BPMi
340/1-77-023
DECEMBER 1977
Stationary Source Enforcement Series
MAJOR
FINANCIAL ASSISTANCE PROGRAMS
AVAILABLE FOR
INDUSTRIAL POLLUTION
CONTROL EXPENDITURES
(FEDERAL AND EPA REGION III STATE PROGRAMS)
Region 111 Library
Environmental Protection Agency
fi 12107
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Enforcement
nf Hpnpral Fnf, T .EPA Report Collection
01 ueneidl tni Information Resource Center
US EPA Region 3
Washington, D.C. <. Philadelphia, A mo?
-------
V
MAJOR FINANCIAL ASSISTANCE PROGRAMS
AVAILABLE FOR
INDUSTRIAL POLLUTION CONTROL EXPENDITURES
-FEDERAL AND EPA REGION III STATE PROGRAMS-
Prepared for
Fred Knapp
Project Officer
Region III
Environmental Protection Agency
6th and Walnut Streets
Philadelphia, Pennsylvania 19107
June 1, 1977
Prepared by
Charles R. Marshall
JACA Corp.
Fort Washington, Pennsylvania 19034
li,S. ri.-'fcnrrnlal Prctsction Agency.
r;,",'.jn Hi information Resource -
Ce',Ua (3PM52)
/
-------
TABLE OF CONTENTS
Page
SUMMARY i
I. INTRODUCTION 1-1
Background 1-1
EPA's Role in Informing Firms of Assistance Programs 1-5
Financial Program Description Format 1-6
II. FEDERAL FINANCIAL PROGRAMS FOR POLLUTION CONTROL II- 1
A. Rapid Amortization of Pollution Control Equipment II- 3
B. Industrial Development Bonds (IDBs) 11-11
C. Small Business Administration Direct Compliance Loans 11-27
D. Small Business Administration Lease Guarantees 11-41
E. Economic Development Administration Financial Programs 11-49
F. Financial Assistance to Farmers and Rural Industry from
the Farmers Home Administration and Small Business
Administration 11-57
G. Industrial Cost Recovery Systems 11-69
III. CERTIFICATION FOR SMALL BUSINESS ADMINISTRATION POLLUTION
CONTROL FINANCING III- 1
U.S. Environmental Protection Agency Region III III- 3
Delaware III- 5
Maryland III- 7
Pennsylvania III- 9
Virginia III-ll
West Virginia 111-13
IV. STATE FINANCIAL ASSISTANCE PROGRAMS FOR POLLUTION CONTROL IV- 1
Delaware IV- 3
Maryland IV- 7
Pennsylvania IV-11
Commonwealth of Virginia ' IV-15
West Virginia IV-19
APPENDICES
A. Rapid Amortization Certification Form
B. Federal Register, Federal Water Pollution Control
Small Business Concerns; Final Rulemaking
C. SBA Field Offices Addresses and Telephone Numbers
D. Small Business Administration - Loan Application Form
-------
APPENDICES (continued)
E. Pilot Program Guidelines and Procedures for the Pollution
Control Financing Program
F. Application for Commercial or Industrial Loan
G. U.S. Department of Agriculture - Farmers Home Administration
Equal Opportunity Agreement
H. Memorandum of Understanding Between the Small Business Admin-
istration and the United States Department of Agriculture
Farmers Home Administration
I. Industrial Development Bond Fees
-------
LIST OF TABLES AND FIGURES
Tables
I. FEDERAL AND EPA REGION III STATE FINANCIAL ASSISTANCE PROGRAMS
FOR INDUSTRIAL POLLUTION CONTROL EXPENDITURES iv
II. INDUSTRIAL CAPITAL AND POLLUTION CONTROL EXPENDITURES 1-2
III. INDUSTRIAL POLLUTION CONTROL EXPENDITURES, 1975-1984 1-4
IV. COMPARISONS OF POLLUTION CONTROL IDE FINANCING TO TOTAL MUNICIPAL
BOND FINANCING AND TO TOTAL POLLUTION CONTROL CAPITAL EXPENDITURES 11-12
V. SMALL BUSINESS ADMINISTRATION COMPLIANCE LOANS 11-31
Figures
1. INDIFFERENCE CURVE FOR AMORTIZATION OPTIONS UNDER THE TAX REFORM
ACT OF 1976 AND FORMER 26 USC 169: TRADITIONAL VS. RAPID
AMORTIZATION II- 5
2. SBA AND FmHA ASSISTANCE FOR FARMERS AND RURAL BUSINESSES 11-67
-------
SUMMARY
The industrial and farming sectors in the Environmental Protection
Agency's Region III have recourse to many federal and state programs aimed at
reducing pollution control expenditures. The federal programs generally pro-
vide more significant cost reductions than the state programs. Federal pro-
grams include long-term low interest rate loans and accelerated depreciation
for pollution control equipment. The savings from these programs are generally
greater than the savings from the most common state programs of Region III, such
as sales and property tax exemptions and accelerated depreciation for state
corporate income taxes.
The mining and manufacturing sectors have recourse to four federal
financing programs that provide low interest, long term loans. One program,
Industrial Development Bonds (IDBs) is widely available; there are no budget
limitations but it is primarily available to larger, strong-credit businesses.
An Economic Development Administration (EDA) loan program is occassionally
available for large businesses with marginal credit positions. For small
businesses that are substantially injured by pollution control requirements,
there are two Small Business Administration (SBA) programs that provide long
term, low interest rate loans. These SBA programs are much more widely avail-
able in terms of funding than traditional SBA regular loan programs. Businesses
that may not be included in any of the three programs are those with moderate
credit positions.
The family farm sector has recourse to several loan programs, namely
those of the Farmers Home Administration (there are 5) and the Small Business
Administration for pollution control loans. The corporate farm sector only
-------
has recourse to one Farmers Home Administration (FmHA)loan program but can
use SBA and IDB programs. FmHA programs are also characterized by limited
funds.
In addition to financing, all existing businesses may amortize pollution
control equipment rapidly for federal income tax purposes. However, rapid
amortization is only attractive for equipment with a useful life greater than
twelve years and where the discount rate (when using present value analyses) is
greater than 10 percent.
Businesses that have their wastewaters treated by a publicly owned treat-
ment works have an additional benefit that reduces pollution control costs.
Their proportionate share of treatment cost is reduced by the absence of an
interest cost for at least 75 percent of the construction costs of the works.
Federal and state financial assistance programs are generally available
for the different types of pollution control, i.e. air, water and solid waste.
The SBA programs, however, are presently only for controls that were pursuant
to the more recently imposed federal laws such as the Clean Air Act of 1970 and
Federal Water Pollution Control Act Amendments of 1972. Requirements imposed
solely at the local level, such as noise control, are not eligible for SBA
assistance.
All end-of-line pollution control equipment is eligible for federal
and state programs. However, several programs exclude process changes from
eligibility. The definition of pollution control as it relates to process
changes is most restricted for IDB, while SBA appears to be the most inclusive.
The use of many federal and state financial programs for pollution control
is predicated on the user obtaining certification from a control agency that
the equipment is necessary and adequate. There is a formalized EPA certification
11
-------
procedure for SBA assistance and rapid amortization, and there are informal
certification procedures for IDBs, FmHA loans and many of the state programs.
The differences in the above summarized federal programs stem largely
from the different agencies responsible for the programs and from the different
legislation that mandated the programs.
The diversity of assistance programs for pollution control is even
greater at the state level because the programs offered differ from state-to-
state. The differences in programs among states is shown in Table I where ten
state programs exist but five of them have three or less states participating
and where only one program is offered by all five states. The table also in-
cludes the various federal programs.
One of the most common state assistance programs is IDBs which even though
federally created, must be further provided for by state legislation. Other
programs fairly common to the states of Region III are sales and property tax
exemptions and accelerated depreciation for state income tax purposes. Common
also are the state grant programs which pay for portions of publicly owned
treatment works on top of what the federal government pays. In addition, in
EPA Region III there is a small water and wastewater federal grants program
under the Appalachian Regional Commission which is administered by the states
for those parts of Appalachia within their state.
-------
Q
2
X
ta
c5
d
O
o.
a;
co
a
a
o
o
OS
(X
o
t(
U
w
nj
rt
CD
a
o
PI
ri
ri
H
c
H
CO
X
ifl
e
CD
X
X
rI
i-H
ri
H
4->
CD
O
O
O
CD
O
4J
O
z:
rt
C
O
<
JZ ^
4-> ri
C CD
O X
e
CD
0 C
vO O
13
13
rt
C
ri
c
r;
O
i i
e
ri
o
T3
^,
U1
O
O
C
ra
-P
t/i
S
3
O
L-,
H
O
O
p
0
CJ
f-^
H
O
I 1
o
-p
X
r-\
(S
o
H
4-J
H
T3
T3
ri
c
cs
4->
C
ri
^
to
a
ri
u
C
CD
CD
O
ri
fH
PH
O
O
ri
CD
pi
O
o
X
ri
4->
4-> CD 4J X ri
X o ri in
O 34-i
4-1 T3 -T3 r-H
CD Pi LO ri
O CD E
CD O CJ t-l
4-i ri ri
CD to c tn
H C as
ri o CD
X
4-> r-l
6 Pi
3
ri
f.
o c
CD
o oo o a
< ^ o
o
H
-------
I. INTRODUCTION
The industrial sector has become a focal point of this nation's
efforts to control pollution. To carry out this task industry must commit
large sums of money. There are instances where the commitment to such ex-
penditures poses problems for industry sectors or individual companies.
To alleviate some of the problems, Federal and Region III governments are
assisting industry by providing various tax and financing programs for
pollution control. The programs vary considerably in regards to eligible
equipment, size users, dollar amounts, and administering agencies.
All pollution control programs that affect industry, including
agriculture and utilities in Region III U.S. Environmental Protection
Agency will be described. Such programs include federal programs as well
as state programs within Region III (Delaware, Maryland, Pennsylvania,
Virginia, West Virginia).
Background
Pollution control expenditures by industry are large. Their size
can be demonstrated by examining data representing past levels of expenditure
and projections for future expenditures.
Pollution control expenditures are often expressed in terms of
initial cost, i.e., capital expenditures. The magnitude of such capital
expenditures for pollution control by industry can be highlighted by a
comparison of national pollution control capital expenditures to national
totals for all other capital expenditures by industry. The Department of
Commerce reports the following figures for industrial capital expenditures
1-1
-------
for new plant and equipment and pollution control.
Table II
INDUSTRIAL CAPITAL AND POLLUTION CONTROL EXPENDITURES
(billions of dollars)
1975 1974 1975 1976e
Industrial Capital Expenditures,
Including Pollution Control1 $100.08 $111.92 $115.49 $119.69
Pollution Control
Air 3.18 3.34 3.79 3.86
Water 1.76 1.88 2.36 3.04
Solid Waste N.A. .40 .40 .44
Total $ 4.94 $ 5.62 $ 6.55 $ 7.34
% of Industrial Capital Expenditures 4.9 5.0 5.8 6.1
Pollution Control Operating and
Maintenance Costs2'0 N.A. 3.10 3.66 N.A.
Total Pollution Control Expenditures N.A. 8.72 10.21 N.A.
e - estimated
N.A. - not available
Segel, Frank W. and Gary L. Rutledge. "Capital Expenditures by Business
for Air, Water and Solid Waste Pollution Abatement," Survey of Current
Business. Department of Commerece. July, 1976.
Bureau of Census
2
Excludes annual depreciation for capital expenditures
1-2
-------
A level of 6.1 percent of all industrial capital expenditures
spent on pollution control ($7.34 billion - 1976) is significant. The
6.1 percent level is an average of all industries and does not reveal the
variation within industries and companies. In several industries (paper,
stone, clay and glass, steel blast furnaces, petroleum, chemicals, electric
utilities and electrical machinery) the percentage of total capital expen-
ditures represented by pollution control ranges from 7-17 percent. In one
industry, nonferrous metals, the percentage is 24. At the company level,
many expenditures represent over 60 percent of capital expenditures, and
in some instances over 50 percent of total asset value. As another indicator
of its significance, the increase in pollution control capital expenditures
from 1973 - 1976 ($2.4 billion) represents 12.2 percent of the growth in
total capital expenditures over the same period.
Not to be overlooked when discussing total pollution control costs
are annual costs for operating and maintaining pollution control systems.
The next to last line of figures on Table II presents those levels of
expenditures. The figures show that yearly annual operating and maintenance
costs are approximately 55% of the annual capital costs.
Looking to the future, the Council on Environmental Quality (CEQ)
reports two sets of estimates of industrial pollution control expenditures
for the period 1975-1984. One set estimates the incremental pollution
control expenditures to achieve more stringent levels of control. The
second, and larger, set estimates total pollution control expenditures,
including those made before and after the recent major pollution control
laws. Both of these sets of CEQ cost estimates contain operating and
maintenance costs. The figures for industry are:
1-3
-------
Table III
INDUSTRIAL POLLUTION CONTROL EXPENDITURES, 1975-1984
Air
Water
Solid
Radiation
Noise
Total
(billions of 1975 dollars)
Incremental
.1 Pollution Control Expenditures $
faste
on
'early Industrial Pollution
Expenditures
iter and Solid Waste
154.5
77.8
68.6
4.5
.2
3.4
15.45
15.09
Total
$ 247.5
116.3
90.4
37.2
.2
3.4
24.75
24.43
The CEQ data shows that the average incremental annual industrial
pollution control expenditures, including operating and maintenance, is
expected to be 15.45 billion. This figure is above the Department of
Commerce's 1975 data which shows costs of $10 billion, which include
Bureau of Census Operating and Maintenance costs which, however, might
be low by $3 billion.*
The Bureau of Census samples pollution control expenditures whereas
the Department of Commerce samples and then projects expenditures
to the entire industry. Both Commerce and Census survey pollution
control capital costs but only Census surveys 0§M costs. Based on
the ratio of Census capital costs ($3.4 billion) to Commerce capital
costs ($6.55 billion), the Census Of,M cost ($3.66 billion) would
increase $3.0 billion to $6.6 billion.
1-4
-------
Industry bears the initial weight of all the pollution control
costs. However, these costs can then be distributed in three ways, or
combinations thereof.
Industry may reduce its profits which, because of the tax
structure, results in the owners bearing approximately 50%
of the costs and government 50%
Industry may pass along the costs to the consumers of its
products who again may share the expense with government
because of the income tax structure
The government may bear still more of the costs by subsidizing
the industrial expenditures with programs that either reduce
the amount of the initial costs borne, or by reimbursing
the company through the tax structure for those costs.
This manual covers the latter instance in which government bears
some of the costs for pollution control, in particular. The first two
means of cost distribution also involve the government but they are
available for industrial expenditures of any type whether pollution control
or not.
