SUPPLEMENTARY INFORMATION:

Programs Affected

The Rural Rental Housing program is listed in the Catalog of Federal Domestic Assistance under Number 10.415, Rural Rental Housing Loans. Rental Assistance is listed in the Catalog under Number 10.427, Rural Rental Assistance Payments.

Discussion of Notice

I. Authority and Distribution Methodology

A. Authority

Section 515 of the Housing Act of 1949 (42 U.S.C. 1485) provides RHS with the authority to make loans to any individual, corporation, association, trust, Indian tribe, public or private nonprofit organization, consumer cooperative, or partnership to provide rental or cooperative housing and related facilities in rural areas for very-low, low, or moderate income persons or families, including elderly persons and persons with disabilities. Rental assistance (RA) is a tenant subsidy for very-low and low-income families residing in rural rental housing facilities with RHS financing and, when available, may be requested with applications for such facilities.

B. Distribution Methodology

The total amount available for Fiscal Year (FY) 2007 for section 515 is $99,000,000, of which $25,740,000 is available for new construction as follows:

Non-Restricted—$8,234,537

Set-aside for nonprofits—$8,910,000

Set-aside for Underserved Counties and Colonias—$4,950,000

Earmark for EZ, EC, and REAP Zones—$2,655,463

Designated Reserve for States with Rental Assistance Programs—$990,000

C. Section 515 New Construction Funds

For FY 2007, the Administrator has determined that it would not be practical to allocate funds to States because of funding limitations; therefore, section 515 new construction funds will be distributed to States based on a National competition, as follows:

1. States will accept, review, score, and rank requests in accordance with 7 CFR 3560.56. The scoring factors are:

(a) The presence and extent of leveraged assistance for the units that will serve RHS income-eligible tenants at basic rents, comparable to those if RHS provided full financing, computed as a percentage of the RHS total development cost (TDC). Loan proposals that include secondary funds from other sources that have been requested but have not yet been committed will be processed as follows: The proposal will be scored based on the requested funds, provided (1) the applicant includes evidence of a filed application for the funds; and (2) the funding date of the requested funds will permit processing of the loan request in the current funding cycle, or, if the applicant does not receive the requested funds, will permit processing of the next highest ranked proposal in the current year. Points will be awarded in accordance with the following table. Percentages will be rounded to the next higher whole number. (0 to 20 points)

(b) The units to be developed are in a colonia, tribal land, EZ, EC, or Rural Economic Area Partnership (REAP) community, or in a place identified in the State Consolidated Plan or State Needs Assessment as a high need community for multifamily housing. (20 points)

(c) Pursuant to 7 CFR 3560.56 (c)(1)(iii), in states where RHS has an on-going formal working relationship, agreement, or Memorandum of Understanding (MOU) with the State to provide State resources (State funds, State RA, HOME funds, Community Development Block Grant (CDBG) funds, or Low-Income Housing Tax Credits (LIHTC)) for RHS proposals; or where the State provides preference or points to RHS proposals in awarding such State resources, 20 points will be provided to loan requests that include such State resources in an amount equal to at least 5 percent of the TDC. Native American Housing and Self Determination Act (NAHASDA) funds may be considered a State Resource if the Tribal Plan for NAHASDA funds contains provisions for partnering with RHS for multi-family housing. (National Office initiative)

(d) The loan request includes donated land meeting the provisions of 7 CFR 3560.56(c)(1)(iv). (5 points)

(e) In an effort to implement USDA's nationwide initiative to promote renewable energy and energy conservation, Rural Development has adopted incentives for energy generation and energy conservation. Participation in these nationwide initiatives is voluntary, but is strongly encouraged.

Energy Generation. Applicants will be awarded points if the proposal includes the installation of energy generation systems to be funded by a third party. The proposal must include an overview of the energy generation system being proposed. Evidence that an energy generation system has been funded by a third party and that it has a quantifiable positive impact on energy consumption will be required. (5 points)

Energy Conservation. Applicants will be awarded points to construct (or substantially rehabilitate) housing that earns the ENERGY STAR label for new residential construction. Units earning the ENERGY STAR label must be independently verified to meet guidelines for energy efficiency as set by the U.S. Environmental Protection Agency. All procedures used in verifying a unit for the ENERGY STAR label must comply with National Home Energy Ratings System (HERS) guidelines. ENERGY STAR guidelines for residential construction apply to homes that are three stories or less and single or low-rise multi-family residential buildings.

The Applicant will include in the summary an explanation of how they plan to incorporate ENERGY STAR. Construction plans pertaining to energy efficiency must be developed with, reviewed, and accepted by a HERS certified rater, the contractor, and the owner. Progress inspections must be made at appropriate times by a HERS certified rater to ensure that the housing is being constructed or rehabilitated according to ENERGY STAR specifications. In order to receive final payment, applicants will be required to submit the appropriate rating reports from the HERS rater to Rural Development as evidence that the housing has been constructed to meet the standards of ENERGY STAR. In the event that housing does not meet ENERGY STAR guidelines for new residential construction, the Agency shall, at its discretion, deduct 5 points from future funding proposals. For further information about ENERGY STAR, see www.energystar.gov or call the following toll-free numbers: (888) 782-7939 or (888) 588-9920 (TTY). (5 points)

2. The National Office will rank all requests nationwide and distribute funds to States in rank order, within funding limits. If insufficient funds remain for the next ranked proposal, the Agency will select the next ranked proposal that falls within the remaining levels. Point score ties will be handled in accordance with 7 CFR 3560.56(c)(2).

