[Federal Register: November 9, 2004 (Volume 69, Number 216)]
[Rules and Regulations]
[Page 64829-64832]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09no04-1]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
[[Page 64829]]
DEPARTMENT OF AGRICULTURE
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Part 4279
RIN 0570-AA39
Business and Industry Loans; Revisions to Implement 2002 Farm
Bill Provisions
AGENCY: Rural Business-Cooperative Service, USDA.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The Rural Business-Cooperative Service (RBS) revises its
regulations to incorporate provisions outlined in Sections 6013, 6017,
and 6019 of the Farm Security and Rural Investment Act of 2002 (Pub. L.
104-424) (2002 Farm Bill). This action is taken to comply with the
amendments to sections 310(B) and 333A of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1932 and 1983a). The intended effect of
this action is to expand eligibility for the Business and Industry
Guaranteed Loan Program, provide for a simplified application form for
loans of up to $600,000, and allow the Agency to require specialized
appraisals on collateral.
DATES: The effective date of this interim final rule is December 9,
2004. Written or e-mail comments must be received on or before December
9, 2004, to be assured of consideration.
ADDRESSES: You may submit commments to this rule by any of the
following methods:
Agency Web Site: http://rdinit.usda.gov/regs/. Follow
instructions for submitting comments on the Web Site.
E-mail: comments@usda.gov. Include the RIN No. 0570-AA39
in the subject line of the message.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Mail: Submit written comments via the U.S. Postal Service
to the Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW.,
Washington, DC 20250-0742.
Hand Deliver/Courier: Submit written comments via Federal
Express Mail or other courier service requiring a street address to the
Branch Chief, Regulations and Paperwork Management Branch, U.S.
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington,
DC 20024.
All written comments will be available for public inspection during
regular work hours at the 300 7th Street, SW., 7th Floor address listed
above.
FOR FURTHER INFORMATION CONTACT: Brenda Griffin, Loan Specialist,
Business and Industry Division, Rural Business-Cooperative Service,
U.S. Department of Agriculture, STOP 3224, 1400 Independence Ave. SW.,
Washington, DC 20250-3224. Telephone: (202) 720-6802. The TDD number is
(800) 877-8339 or (202) 708-9300.
SUPPLEMENTARY INFORMATION:
Classification
This rule has been determined to be significant and was reviewed by
the Office of Management and Budget (OMB) under Executive Order 12866.
Programs Affected
The Catalog of Federal Domestic Assistance number for the program
impacted by this action is 10.768, Business and Industry Loans.
Intergovernmental Review
The Business and Industry loan programs are subject to the
provisions of Executive Order 12372, which require intergovernmental
consultation with state and local officials. RBS will conduct
intergovernmental consultation in the manner delineated in RD
Instruction 1940-J, ``Intergovernmental Review of Department of
Agriculture Programs and Activities'' in 7 CFR part 3015, subpart V.
Paperwork Reduction Act
The information collection requirements contained in this
regulation have been approved by OMB under the provisions of 44 U.S.C.
chapter 35 and have been assigned OMB control numbers 0570-0014 and
0570-0017, in accordance with the Paperwork Reduction Act (PRA) of
1995.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act (5 U.S.C. 601-
612), the undersigned has determined and certified by signature of this
document that this rule will not have a significant economic impact on
a substantial number of small entities. Some provisions published as a
part of this rule are, in fact, a benefit to small entities.
Eligibility for the cooperative stock purchase program, a program that
provides loan guarantees for the purchase of stock in a cooperative by
an individual farmer or rancher, has been expanded to include more
entities. Additionally, provisions allow the Agency to accept financial
statements from farmers and ranchers that are generally accepted by
commercial agricultural lenders. Since this rule has no significant
economic impact on a substantial number of small entities, a regulatory
flexibility analysis was not performed.