EPA's Role in Informing Firms of Assistance Programs
EPA is not required to inform any company, impacted or not, of
pollution control financial assistance programs. EPA does not even have
the lead administrative role for any of the financial programs that will
1-5
-------
subsequently be described. Moreover, no single government agency has the
administrative role for all the programs. EPA's major role in financial
assistance programs is to certify to other agencies that the equipment
under consideration is necessary and/or adequate.
However, EPA, in acknowledging its concern for the companies
economically impacted by EPA regulations, has named an SBA program coordinator
(Sheldon Sacks, Small Business Section, Water Planning Division - WH-454,
Rm. 801 East Tower, 401 M Street, S.W., Washington, D.C. 20460; 202-755-6023).
He has responsibility for coordinating EPA's role with SBA programs, both
under water pollution control loan programs and general compliance loan
programs. A publication, Loans to Small Businesses Under the Federal Water
Pollution Control Act, is available from his office.
Another report entitled Choosing Optimum Financial Strategies -
Pollution Control Systems written by JACA Corp. is available upon
request from EPA's Environmental Research Information Center, Cincinnati,
Ohio 45268. The report performs net present value analyses for the federal
programs herein described except for Economic Development Administration
and Farmers Home Administration Loans.
Financial Program Description Format
Each financial program in the federal section will be described
by a standard format. The state program format will be somewhat abbreviated.
The use of such a format insures complete coverage of the important
descriptive elements of each program. The format also facilitates the
highlighting of differences and similarities in the financial programs.
The format elements are listed below, accompanied by a definition.
1-6
-------
Benefit of the Program
This quantifies, where possible, the user's cost reduction and
other benefits permitted by the financial program. The description does
not attempt to determine nationwide benefits, although national usage
figures are sometimes given for specific programs.
Eligible Program Users
This element describes who can legally use the program. In some
programs, costs or other economic factors preclude some otherwise eligible
companies from using the program. Such exclusions will be covered.
Eligible Pollution Control Programs
This element describes which pollution control programs, i.e., air,
water, solid waste, etc. are covered by the financial program.
Eligible Pollution Control Expenditures
In essence, this characteristic defines pollution control for each
of the above eligible pollution control programs. The eligibility of
process changes, the effect of by-product recovery and heat recovery are
defined according to their eligibility for the financial program. Iden-
tifiable waste treatment and end-of-line control equipment is clearly
eligible under all the financial programs herein described and is therefore
not mentioned in each description. The discussion of eligibility often
centers on equipment which controls pollution and at the same time enhances
a process or equipment which prevents pollutants from being generated.
1-7
-------
Operating and maintenance costs are not eligible for any of the financial
programs discussed herein. (Some argue that the ineligibility of these
expenses creates an improper bias to capital intensive pollution control
measures. It is not the intent of this manual, however, to enter such
discuss ions).
Availability of Funds
The funding limits, if any, of the pollution control financial
programs will be described.
Duration of Program
The time limitations, if any, of financial programs will be described.
Time limitations may refer to when the pollution control expenditures are
made, or for what age plant, or when the program funding expires.
Utilizing the Program
Most of the financial programs described herein must be applied
for by the recipient. (The one exception is industrial cost recovery).
Since there are many ways to gain access to the benefits of the financial
programs the description will be divided into four parts:
1. Certification of pollution control expenditures
2. Other documentation
3. Procedures
4. Costs
-------
1. Certification of Pollution Control Expenditures
Frequently, the agency that administers a financial program does
not have the technical expertise to analyze pollution control expenditures
for their adequacy to do the job,, necessity to meet regulations, or their
inclusion of ineligible equipment. Therefore, certification by the
regulatory agency is often required before an applicant can utilize the
financial program. Certification, in essence, determines that the expen-
diture is eligible for the financial program. Certification documentation
and procedures will be described in this part of the format.
2. Other Documentation
This element of the format lists all the documents and critical
information required by the agency that administers the financial program.
When available, sample forms will be included plus the name, addresses,
and phone numbers of key people or agencies.
3. Procedures
This description will include the sequence of steps to be followed
by the applicant in applying for the financial program. When possible,
copies of forms to be used for application will be included.
4. Costs
Any fees required to apply for financial programs will be described
1-9
-------
in this element. Occasions will also be described when the applicant
must also pay for such efforts as title searches, bond council, collateral
assessments and so forth. The manual will not, however, attempt to describe
the labor costs for the applicant to complete the application process.
Other Elements
This will cover such topics as accounting, and miscellaneous rules,
procedures or information regarding the financial program.
Legislative Reference
For those users of this manual who need more precise legal information,
this part of the format will provide the legal citations for the financial
program.
1-10
-------
II. FEDERAL FINANCIAL PROGRAMS FOR POLLUTION CONTROL
Federal financial programs for pollution control can be characterized
as diverse and fragmented. Most programs were created over a span of eleven
years from 1965 to 1976, though the Farmers Home Administration loans have
their origins in the 1930's before soil erosion control was called "non-
point source water pollution control" as it is today.
Because the laws creating the programs have arisen from different
Congressional committees and out of different objectives, there is no single
federal authority which has jurisdiction over all the programs, and no
attempt has been made to see that everyone's pollution control expenditures
are covered by at least one program.
Yet, many federal programs have emerged and they do touch many com-
panies and many types of expenditures. Seven such programs which cover
industrial expenditures will be covered in this section. They all provide
industry's pollution control expenditures with benefits not available to
other manufacturing equipment. The seven programs, along with the dates
after which pollution control was eligible., are:
Rapid Amortization (1969)
Industrial Development Bonds (1968)
Small Business Administration Direct Compliance (1972)
SBA loans for companies required to comply with such laws as the Wholesome
Meat Act and Occupational Safety and Health Act were passed earlier; 1972
was the first date when loans could be made for compliance with EPA programs.
II-l
-------
Small Business Administration Lease Guarantees (1976)
Economic Development Administration Programs (1965)
Farmers Home Administration and SBA Loans to farmers (1930's)
Industrial Cost Recovery Systems (1972).
-------
Rapid Amortization of Pollution Control Equipment
Rapid amortization is a method for more swiftly recovering the cost
of pollution control equipment through depreciation than what would other-
wise be allowed. It was established in 1969 when the investment tax credit
for all new equipment purchases was being repealed. In fact, one of the
reasons for granting pollution control equipment a special program was that
the general tax credit was being removed.
The repeal of the investment tax credit, therefore,
would have an undesirable effect on the efforts made
by private industry to combat pollution were not
another type of incentive to be made available.
Although the investment taxt credit was reinstituted in 1971, rapid
amortization was not terminated. The investment tax credit was not allowed,
however, for pollution control equipment on which rapid amortization was
to be the method of expensing the equipment cost. The effect of this was
to make rapid amortization unattractive from that point on except for
a relatively small number of situations.
The original termination date of January 1, 1975 was extended to
r-r
January 1, 1976J, without changing other provisions of rapid amortization.
However, changes were made by PL94-455, October 41, 1976 when Congress
General Explanation of the Tax Reform Act of 1969, H.R. 13270, 91st Congress
PL 91-172 prepared by the staff of The Joint Committee on Internal Revenue
Taxation, December 3, 1970, p.208.
3PL 93-625, January 31, 1975.
II-3
-------
both extended arid enhanced the rapid amortization of pollution control
equipment. These changes as well as past provisions of rapid amortization
will be included in the following discussion.
1. Benefits of Rapid Amortization
Prior to the Congressional changes of 1976, rapid amortization
was used in relatively few situations, and therefore, was of little bene-
fit to industry. The reason for its lack of used was the mutual exclusivi-
ty of rapid amortization and the more beneficial investment tax credit.
The value of the investment tax credit is largely attributable to its
being an absolute reduction in taxes rather than an acceleration of
deductions.
The period of rapid amortization is 60 months for the value associated
with the first fifteen years of useful life of the equipment. For example,
consider equipment with a 20 year useful life. The value for the first
fifteen years, i.e. three-fourths can be rapidly amortized. The remaining
one-fourth has to be depreciated by a traditional method; however, the
depreciation on the remainder begins in the first year, not the 16th.
The recent Congressional provision permits one-half the investment
tax credit (i.e., 5 percent)with rapid amortization. As a result rapid
amortization is more attractive to industry than heretofore though not
universally so. Using net present value analysis, it can be shown that
rapid amortization is attractive only at very high discount rates or when
the equipment would otherwise have a useful life greater than twelve years.
Figure 1 is a plot of sets of conditions that separate the attractiveness
II-4
-------
IN33U3d-31VUINn03SIO
o
o
fn
S in
K =>
O
o
$-,
Wi
01
vO
U
CO CO
B, o
O Ci M
m f.
2 S <
O 3 N
ii O 'i
H U, H
M Q O
O vD Q
S I^ 1-1
< CD &,
tI <^
K: c2
o «,
u. o
CO
PJ H >
5 < j
u s z
Oi O
WOn
U n, H
S5 tq M
W CS Q
W X B?
C-J-i
se
o
a
c:
<
3C
.. >
UJ O
o
H
+J
W
a
cfl
C
H
I
(U
O
H
O
H
to
H
>
H
Q
t/> X
r
o <
e ^
o a>
c +e
o p
3
o
CO
II-5
-------
of rapid amortization and the most accelerated traditional way of depre-
ciating equipment (double-declining balance in the first year taken with the
investment tax credit and sum-of-the-years digits for the remaining years
of useful life). As the solid line of the graph shows, at the generally high
discount rate of 15 percent, the useful life of the equipment must be approxi-
mately eleven and one-half years before rapid amortization is attractive
(seventeen years under former conditions as shown by the broken line). At a
10 percent discount rate, rapid amortization is attractive after 15 years.
The solid line separates the attractiveness of rapid amortization and tradi-
tional appreciation for current conditions as a result of the Tax Reform Act
of 1976. The broken line shows where that line of separation was under former
conditions.
2. Eligibile Program Users
Any company is eligible to use rapid amortization.
3. Eligible Pollution Control Programs
Air and water pollution programs are definitely eligible for rapid
amortization. Solid waste pollution, to the extent it is connected with
air or water pollution control, is also eligible. The statute allows
"depreciable property used to abate or control water or atmospheric pol-
lution or contamination by removing, altering, disposing, storing or
preventing the creation or emission of".
4. Eligible Pollution Control Expenditures
Expenditures eligible for rapid amortization must be made for a
II-6
-------
plant that was in operation prior to December 31, 1975. Therefore the
intent of rapid amortization is to assist existing plants.
The costs of a treatment facility that serves parts of a plant con-
s'tructed after 1975 as well as parts constructed prior to or during 1975
must be apportioned appropriately, for rapid amortization purposes. Like-
wise, costs must be apportioned for equipment which both controls pollu-
tion and performs another function.
The investment tax credit provision is for expenditures that occur
after December 31, 1976.
Process changes which include changes that avoid the creation or
emission of pollutants are now eligible for rapid amortization. The
eligibility of process changes is recent, i.e., January 1, 1976. Former-
ly, only end-of-line treatment techniques were acceptable.
A process change is eligible as long as it "does not significantly
[greater than 5 percent] increase the output or capacity, extend the useful
life, or reduce the total operating costs of such plant or other property"
or "alter the nature of the manufacturing or production process or facility".
Allowing process change equipment to be eligible appears expansive,
but the restrictions just quoted are significant enough to dampen the
effect of this change. The restrictions are in some ways more severe
than what is allowed by the IRS for industrial development bond financing.
Under IDBs in those instances when the process change did extend the useful
life of equipment, a fraction of the cost of the new equipment is eligible
for the benefit. The fraction is determined by taking the remaining use-
ful life of the old equipment and making a fraction by placing that over
the new useful life (or capacity) and applying the fraction to the new
equipment cost. In addition, a significant increase in capacity for IDBs
II-7
-------
means greater than 20 percent.
Not affected by the Tax Reform Act of 1976 was another limitation on
the amounts eligible for rapid amortization. The cost of equipment other-
wise eligible for rapid amortization must be reduced by the net value of
products recovered by the pollution control equipment and sold to others.
There is no reduction to the costs eligible for rapid amortization when the
by-product recovered is returned to the process.
Net value means the sales revenue from the product minus the expense of
selling and operating and maintenance expenses connected with the by-product
sale. Depreciation or amortization is not considered an eligible expense
to include when determining by-product recovery value.
The net value to be deducted from the cost that is rapidly amortized
consists of each year's net value for the useful life of the equipment.
The useful life is the shortest period authorized under Section 167 of the
Internal Revenue Code.
5. Availability of Funds
There is no limit to the use of rapid amortization.
6. Duration of Rapid Amortization
Rapid amortization is now a permanent provision of the tax code.
As explained earlier, the first legislation set a time limit of January 1, 1975
which was subsequently extended by additional legislation to January 1, 1976.
The legislation signed in October, 1976 made rapid amortization a permanent
II-8
-------
tax program for pollution control equipment.
7. Utilizing Rapid Amortization
The steps in applying for rapid amortization are few and straight-
forward in relation to other financial programs.
Certification. For a company to use rapid amortization for tax
purposes, it must obtain certification from the Environmental Protection
Agency (EPA). In turn, the EPA must have certification from the appropriate
State(unless EPA is the enforcer) that the facility is in conformity with
the State program or requirements for abatement. Copies of EPA and state
forms for certification are included herein as Appendix A.
Other Documentation. The applicant should determine what permits,
notifications, etc. are required from the appropriate state or federal
control agency. The State may not be able to certify the equipment to EPA
unless the applicant has done all that is necessary to satisfy other State
procedural requirements.
Procedures. The applicant or taxpayer can obtain rapid amortization
certification forms from EPA Regional offices. The state certification
form is part of the forms package. The applicant should submit the state
form to the state for completion and forwarding to EPA. The remainder of
the forms should then be completed by the applicant and submitted to EPA.
Upon EPA approval the taxpayer must attach a copy of the certified
application to its tax return.
II-9
-------
Costs. There are no costs charged by EPA for certification or any
other feature of rapid amortization.
8. Other
The additional first year's depreciation of 20% of the equipment
value or a maximum of $2,000 (20% x $10,000) is available with rapid
amortization under certain conditions. If the deduction for rapid amor-
tization begins in the tax year following installation of the equipment
(instead of beginning the next month), then the additional first year
depreciation can also be taken.
Rapid amortization can be used for pollution control equipment re-
gardless of the depreciation methods used for other plant equipment and
property.
An election can be made by the taxpayer to discontinue rapid amor-
tization. At any time a copy of the original EPA certification should be
filed with the proper notification to the IRS. Once terminated, the tax-
payer can use any other depreciation method, but cannot return to rapid
amortization.
9. Legislative Reference
Section 169 of the Internal Revenue Code is the regulation governing
rapid amortization of pollution control facilities.