D. Applications That Do Not Require New Construction RA

In the event new construction RA is available for FY 2007, it will be available in limited amounts. Therefore, the Agency is inviting applications to develop units in markets that do not require RA. The market study for proposals must clearly demonstrate a need and demand for the units by prospective tenants at income levels that can support the proposed rents without tenant subsidies. The proposed units must offer amenities that are typical for the market area at rents that are comparable to conventional rents in the market for similar units.

E. Set-Asides

Loan requests will be accepted for the following set-asides:

1. Nonprofit set-aside. An amount of $8,910,000 has been set aside for nonprofit applicants. All loan proposals must be in designated places in accordance with 7 CFR 3560.57. A State or jurisdiction may receive one proposal from this set-aside, which cannot exceed $1 million. A State could get additional funds from this set-aside if any funds remain after funding one proposal from each participating State. If there are insufficient funds to fund one loan request from each participating State, selection will be made by point score. If there are any funds remaining, they will be handled in accordance with 42 U.S.C. 1485(w)(3). Funds from this set-aside will be available only to nonprofit entities, which may include a partnership that has as its general partner a nonprofit entity or the nonprofit entity's for-profit subsidiary which will be receiving low-income housing tax credits authorized under section 42 of the Internal Revenue Code of 1986. To be eligible for this set-aside, the nonprofit entity must be an organization that:

(a) Will own an interest in the project to be financed and will materially participate in the development and the operations of the project;

(b) Is a private organization that has nonprofit, tax exempt status under section 501(c)(3) or section 501(c)(4) of the Internal Revenue Code of 1986;

(c) Has among its purposes the planning, development, or management of low-income housing or community development projects; and

(d) Is not affiliated with or controlled by a for-profit organization.

2. Underserved counties and colonias set-aside. An amount of $4,950,000 has been set aside for loan requests to develop units in the 100 most needy underserved counties or colonias as defined in section 509(f) of the Housing Act of 1949.

3. EZ, EC, and REAP Earmark. An amount of $2,655,463 has been set aside to develop units in an EZ, EC, or REAP zone. Loan requests that are eligible for this set-aside are also eligible for regular Section 515 funds. If requests for this set-aside exceed available funds, selection will be made in accordance with 7 CFR 3560.56(c).

II. Funding Limits

A. Individual loan requests may not exceed $1 million. This applies to regular section 515 funds and set-aside ( printed page 21210) funds. The Administrator may make an exception to this limit in cases where a State's average total development costs exceed the National average by 50 percent or more.

B. No State may receive more than 20% of the total available for new construction, including set-aside funds.

III. Rental Assistance (RA)

In addition to the State Matching RA program as described in Section VI. E. of this Notice and subject to its availability, new construction RA will be held in the National Office for use with section 515 Rural Rental Housing loans. Because the amount of RA available for new construction is minimal, RA will be granted to projects which best meet the scoring and ranking criteria at 7 CFR 3560.56(c). Unused RA may be allocated from within the State jurisdiction to approved new construction projects. New construction RA may not be used in conjunction with a transfer or subsequent loan for repairs or rehabilitation, preservation purposes or for inventory property sales.

IV. Application Process

All applications for section 515 new construction funds must be filed with the appropriate Rural Development State Office and must meet the requirements of 7 CFR 3560.56, as well as comply with the provisions of Section V. of this notice. Incomplete applications will not be reviewed and will be returned to the applicant. No application will be accepted after 5 p.m., local time, on the application deadline previously mentioned unless that date and time is extended by a Notice published in the Federal Register .

V. Application Submission Requirements

A. Each application shall include the following information, materials, forms and exhibits required by 7 CFR 3560.56, as well as comply with the provisions of this Notice.

Forms to be included in initial application package:

1. Form SF 424, Application for Federal Assistance, which can be found online at www.whitehouse.gov/​omb/​grants/​sf424.pdf;

2. Form RD 1940-20, Request for Environmental Information, which can be found online at www.rurdev.usda.gov/​regs/​forms/​1940-20.pdf;

3. Form RD 3560-7, Multiple Family Housing Project Budget/Utility Allowance, which can be found online at www.rurdev.usda.gov/​regs/​forms/​3560-07.pdf;

4. Form HUD 2530, Previous Participation Certification, which can be found online at www.hudclips.org/​sub_​nonhud/​cgi/​pdfforms/​2530.pdf;

5. Form RD 1924-13, Estimate and Certificate of Actual Costs, which can be found online at www.rurdev.usda.gov/​regs/​forms/​1924-13.pdf;

6. Form RD 410-9, Statement Required by the Privacy Act (for individuals only), which can be found online at www.rurdev.usda.gov/​regs/​forms/​0410-09.pdf;

Information requested in initial application package:

I. To establish applicant eligibility:

A. Current (within 6 months) financial statements with the following paragraph certified by someone with the legal authority to do so:

I/we certify the above is a true and accurate reflection of my/our financial condition as of the date stated herein. This statement is given for the purpose of inducing the United States of America to make a loan or to enable the United States of America to make a determination of continued eligibility of the applicant for a loan as requested in the loan application of which this statement is a part.