Civil Justice Reform
This interim rule has been reviewed under Executive Order 12988,
Civil Justice Reform. In accordance with this Executive Order: (1) All
State and local laws and regulations that are in conflict with this
rule will be preempted, (2) no retroactive effect will be given to this
rule, and (3) administrative proceedings in accordance with the
regulations of the Agency at 7 CFR part 11 must be exhausted before
bringing litigation challenging action taken under this rule unless
those regulations specifically allow bringing suit at an earlier time.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' RBS has determined that this
action does not constitute a major Federal action significantly
affecting the quality
[[Page 64830]]
of the human environment and, in accordance with the National
Environmental Policy Act of 1969, 42 U.S.C. 4321 et seq., an
Environmental Impact Statement is not required.
Unfunded Mandates Reform Act
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub.
L. 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, RBS
must prepare a written statement, including a cost-benefit analysis,
for proposed and final rules with ``Federal mandates'' that may result
in expenditures to State, local or tribal governments, in the
aggregate, or to the private sector, of $100 million or more in any 1
year. When such a statement is needed for a rule, section 205 of UMRA
generally requires RBS to identify and consider a reasonable number of
regulatory alternatives and adopt the least costly, more cost-
effective, or least burdensome alternative that achieves the objectives
of the rule.
This rule contains no Federal mandates (under the regulatory
provisions of title II of the UMRA) for State, local, and tribal
governments or the private sector. Thus, this rule is not subject to
the requirements of sections 202 and 205 of the UMRA.
Executive Order 13132
It has been determined under Executive Order 13132, Federalism,
that this rule does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment. The provisions
contained in this rule will not have a substantial direct effect on
States or their political subdivisions or on the distribution of power
and responsibilities among the various levels of government.
Background
The 2002 Farm Bill contains provisions to be incorporated into
existing Business and Industry program regulations. Changes include
specifically adding renewable energy systems to eligible loan purposes,
allowing the Agency to require specialized appraisals, and using a
simplified application for loans of up to $600,000. The cooperative
stock purchase program has also been expanded to allow for guaranteed
loans to purchase stock in existing cooperatives, to allow for
cooperatives whose members receive cooperative stock purchase loans to
contract for services to process agricultural commodities or otherwise
process value-added agricultural products during its first 5 years, and
to allow the Agency to accept financial statements from farmers and
ranchers that are generally accepted by commercial agricultural
lenders. The 2002 Farm Bill also contains provisions (under certain
conditions) that allow cooperative organizations to apply for
guaranteed loans for the financing of facilities in non-rural areas,
for the refinancing of existing B&I loans, and in amounts up to $40
million.
These revisions are being published as an interim final rule
because the changes being made are mandated by sections 6013, 6017, and
6019 of the 2002 Farm Bill and provide limited administrative
discretion. This interim final rule will be effective 30 days after
publication, and a final rule will be published at a later date
addressing any comments received. Section 6020 of the 2002 Farm Bill
created a new definition of ``rural'' and ``rural area'' for the B&I
Guaranteed Loan Program. Part of that new definition precludes loans
being made in ``* * * a city or town that has a population of greater
than 50,000 inhabitants. * * *'' Many States have communities that
while not legally designated as ``towns'' under State law are the
functional equivalent (e.g., villages or boroughs, or for which there
is State law recognition as an incorporated general purpose public
entity). RBS believes it is consistent with the intent of the 2002 Farm
Bill to include these functionally equivalent localities in the meaning
of ``town'' and proposes to do so in the future. RBS requests public
comment on this position.
List of Subjects in 7 CFR Part 4279
Loan programs--Business and industry, Loan Programs--Rural
development assistance, Rural areas.
0
Accordingly, chapter XLII, title 7, Code of Federal Regulations, is
amended as follows:
CHAPTER XLII--[AMENDED]
PART 4279--GUARANTEED LOANMAKING
0
1. The authority citation for part 4279 continues to read as follows:
Authority: 7 U.S.C. 1989.
Subpart B--Business and Industry Loans
0
2. Section 4279.108 is amended by revising paragraphs (a) introductory
text, (a)(4), and (c); redesignating paragraph (d) as paragraph (e);
and by adding a new paragraph (d) to read as follows:
Sec. 4279.108 Eligible borrowers.