11-10
-------
Section B
Industrial Development Bonds (IDE's)
Industrial development bonds have been used for over forty years by
state, local governments, and quasi-governmental authorities (collectively
called municipalities) to finance industrial projects that serve a public
purpose such as increased employment. In 1968, the definition of public
purpose was expanded by Congress to include industrial pollution control
equipment.
From a modest beginning of $88 million in pollution control IDB
financing in 1971, the amount had increased to $2.05 billion in 1976 (Table
IV). In 1976 such a level of financing represented 6.1% of all municipal
bonds issued and 27.9% of all pollution control capital expenditures.
The above figures on pollution control IDB financing represent muni-
cipal issues publicly sold to institutional and individual investors. Addi-
tionally, IDBs are issued on a private basis to institutional buyers such as
commercial banks and insurance companies. The dollar volumes of IDBs sold
privately are not recorded centrally;therefore the numbers above are under-
stated by what many consider to be significant amounts.
IDBs, pollution control or otherwise, are long-term securities which are
issued in a municipality's name for the benefit of a particular company pro-
ject. Typically, it is the revenue from the project which provides interest
and principal repayments to the municipality which in turn pays the bondholders.
Because no municipal revenues are imrolved, and because the municipality doesn't
guarantee payment upon default, the bonds are often referred to as revenue bonds.
(If the municipality itself is responsible for their bonds, they are called
general obligation bonds.)
The figure for pollution control capital expenditures, $7.34 billion was
based on the Department of Commerce's 1976 estimates.
11-11
-------
\O LO
r-- o
CTl
rH CM
&e-
m
3
ex
II
CJ
1 1
Z
3
^
g
o
H
R
CJ
Z
rH
CJ
z
<;
z
i i
P-.
EQ
Q
1-1
_3
O
pi
2;
0
CJ
Z
O
rH
£-.
I-J
_3
o
CX
O,
O
cn
z
o
CO
COMPARI
PJ
C£j
3
H
i i
Q
Z
04
CX
X
P-l
>_I
<
E-
HH
a,
<
CJ
j
o
«;
C i
Z
O
CJ
z
o
rH
r
3
HH
p
1-4
<
H
O
C,
p
-""
Q
Z
<
CJ
Z
t 1
CJ
p
Z
1 i
UH
Q
Z
o
ca
LO to
r-. I-H
CTi
-( CM
&e-
^J- t^^
r-- VD
CTl
i-H rH
fee-
to 00
r-. t-»
CTi
i I i 1
6O-
CM j r-^
r-- LO
CTl
rH O
feO-
rH CTl
r- o
C7l
rH O
vy
i i
*. *
Vl
CO
r~~t
f (
i 1
O
M
p
c
o
o
c
o
H
p
rl
1 (
rH
o
rx
VO rH
to \o
to
CM tO
CTI r--
CM
CO to
CM r-.
CM
LO CTl
CM t~-
CN
rH LO
tO CM
CM
xf ^f
H-
CM
f ^
CM
C/i
T3
0
ca
i-H (/)
<& Pi CQ
P-i O .Ci
H -H rH
0 P
iH 3 rH
C rH 0
3 I-H fH
SOP
ex c
rH O
cd o\=> CJ
P
O
t '
rH
P Vd
0 K
rH rH 5
a> P «
^> S 5
5 < -
T) rH
§ S K
<=3 -< E:
^ CTI
X V) ^
rH -H 1
A: P r;
O rt "^
o P cr,
S 00 ^
\ f % '"T^
^ CM ^2-
^ ~ '
o
rtl H
11-12
-------
Tax-free IDBs used for job creation purposes (i.e. industrial develop-
ment) can only be issued for up to $1 million per issue, or $5 million per
project. Tax-free pollution control IDBs have no such dollar limitations.
The $1 million limitation for job-related IDBs is for any and every project
of a company. A company can obtain up to $5 million if project capital expen-
ditures within plus or minus three years of the IDE financing do not exceed
$5 million.
Pollution control IDBs are used by the very credit-worthy corporations,
which are typically large corporations. The smaller credit-worthy corporations
tend to use privately placed pollution control IDBs. Many small credit-worthy
companies do not have access to IDBs unless their state has a special IDE program.
The benefit of IDBs are long-term financing and interest costs that are
lower than what are generally available for companies. Since interest on munici-
pal bonds is tax free to the bondholders, the interest rates in the IDE market are
lower, usually by 2-3 points, than equivalent corporate bonds.
1. Benefits of IDBs
The benefits of pollution control IDBs can be demonstrated by two
financial tools, as shown in the following example analyzing a $100,000 pollution
control investment. A comparison of net present value (NPV) and short-term
cash flow (first 3 years after project) will be made for a tax-free and taxable
long-term (18 years) bond.
11-13
-------
Short Term
NPV Cash Flow
6%, 18 year IDE -$32,510 $+8,391
8%, 18 year -$39,343 +5,770
taxable bond
The NPV of the IDB is 82.6% that of the taxable bond, and the cash
flow of the IDB is 1.46 times that of the taxable bond. (The cash flow
is still positive after three years because of the investment tax credit
and depreciation).
An additional benefit of IDBs to corporations is flexibility in
principal repayments schedules. Many IDB issues for larger corporations
have deferred principal payments whereby only interest is paid for the
first five to eight years and then principal payments begin yearly, perhaps
with the largest principal payment in the last year.
Another benefit of pollution control IDBs to corporations is the
tax exemption for property whose title is in the name of the municipality.
An additional benefit of pollution control IDBs is that some proceeds
of the issue can be used for other than pollution control purposes. The
tax regulations require that substantially all of the proceeds of the bond
issue must be used for pollution control. Substantially means 90 percent.
Assuming the company can accurately estimate their pollution control needs,
they can issue the bonds for 10 percent more than they need and use the ex-
cess for other purposes.
The above benefits only apply to those expenditures which the In-
ternal Revenue Service defines as pollution control. In mid-1975, the In-
ternal Revenue Service promulgated revised regulations which define pollu-
tion control equipment for industrial development bond financing and which
11-14
-------
allocate its costs where the equipment alsoperforms a function other than
pollution control. Wherever allocation occurs, the benefits accrue only to
the pollution control portion. The allocation provision is explained below
in element 4.
2. Eligible Program Users
The tax laws which permit tax-free IDBs for pollution control do
not exclude any companies from using IDBs. The federal law, however, does
not automatically make the program available for all companies. First, in-
dividual states must pass legislation, in accordance with IRS Section 1.103,
declaring that pollution control is for a public purpose. Such a step is
necessary because the tax-free bond market can only be used for projects
which are declared to serve a public purpose. To date nearly all states
have taken the declaratory step for pollution control projects. Washington
State has not taken such a step.
Although all companies are entitled to use IDBs, the practical use
of the market is limited to large and/or credit-worthy firms. A second
limitation for eligible users is that the administrative costs of obtaining
IDBs effectively create a minimum amount that is practical for the use of
IDBs.
The vast majority of IDBs are offered for sale on the public bond
market. Therefore, the name and reputation of a company is important for
attracting potential investors. Large companies generally have the most
well-known names and reputations. Along with the reputation, potential in-
vestors examine the credit-worthiness of the company from their own analysis,
or rely upon a rating from one of the bond-rating agencies.
11-15
-------
Smaller but nevertheless credit-worthy companies also have some
access to IDBs. These transactions of IDBs are usually private placements
because they are sold privately by the company to one or more banks or in-
surance companies without going through a public market. Private placement
has the advantage of lower administrative costs.
Publicly placed IDBs involve large pollution control expenditures
because the interest expense saved by using an IDE must be significant
enough to be greater than the administrative costs of IDBs, such as bond
council and printing costs. Of the 720 publicly placed bond issues from
1971 through 1976, only 6 (or l%)were $500,000 or less, and 33 (or 5%) were
$1,000,000 or less. The dollar average publicly placed pollution control
issue for the last three years has been:
1974 $14,583,982
1975 $11,057,689
1976 $12,238,770
Privately placed IDB issues are in substantially smaller dollar
amounts. In some states the amounts can be as small as $25,000 - $50,000
though they are typically greater than $100,000. The lower ceiling for
private placements is often a function of the size of the fee charged by
the municipality for approving an IDB.
3. Eligible Pollution Control Programs
Air, water, and solid waste pollution control expenditures are eli-
gible for IDBs. Occupational Safety and Health expenditures are not. The
definition of air pollution includes radioactive materials control.
11-16
-------
4. Eligible Pollution Control Expenditures
IDE financing can be used for end-of-line pollution control equip-
ment and for process changes which control pollution, to the extent that
they do not serve other purposes. Regulations pertinent to eligible expend-
itures are listed below, several followed by examples:
"The property must in whole, or in part, abate or control
water or atmospheric pollution or contamination by remov-
ing, altering, disposing or storing pollutants, contaminants,
waste or heat." The term pollutant only applies to materials
or heat discharges which definitely result in water or atmos-
pheric contamination. This definition excludes "the release
of materials or heat which would endanger the employees. . .
in which such property is used," as determined, for example,
under the OSHA program.
The property must be "of a character subject to allowance for
depreciation ... or land."
"The jurisdictional agency must certify that the facility, as
designed, is in furtherance of the purpose of abating or con-
trolling pollutants, or the facility will meet or exceed the
appropriate regulations in effect at the time of issuance."
Property does not qualify if it is used to avoid the creation
of pollutants. For example, the installation of a new boiler
which reduces pollution by more efficient combustion than the
replaced boiler does not qualify. Likewise, equipment that re-
moves potentially polluting sulfur from fuel does not qualify.
However, equipment which handles or treats the removed sulfur
does qualify.
11-17
-------
Property does not qualify if it processes material or heat
that was a pollutant, but is not upon reaching the process
in question. The property must be "a unit which is discrete
and which performs . . . one or more of the (pollution control)
functions. . . and which cannot be further reduced in size
without losing one of such characteristics." For example,
consider pollutants converted in a first step to a nonpollutant
chemical which is subsequently processed to make it saleable.
The equipment of the first step qualifies; equipment in the
subsequent steps does not qualify. The equipment in the first
step is the smallest unit of property which functions to control
pollution. In addition, by the time the material reaches sub-
sequent steps it is no longer a pollutant.
Property also does not qualify if the polluting materials were
customarily controlled for other reasons. For example, a water
system which discharges heat from cooling a turbine does not
qualify since turbines require cooling to operate at peak effic-
iencies.
In addition to the above tests, an exempt issue requires that 90
percent or more of the proceeds must be used for pollution control equip-
ment. Therefore, up to 111 percent of the pollution control costs, if
exactly known, may be borrowed.
The second major component of the regulations concerns the allocation of
property costs which control pollution and those which serve a purpose other than
the control of pollution, such as a process change. Allocations are necessary
since it is only the cost of the pollution control portion which qualifies
11-18
-------
for the financing. The following ratio should be applied to the property
cost to determine what costs do not qualify:
Y
C + E
where Y = present value of estimated economic benefits to be realized over
the life of the equipment, such as "gross income or cost savings
resulting from any increase in productivity or capacity, produc-
tion efficiencies, the production of a byproduct, the extension
of the useful life of other property. . . (and) savings resulting
from the use, reuse, or recycling of items recovered."
C = present value of payments (excluding interest and minus salvage
value)for acquiring the property, i.e., capital costs.
E = present value of all expenses, including interest, incurred during
the operation of property.
Present values as an IRS rule are computed using a 12-1/2 percent discount rate.
5. Avai1abi1ity of Funds
For those eligible to use IDBs and who have the credit status and
size expenditures generally required, IDBs are generally available. The
federal statutes for IDBs do not set any budgetary or time limits. However,
a possible source of concern regarding availability is in the IDE bond buy-
ing market. In this regard, two observations are pertinent:
Some normal buyers of IDBs, such as, commercial banks and
insurance companies have limits on the extent of tax-exempt
income they can receive
11-19
-------
Criticism that IDBs drive up the cost of other municipal
borrowing could bring future legislation.
The implication of the first statement on IDB availability is that
a company may on occasion not be able to use their primary bank as an IDB
financing source. The company may then have to approach other banks per-
haps not as familiar with a company's financial position. The implication
of the second statement is not real at this time, in that it is only a
threat that Congress could take away the IDB privilege for corporate pollu-
tion control expenditures. A report by the Twentieth Century Fund Task
Force on the Municipal Bond Market concluded that pollution control IDBs
have increased municipal borrowing costs by 10-20 basis points. This in-
crease for the entire bond market means municipalities are paying an addi-
tional $30-60 million in interest costs on other more traditional uses of
bonds (for schools, sewers, parks, etc.).
6. Duration of IDBs
There are no time limits by which IDBs have to be issued before
benefit expires. However, as just indicated, pressures could develop in
the future to eliminate the tax-free privilege for corporate pollution con-
trol expenditures, because of the effect of IDBs on municipal borrowing
costs.
7. Utilizing IDBs
The steps that a corporation takes in obtaining IDBs are several,
many of which are quite complex. The costs of these steps can also be
11-20
-------
substantial, as witnessed by the statistics given earlier concerning mini-
mum size issues.
A type of certification is required for the bond buyers of pollution
control IDBs. In addition, an investment banker must be obtained to sell
publicly placed IDBs. An agreement also has to be established with the
municipality for the bond issuance. Frequently, the municipality will re-
quire certification from the appropriate control agency before an agreement
is written with the company.
Certification. A pollution control IDE must be certified as being
for pollution control equipment, eligible for tax-free financing. Independ-
ent bond councils provide such certifications. Internal Revenue Service
regulations specify that:
property is a pollution control facility if...either
(A) a Federal, State or local agency exercising juris-
diction has certified that the facility, as designed,
is in furtherance of the purpose of abating or con-
trolling atmospheric pollutants or contaminants, or
water pollution as the case may be, or (B) the facil-
ity is designed to meet or exceed applicable Federal,
State or local requirements for the control of atmos-
pheric contaminants, or water pollution, as the case
may be, in effect at the time the obligations, the
proceeds of which are to be used to provide such fac-
ilities, are issued.
Certification is in the form of a statement to the bondholders that
their interest income will be tax-free. This statement is usually made by
a law firm, serving as the bond council. The bond council can make this
statement with or without obtaining a specific IRS ruling on the issue. To
make a statement without a ruling requires that bond council is assured,
11-21
-------
from its knowledge of all applicable regulations, that the interest income
is tax-free. Should this not be the case, after the issue is sold, the
corporation is responsible for compensating bondholders for the taxes paid.
For the majority of pollution control IDBs, bond council obtains
a ruling from IRS. This is especially appropriate when process changes
are part of the pollution control plan or when some economic benefits
(perhaps by-product recovery) occur in the project. As explained earlier,
complicated formulae exist for apportioning the cost of equipment for IDE
purposes where the equipment serves a purpose other than pollution control.
Certification is required for issues either publicly or privately placed.
