stability over time;
* * * * *
(5) * * *
(v) * * *
(B) A Recipient that is a non-profit organization is financially
strong and is an established organization with sufficient
organizational life to demonstrate stability over time;
* * * * *
(c) Encumbering Project Property, other than as permitted in this
section, is an Unauthorized Use of the Property under Sec. 314.4.
0
44. Revise paragraphs (a), (c) introductory text, (c)(1), (c)(1)(ii),
(c)(2) introductory text, (c)(4) introductory text, (c)(4)(ii)(B),
(c)(4)(iii), (c)(5)(i), and (c)(5)(iii) of Sec. 314.7 to read as
follows:
Sec. 314.7 Title.
(a) General title requirement. Except in those limited
circumstances identified in paragraph (c) of this section, at the time
Investment Assistance is awarded, the Recipient must hold title to
Project Real Property, which, as noted in Sec. 314.1 in the definition
of ``Real Property'' includes land that is served by the construction
of Project infrastructure (such as roads, sewers, and water lines) and
where the infrastructure contributes to the value of such land as a
specific purpose of the Project. The Recipient must maintain title to
Project Real Property at all times during the Estimated Useful Life of
the Project, except in those limited circumstances as provided in
paragraph (c) of this section. The Recipient also must furnish
evidence, satisfactory in form and substance to EDA, that title to
Project Real Property (other than property of the United States) is
vested in the Recipient and that any easements, rights-of-way, State or
local government permits, long-term leases, or other items required for
the Project have been or will be obtained by the Recipient within an
acceptable time, as determined by EDA.
* * * * *
(c) Exceptions. The following are exceptions to the requirements of
paragraph (a) of this section that the Recipient hold title to Project
Real Property at the time Investment Assistance is awarded and at all
times during the Estimated Useful Life of the Project.
(1) Project Real Property acquisition. Where the acquisition of
Project Real Property is contemplated as part of an Investment
Assistance award, EDA may determine that an agreement for the Recipient
to purchase the Project Real Property will be acceptable for purposes
of paragraph (a) of this section if:
* * * * *
(ii) EDA, in its sole discretion, determines that the terms and
conditions of the purchase agreement adequately safeguard the Federal
Government's interest in the Project Real Property.
(2) Leasehold interests. EDA may determine that a long-term
leasehold interest for a period not less than the Estimated Useful Life
of Project Real Property will be acceptable for purposes of paragraph
(a) of this section if:
* * * * *
(4) State or local government owned roadway or highway
construction. When the Project includes construction on a State or
local government owned roadway or highway the owner of which is not the
Recipient, EDA may allow the Project to be constructed in whole or in
part in the right-of-way of such public roadway or highway, provided
that:
* * * * *
(ii) * * *
(B) If at any time during the Estimated Useful Life of the Project
any or all of the improvements in the Project within the State or local
government owned roadway or highway are relocated for any reason
pursuant to requirements of the owner of the public roadway or highway,
the Recipient shall be responsible for accomplishing such relocation,
including expending the Recipient's own funds as necessary, so that the
Project continues as authorized by the Investment Assistance; and
(iii) The Recipient obtains all written authorizations (i.e., State
or county permit(s)) necessary for the Project to be constructed within
the public roadway or highway, copies of which shall be submitted to
EDA. Such authorizations shall contain no time limits that EDA
determines substantially restrict the use of the public roadway or
highway for the Project during the Estimated Useful Life of the
Project.