(a) Type of entity. A borrower may be a cooperative organization,
corporation, partnership, or other legal entity organized and operated
on a profit or nonprofit basis; an Indian tribe on a Federal or State
reservation or other Federally recognized tribal group; a public body;
or an individual. A cooperative organization is a cooperative or an
entity, not chartered as a cooperative, that operates as a cooperative
in that it is owned and operated for the benefit of its members,
including the manner in which it distributes its dividends and assets.
A borrower must be engaged in or proposing to engage in a business.
Business may include manufacturing, wholesaling, retailing, providing
services, or other activities that will:
* * * * *
(4) Reduce reliance on nonrenewable energy resources by encouraging
the development and construction of solar energy systems and other
renewable energy systems (including wind energy systems, geothermal
energy systems, and anaerobic digesters for the purpose of energy
generation).
* * * * *
(c) Rural area. The business financed with a B&I Guaranteed Loan
must be located in a rural area, except for cooperative organizations
financed in accordance with paragraph (d)(3) of this section. Loans to
borrowers with facilities located in both rural and non-rural areas
will be limited to the amount necessary to finance the facility in the
eligible rural area, except for cooperative organizations financed in
accordance with paragraph (d)(3) of this section. Rural areas are any
areas other than:
(1) A city or town that has a population of greater than 50,000
inhabitants; and
(2) The urbanized area contiguous and adjacent to such a city or
town, as defined by the U.S. Bureau of the Census using the latest
decennial census of the United States.
(d) Loans to cooperative organizations. (1) B&I loans to eligible
cooperative organizations may be made in principal amounts up to $40
million if the project is located in a rural area, the cooperative
facility being financed provides for the value-added processing of
agricultural commodities, and the total amount of loans exceeding $25
million does not exceed 10 percent of the funds available for the
fiscal year.
(2) Cooperative organizations that are headquartered in a non-rural
area may be eligible for a B&I loan if the loan is
[[Page 64831]]
used for a project or venture that is located in a rural area.
(3) B&I loans to eligible cooperative organizations may also be
made in non-rural areas provided:
(i) The primary purpose of the loan is for a facility to provide
value-added processing for agricultural producers that are located
within 80 miles of the facility;
(ii) The applicant satisfactorily demonstrates that the primary
benefit of the loan will be to provide employment for rural residents;
(iii) The principal amount of the loan does not exceed $25 million;
and
(iv) The total amount of loans guaranteed under this section does
not exceed 10 percent of the funds available for the fiscal year.
(4) An eligible cooperative organization may refinance an existing
B&I loan provided that the existing loan is current and performing, the
existing loan is not and has not been in payment default (more than 30
days late) or the collateral of which has not been converted, and there
is adequate security or full collateral for the new B&I loan.
* * * * *
0
3. Section 4279.113 is amended by redesignating paragraphs (j) through
(aa) to be paragraphs (k) through (bb); by revising paragraphs (i) and
newly redesignated paragraph (r); and by adding a new paragraph (j) to
read as follows:
Sec. 4279.113 Eligible loan purposes.
* * * * *
(i) Purchase of membership, stocks, bonds, or debentures necessary
to obtain a loan from Farm Credit System institutions and other lenders
provided that the purchase is required for all of their borrowers.
(j) Purchase of cooperative stock by individual farmers or ranchers
in a farmer or rancher cooperative established for the purpose of
processing an agricultural commodity.
(1) The cooperative may contract for services to process
agricultural commodities or otherwise process value-added agricultural
products during the 5-year period beginning on the operation startup
date of the cooperative in order to provide adequate time for the
planning and construction of the processing facility of the
cooperative.
(2) Notwithstanding Sec. Sec. 4279.131(d) and 4279.137, the
individual farmer or rancher may provide financial information in the
manner that is generally required by commercial agricultural lenders in
order to obtain a loan.
* * * * *
(r) To refinance outstanding debt when it is determined that the
project is viable and refinancing is necessary to improve cash flow and
create new or save existing jobs. Except as provided for in Sec.