Other documents. It is common for a municipality to require that
an agreement, referred to as a bond resolution, be adopted between it and
the benefiting company. The nature of this agreement is to specify the
amounts involved, the purposes, approval for issue by the municipality,
the liabilities and obligations of each party, etc. Bond resolutions are
required for publicly or privately placed issues.
One of the key aspects of the bond resolution is the type of fin-
ancial transaction that exists between the company and the municipal au-
thority.
The interest and principal repayment schedule utilized by the bor-
rower is often similar to many bond indentures. That is, equal interest
payments are paid each year, but the borrower pays different amounts of
principal into a type of sinking fund during the life of the financing. The
sinking fund plus earned interest is used as the repayment source at the end
of the term of the financing. As is typical in most situations, there is
a lien on the property being financed and/or a guarantee by the borrower.
11-22
-------
At the end of the financing period, the borrower purchases the facility
from the authority at nominal consideration, which must be less than fair
market value. The borrower is treated as the owner for tax purposes during
the financing period, even though legal title is in the authority. The
borrower can take depreciation and investment tax credits.
It is also possible for the relationship between the governmental
authority and the industry to be structured as an ordinary financing lease,
with lease payments deducted by the business as rental payments. In this
case, the lessee does not have the privilege of taking depreciation and
the investment tax credit. The payments would be even over the lease life.
The authority retains title at the end of the financing. This relationship
does not occur often because of difficulty in meeting true lease tests,
which require that a certain percentage of value remain at the end of the
lease and that the equipment be capable of being sold to someone else.
Another possibility is to establish the relationship as an install-
ment sale with title going to the buyer at the end of the installment period.
This system would have equal payments and allow the purchaser to take depre-
ciation and the investment tax credit.
The last method is for the government agency to issue a bond, the
proceeds of which are reloaned to several companies. Each company negoti-
ates its own terms and signs % loan agreement or note. The borrower is en-
titled to depreciation and the investment tax credit.
Procedures. Step-by-step procedures do not exist for obtaining
IDBs. Hoivever, certain steps must be performed before others. Certification
of equipment by the appropriate pollution control agency will be a likely
step before the bond council's statement can be made or before a bond
11-23
-------
resolution could be established with the municipality. While these steps
are taking place, the company may wish to determine whether they will under-
take a public or private issue. A private issue with a bank, for example,
has the disadvantage of being for a shorter period than that that is likely
under a public issue. On the other hand, it has an advantage for a company
of reserving use of the public market for equity issues, perhaps of larger
amounts.
Costs. Earlier it was mentioned that the total costs included in pub-
licly placed IDBs were large enough to require expenditures typically
greater than $500,000. It is at this level and above that the interest
savings are greater than the administrative costs. The expenditures amount
is typically less for privately placed issues.
The categories of costs encountered are as follows:
legal costs of bond resolutions
legal costs of bond council
certification costs
legal and administrative costs for developing a prospectus/
official statement for a public ifcsue
bond printing costs for a public issue
« sales costs for a public issue.
8. Legislative Reference
All federal regulations pertaining to pollution control IDBs are
contained in IRS regulations, Section 103(c). Each of the 49 states that
11-24
-------
allow pollution control IDBs has its own regulations with which a company
needs to be familar. In addition, the municipality with which a company
is working likely has another set of applicable regulations.
11-25
-------
Section C
SMALL BUSINESS ADMINISTRATION DIRECT COMPLIANCE LOANS
The Small Business Administration (SBA) has been granted specific
lending authority by Congress for making pollution control loans to eligi-
ble small businesses. These loans will be referred to here as compliance
loans. Qualifying under such loans are air, water and solid waste programs
in addition to OSHA, Mine Safety and wholesome food programs (i.e. eggs,
meat and dairy). Process changes and end-of-line controls are eligible
for these loans. Eligible companies must meet SBA's small business size
limit requirements and must be likely to suffer substantial economic in-
jury from compliance without such assistance.
The special characteristics of SBA's compliance loan program are
that 1) the funds come from SBA's disaster loan program, 2) more direct
loans are available, and 3) the loans can be for longer terms than other
SBA loans. These characteristics must be clearly understood because it
is also possible that companies could get pollution control financing
under the less favorable traditional programs of SBA.
SBA has always provided loans to businesses if such loans were
not available through normal banking channels and if the applicant met
SBA business size and risk requirements. Such funds are provided in three
ways: by the SBA guaranteeing a portion up to 90 percent of a bank loan;
by participation, in which case the SBA provides a part of the funds and the
rest is provided by the bank; and by direct loans, in which case the SBA
provides funds on a direct loan basis. All of these so-called regular
business loans have typical repayment periods of up to 15 years. Direct
loans have considerably lower rates than the participation rate or the
guaranteed rate; however, such direct loans are frequently not available.
11-27
-------
Thus the advantages of the special compliance loans are availability
of mpre direct loans, the lower rate of direct loans, and their longer term
(up to 30 years).
The authority for SBA to make air, water and solid waste pollution
loans was provided by Congress in two steps.
Water Pollution Control Loans. The 1972 amendments to the Federal
Water Pollution Control Act (FWPCA) legislated that $800 million to be made
available under SBA to small businesses for water pollution control capital
expenditures providing the company is substantially injured. The program
has been operating since August 1974. An important part of the law that it
is necessary for an applicant to obtain a certification from the appropriate
regional office of EPA stating that the equipment is "necessary and adequate"
to meet FWPCA regulations.
A Company qualifies for SBA water pollution control loans if it is a
"small business concern . . . affecting additions to or alterations in the equip-
ment, facilities (including the construction of pretreatment facilities and
interceptor sewers) or methods of operation of such concern to meet water
pollution control requirement ... if such concern is likely to suffer
substantial economic injury without assistance."
Compliance Loans for Other Regulations. In January 1974, the President
approved legislation permitting SBA to make loans to any small business concern
required to "meet requirements imposed on such a concern pursuant to any
Federal law," or any state law enacted in conformity with the federal law.
This legislation unified several earlier enactments (except for water pollution
control) which had established specific loan programs for each regulatory
11-28
-------
program. Under the new legislation, SBA can now provide a loan to any
eligible company for compliance to any federally-imposed standards (except
for water pollution control) which require alterations in its plant, facilities,
or methods of operation.
As to the volume of compliance loans already granted, the following
statistics were provided by SBA through December 31, 1976.
Numbers Total Amount Average Amount
Air Pollution Control Loans 65 $11.6 million $178,500
Water Pollution Control Loans 51 13.7 million 268,600
It is important for companies to know that SBA does not advertise
or promote compliance loans. In fact, EPA has received more certification
requests for SBA loans from businesses and their Congressmen than it has
from SBA. In addition, many bankers are unaware of these special compliance
loans, and instances have been known where SBA loan officers in district
offices did not know of these programs either. Therefore, potential
borrowers should not be deterred in their search for the proper SBA person
in an office in charge of these loans.
EPA initially publicized the existence of SBA loans through press
releases. EPA Washington has requested the regional offices to mail notices
of loan programs to all NPDES applicants, but Region III has not done so,
primarily because of staff limitations that preclude prescreening the
recipients for SBA size qualifications.
11-29
-------
In Maryland, seminars were held, with SBA's help, to publicize the
water loan programs (though not for air loans). In Pennsylvania, the
state Commerce Department is alerted about any company in violation of environmen-
tal regulations; the department then sends the company a packet of information
about financial programs, including SBA loans. There are apparently no
publicity efforts undertaken in the other states of the Region.
1. Benefits of SBA Compliance Loans
The benefits to a company of direct SBA compliance loans are long
repayment terms and low interest rates. Such benefits are in comparison
to bank loans or in comparison to traditional SBA guaranteed loans.
Table V illustrates the benefits of SBA direct compliance loans
measured by net present value (NPV) and short term cash flow impacts.
The illustration covers a $100,000 pollution control expenditure. The
NPV calculations included a ten year useful life, double-declining de-
preciation, 10 percent investment tax credit and additional first year
depreciation. Short term cash flow impacts cover the first three years
useful life. The NPV of the 7% 10 year SBA direct loan is 80.3% that of
the 12% 10 year bank loan, and 83.9% that of the 11% 10 year SBA guaranteed
loan. The short term cash flow benefits are even greater, $40.9% and
46.4% respectively.
11-30
-------
Table V
SMALL BUSINESS ADMINISTRATION COMPLIANCE LOANS
Loan Type
7%, 10 year, SBA
Direct Loan
11%, 10 year, SBA
Indirect Loan
12%, 10 year
Bank Loan
NPV
% of bank
Value loan amount
-$47,460 80.3°
-$56,545 95.7%
Short Term Cash Flow
-59,098
100%
Value
+$4,341
+9,346
+10,601
% of bank
Loan amount
40.9%
88.23
100.03
2. Eligibile Program Users
Three elements are necessary for companies to be eligible for SBA
compliance loans: 1) the company must be conforming with pollution control
requirements that are pursuant to a federal law, 2) the company must meet
SBA's size limit requirements, and 3) the company must be substantially
injured. Further details of each element are explained below.
Concerning the first, SBA has determined that compliance with state
or local regulations which were not required by federal regulations or laws
is not eligible for SBA's compliance loans. Thus, a company must be doing
something that can be directly traced to requirements of, for example, the
Clean Air Act of 1970 or the Federal Water Pollution Control Act amendments
of 1972.
Regarding size, SBA has specified limits for each Standard Industrial
11-31
-------
Classification (SIC). The limits can be obtained from all SBA offices
(Appendix C). The limits are expressed in number of employees for manu-
facturers and mining, and in dollar volume of sales for wholesale or re-
tail firms. The limits are obtained from an average of a pay period in
each of the previous four calendar quarters. Thus, companies with seasonally
high employments are not penalized by their peak needs for employees.
SBA also has a procedure for determining number of employees when
a company does business in more than one SIC and when each SIC has been
assigned a different employee size limit. The percentage of total business
in each SIC is multiplied by the employee size limit of its correspond-
ing SIC. The sum of the results for each SIC are then added to find a size
limit to which a company's actual level is compared.
The size limitations should definitely be checked because many
companies are surprised to discover how large a ''small" business is.
The showing of substantial injury (the third element of eligibility)
is demonstrated by the company's inability to obtain conventional financing.
Inability can mean the lack of sufficient collateral, interest rates that
would cause losses for the company,or too short a repayment term. A letter
of financing refusal or a letter of the best financing offer from a bank
is enough to demonstrate inability to obtain financing.
3. Eligibile Pollution Control Programs
The SBA loan authority extends to all compliance programs which are
created pursuant to federal law. A small business that is complying to
a state law which was not required by federal law would not be eligible
11-32
-------
for loan funds from SBA's compliance loan program. The small business
may, however, be eligible for a regular small business loan. (It should
be kept in mind that such a loan will have shorter repayment periods and
may not be as readily available as compliance loans).
An example of state laws passed where there is not corresponding
federal law is noise pollution. The federal government has some noise con-
trol regulations for airplanes, motorcycles and trucks and new equipment, such
as construction equipment. The federal government does not have a program for
controlling what is commonly referred to as community noise, or noise across
property lines from existing sources. Should a community control such noise,
as a few communities have, complying small businesses would not be eligible
for SBA's compliance loans.
Another example of expenditures pursuant to state law requirements
which are not eligible for SBA financing occurs when the laws of aggressive
states affected companies prior to the enactment of the major federal bills
such as:
Clean Air Act of 1970
Federal Water Pollution Control Act of 1972
Occupational Safety and Health Act of 1970
Wholesome Meat Act of 1967
Consumer Product Safety Act of 1972
Emergency Petroleum Act of 1973
Even if the expenditures were pursuant to earlier federal laws,
they are not eligible because SBA has specified particular amendments
to air and water acts, thus eliminating projects from eligibility if
they were in compliance with regulations that came from earlier laws.
11-33
-------
4. Eligible Pollution Control Expenditures
Eligible compliance expenditures for air compliance programs must
have occurred after January 1974 and for water pollution control after
October 1972.
Process changes and end-of-line equipment that reduces or controls
pollution are both eligible for SBA compliance loans. The wording of
the blanket law which covers all compliance programs, other than water
pollution control, specifies that it is "to assist any small business con-
cern in effecting additions to or alterations in its plant, facilities,
or methods of operation to meet requirements". Similar working is found
in the Federal Water Pollution Control Act of 1972 for SBA water pollution
control loans.
SBA is supposed to adjust loan amounts downward for pollution control
expenditures that have economic benefits such as by-product recovery or
that expand the useful life or capacity of the plant. However, the SBA does
not appear to strictly follow this rule.
SBA can also provide compliance loans for working capital replen-
ishment. This occurs when funds were spent by the company for pollution
control and not previously financed in any way.
Companies that are creditworthy and have expenditure requirements
greater than $250,000 may be channeled by SBA into the lease guarantee
program (see Section D below).
5. Availability of Funds
The funds for all compliance loans are supplied from the SBA disaster
11-34
-------
loan pool which is separate from the source that supplies regular small
business loans. The disaster loan pool funds more than compliance loans;
therefore, compliance projects compete for funds with natural and economic
disasters.
The fiscal 1977 disaster loan budget was $50 million.
In theory, the funds for water pollution control are supposed to be
separate from and considerably larger than the disaster funds for all other
compliance loans. The theoretical basis for separate funds lies in the 1972
amendments to the Federal Water Pollution Control Act. Those amendments
authorized $800 million for water pollution small business loans. No legis-
lation for the other compliance loans established such a funding mechanism.
This funding situation was one of the reasons why water pollution control loans
could not be consolidated with all other compliance programs and covered under
one section of SBA law. However, although the $800 million was authorized,
it has yet to be appropriated for SBA's use, and therefore water pollution
loans actually come out of disaster loan funds.
The answer to the question of adequate availability of loan funds
for complying small businesses is difficult to determine for three reasons:
1) the competition of compliance with major disasters; 2) the fact that the
$800 million, although authorized for water pollution control, is not actually
appropriated for SBA to use; and 3) the way in which the disaster loan funds
are replenished from time to time. Regardless of these indicators, however,
there is inadequate data on the demand side of the supply-demand equation for
SBA compliance loans. This makes it difficult to determine whether or not
the loan supply funds, although restricted, are nevertheless adequate.
11-35
-------
6. Duration of Program
The SBA legislation for compliance loans contains no time restric-
tions for such loans. Practical duration seems to be most influenced
by fund availability and loan demand. The disaster loan pool, from which
water pollution and all other compliance loans are made, is periodically
replenished by loan repayments, Congressional legislation and Office of
Management and Budget control. Loan demand is very unpredictable. The
interaction of two such unpredictable sides of the demand-supply equation
make future duration of the compliance loan program indeterminate.
7. Utilizing SBA Compliance Loans
Obtaining an SBA loan is typically a complex and time consuming
activity. Several parties can be part of an SBA loan transaction, namely,
a bank, a pollution control agency, other regulatory agencies, and SBA.
