Notice of Funding Availability (NOFA); Treasury Rate Loan Program

AGENCY:

Rural Utilities Service, USDA.

ACTION:

Notice of funding availability (NOFA).

SUMMARY:

This Notice of Funding Availability (NOFA) announces the availability of $500 million in direct Treasury rate electric loans for fiscal year (FY) 2001. This document describes the eligibility and submission requirements, the criteria that will be used by the Rural Utilities Service (RUS) to select applications for funding, and the expectation that the current backlog of qualifying applications for loans from RUS under the Rural Electrification Act will exhaust all of the available funding. In the event this assumption proves to be incorrect, RUS intends to publish another NOFA on or before July 1, 2001, announcing the availability of any remaining direct Treasury rate electric loan funds and how they will be allocated. The intended effect of this NOFA is to enable RUS to approve all direct Treasury rate electric loans for FY 2001 prior to July 1, 2001.

DATES:

RUS intends to treat all completed qualifying applications for direct electric loans at the municipal rate as pre-applications for direct electric loans at the Treasury rate. The closing date for receipt of pre-applications that will be considered is October 28, 2000; the date on which the direct Treasury rate electric loan program was established by Pub.L. 106-387.

ADDRESSES:

Loan applicants that do not have outstanding loans from RUS should write to the Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500. A field or headquarters staff representative may be assigned by RUS to visit the applicant and discuss its financial needs and eligibility. Borrowers that have outstanding loans should contact their assigned RUS general field representative (GFR). Borrowers may consult with RUS field representatives and headquarters staff, as necessary.

FOR FURTHER INFORMATION CONTACT:

Robert O. Ellinger, Management Analyst, U.S. Department of Agriculture, Rural Utilities Service, Electric Program, Room 4023 South Building, Stop 1560, 1400 Independence Ave., SW., Washington, DC 20250-1560, Telephone: 202-720-0424.

SUPPLEMENTARY INFORMATION:

Programs Affected

The Catalog of Federal Domestic Assistance Program number assigned to this program is 10.850.

Discussion of Notice

I. Authority and Distribution Methodology

a. Authority

Section 4 of the Rural Electrification Act of 1936, (RE Act) (7 U.S.C. 904), among other things, provides RUS with the authority to make loans for rural electrification and for the purpose of furnishing and improving electric service in rural areas. Section 305 of the RE Act (7 U.S.C. 935) establishes the municipal rate electric loan program for these purposes. Title III of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2001 (Pub. L. 106-387) authorizes a direct Treasury rate electric loan program of $500 million for FY 2001.

b. Distribution Methodology

RUS believes that Congress authorized the direct Treasury rate electric program to address the backlog of qualified loan applications for direct municipal rate electric loans from RUS. Such loans are generally allocated by RUS in the order that qualified applications are received. RUS will distribute direct Treasury rate electric loans by offering those municipal rate electric loan applicants whose qualified applications were pending at the time of the enactment of Pub.L. 106-387 the option of selecting the direct Treasury rate in lieu of the municipal rate for their loans. RUS will contact applicants in the order of priority that their applications for municipal rate loans would otherwise have been funded using the loan processing priorities published in 7 CFR 1710.119. In that order, RUS will allocate up to the original (as adjusted in accordance with this NOFA) qualifying municipal loan amount to each applicant who so elects. RUS will proceed in turn until such point as the $500 million of authority has been exhausted. In the unlikely event that any of the authority remains unobligated on July 1, 2001, RUS plans to publish a notice of the availability of the remaining portion and describe the manner in which it intends to proceed. RUS intends to obligate loans for the full amount by September 1, 2001.

II. Applications Process

Qualifying applications for direct municipal rate electric loans which have been submitted to RUS in accordance with 7 CFR part 1710 subpart I, before October 28, 2000 will be treated as pre-applications for direct Treasury rate electric loans. RUS will contact qualified applicants in the order which they are presently queued, and offer the applicant the opportunity to elect to receive its loan at the direct Treasury rate in lieu of the municipal rate. Applicants should notify RUS promptly in writing of their election. Only timely responses received by RUS and electing the direct Treasury rate will qualify for further loan processing by RUS at that rate. All other applicants will remain in the municipal rate loan queue without prejudice. RUS notes that a reduction of $500 million of applications in the municipal rate loan queue will result in reaching municipal rate loan applications that otherwise would not be reached during FY 2001. Congress authorized a direct municipal rate electric loan program level of $295 million for FY 2001. RUS estimates its current backlog of qualified applications for electric distribution loans as exceeding $1.2 billion. Therefore, RUS anticipates that it will significantly reduce but not substantially eliminate its backlog of electric distribution loan applications.

III. Application Submission Requirements

Each application should include all of the information, materials, forms and exhibits required by 7 CFR part 1710 subpart I, as well as comply with the provisions of this NOFA. RUS believes that it currently has received sufficient pre-applications to exhaust all available FY 2001 funding for the direct Treasury rate electric program and therefore it is not soliciting additional applications for this rate category at this time.

IV. Differences Between Direct Municipal Rate Electric Loan Category and Direct Treasury Rate Electric Loan Category

Generally speaking, since the primary distinction between the established direct municipal rate electric loan program and the direct Treasury rate electric loan program is merely one of interest setting methodologies, RUS intends to administer the direct Treasury rate program during FY 2001 in a manner substantially the same as it administers the direct municipal rate program. General and pre-loan policies and procedures for electric loans made by RUS may be found in 7 CFR parts 1710 and 1714. It is intended that the use of established and highly successful direct electric loan program procedures will enable RUS to promptly make prudent loans to qualified applicants. These procedures have generally worked well and are familiar to both RUS staff and to the applicants. This approach helps assure that the funds authorized by Congress for FY 2001 are expended in a timely manner as Congress intended. The principal variances are as follows:

a. Interest Rates

1. The standard interest rate on direct Treasury rate loans will be established daily by the United States Treasury.

2. The interest rates for Treasury rate loans can be found on the Internet at www.federalreserve.gov/releases/H15/currrent/.

3. Selection of interest rate terms will be made by the borrower for each advance of funds. The minimum interest rate term shall be one year. Interest rate terms will be limited to terms published by the Treasury (i.e. 1, 2, 3, 5, 7, 10, 20, and 30). Interest rates for terms greater than 30 years will be at the 30-year rate.

4. There will be no interest rate cap on Treasury rate loans.

b. Prepayment

A direct Treasury rate electric loan may be repaid at par on its rollover maturity date if there is one. Such a loan may also be prepaid with no premiums or penalties at its “net present value” (NPV) as determined by RUS using the prepayment methodology in 7 CFR part 1786.

c. Supplemental Financing

The Administrator has elected not to impose any supplemental financing requirements in conjunction with direct Treasury rate electric loans made during FY 2001. Accordingly, the “original qualifying municipal amount” referred to in part I.B of this NOFA may be adjusted at the election of the applicant to include otherwise eligible amounts that would have been financed from other sources in accordance with 7 CFR 1710.110(c). Request for an adjustment in the “original” amount should specify the amount of the adjustment and accompany the applicant's election to use the Treasury rate category of direct electric loan. See part II of this NOFA.

V. Loan Documents

Successful applicants will be required to execute and deliver to RUS a promissory note evidencing the borrower's obligation to repay the loan. The note must be in form and substance satisfactory to RUS. RUS plans to require a form of note substantially in the form that it currently accepts for direct municipal rate electric loans, with such revisions as may be necessary or appropriate to reflect the different interest setting provisions and the terms of this NOFA. All notes will be secured in accordance with the terms of 7 CFR part 1718.