4279.108(d)(4) of this subpart, existing lender debt may be included
provided that, at the time of application, the loan has been current
for at least the past 12 months (unless such status is achieved by the
lender forgiving the borrower's debt), the lender is providing better
rates or terms, and the refinancing is a secondary part (less than 50
percent) of the overall loan.
* * * * *
0
4. Section 4279.119(a) is revised to read as follows:
Sec. 4279.119 Loan guarantee limits.
(a) Loan amount. The total amount of Agency loans to one borrower,
including: The guaranteed and unguaranteed portions; the outstanding
principal and interest balance of any existing Agency guaranteed loans;
and new loan request, must not exceed $10 million, except as outlined
in paragraphs (a)(1) and (2) of this section.
(1) The Administrator may, at the Administrator's discretion, grant
an exception to the $10 million limit for loans of $25 million or less
under the following circumstances:
(i) The project to be financed is a high-priority project. Priority
will be determined in accordance with the criteria contained in Sec.
4279.155 of this subpart;
(ii) The lender must document to the satisfaction of the Agency
that the loan will not be made and the project will not be completed if
the guarantee is not approved;
(iii) The percentage of guarantee will not exceed 60 percent. No
exception to this requirement will be approved under paragraph (b) of
this section for loans exceeding $10 million; and
(iv) Any request for a guaranteed loan exceeding the $10 million
limit must be submitted to the Agency in the form of a preapplication.
The preapplication must be submitted to the National Office for review
and concurrence before encouraging a full application.
(2) The Secretary, whose authority may not be redelegated, may
approve guaranteed loans in excess of $25 million, at the Secretary's
discretion, for rural cooperative organizations that process value-
added agricultural commodities in accordance with Sec. 4279.108(d)(1)
of this subpart.
* * * * *
0
5. Section 4279.144 is revised to read as follows:
Sec. 4279.144 Appraisals.
Lenders will be responsible for ensuring that appraisal values
adequately reflect the actual value of the collateral. All real
property appraisals associated with Agency guaranteed loanmaking and
servicing transactions will meet the requirements contained in the
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of
1989 and the appropriate guidelines contained in Standards 1 and 2 of
the Uniform Standards of Professional Appraisal Practices (USPAP). In
accordance with USPAP, the Agency will require documentation that the
appraiser has the necessary experience and competency to appraise the
property in question. All appraisals will include consideration of the
potential effects from a release of hazardous substances or petroleum
products or other environmental hazards on the market value of the
collateral. For additional guidance and information concerning the
completion of real property appraisals, refer to ``Standard Practices
for Environmental Site Assessments: Transaction Screen Questionnaire''
and ``Phase I Environmental Site Assessment,'' both published by the
American Society of Testing and Materials. Chattels will be evaluated
in accordance with normal banking practices and generally accepted
methods of determining value.
0
6. Section 4279.161 is amended by adding a sentence at the end of the
introductory text and by adding paragraph (c) to read as follows:
Sec. 4279.161 Filing preapplications and applications.
* * * Guaranteed loans of $600,000 and less may be processed under
paragraph (b) or (c) of this section, but guaranteed loans exceeding
$600,000 must be processed under paragraph (b) of this section.
* * * * *
(c) Applications of $600,000 and less. Guaranteed loan applications
may be processed under this paragraph if the request does not exceed
$400,000. Beginning in fiscal year 2004, this limit may be increased on
a case-by-case basis to $600,000 provided that the Agency determines
that there is not a significant increased risk of a default on the
loan. Applications may be resubmitted under paragraph (b) of this
section when the application under this paragraph contains insufficient
information for the Agency to guarantee the loan. Applications
submitted under this paragraph must use the Agency's short
[[Page 64832]]
application form and include the information contained in paragraphs
(b)(3), (5), (7), (8), and (11) of this section. The lender must have
the documentation identified in paragraph (b) of this section, with the
exception of paragraphs (b)(1), (2), (14), and (15), available in its
file for review.
Dated: November 2, 2004.
Gilbert Gonzalez,
Acting Under Secretary, Rural Development.
[FR Doc. 04-24886 Filed 11-8-04; 8:45 am]