The procedures for SBA compliance loans take longer than those of SBA
regular business loans since the latter do not involve regulatory agency
approvals.
The general steps for obtaining SBA compliance loans begin with a
bank turndown of a financing request.
Secondly, a company should establish with SBA that it is a small
business and discuss in general terms the compliance loan program. Third,
the company will be required to obtain certification from the appropriate
regulatory agency(ies). Fourth, the company completes its application
for SBA.
11-36
-------
Certification^ The SBA laws are very specific as to the requirement
that EPA certifies water pollution control loans. The certification by
EPA must say that the equipment is necessary and adequate. Certification
can be provided' by EPA or the state, if it has been granted certification
authority by EPA.
Appendix B contains EPA's certification regulations. Instructions
for EPA's certification are contained in a brochure called "Loans To Small
Businesses Under The Federal Water Pollution Control Act (92-500)'! This
is available from Sheldon Sacks, Small Business Section, Water Planning
Division-WH-454 Room 801 East Tower, 401 M Street, Washington, DC 20460
(202)755-6023.
Certification for air pollution control loans and other compliance
loans is not specified by the regulation. In practice,however, SBA does
require certification from the appropriate regulatory agency for these loans
as will be discussed in the general certification chapter.
SBA can also require that another regulatory agency certify or comment
on the control system contemplated under the loan. Consider, for example,
a significant change in process to control pollution, such as an electric
induction furnace replacing a cupola. SBA can ask that OSHA (Department
of Labor) comment upon the worker safety of the contemplated compliance
program.
SBA can also take measures to determine if the applicant is in com-
pliance with all regulations whether or not they are related to the process
subject to the application. SBA does this to anticipate additional expen-
diture needs of the company in assessing risk.
Most states, or EPA, will only provide certification if the company
11-37
-------
is conforming to agency procedural requirements concerning permits to
construct or operate. Several states, regardless of financing, require
a company to obtain a permit to construct a pollution control device be-
fore it can be bought and installed. The state agency may therefore not
issue certification until the company also files the necessary papers for
a permit to construct.
Other Documents. A company must show substantial injury to SBA
by demonstrating that commercial financing is not available. The typical
demonstration is a letter from the company's bank refusing the applicant's
loan request. In more densely populated cities and regions, the applicant
may have to furnish two such turndown letters. If SBA suspects that an
applicant xvith a turndown letter has a good credit position, then SBA can
go to another bank in the applicant's area and determine if they will lend
money to the applicant.
The SBA loan application (Appendix D) can be quite involved for
some companies to complete. It asks for the following, where appropriate:
collateral offered as loan security
additional guarantees of guarantors
statements of personal history
pro-forma financial statements
financial statements for past 3 years
description and history of business debt schedules
plans, specifications and costs of pollution control equipment.
11-38
-------
Procedures. As indicated earlier the bank's turndown of a pollution
control loan request is the first step in obtaining an SBA loan. It is
then suggested that the company establishes contact with an SBA officer
to discuss intent for a loan. (Addresses of branch and district offices
can be found in Appendix C). The loan officer should then determine whether
or not the potential applicant is definitely a small business and
explain the SBA appliction. The loan officer can also inform an applicant
as to which SBA pollution control financing program is better for the ap-
plicant, i.e., the direct compliance loan or the lease guarantee(to be dis-
cussed in the next section).
Upon a positive determination of small business eligibility,the
applicant should obtain the necessary certification letters from the ap-
propriate regulatory agency(ies). While waiting for certification, the
company should complete the application. When certification is obtained,
the SBA application can be submitted.
Loans greater than $500,000 must be approved by SBA Washington
headquarters. This requirement adds time to the overall approval process.
Certification from EPA, or states, for water pollution loans is
required within 45 days of application. It can be expected that air pol-
lution certification can occur within the same time period. SBA processing
takes one to two months generally, but could take longer, depending upon
the complexity of the loan and the completeness of the application. Ap-
proved loans that cannot be funded immediately because of budget limita-
tions are carried into the next quarter when SBA funds are replenished.
11-39
-------
Costs. No SBA fee structure exists for direct loans and no cer-
tification costs are assessed by the regulatory agencies. Out-of-pocket
costs are incurred by the applicant to fulfill such requirements as an
assessment for collateral evaluation. Some companies may also need the
services of their accountant to complete the application.
One characteristics that adds considerably to loan processing time
by SBA is additional requests by them for information or insufficient
application information submitted by the company. Since SBA is very thorough,
an applicant should discuss at the first meeting exactly what SBA wants
in the application. Such a step reduces lost time and therefore costs
for the potential borrower.
8. Other - Multiple Loans
Applications for loans covering more than one pollution control
requirement can be made as one package. The applicant must have certi-
fication for each requirement. SBA's loan processing time for a multiple
loan does not increase significantly.
9. Legislative Reference
All legal matters pertaining to SBA compliance loans are found in
Sections 7(a) (5) and 7(g) of the Small Business Act.
11-40
-------
Section D
Small Business Administration Lease Guarantees
In June, 1976 Congress provided the Small Business Administration
(SBA) with a significantly different mechanism than just described for
assisting small business in controlling pollution. While the former pro-
gram covers loans, this new mechanism covers leases under qualified con-
tracts. The area of pollution control financing in which leases occur
most is in Industrial Development Bonds (IDBs). Therefore, this program
is expected to take the form of SBA guarantees of small business payments
to municipalities that issue IDBs for industrial pollution control projects.
The likelihood is that each IDB issued will cover the expenditures
of several small businesses. As has been shown in section B, IDBs must
be of such a magnitude that the interest savings to the company exceeds
the administrative, sales and legal expenses of obtaining IDBs. This level
is generally $500,000 - $1,000,000. It may take several small businesses'
pollution control expenditures to reach those levels. Even if small busi-
nesses singularly have expenditures that exceed the minimum level, they
can still benefit from this program. Their savings of interest over IDB
costs will be greater if they can join a group in the financing. Secondly,
if the company's name and credit reputation is not widely known they would
not be able to issue an IDB unless a guarantor of'sufficient credit reputa-
tion and name was also obligated in the issue.
The purpose of this legislation was to provide small businesses
with access to such capital markets on equal footing with large businesses
which frequently finance their pollution control facilities through tax-free
IDBs. However, all small businesses will not be able to use this lease
11-41
-------
guarantee program. SBA expects that companies with financial needs greater
than $250,000 could use the lease guarantee program while companies with
lesser needs would use the SBA compliance loan program.
It is not necessary that a small business be involved in an IDE for
SBA's guarantee to be utilized. The enabling legislation for the lease
guarantee program specifies qualified contracts for the lease as "a lease,
sublease, loan agreement, installment sales contract or similar instrument
entered into between a small business concern and any person,"
SBA is in the process of developing specific regulations for the
lease guarantee program, as well as conducting a pilot program in California.
The most controversial regulation is the fee that SBA will charge the com-
pany for the lease guarantee. The law permits up to 3% % per annum of
the minimum annual guaranteed payments. SBA has indicated they will probably
set the fee at 3%%. Others argue that much of the benefit of this program,
and therefore, the equal footing with large businesses, will be lost at that
high a rate.
Other details of the program include a 25 year limit on guarantees
and a 100 percent guarantee (as opposed to regular SBA guarantee programs
which are 90%). In addition, applicants must have been in business five
years and have a history of profitable operations on average over the last
three fiscal years. These last two conditions are different from the com-
pliance loan program.
The budget for this lease guarantee program is $15 million. The
budget is not an amount to which SBA has access. It is a contingency amount
for uncovered expenses and losses. SBA is designing the program to be self-
sustaining and is therefore not expecting to use the budget. The budget
figure does not mean any limitation on the number or amount of leases that
can be guaranteed.
11-42
-------
1. Benefits of the Program
Precise benefits cannot yet be determined for the small businesses
that utilize this lease program. It is only after the program begins market
operation that interest rates will become known. Estimates by bond analysts
place the rate as equivalent to AM municipal bond rates.
Regardless of the inability to as yet determine the precise benefits
of this program, it can be said that a small business will gain significant
benefits over conventional financing. The reader can refer to Section B.I
and C.I (IDBs and SBA loans) to gain an idea of the range of benefits that
the lease guarantee program may provide.
2. Eligible Program Users
The number of eligible small businesses for the lease guarantee pro-
gram will be different from the number eligible for the compliance loan
program for two reasons. The lease guarantee program has two definitions
of size, either of which can be used at SBA's discretion. One definition
is the same as that for compliance loans which is based upon maximum number
of employees per SIC. The second definition involves dollar limitations
and potentially expands the number of small businesses that could be elig-
ible for the lease guarantee program. It states that a company is eligible if it
together with its affiliates, is independently owned and
operated, is not dominant in its field of operation, does
not have assets exceeding $9 million, does not have net
worth in excess of $4 million, and does not have an aver-
age net income, after Federal income taxes, for the pre-
ceding 2 years in excess of $400,000 (average net income
to be computed without benefit of any carryover loss).
11-43
-------
On the other hand, SBA has imposed eligibility criteria on this
program which are intended for the more credit-worthy companies in the ex-
panded coverage. Those criteria are that a company has to have been in
business five years and must have had profitable operations on average
over the last three fiscal years.
3. Eligible Pollution Control Programs
Eligible programs are the same as for SBA compliance loans.
4. Eligible Pollution Control Expenditures
Although this is an SBA program, the IDE criteria apply for deter-
mining eligible pollution control expenditures. These criteria are more
restrictive than SBA's. The reader should refer to Section B.4 for the
specific criteria. Should a significant portion of expected expenditures
be ruled ineligible under IDE criteria, the application could be withdrawn
from the lease guarantee program and placed with the direct compliance
loan program.
5. Availability of Funds
SBA has a separate budget for the lease guarantee program. In theory,
therefore, the funding of this program is not affected by the compliance loan
programs. The fund is a revolving fund and therefore not subject to fiscal
year limitations. The amount of the fund is $15,000,000 and covers losses
or other expenses not recoverable in normal operations of the program.
11-44
-------
6. Duration of Program
The enabling legislation does not contain an expiration date for
the program. Its actual duration depends on the rate at which the $15,000,000
is consumed, and on the inclinations of Congress to increase the fund.
7. Utilizing the SBA Lease Guarantee
SBA has not yet promulgated regulations for the conduct of the lease
guarantee program. SBA has, however, issued guidelines for the operation
of the pilot lease guarantee program being conducted in California. The
guidelines contain many procedures smiilar to those for direct compliance
loans. The guidelines are reproduced as Appendix E.
Certification. The procedures applicable to direct compliance loans
are also applicable to lease guarantees (see C.7.a).
Other Documents. The most significant difference in procedures be-
tween the two SBA pollution control financing programs is in the requirement
for a bank to sponsor a company. Sponsorhip by a bank does not impose an
obligation upon the bank for the company. Sponsorship is a statement of
opinion from a bank that the company is creditworthy. The financial anal-
ysis of the bank must include, among other things, the composition and
adequacy of the small business!s fixed debt requirements, past and projected
earnings, debt to worth ratio, working capital sufficiency, etc.
Procedures. A company should discuss its situation with a branch or
district SBA office (addresses in Appendix C). Presuming the company has
11-45
-------
been denied financing at reasonable terms, it should then apply to EPA for
certification and should concurrently obtain bank sponsorship and complete
the SBA lease application. SBA can process the lease guarantee after it
receives EPA's certification and bank sponsorship.
The amount of processing time for obtaining a lease guarantee is not
yet documented. The time should be longer than that of a direct compliance
loan since bank sponsorship is an added step and since many of the IDB
steps, such as, bond resolutions and bond council rulings may be involved.
Fees. An applicant for this program pays two fees that are not in-
curred under the direct compliance loan program. The first fee is a guar-
antee fee which can be a maximum 3% percent of the minimum annual guaran-
teed payments. SBA has also set a processing fee to cover administrative
expenses. The fee schedule is as follows:
Amount of Contract Base Fee
Payments Guaranteed
Up to $500,000 $1,000
$500, 000 to $1,000,000 1,000
$1,000,000 to $2,500,000 2,000
Over $2,500,000 4,250
Additional Fee
+ .002 of above $500,000
+ .0015 of above $1,000,000
+ .001 of above $2,500,000
Each application submitted to SBA must be accompanied by $500 of the
above fee, which is not refundable. The remainder of the fee is payable
upon request for the issuance of the guarantee.
11-46
-------
8. Legislative Reference
Section 404 of the Small Business Investment Act contains the basic
enabling legislation for this program.
11-47
-------
Section E
Economic Development Administration Financial Programs
The Economic Development Administration (EDA) under the Federal
Department of Commerce provides financial assistance to industry primarily
to create and secondarily to preserve jobs. This program was created
in 1965 under the Public Works and Economic Development Act. Financial
assistance under various EDA programs can consist of loans, guarantees
or grants. EDA does not have special authorities or budgets to make pol-
lution control financial assistance; however, pollution control is occasional-
ly included in some of the financial assistance programs of EDA.
There are two programs of EDA that could benefit industrial pollution
control expenditures. The first program is under Title II of EDA legis-
lation and provides direct loans or loan guarantees to industry to create
jobs. If a company is threatened with closure due to pollution control,
EDA can make loans or loan guarantees to preserve jobs. The other EDA
program whereby industries pollution control expenditures could benefit
is under Title IX. Under that program, grants are the vehicle instead
of loans or guarantees, and such grants are made to communities for com-
munity-owned property. This community-owned property can consist of waste-
water treatment and collection facilities which industry uses.
EDA does not aggressively seek companies for pollution control
loans under Title II. EDA does,however, monitor the Environmental Pro-
tection Agency's Early Warning System that lists companies where plant
closure is threatened. Under Title II when it is imminent that a company
will close due to pollution control, EDA will contact the company for pos-
sible assistance. Under Title IX, EDA has a more explicit authority to seek
11-49
-------
to place environmental grants for pollution control, though the main objec-
tive under this program is to grant monies for municipal wastewater treatment
expenditures.
The number of pollution control loans made to industry under the
Title II program has only been 2 or 3 over the past six years. EDA loans
are typically large and may cover companies of 200 employees or greater.
The Title II program of EDA is essentially for large businesses and is to
them what SBA loans are to small businesses. Loan amounts are geared to
the number of jobs. Loan amount formulas are typically between $5,000
to $10,000 per job created or preserved. Therefore, loans are typically
$1,000,000 or greater (based upon 200 employees at $5,000 per job).
The actual EDA Title II program can consist of both loans and
guarantees. Direct loans can be made for fixed assets or for working
capital. Such loans cannot by law be greater than 65% of project cost.
Typically the percentages are lower than that specified in the law due
to funding limitations. Guarantees can be extended by EDA for loans or
for leases. Guaranteed amounts can not exceed 90% of the amount of the
project.
Under Title IX there are no such formulas specified by the legis-
lation for EDA grants. Grant amounts are established on a case-by-case
basis.