B. Check for $28 from individual applicants and $40 from organizational applicants made out to United States Department of Agriculture. This will be used to pay for credit reports obtained by the Agency.

C. Statement signed by applicants that they will pay any cost overruns.

D. Proposed limited partnership agreement and certificates of limited partners, if applicable. (Agency requirements should be contained in one section of the agreement and their location identified by the applicants or their attorney in a cover sheet.)

E. If a nonprofit organization:

1. Tax-exempt ruling from the IRS designating them as a 501(c)(3) or 501(c)(4) organization. If the designation is pending, a copy of the designation request must be submitted.

2. Purpose statement, including the provision of low income housing.

3. Evidence of organization under state and local law, or copies of pending applications.

4. List of Board of Directors.

F. If a limited liability company, proposed operating agreement and the authorized agent who has the authority to complete the loan application and loan closing documents.

G. If a trust, organizational documents and attorney opinion letter that the trust is validly formed and identifying the authorized representative to act on the trust's behalf.

II. To establish project feasibility:

A. Market feasibility documentation: Either a market study or a market survey, as appropriate.

B. Type of project and structures proposed (total number of units by bedroom size, size of each unit type, size and type of other facilities).

C. Schematic drawings:

1. Site plan, including contour lines;

2. Floor plan of each living unit type and other spaces, such as laundry facilities, community rooms, stairwells, etc.;

3. Building exterior elevations;

4. Typical building exterior wall section; and

5. Plot plan.

D. Description and justification of related facilities, schedule of separate charges for related facilities.

E. Type and method of construction (owner builder, negotiated bid, or contractor method).

F. Estimated costs (Form RD 1924-13).

G. Statement of proposed management.

H. Congregate services package/plan (if applicable).

I. Statement of support from other Government services providers to the project (congregate only).

J. Response to the Uniform Relocation Assistance Act (if applicable).

III. To establish project financing:

A. Statement of budget and cash flow (applicant completes Form RD 3560-7), including type of utilities and utility allowance, if applicable and contribution to reserves.

B. Congregate services charges (if applicable).

C. Status of efforts to obtain leveraged funds.

D. Proposed construction financing (interim or multiple advance; if interim financing, letter of interest from intended lender).

IV. Environmental and site information:

A. Environmental information (applicant completes Form RD 1940-20).

B. Evidence of compliance with Executive Order 12372 (A-95) (if applicable) Form SF 424 is sent to a clearinghouse for intergovernmental review.

C. Phase I due diligence (Environmental Site Assessment; see Chapter 3 of the section 515 Rural Rental Housing Loan Origination Handbook).

D. Map showing location of support services.

E. Evidence of submission of project description to State Housing Preservation Office with request for comments. ( printed page 21211)

F. Comments regarding relevant offsite conditions.

G. Explanation of any proposed energy efficiency components.

Applicants are encouraged, but not required, to include a checklist and to have their applications indexed and tabbed to facilitate the review process. The Rural Development State Office will base its determination of completeness of the application and the eligibility of each applicant on the information provided in the application.

B. Applicants are advised to contact the Rural Development State Office serving the place in which they desire to submit an application for the following:

1. Questions pertaining to the application process; and

2. List of designated places for which applications for new section 515 facilities may be submitted.

VI. Areas of Special Emphasis or Consideration

A. The RHS encourages the use of funding from other sources in conjunction with Agency loans. This year there will be a National Office Initiative pursuant to 7 CFR 3560.56(c)(1)(iii), whereby preference points will be awarded to loan requests that meet the selection criteria as follows: In states where RHS has an on-going formal working relationship, agreement, or MOU with the State to provide State resources (State funds, State RA, HOME funds, CDBG funds, or LIHTC) for RHS proposals; or where the State provides preference or points to RHS proposals in awarding these State Resources, 20 points will be provided to loan requests that include such State resources in an amount equal to at least 5 percent of the TDC. NAHASDA funds may be considered a State Resource if the Tribal Plan for NAHASDA funds contains provisions for partnering with RHS for multi-family housing.

B. $8,910,000 is available nationwide in a set-aside for eligible nonprofit organizations as defined in 42 U.S.C. 1485(w).

C. $4,950,000 is available nationwide in a set-aside for the 100 most Underserved Counties and Colonias.

D. $2,655,463 is available nationwide in an earmark for EZ, EC, and REAP zone.

E. $990,000 is available nationwide in a reserve for States with viable State RA programs. In order to participate, States are to submit specific written information about the State RA program, i.e., a memorandum of understanding, documentation from the provider, etc., to the National Office.

72 FR 21207