Frequently asked questions for Community Facilities Direct Loans and Grants:

1.   What is an essential community facility?

Essential community facilities are broad based, viable facilities that provide lasting services and benefits to the entire community.  Essential community facilities must meet all of the following criteria:

·        Provide an essential public service to the local community -  the service should be a service that is typically provided by a local unit of government;

·        Be needed for the orderly development of the rural community - considered a public improvement;

·        Does not include private, commercial or business undertakings; and

·        Must include significant community support.

2.   What kind of projects qualifies as a community facility?

Examples of community facilities are:

·        Community Health Care:  physicians clinics, outpatient care, nursing home, dental clinic, telemedicine, assisted care, ambulatory care, etc.

·        Cultural and Educational: library, museum, vocational school, public school, all purpose building, college, educational camp for persons with disabilities, shelters, alcohol treatment centers, etc.

·        Fire Rescue and Public Safety: fire department, fire trucks, jail, police station,        communications center, civil defense building, rescue and ambulance service building, multiservice fire/rescue, etc.

·        Public Building and Improvements:  adult day care center, child day care center, city hall, community health department office building, community center, county courthouse, food preparation center, home for delinquents, public maintenance building, domestic violence centers

The most important factor is that the project serves the community as a whole and is needed for the orderly development of the community such as providing an essential service to the residents (health care services, fire and safety services, educational services, etc.).

3.   Can we pay 100% of the project costs with CF funds? 

CF direct and guaranteed loan funds can be used to pay 100% of the project costs.  Normally, under the direction of Rural Development, applicants use interim financing to pay construction costs and CF loans are used for long-term financing.  This arrangement encourages participation from commercial banks.

The amount of grant assistance is 75% of project costs depending upon the median household income and population in the community where the project is located and the availability of grant funds.  Grant assistance is very limited.  The average grant award for projects in FY 1999 was $30,700.  In most instances, projects, which receive grant assistance, have a high priority for funding and are highly leveraged with other loan and grant awards.

4.   What is the maximum loan amount I can apply for?

There is no set maximum loan limits with the Community Facilities direct and guaranteed loan programs.  The amount that can be financed is based on realistic project costs, project feasibility and funding availability at the time.

5.  What are the eligibility rules?

Community Facilities programs has eligibility issues that are unique to the type of loan program.  Applicant eligibility:

·        Public body, non-profit corporation, special purpose district, or Indian tribe

·        Project must be in a city or town of 20,000 or less, or an unincorporated area;

·        Have legal capacity to borrow, pledge security, construct, operate and maintain the facility for the life of the loan;

·        Be financially sound;

·        Provide certification they are unable to obtain other credit at reasonable rates and terms and are unable to finance the proposed project from their own resources.  A letter from a Lender will be sufficient.

·        Have loan repayment ability based on revenues, fees, taxes, and assessments;

·        Final control of the facility must remain with the borrower organization for the life of the loan.  The borrower may enter into a contractual agreement for management of the facility by a third party by contract management agreement; and

·        Facility being financed must be for public use.

6.   What forms are required for filing a Community Facilities (CF) Direct loan or Grant application?

The application process for CF Direct loans and Grants, or a combination of both, is a two-stage process.  An applicant must submit documentation to support its eligibility status and priority for funding before making a formal application. The form needed to start the application process is SF 424.2, Application for Federal Assistance. You should also contact the Rural Development State Office where you are located in order to obtain all other necessary forms. The requirements for each type of project differ.  As always, Rural Development staff members will fully assist in completing the requirements for a loan or grant.

7.   Can we use CF funds to refinance existing debts?

Refinancing existing debts may be considered an eligible direct or guaranteed loan purpose if the debt being refinanced is a secondary part of the loan, is associated with the project facility, and if the applicant’s creditors are unwilling to extend or modify terms in order for the new loan to be feasible. 

8.   What types of projects are eligible for grant assistance?

All of the Community Facility programs have the same eligibility rules pertaining to the types of projects that can be financed. With the grant program, such projects as health care and public safety receive a higher priority for funding.

9.   We’re a small community and we understand you have grant money available for small rural communities.  How much grant money are we eligible for?

Grants have population and income limits based on where the project is located.  There are three levels of percentage of grant assistance ranging from 75% down to 15% based on population and income.   

Grants cannot be made to an entity whose service area has a median household income of more than 90% of the state nonmetropolitan median household income.   Priority is given to projects whose service area has a median household income below 60% of the state nonmetropolitan median household income and if the population where the project is located is less than 5,000.

Contact your Rural Development State Office to determine if your community is eligible for grant funds.

10.   Where are the Community Facilities applications processed? 

All applications are filed and processed in either the State or local office of the State the project is located in.  Contact USDA Rural Development’s State Office either by telephone or through our web site and request information on how to proceed with your loan or grant request.