The current fiscal budget for Title II loans is $40,000,000. The
current fiscal budget for Title IX grants is $68,000,000.
EDA has regional offices; the Philadelphia Office covers the Middle
Atlantic and New England states. Each state has an EDA representative
who often activates projects or can answer questions for possible loan
11-50
-------
or grant candidates.
Each element below will describe the characteristics for both Title
II and Title IX programs.
1. Benefits of the Program
The major benefit of EDA programs is that an ailing company may
have access to a source of funds. EDA will only make direct loans or
guarantees to industry or grants to communities if they have no other funds
commercially or otherwise available.
Under Title II, loans are made at a specified treasury rate. The
loans usually have long repayment terms, and in the case of fixed assets
would not likely exceed the useful life of the fixed asset. Rates on loan
guarantees are subject to negotiation between the lender and the company.
The numerical benefit of EDA loans is the same as the benefit of Small
Business Administration direct compliance loans.
Under Title IX the benefit of the program is that no repayment
is required. However, the full cost of a program such as pollution control
may not be awarded under the grant. The amount of the grant will depend
on a case-by case evaluation of the amount of expenditures involved and
the need of the community/industry.
An industry does not have to repay any part of the grant.
2. Eligible Program Users
Under Title II and Title IX, programs, all large companies are
11-51
-------
eligible for EDA programs. The definition of large begins where the
definition of small leaves off under SBA programs.
3. Eligible Pollution Control Programs
Under Title II, any pollution control or regulatory program which
threatens the closure of a plant would qualify for financial assistance.
Under Title IX^a somewhat more restrictive eligibility exists due to the
nature of pollution control programs funded. Grants only go to those
programs where community-owned property is involved. An example is a
wastewater treatment or collection facility which is owned by the munici-
pality. A way of utilizing this program for air or water pollution control
at the plant level is when the municipality takes title to property used
by an industry under an industrial development bond program.
4. Eligible Pollution Control Expenditures
All process change and end-df-line expenditures are eligible under
EDA Title II or Title IX programs.
5. Availability of Funds
The availability of EDA funds for Titles II and IX are relatively
restricted and are not sufficient to satisfy demand for all projects re-
gardless of pollution control. The budget for Title II programs for fiscal
year 1977 was $40,000,000. The budget for fiscal year 1977 for Title IX
programs was $68,000,000. A greater amount of funds under Title IX is
11-52
-------
likely to go to pollution control than is likely under Title II. As indicated
earlier, there have been 2 or 3 pollution control loans under Title II.
There are no figures available to indicate what the demand for EDA loans
could be with unlimited funding. For example, EDA does not publicize or
promote Title II programs in an active way. Under the Early Warning System
monitoring that EDA performs, a company is only contacted if imminent closure
is threatened.
6. Duration of Program
The duration of Title II and Title IX programs is dependent on
annual funding by Congress. The EDA is not a permanent agency under the
Department of Commerce; therefore appropriations for their budget have to
be made yearly. It is anticipated by EDA that Title II and Title IX
programs will continue.
7. Utilizing EDA Assistance
The loan application process for EDA loans under Titles II and IX
is quite involved and time consuming. It is time consuming for the appli-
cant to complete the entire application package including necessary docu-
mentation. It is also time consuming for EDA to process the loan application
because it often performs its own feasibility study of the project. There
are many parties involved in the loan or grant package under EDA programs.
These parties will be enumerated below. There are no longer any fees charged
for Title II or Title IX applications.
11-53
-------
Certification. Whenever pollution control is involved under
Title II loan or guarantee programs or Title IX grants,the applicant
must submit the notice from the appropriate agency that the agency intends
to shut down the facility if compliance is not achieved by a certain date.
Certification is also required from the pollution control agency for the
actual equipment which will be installed to control pollution. For any
new project involving greater than 1 million dollars, a feasibility study
prepared by an independent consultant must also be submitted with the ap-
plication. For projects of less than 1 million dollars the company itself
may submit a feasibility study package. Specific details of the pollution
control compliance certification as well as feasibility studies are not
specified in the EDA regulations.
Other Documents. The applicant must submit evidence from banks
or other commercial lending institutions that the company is not able to
obtain financing. The application for Titles II and IX are contained here-
in as appendix F. There is considerable information required on this ap-
plication pertaining to employees, collateral for loans, the cost of the pro-
ject, the financing sources for the project including the participation by
the company, EDA, banks, and any government agency.
Procedures. Applications for Title II and Title IX programs are
available from the appropriate regional EDA office. The Philadelphia
EDA office is located at 6th and Arch Streets, Philadelphia, PA 19107,
(215)597-7889. It is advised that a potential applicant spend some time
with an EDA loan officer to review the application and information that
11-54
-------
is required. It is then necessary to complete the application package along
with all of the other documentation required, such as certification, feasi-
bility studies, collateral appraisals and evidence of the unavailability
of financing. This entire process will be time consuming and involve
considerable cost to the applicant, i.e. administrative costs. The ap-
plication is then submitted to EDA. EDA can perform its own feasibility
on the project if it so desires. It will also do considerable investiga-
tion into the project.
Costs. There are no fees for submitting applications for Title
II or Title IX financial assistance programs. Under the Title II guar-
antee program,a fee existed until January 1, 1977. EDA does have the
right, when they require additional studies or appraisals, to assess the
company for the conduct of those efforts when they are performed by per-
sonnel outside of EDA.
8. Legislative References
Authorities for these programs may be found in the Public Works and
Economic Development Act of 1965, as amended: 42 U.S. Code 3121 et seq.
The rules and regulations issued pursuant thereto are contained in Title
XIII, Chapter 3, Code of Federal Regulations.
11-55
-------
Section F
Financial Assistance to Farmers and Rural Industry from the
Fanners Home Administration and Small Business Administration
Any farmer facing pollution control expenditure requirements and
who is unable to obtain financing, or obtain it at reasonable rates, is
eligible for additional federal financial assistance. The same assistance
for pollution control is also available to rural businesses that cannot
obtain financing. The assistance is primarily available from the Farmers
Home Administration of the U. S. Department of Agriculture and secondarily
from the Small Business Administration. Rural businesses and farmers are
also able to use the other federal programs previously described. However,
the financially weak rural business and farmers are the primary benefici-
aries of the programs to be described in this section.
The pollution control requirements need not be federally imposed to
qualify for FmHA assistance. For example, if a farmer is complying with
local nuisance complaints, he can receive assistance from FmHA or SBA to
control the nuisance.
Other pollutant control needs include, for example, non-point source
water pollution control, fugitive dust control, erosion and sedimentation
control and feedlot discharge controls.
The type of financial assistance available to farmers is largely
direct loans at low interest rates and moderate to long term repayment per-
iods. Guaranteed loans are provided in these programs, but direct loans
(referred to as insured loans by FmHA) are more widely used for farmers.
For its rural business and industrial loan program, FmHA uses guaranteed
loans almost exclusively.
11-57
-------
FmHA has five different financial assistance programs that can cover
pollution control expenditures of profit oriented farmers and/or rural busi-
nesses: Soil and Water Loans , Operating Loans, Farm Ownership Loans, Busi-
ness and Industrial Loans, and Water and Wastewater Loans and Grants.^ '
All of these loan programs can fulfill non-pollution control needs as well;
therefore, the budget figures need to be kept in this perspective. SBA
has one program that covers farmers when the size of funds required cannot
be completely loaned by FmHA and when SBA can cover the size required. All
of these programs have different characteristics. The description of all
these programs will depart from the format of the other programs. Each
program will still be described individually but not in such a formated
structure. Emphasis will be placed on the characteristics that differenti-
ate the FmHA programs from each other. A section will then describe
the commonalities of the various programs. A concluding section then de-
scribes the SBA loan program and how the FmHA and SBA programs are integ-
rated.
1. Soil and Water Loans
Assistance provided under this program is for improving and con-
serving water supplies, and for preventing contamination of ground water or
streams. The assistance was provided at first for 17 western states under
FmHA also has a loan program for farmers converting or acquiring land
for recreation purposes. This program is not covered herein since it
is unrelated to mandatory environmental requirements. FmHA can also
make loans to associations of farmers for purposes of pollution control,
where the association cannot obtain credit elsewhere. This program
only has a $4,000,000 budget (considered small, relative to other FmHA
programs) and is not given separate treatment here.
11-58
-------
the Water Facilities Act of 1937. In 1954 the Act was changed to include
all states.
Soil and Water Loan assistance typically consists of insured loans,
although guaranteed loans can be made. Insured loans are made at a 5 percent
rate of interest as prescribed by Federal statute. Guaranteed loans cover
90 percent of the expenditure and also have a 5 percent interest rate stat-
utory limit for the borrower. FmHA provides a subsidy to the lender, cur-
rently 3 percent, for guaranteed loans in order to make up the difference
in what are going lending rates.
The maximum Soil and Water Loan principal may not exceed $100,000
and the combination of all debts against the property may not exceed
$225,000 or the market value, whichever is less. Loan repayment periods
under this program can be as long as 40 years but no longer than the useful
life of the project involved. Loan needs greater than the above limitations
may be satisfied by SBA.
This particular FmHA program has been in existence for many years.
However, beginning in fiscal year 1976, the funding for this program was
raised considerably. Funding levels prior to fiscal year 1976 were on the
order of 3 million dollars per year. Budgets for fiscal years 1976 and 1977
were increased by Congress to approximately 53 million dollars. This in-
creased funding was due to expected pollution control needs and has helped
FmHA erase some of the widespread shortages of funds that exist in other
FinHA programs that have overlapping lending authority, such as farm owner-
ship. Even with this funding boost, however, the first quarter 1977 budget
for Soil and Water Loans was depleted 3 weeks before the quarter ended.
Soil and Water Loans are the only FmHA farm loan program herein
described for which nonfamily farming entities are eligible for financial
11-59
-------
assistance. In most other FmHA farm loan programs, only the family farmer
is eligible. The term'fcorporate farming entity"includes partnerships and
proprietorships as well as private corporations engaged primarily in farming.
The definition of family farm is included in the next loan category.
The typical use for Soil and Water Loans is for irrigation. However,
erosion control measures such as grassways, land leveling, ditching, con-
touring, lagoons, etc. are eligible under this program. These latter types
of erosion control measures can also fall under the FmHA Farm Ownership Loan
program which is described as the third program in this section.
The low rate of interest and long repayment terms on these loans makes
their benefit one of the highest when compared to programs previously men-
tioned outside FmHA programs. Funding for the program is provided on a
yearly basis by Congress. Procedures for obtaining the loans are presented
in a later section.
2. Operating Loans
Under this financial assistance program, loans can be made for pollu-
tion control expenditures that are relatively short lived. The program,
however, covers all short-term farm operating requirements. This program
grew out of an emergency farm production loan program enacted in 1949 and
expanded in 1961 to include operating loans. Short-lived expenditures might
include small equipment, such as a tractor to move manure from drainage
areas or a device for cleaning barns of potential pollutants. The majority
of loans under this program are insured loans. The maximum repayment period
is 7 years. Although loans have a maturity of 7 years there is a provision
11-60
-------
for a 5 year renewal. The interest rates for these loans are determined by
a formula; in 1977, the rate was 8 percent. The fiscal budget 1977 for this
program was 625 million dollars of which 10 million is expected to be for
guaranteed loans. Funding is provided annually by Congress.
Operating loans are only for family farmers, which is defined as a
family which provides the management and major portion of the labor for the
farm.
At no time may a borrower's total principal indebtedness for FmHA Farm
Operating Loans exceed $50,000. Loan requirements greater than $50,000
should be handled through the Soil and Water Loan program (up to $100,000)
and the SBA farm loan program (beyond $100,000).
One of the benefits of this program is that it provides a source of
funds that may not otherwise be available. The interest rates are lower
than those most operators in financial difficulty can obtain. However, the
interest rates are not as low as other FmHA programs and other Federal fin-
ancing programs. Loan application procedures are discussed in a later sec-
tion.
3. Farm Ownership Loans
These loans cover real estate ownership for a family farm and include
land purchase, farm enlargement, land and building development, and refin-
ancing. The program was created by Congress in 1932. The definition of
family farm is the same as the definition for family farm under Operating
Loans. The loans can be made up to a period of 40 years, and the Federal
statutory interest rate is limited to 5 percent.
11-61
-------
The overall budget for this program was 450 million dollars in
fiscal year 1977. That it is not adequate to meet present demand is evi-
denced by the fact that the first quarter budget for 1977 was already com-
mitted early in the quarter. The budget is not apportioned between pollu-
tion control and nonpollution control farm expenditures.
The majority of this budget is used to make insured loans. The
maximum Farm Ownership Loan principal may not exceed $100,000 and the com-
bination of all debts against the property may not exceed $225,000. As was
the case for previously described FmHA programs, farmers with needs greater
than those limitations should apply to SBA.
Some pollution control measures allow an applicant to qualify for
Farm Ownership Loans or Soil and Water Loans. In such instances FmHA will
(assuming funds are available) fulfill the loan under the program that is
best for the applicant.
This program ranks, along with FmHA Soil and Water loans, as one of
the best Federal assistance programs because of low-interest rate and,long
repayment term.
4. Business and Industrial Loans
This FmHA program may provide financial assistance to improve, among
other things, the economic and environmental climate in rural communities,
including pollution abatement and control. A rural area is defined as any
area outside the boundary of a city of 50,000 or more and its immediately
adjacent urbanized areas with population density of more than 100 persons
per square mile. Priorities for loans are given to applicants for projects
located in open country or rural communities and towns of 25,000 and smaller.
11-62
-------
The main thrust of the program is to create and maintain jobs in rural
areas.
Loans under this program are in the form of a loan guarantee, whereby
FmHA, upon loan default, reimburses a lender for a maximum of principal ad-
vanced plus accrued interest. Borrowers of less than $500,000 are encour-
aged by FmHA to apply for assistance through the Small Business Administra-
tion. There arc no dollar limitations on the size of a Business and Indus-
trial loan. The fiscal year 1977 budget for this program was 350 million
dollars. Interest rates are negotiated between the lender and the applicant.
Loan repayment period cannot exceed 30 years for land, buildings,
and permanent fixtures; 15 years for machinery and equipment; or 7 years for
working capital. Ordinarily a minimum of 10 percent equity at loan closing
is required of the applicant.
Demands for funding under this program greatly exceed the available
funds at present. The financing of pollution control expenditures is only
part of the loan purpose for the program.
5. Water and Wastewater Loans and Grants
The Farmers Home Administration (FmHA) is authorized to make loans
and grants to develop water and wastewater facilities for public use in
rural areas and in towns of up to 10,000 people. This assistance is a
supplement to Federal Water Pollution Control Act wastewater treatment
construction grants.
