GM 12-075

Rural Utilities Service Publishes Final Regulations Implementing Priority Access to Financing for Substantially Underserved Trust Areas

On June 13, 2012, the Rural Utilities Service (RUS), an agency within the Department of Agriculture, published the attached final regulations to implement the Substantially Underserved Trust Area (“SUTA”) provisions of the 2008 Farm Bill. The purpose of the SUTA program is to help Indian, Alaska Native, and Native Hawaiian communities obtain grants, loans, and guaranteed loans from the RUS to address the significant lack of access to telephone, internet, electricity, water and sewer needs.

The RUS also hosted a national conference call on June 13, 2012, with Jessica Zofolo, Deputy Administrator of the RUS and Janie Hipp (Chickasaw), Senior Advisor to Agriculture Secretary Tom Vilsack. The SUTA provisions go into effect on July 13, 2012.

SUTA provides tribal applicants with preferential treatment by allowing the RUS to:

1. make loans and guarantee loans with interest rates as low as two percent and with extended repayment terms
2. waive non-duplication restrictions, matching fund requirements, or credit support requirements from any loan or grant program to facilitate construction, acquisition or improvements of infrastructure
3. give highest priority to designated projects in substantially underserved trust areas

Tribal applicants can invoke the SUTA provisions when seeking financing from the following programs:

• Rural Electrification Loans and Guaranteed Loans, and High Cost Energy Grants
• Water and Waste Disposal Loans, Guaranteed Loans, and Grants
• Telecommunications Infrastructure Loans and Guaranteed Loans
• Distance Learning and Telemedicine Loans and Grants
• Broadband Loans and Guaranteed Loans

During the teleconference call, some tribes requested clarification on the ability of the Administrator to give highest priority to SUTA projects. RUS staff responded that SUTA applications that meet the qualifications will “go to the front of the line,” meaning that those proposals will be evaluated first. We note that section 1700.107(e) of the regulations allows the Administrator to award extra points to SUTA applications when a program uses a priority point scoring system. Section 1700.107(e) also authorizes the Administrator to open a competitive grant opportunity for trust lands that uses the SUTA criteria in a point scoring system.

The new regulations still require that all RUS loans be financially feasible. Section 1700.107(c) of the regulations allows the Administrator, on a case by case basis, to waive matching fund requirements for reasons including whether the imposition of matching funds would stop the project from going forward. Section 1700.107(d) of the regulations also allows the Administrator to waive credit support requirements such as equity, cash, and lines of credit when issuing loans and loan guarantees if the Administrator determines that those requirements pose a barrier to participation in the program or when credit may be unavailable or expensive.

Tribes who wish to access SUTA priority must explain why their trust lands are underserved and can do so by documenting (1) lack of service, no service, or inadequate service, (2) significant health risk to the community’s residents, and (3) community needs which may include per capita income and unemployment statistics and participation rates in the Supplemental Nutrition Assistance Program (SNAP), the National School Lunch Program, the Temporary Assistance for Needy Families Program (TANF), and the Lifeline Assistance and Link-up America Program. Applications should also include examples of economic opportunities lost without improvement.

Please contact us if you would like further information regarding the SUTA regulations or applications for the financing of tribal projects from the Rural Utilities Service.