(5) * * *
(i) General. At EDA's discretion, when an authorized purpose of the
Project is to construct Recipient-owned facilities to serve Recipient
or privately owned Project Real Property, including industrial or
commercial parks, so that the Recipient or Owner may sell or lease
parcels of the Project Real Property to private parties, such
ownership, sale, or lease, as applicable, is permitted so long as:
(A) In cases where an authorized purpose of the Project is to sell
Project Real Property, the Recipient or Owner, as applicable, provides
evidence sufficient to EDA that it holds title to the Project Real
Property intended for sale or lease prior to the disbursement of any
portion of the Investment Assistance and will retain title until the
sale of the Property in accordance with
[[Page 68212]]
paragraphs (c)(5)(i)(C) through (E) of this section;
(B) In cases where an authorized purpose of the Project is to lease
Project Real Property, the Recipient or Owner, as applicable, provides
evidence sufficient to EDA that it holds title to the Project Real
Property intended for lease prior to the disbursement of any portion of
the Investment Assistance and will retain title for the entire
Estimated Useful Life of the Project;
(C) The Recipient provides adequate assurances that the Project and
the development of land and improvements on the Recipient or privately
owned Project Real Property to be served by or that provides the
economic justification for the Project will be completed according to
the terms of the Investment Assistance;
(D) The sale or lease of any portion of the Project or of Project
Real Property served by the Project or that provides the economic
justification for the Project during the Project's Estimated Useful
Life must be for Adequate Consideration and the terms and conditions of
the Investment Assistance and the purpose(s) of the Project must
continue to be fulfilled after such sale or lease; and
* * * * *
(iii) Agreement between Recipient and Owner. In addition to
paragraphs (c)(5)(i) and (ii) of this section, when an authorized
purpose of the Project is to construct facilities to serve privately
owned Real Property, the Recipient and the Owner must agree to use the
Real Property improved or benefitted by the EDA Investment Assistance
only for the authorized purposes of the Project and in a manner
consistent with the terms and conditions of the EDA Investment
Assistance for the Estimated Useful Life of the Project.
* * * * *
0
45. Revise paragraphs (a), (b), and (d) of Sec. 314.8 to read as
follows:
Sec. 314.8 Recorded statement for Real Property.
(a) For all Projects involving the acquisition, construction, or
improvement of a building, as determined by EDA, the Recipient shall
execute a lien, covenant, or other statement of the Federal Interest in
such Project Real Property. The statement shall specify the Estimated
Useful Life of the Project and shall include, but not be limited to,
the Disposition, encumbrance and Federal Share requirements. The
statement shall be satisfactory in form and substance to EDA.
(b) The statement of the Federal Interest must be perfected and
placed of record in the Real Property records of the jurisdiction in
which the Project Real Property is located, all in accordance with
applicable law.
* * * * *
(d) In extraordinary circumstances and at EDA's sole discretion,
EDA may choose to accept another instrument to protect the Federal
Interest in Project Real Property, such as an escrow agreement or
letter of credit, provided that EDA determines such instrument is
adequate and a recorded statement in accord with paragraph (a) of this
section is not reasonably available. The terms and provisions of the
relevant instrument shall be satisfactory to EDA in EDA's sole
judgment. The costs and fees for escrow services and letters of credit
shall be paid by the Recipient.
0
46. Revise Sec. 314.9 to read as follows:
Sec. 314.9 Recorded statement for Project Personal Property.
For all Projects which EDA determines involve the acquisition or
improvement of significant items of Personal Property, including ships,
machinery, equipment, removable fixtures, or structural components of
buildings, the Recipient shall provide notice of the Federal Interest
all Project Personal Property by executing a Uniform Commercial Code
Financing Statement (Form UCC-1, as provided by State law) or other
statement of the Federal Interest in the Project Personal Property,
acceptable in form and substance to EDA, which statement must be
perfected and placed of record in accordance with applicable law, with
continuances re-filed as appropriate. Whether or not a statement is
required by EDA to be recorded, the Recipient must hold title to all
Project Personal Property, except as otherwise provided in this part.
0
47. Revise the section heading and paragraphs (a) through (d), (e)(2),
and the introductory text to paragraph (e)(3) to read as follows:
Sec. 314.10 Procedures for release of the Federal Interest.
(a) General. As provided in Sec. 314.2 of this chapter, the
Federal Interest in Project Property extends for the duration of the
Estimated Useful Life of the Project, which is determined by EDA at the
time of Investment award. Upon request of the Recipient, EDA will
release the Federal Interest in Project Property upon expiration of the
Estimated Useful Life as established in the terms and conditions of the
Investment Assistance and in accord with the requirements of this
section and part. This section provides procedures to obtain a release
of the Federal Interest in Project Property.