Authority to finance water facilities was first received in 1937
with the enactment of the Water Facilities Act. The authority was expanded
in 1965 to include the financing of wastewater facilities. The program is
currently authorized by Section 306(a) of the Consolidated Farm and Rural
11-63
-------
Development Act of 1972.
The maximum term on all loans is 40 years. However, no repayment
period can exceed any statutory limitation on the organizations' borrowing
authority or the useful life of the improvement or facility to be financed.
The interest rate currently is 5 percent of the unpaid principal.
Facilities financed by FinHA must primarily serve rural residents;
however, other users in the service area may be included in the facility
design. Industries which may be served by such a facility are expected to
pay their share of the wastewater treatment costs. The formula for indus-
trial repayment is not the same formula that EPA uses for its municipal
wastewater construction grant program. The industrial repayment for these
FmHA loans are either determined by the Public Utility Commission having
responsibility for that location or the design engineering firm for the
wastewater treatment plant. As part of the loan repayment formula, in-
dustries with large wastewater flows are given bulk discount rates. (Such
discounts are not available to industries under the EPA construction grant
cost recovery systems.) For fiscal year 1977, $600 million in loan funds
and about $265 million in grant funds were available.
Common Elements in FmHA Assistance Programs
All of the above FmHA programs have certain commonalities, especially
involving procedures for obtaining the financing. All applicants must be
able to demonstrate that financing is unavailable or only available at terms
which they cannot afford. Evidence that other credit is not available need
not be obtained in writing, but should be referable. All applicants must
first contact the local FmHA county office, of which there are approximately
11-64
-------
1750 throughout the country. The local county office can handle the major-
ity of all loan applications and has independent decision-making authority.
The local county supervisor will determine the best loan program for cover-
ing pollution control or any other expenditures for which a loan is being
requested. FmHA charges no fees for the loan or guai^antee programs it
provides. Occasionally certain application and loan closing costs must be
paid by the loan applicant. Such costs may include credit report fees,
title searches, and title insurance. Collateral appraisals are performed
by FmHA personnel in most cases. Funding for all of these programs is pro-
vided by Congressional appropriations on a year-to-year basis. An applica-
tion package for all FmHA programs is included as Appendix G.
Small Business Administration Loans to Farmers
Public Law 94-305, approved June 4, 1976, now permits all small
agricultural enterprises to be eligible for financial assistance from SBA.
The passage of that law gave SBA and FmHA overlapping loan authorities for
such enterprises as small business concerns engaged in the production of
food and fiber, ranching, and raising of livestock, and all other farming
and agricultural related industries. SBA's authority includes the types of
farming activities described in the five FmHA programs.
The passage of this law was partially motivated by the lack of funds
in FmHA programs. In addition, FmHA has received the extra Soil and Water
I-oan funds already discussed, which have helped some of the funds deficit.
However, some FmHA loan programs such as Farm Ownership still have greater
demand for funds than the supply.
To resolve the question of how to handle the overlap in loan
11-65
-------
authorities, FraHA and SBA, in September 1976, established a memorandum of
understanding (Appendix H); staff in either office should be expected to give
an applicant a determination of which agency has the authority in a given
situation. In essence, the guidelines specify that FmHA is to handle loan
requests when applicants qualify for both programs. One exception is when
FmllA's lending limits in a particular program are less than the applicant's
request and when SBA's limit are not exceeded by the request. In order to
avoid two partial loans in that case, the application should be made through
SBA. Another exception is when the project is an FmHA Business and Indus-
trial Loan type but is for an amount less than $500,000. Again, SBA is the
appropriate source.
Applicants, who were initially directed to an FmHA program but who
are denied FmHA assistance for any reason, including lack of available funds
in the program or an inadequate company credit for an FmHA program, may then
contact SBA.
The reader should refer to Sections C and D of this report for a
complete description of the SBA financial assistance programs for pollution
control.
The flow diagram which follows is a useful summary to indicate which
direction a farmer or rural business should go (or would be directed) for
assistance based on specific conditions. Such a flow diagram is necessary
because of the overlap in lending authorities between FmHA and SBA, and
among FmHA programs.
The diagram first asks whether the potential applicant is a farmer
or rural business. If a rural business, the applicant is directed to FmHA's
business and industrial loan guarantee if the amount of funds required is
greater than $500,000 or to SBA for lesser amounts.
11-66
-------
SBA and FmHA Assistance for Farmers
and Rural Businesses
Rural'
Business
$500K
Needed
Real
or _\ Personal
personal \
property ~
FmHA
3perating
Loan
>$100K
Needed
FmHA
Soil
Water
Loans
Funds
in FmHA
vmership
loan
und
FmHA
Soil S,
Water
Loans
Cost
NO / of
Qwnership
Fund
stte
i
FmHA
Soil
Water
Loans
Companies must meet SBA small business criteria
\See definition in text
11-67
-------
Farmers are then divided into two categories: family and non-family.
Corporations, partnerships and the like can only receive loans from the
Soil and Water Loan fund, and then, only if their need is less than $100,000.
Otherwise the non-family farmer must apply to SBA.
The pollution control needs of family farmers must then be divided
into personal versus real property. Personal property pollution control
measures can be satisfied by FmHA's Operating Loan program if the needs are
less than $50,000; the Soil and Water Loan fund if needs are between $50,000
and $100,000; and SBA if the needs are greater than $100,000.
Real property needs can be satisfied by either SBA (where needs are
greater than $100,000) or one of two of FmHA's programs, i.e., Farm Owner-
ship or Soil and Water. The choice between the two FmHA programs is based
on funds availability and cost to the farmer.
11-68
-------
Section G
INDUSTRIAL COST RECOVERY SYSTEMS
Companies that generate wastewater sometimes have the option of
treating the wastewater themselves and directly discharging to a stream,
or indirectly discharging to a stream through a publicly owned treatment
works (POTW). A company's choice of direct or indirect wastewater dis-
charge depends upon many factors including the following:
To discharge directly to the stream, the company must consider
its costs for treating all wastes to conditions specified
by discharge permit and its costs to transport the waste-
waters to stream
To discharge through a POTW, the company must consider the
POTIV charges for treating"compatible" wastes; the company
costs to pre-treat "incompatible" wastes; and company costs
to transport wastewaters to the POTW.
Section 204(b)(l)(B) of the Federal Water Pollution Control Act
requires that industrial users of publicly owned treatment works receiving
federal grants make payments for that portion of the cost of construction
of such treatment works which is allocable to the treatment of such in-
dustrial wastes. The resulting charges are called industrial cost recovery (ICR)
and are for the capital (construction) costs associated with treating
a company's compatible wastes, or handling pre-treated wastes.
"Incompatible wastes"refers to industrial pollutant discharges that are
not normally present in the wastes of residences. "Compatible wastes"of
industry are present in residential wastes and primarily include
pended solids and biological oxygen demanding wastes.
11-69
-------
The capital costs, without interest, are repaid over the useful life
of the POTW or 30 years, whichever is shorter. Industrial cost recovery only
applies to the federal grant portion (usually 75 percent) of the POTW capital
costs. POTWs may have to charge interest when recovering capital costs
to repay the debt incurred in procuring construction cost money for the
remaining 25 percent share, although interest costs for the local con-
struction cost share can be reduced when the states provide grants for a
portion or all of the local share.
It may appear peculiar to some companies who discharge to upgraded POTWs
that this program could be categorized as providing financial assistance.
These are the companies who, because they must now pay their equitable
share of POTW capital and operating and maintenance costs, must pay con-
siderably more than charges experienced in previous years before the FWPCA.
There is one important reason why POTW equitable cost recovery
systems are categorized as providing financial assistance. A company
would, in most instances, experience higher costs to meet effluent limita-
tions if they discharged directly to a stream than if they pretreated
if necessary and discharged to a POTW (discharged "indirectly" to a stream).
Assuming equal stringency of direct or indirect treatment of pollutants,
the direct discharger purchases capital equipment and pays interest, or
an opportunity cost; the indirect discharger is also assessed capital costs,
but interest payments are not required. The exclusion of interest payments
on the company's portion of the POTW's capital costs is considered a form
11-70
-------
2
of financial assistance.
The financial assistance of municipal treatment can be offset by
at least two factors. First, POTWs are sometimes cost ineffective, which
could result in a higher capital cost to the company than what would be
incurred by the direct discharger. Secondly, POTW costs for the flow
through of pre-treated wastewaters may be more than what the company would
have otherwise experienced if it discharged directly to a stream.
A typical way in which industrial cost recovery is calculated by
a municipality is to allocate the costs covered by the federal grant to
the various components of compatible industrial wastewater; namely, waste-
water flow, suspended solids and biological oxygen demand. The allocation
results in a cost per unit quantity of those three pollutants. A company's
actual discharges are multiplied by the cost to obtain the total capital
cost allocation. The company is assessed the allocated amount over thirty
3
years, or less if the POTW has a shorter useful life.
An important question about industrial cost recovery is what happens
to the annual payments if a company's discharge subsequently is reduced
in volume or pollutant concentration. The answer depends on the commitment
that the company initially made with the POTW. The annual payments would
not be reduced upon subsequent discharge reductions if the company had
reserved a specific capacity of the POTW. The reservation is the equivalent
2
POTWs which receive federal wastewater construction grants must also estab-
lish a user charge system for the operation and maintenance costs of the
plant. The municipality must charge industry and residences the full share
of such costs and no benefit that could be called a subsidy or cost reduction
technique is allowed.
The above cost calculation procedure appears straightforward. However,
there is considerable latitude in such things as the methods by which the
municipality allocates costs, the overall costs, and in what constitutes
normal and peak discharges.
11-71
-------
of having purchased a treatment system of its own and being accountable
for the capital costs. When no reserve capacity is involved, the company's
annual payments would decrease upon subsequent discharge reductions. Com-
panies that make no reservation commitment, however, run the risk of not
having access to POTW capacity if they expand in the future.
Other details of industrial cost recovery systems are important. These
include the following:
If an industrial user's maximum flow (hourly, daily, monthly, seasonally,
etc.) contributes to the cost of construction of a treatment works,
it should be the basis for that ICR payment. No credit shall be
given to the industrial user for the time period when the user is not
operating and not discharging wastewater. Credit may effectively
result however when other users have peak needs during the time when
that first industrial user is not discharging.
Industrial users often discharge uncontaminated cooling waters
into municipal treatment facilities. Such cooling water is
considered process waste and must be included in the ICR computation.
Wastewater collection and treatment facilities are normally
designed with unreserved excess capacity for expanded future
use. The cost of building such unreserved excess capacity
into a facility is not to be recovered from existing users
under the federal guidelines.
11-72
-------
Industrial users discharging pretreated process wastes into
the municipal treatment facilities must pay industrial cost
recovery based on the characteristics of the pretreated
process wastes.
1. Benefits of the Program
The following four scenarios demonstrate the extent of savings
which arise from the industrial cost recovery system of public treatment.
In each scenario, a NPV is computed for a $100,000 hypothetical cost of
water pollution control. The cost is assumed to be the same for the direct
and the indirect discharge. An after-tax discount rate of 9% is used
in each scenario.
Scenario 1 assumes a reasonable set of variables for completely
private financing, i.e., 10-year double-declining balance depreciation,
plus the 10 percent investment tax credit and a 10 percent, 10 year loan.
The NPV is $41,708.
Scenario 2 assumes the same investment but with the lower interest
rate (6%) and longer payback period (20 years) characteristic of IDE
financing. The NPV is $21,315.
Scenario 3 introduces the interest free 75% federal subsidy for the
same plant tied into a municipal system, but assumes that industry must
repay the entire cost (principal and 6% interest) to the municipality
for the 25% that it finances. (This is a severe case, since often the
municipality does not include interest on its 25% in the industrial user
charge). The repayment period is 30 years. The NPV is $23,504.
11-73
-------
Scenario 4 presents the combination of the interest free 75%
federal subsidy and no repayment of principal or interest on the 25%
municipal share. Obviously, of course, industry will be paying slightly
higher general municipal taxes in this case. The NPV in this case is
$13,354.
Scenario 1 can be compared to scenarios 3 and 4 for determining
the benefit of industrial cost recovery assuming none of the federal
pollution control financial assistance programs for direct discharge.
Otherwise, scenarios 3 and 4 needs to be compared to scenario 2, which
can be interpreted as saying that industry's benefit from industrial
cost recovery is the same or better than that which pollution control
IDBs provide. Scenario 4 benefits are considerably better than those
of Scenario 2; however, Scenario 4 is not common, especially in EPA
Region III.
2. Eligible Program Users
Industrial cost recovery applies to companies who discharge to
those POTWs which have received federal construction grants under the
Federal Water Pollution Control Act.
3. Eligible Pollution Control Programs
This program is only applicable to water pollution.
11-74
-------
4. Eligible Pollution Control Expenditures
This benefit is not available for POTW treatment costs which
are not eligible for federal construction grants. One example is costs
unrelated to the requirements of the POTWs discharge permit. In other
words, if the POTW treats a pollutant for a company but treatment of that
pollutant is not required by the POTW's permit, then the POTW is unlikely to
receive federal construction grant money for the treatment of that pollu-
tant. Costs to connect the company to the municipal wastewater interceptor
are also not eligible for federal construction grant money.
5. Availability of Funds
The vast majority of POTWs must upgrade their treatment of waste-
waters to meet effluent limitations established under the FWPCA. Congress
has intended that federal construction grant money be available to POTWs
to perform the upgrading. By the end of fiscal year 1977, the $21 billion
provided by the 1972 FIVPCA amendments is almost entirely committed to
projects. Additional funds are still required if the government still
intends to assist in covering the upgrading costs. Action on future
federal construction grant monies is expected by Congress in the Fall of
1977.
6. Duration of Program
Industrial cost recovery is a permanent part of the federal waste-
water construction grant procedure. The program will expand as long as
there is federal grant money available.
11-75
-------
7. Utilizing Industrial Cost Recovery
A POTW will automatically establish an industrial cost recovery
system if it receives federal grant money under the FWPCA. Prior to
establishing the system the POTW will solicit information from companies
about future wastewater discharge plans. It is important that companies
monitor and understand how the POTW is establishing the industrial cost
recovery system. There are no hard-and-fast rules for allocating POTW
costs to industry, and the POTW has considerable discretion in such al-
locations. Therefore, the companies involved have a stake in insuring
that the overall costs are reasonable and the allocations appropriate.
Discussions about costs should be held with POTW officials and the POTW's
engineering firm.
There are no certifications, other special documents, or application
fees required by the POTW for industrial cost recovery. A significant
user of a POTW, i.e., greater than 10 percent of the POTW capacity, is
required to sign a letter of intent concerning future usage plans. The
letter of intent does not bind the company to future payments should it
decide to leave the POTW.
8. Legislative Reference
Section 204(b)(l)(B) of the FWPCA requires industrial cost recovery
systems. The provisions of such systems are contained in 40 CFR Part 35,
Subpart E.
