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RUS will amend existing regulation 7 CFR 1738 to implement the statutory changes to title VI as required by the 2018 Farm Bill. The statutory changes affecting 7 CFR 1738 are found in various sections of title VI of the 2018 Farm Bill, including sections 6201, 6205, 6207, 6208, 6209 and 6212. The changes to title VI include but are not limited to amendments to the program’s current grant funding; priority consideration; project eligibility; broadband service requirements; broadband build out requirements; program funding instruments; technical assistance and training; treatment of outdated broadband systems; public notice, assessment and reporting requirements; environmental reviews; use of loan proceeds for refinancing; and Federal broadband program coordination.

Overall Description of Deadline: Section 6213 of the Agriculture Improvement Act of 2018 provides a one-year period for enactment with respect to the implementation of the rural broadband access program under section 601 of the Rural Electrification Act of 1936.

Statement of Need:

This regulatory action will implement mandatory changes to 7 CFR 1738, as required by Sections 6201, 6202, 6205, 6206, 6207, 6208, 6209 and 6212 of the Agriculture Improvement Act of 2018, Pub. L. 115-334 (2018 Farm Bill).

Summary of the Legal Basis:

This action is required by statute. The Agriculture Improvement Act of 2018, Pub. L. 115-334 (the 2018 Farm Bill) amended Title VI of the Rural Electrification Act of 1936 (7 USC 950bb).

Alternatives:

There is no alternative to amending the regulation. The 2018 Farm Bill mandates that the Secretary implement the changes to the rural broadband program.

Anticipated Costs and Benefits:

The Agency expects that these regulatory changes will result in increased costs to the government and applicants due to adjustments in program funding and eligibility, application development, and application processing. In recognizing the increased demands on the agency due to the new requirements, Congress provided for 3-5% in administrative costs to the agency.  Additionally, it is anticipated that the regulatory changes will result in a higher number of successful application submissions.

Risks:

The rule includes new financial standards which require applicants to demonstrate a positive Net Worth throughout the forecast period and achieve a current ratio and debt-service coverage ratio of 1.25 in Year 5 of the financial forecast.  While maintaining the requirement that applicants must achieve a TIER of 1.25 in Year 5 of the forecast.  The rule also requires applicants to provide two years of audited financial statements.  These requirements strengthen the overall financial standards for the program and will help to reduce the overall financial risk to individual projects.