(b) Release of the Federal Interest after the expiration of the
Estimated Useful Life. At the expiration of a Project's Estimated
Useful Life and upon the written request of a recipient, the Assistant
Secretary may release the Federal Interest in Project Property if EDA
determines that the Recipient has made a good faith effort to fulfill
all terms and conditions of the Investment Assistance. The
determination provided for in this paragraph shall be established at
the time of Recipient's written request and shall be based, at least in
part, on the facts and circumstances provided in writing by the
Recipient. For a Project in which a Recorded Statement as provided for
in Sec. Sec. 314.8 and 314.9 of this chapter has been recorded, EDA
will provide for the release by executing an instrument in recordable
form. The release will terminate the Investment as of the date of its
execution and satisfy the Recorded Statement. See paragraph (e) of this
section for limitations and covenants of use that are applicable to any
release of the Federal Interest.
(c) Release prior to the expiration of the Estimated Useful Life.
If the Recipient will no longer use the Project Property in accord with
the requirements of the terms and conditions of the Investment within
the time period of the Estimated Useful Life, EDA will determine if
such use by the Recipient constitutes an Unauthorized Use of Property
and require compensation for the Federal Interest as provided in Sec.
314.4 and this section. EDA may release the Federal Interest in
connection with such Property only upon receipt of full payment in
compensation of the Federal Interest and thereafter will have no
further interest in the ownership, use, or Disposition of the Property,
except for the nondiscrimination requirements set forth in paragraph
(e)(3) of this section.
(d) Release of the Federal Interest before the expiration of the
Estimated Useful Life, but 20 years after the award of Investment
Assistance. In accord with section 601(d)(2) of PWEDA, upon the request
of a Recipient and before the expiration of the Estimated Useful Life
of a Project, but where 20 years have elapsed since the award of
Investment Assistance, EDA may release any Real Property or tangible
Personal Property interest held by EDA, if EDA determines:
(1) The Recipient has made a good faith effort to fulfill all terms
and conditions of the award of Investment Assistance; and
(2) The economic development benefits as set out in the award of
[[Page 68213]]
Investment Assistance have been achieved.
(3) See paragraph (e) of this section for limitations and covenants
of use that are applicable to any release of the Federal Interest.
(e) * * *
(2) In determining whether to release the Federal Interest, EDA
will review EDA's legal authority to release its interest, including
the Recipient's performance under and conformance with the terms and
conditions of the Investment Assistance; any use of Project Property in
violation of Sec. 314.3 or Sec. 314.4; and other such factors as EDA
deems appropriate. When requesting a release of the Federal Interest
pursuant to this section, the Recipient will be required to disclose to
EDA the intended future use of the Real Property or the tangible
Personal Property for which the release is requested.
(i) A Recipient not intending to use the Real Property or tangible
Personal Property for explicitly religious activities following EDA's
release will be required to execute a covenant of use. A covenant of
use with respect to Real Property shall be recorded in the jurisdiction
where the Real Property is located in accordance with Sec. 314.8. A
covenant of use with respect to items of tangible Personal Property
shall be perfected and recorded in accordance with applicable law, with
continuances re-filed as appropriate. See Sec. 314.9. A covenant of
use shall (at a minimum) prohibit the use of the Real Property or the
tangible Personal Property for explicitly religious activities in
violation of applicable Federal law.
(ii) EDA may require a Recipient (or its successors in interest)
that intends or foresees the use of Real Property or tangible Personal
Property for explicitly religious activities following the release of
the Federal Interest to compensate EDA for the Federal Share of such
Property. If such compensation is made, no covenant with respect to
explicitly religious activities will be required as a condition of the
release. EDA recommends that any Recipient who intends or foresees the
use of Real Property or tangible Personal Property (including by
successors of the Recipient) for explicitly religious activities to
contact EDA well in advance of requesting a release pursuant to this
section.
(3) Notwithstanding any release of the Federal Interest under this
section, including a release upon a Recipient's compensation for the
Federal Share, a Recipient must ensure that Project Property is not
used in violation of nondiscrimination requirements set forth in Sec.
302.20 of this chapter. Accordingly, upon the release of the Federal
Interest, the Recipient must execute a covenant of use that prohibits
use of Real Property or tangible Personal Property for any purpose that
would violate the nondiscrimination requirements set forth in Sec.
302.20 of this chapter.
* * * * *
Dated: September 12, 2016.
Roy K.J. Williams,
Assistant Secretary of Commerce for Economic Development.
[FR Doc. 2016-22287 Filed 9-30-16; 8:45 am]
BILLING CODE 3510-24-P