The Environmental Protection Agency has issued guidelines to
municipalities to help them establish industrial cost recovery and user
11-76
-------
charge systems. The title is: Federal Guidelines - Cost Recovery Systems
Industrial Cost Recovery Systems, Municipal Waste-Water Treatment Works,
Construction Grants Program, U.S. Environmental Protection Agency MCD-45,
February 1976, Revised August 1976.
11-77
-------
Ill CERTIFICATION FOR SMALL BUSINESS ADMINISTRATION
POLLUTION CONTROL FINANCING
To assure that the SBA loans and leases for pollution control
equipment are not used for improper purposes, there is a requirement
that the equipment be certified by EPA as necessary and adequate for the
stated task. SBA assistance cannot occur without such certification.
Certification of necessity is not a new concept. It means that
EPA certifies that the company is being required by, in this instance,
a pollution control agency to comply with a law. Adequacy, on the other
hand, was first placed into use for SBA loans in the 1972 amendments to
the Federal Water Pollution Control Act. It means that the regulating agency
must also say that the equipment under consideration will do the job of
complying with the regulation. Because such certification helps dis-
tribute the task of insuring proper usage of the SBA loan program, SBA
now makes both adequacy and necessity a certification requirement for all
compliance loans.
SBA has even taken certification a step further by requiring that
the certifying agency specify what equipment is extraneous to pollution
control. This step makes certification more time consuming and difficult
for the certifying agency. In practice, a reasonable doubt exists as to
the thoroughness with which certifying agencies perform this step.
This section of the manual will describe certification activity
and procedures within the states of EPA Region III. The parties involved
in these descriptions are SBA, EPA, state pollution control agencies and
potential loan applicants.
A significant aspect of SBA financial assistance for pollution
III-l
-------
control loans is the infrequency of loan applications. By mid-1976, there
had been only 20 applications for certification made to all environmental
agencies within EPA Region III. Of these, 16 certifications were issued,
1 was pending, and 3 were presumed to have been dropped by the applicant.
Certifying authorities have advanced several reasons for the lack of interest
among small businesses, including the lack of publicity by SBA.
EPA has primary certifying authority for all compliance loans.
Region III of EPA issues certifications for water pollution control equip-
ment in the region, except in Maryland, which requested and received
certifying authority from EPA for water pollution control projects. None
of the other states in Region III have requested water certification
authority; in fact they have refused to accept the authority despite their
seeming legislative mandate to do so. The state agencies provide certi-
fication for air projects essentially by default, but in virtue of the
fact that they designed the controlling State Implementation Plans for
reducing air pollution. SBA has been accepting state certifications in
most cases so a viable procedure has evolved in a manner unusually in-
formal for government agencies. However in one instance a manufacturer
was required to obtain a certification letter from EPA for an air pollution
control project even though the state had supplied a letter. This was an
instance involving one of the larger SBA loans. SBA Region III has informed
JACA that as long as they receive certification from an "authorized agency"
(underlined but not defined) they are satisfied; they do not care which
agency issues the certification. The various federal and state agencies
will be discussed below.
III-2
-------
U.S. Environmental Protection Agency Region III
EPA processes all certification for water pollution control pro-
jects within Region III, with the exception of Maryland. EPA has issued
no air certifications (though it did approve one state-issued certifica-
tion), and has no present intention of doing so.
Mien EPA receives a request for certification of water pollution
control equipment, it is routed to Dr. Walter Lee, Staff Environmentalist,
Envorcement Division, U.S. Environmental Protection Agency Region III,
Curtis Building, 6th and Walnut Streets, Philadelphia, PA 19107. He
collects any supplementary information that may be required and performs
the technical review. His review consists of:
1. Determining which regulations apply to the applicant
2. Determining whether the contents of the consent order satisfy
best practicable control technology requirements
3. Checking consultant-supplied specifications for gross errors, and
4. Issuing the certification if controls are necessary and the sub-
mitted plan appears adequate.
About half of the applicants have had their size eligibility
determined by SBA prior to application; doubtful cases are checked by EPA
prior to certification. SBA does not begin to process loan application
until after certification is issued by EPA.
EPA docs not interpret the regulations on not certifying extraneous
equipment strictly. One way that EPA could stop extraneous equipment
III-3
-------
is by analyzing costs. However, EPA does not examine proposed costs for
reasonableness.'
Liability of the agency for improper certification for adequacy
has been discussed, and is protected against by inserting qualifying
clauses in certification statements.
III-4
-------
DELAWARE
Delaware would issue certifications for air pollution control equip-
ment, but there have been no applications as of mid-1976. Even consider-
ing the fact that Delaware is a small state with few small manufacturing
concerns, no applications indicates little public awareness of the com-
pliance loan program. The Department in charge of certification is the
Delaware Department of Natural Resources and Environmental Control,
Dvision of Environmental Control, Air Resources Section, Tatnall Building,
Dover, DE 19901.
Certification for SBA water pollution control loans should be
requested from EPA's Region III office.
I1I-5
-------
MARYLAND
The Maryland Department of Natural Resources handles all
water pollution control certifications for Maryland, having been dele-
gated certification authority by Region III; the address is Maryland
Department of Natural Resources, Water Resources, Water Resources Ad-
ministration, Water Permits Division, Tarries Office Building, Annapolis,
MD 21401 (301)267-5821. Despite various other forms of publicity, only
four reqye'.s'ts for certification were received (only one of which was pur-
sued by the applicant to completion).
Maryland has not issued certification regulations; they follow the
federal regulations. Once all the necessary information has been submitted,
the application is reviewed in depth commensurate with the complexity
of the project. If the costs proposed were exhorbitant, the application
would not be approved, but costs are not otherwise certified. All appli-
cations are processed and then sent to SBA; size eligibility is not a
prerequisite for the agency to perform certification.
Liability for faulty certification for adequacy has been considered
by the agency; certification letters contain conditions to protect
the agency rights. If a project proved to be inadequate, enforcement
would be suspended; but compliance would eventually be required.
Air pollution control certification is obtained through the Maryland
Department of Health and Mental Hygiene, Bureau of Air Quality and Noise
Control, Division of Engineering, Permits Section 201 W. Preston Street,
Baltimore, MD 21201 (301)583-3147.
Maryland follows the federal certification regulations (Appendix
B) as they have none of their own. One modification of the federally determined
III-7
-------
procedures that Maryland follows for air pollution control is to link
certification to permits to construct. (Maryland has a set of procedures
for companies to-obtain permits to construct new air pollution control
systems). Certification for SBA loans is issued after the permit to
construct is obtained.
The same review procedures used for issuing a Maryland permit to
construct control devices is used for issuing the certification letter.
The letter can be issued prior to any SBA processing of the loan or size
eligibility determination. Costs are not considered.
III-8
-------
PENNSYLVANIA
The Pennsylvania Department of Environmental Resources (DER) is responsible
for certifying air pollution control projects in Pennsylvania. There are
no certification regulations established in the State of Pennsylvania; however,
the Pennsylvania Department of Environmental Resources, Bureau of Air
Quality and Noise Control, Division of Abatement and Compliance administers
the loan certification program. The location of this office is the Fulton
National Bank Building, 3rd and Locust Streets, Harrisburg, PA 17120,
(717)-787-4324. As with other State programs,the certification procedures
are only applicable to air pollution control. Certification for water
pollution control is obtained from EPA (see Section III).
In Pennsylvania, each violation notice that is sent to a company
is also sent to the Pennsylvania Commerce Department which in turn sends
brochures to the company describing SBA and other financial assistance
that is available.
DER's system is unusual in that each regional DER office (there are 7)
processes the requests arising in that region. The regional offices are
independent of headquarters in Harrisburg and have received little guidance
from it, so each region may adopt its own procedures for issuing certifi-
cations. Four requests for certification have been processed by DER: two
of those were by the Norristown, PA office, so its procedures are the ones
detailed.
Requests for certification at Norristown are routed directly to
the Regional Engineer, N. Rao Kona. SBA size eligibility must be estab-
lished before a certification request will be processed. If the company
III-9
-------
has received an air pollution citation, this is construed as a determination
of necessity. If a permit to construct the pollution control devices has
been issued, this is equivalent to a determination of adequacy; a permit
to construct will not be issued unless the plant will be in compliance
with all state environmental regulations. The processing time is from 4 to
6 weeks. The engineering evaluation is done in the context of issuing
a permit to construct and certification will not be issued without one.
The staff use vendor guarantees^process information equipment specifications,
and emission data to determine the necessity and adequacy of the equipment.
DER does not consider the reasonableness of the costs of control for
certification purposes.
DER has considered the problem of improper certification. Their
solution is to use qualifing statements in certification letters and
conditional permits to construct.
Certification for SBA water pollution control loans should be
requested from EPA1s Region III office.
111-10
-------
VIRGINIA
The State of Virginia will certify air pollution control equipment
for SBA financing. Certification can be obtained from the Virginia Air
Pollution Control Board, Enforcement Division, Room 1106, Ninth Street
Office Building, Richmond, VA 23219 (804)786-3248. The state has no
certification regulations of its own for SBA financing. The board performs
a cursory review of the application for the adequacy and necessity of the air
pollution control method. Compliance with other environmental regulations
is not required for certification.
Certification for SBA water pollution control financing should be
requested from EPA's Region III Office.
III-H
-------
WEST VIRGINIA
The State of West Virginia will certify air pollution control systems
for SBA financing. State does not have specific regulations for such cer-
tification. The responsibility for certification lies with the West Vir-
ginia Air Pollution Commission, Compliance Division, 1558 Washington Street
E., Charlestown, West Virginia 25311 (304)348-4022. Some administrative
procedures have been established for certification when it does occur.
Processing of certification request is expected to take about 30 days.
It will be conducted by a mechanical engineer plus industry expert for com-
plex certification cases. The reviewing engineer will rely upon process
waste and equipment specifications provided by the company. To date,
no request for certifications has been made.
Certification for SBA water pollution control loans should be
requested from EPA's Region III office.
111-13
-------
IV. STATE FINANCIAL ASSISTANCE PROGRAMS FOR POLLUTION CONTROL
Nearly all states in the country have financial assistance programs
for pollution control, often related to state or local taxes payable. Several
states also have their own loan programs for pollution control. The effect
of these programs is to add to the reduction in pollution control costs achiev-
able by the Federal assistance programs. However, their benefits are typically
not as large as those derived from the Federal financial assistance programs.
This section will describe the state financial programs for each state
in Environmental Protection Agency Region III, i.e., Maryland, Delaware,
Pennsylvania, Virginia and West Virginia. The description of each state
program will be similar to that used with the Federal program descriptions.
The general categories of state programs typically include the following:
Industrial development bond authority
Tax exemptions, such as sales, use, and property
Accelerated depreciation
Grants or loans to municipalities
Investment tax credits for pollution control equipment.
In addition, the states are often involved in Appalachian Regional
Commission programs. The Appalachian Regional Commission (ARC) was created in
1965 to increase the economic vitality of the areas covered by the Appalachian
mountains. One of the many programs created by ARC was an environmental grants
program which included water and wastewater treatment facilities and solid waste
facilities. For example, a municipality can receive anywhere from 5 to 25°6
IV-1
-------
of the cost of construction of wastewater treatment facilities. However,
not all of the funds in a fiscal year will go to wastewater treatment projects,
since other pollution control such as mine subsidance and acid mine drainage
also qualify. The program is not a very large one in any of the states. For
example, in fiscal year 1977, there was approximately $14 million in Pennsylvania
to be distributed among all the eligible environmental programs. There are
thriteen states which each administer projects within its boundaries; these include
Maryland, Pennsylvania, Virginia, and West Virginia. When ARC grants cover indus-
trial waste treatment, the industry is not required to repay.
IV- 2
-------
Delaware
Delaware's financial assistance for pollution control includes the
following programs: authority to use industrial development bonds, sales and
property tax exemptions, accelerated depreciation, and grants to municipalities.
1. Industrial Development Bonds
Delaware permits industries to use industrial development bonds (IDBs) for
pollution control capital expenditures. For a description of how the IDE pro-
gram operates,the reader should refer to Section II.B. Since 1973, there have
been nine Industrial Development Bond issued by the State of Delaware as revenue
bonds, i.e., the state does not guarantee the bonds. This program has been used
by seven companies. The size of issues has ranged from $1 million to $32 million
and the total amount of issued bonds is $66.48 million.
The State of Delaware also has a program for guaranteeing industrial
development bonds; however, it is not presently used for pollution control ex-
penditures- The guarantees are used for job creation purposes. Legally, it
appears that the guarantee could be used for pollution control IDBs.
There have been no private placements of pollution control industrial
development bonds in the State of Delaware, as there have been in the other
states within Region III.
The IDB program is conducted by the Department of Community Affairs and
Economic Development, the Division of Economic Development located at 45 The
Green, Dover, Delaware.
There is a charge from the State of Delaware for using industrial develop-
ment bonds. The fee schedule is reproduced herein as Appendix I. In addition
IV-3
-------
to these charges, industries must deposit $5,000 with the Secretary of Community
Affairs* and Economic Development when their application for industrial financing
is approved. Upon sale of the bonds the deposit will be returned in full to the
company. If the bonds are not sold, or if the company terminates the project,
the deposit minus the expenses incurred by the Department will be returned to
the company.
2. Tax Exemptions
Pollution control equipment is exempt from County, Municipal and school
taxes of the three counties in Delaware. There is no sales tax for the State
of Delaware. The property tax exemption includes all types of pollution control
expenditures by all companies. The exemption is a permanent part of the tax
laws.
3. Accelerated Depreciation of Pollution Control Equipment
The State of Delaware has a corporate income tax which includes accel-
erated depreciation of pollution control equipment. The computation of the
state tax starts from what the company reports as federal taxable income, thus
companies will receive an additional benefit under the state corporate income
tax. The state benefits do not include an investment tax credit since the
state does not have such a credit. The use of the federal investment tax credit
by a company is not affected by the absence of a state credit.
Special forms, certification and the like are not required to obtain this
state privilege for pollution control equipment.
IV-4
-------
4. Grants to Municipalities
The State of Delaware contributes a minimum 10% grant for eligible
costs of municipal treatment works. Eligible costs are defined in the same
way as the Federal EPA construction grants program. The one exemption is that
the acquisition of real property is not included in the project cost. The 10%
grant program does not require industries to repay its proportionate share of
the construction costs identifiable with the 10% grant. The funding level of
the State grant program has been sufficient to cover the demand by municipal
wastewater treatment plants. One reason for this sufficiency is the consider-
able delays that have been experienced by municipalities in receiving federal
construction grants for the financing of the remainder of the facility. State
grant program funds were authorized several years ago and are available when
federal funds are provided.
IV- 5
-------
Maryland
The State of Maryland has two Industrial Development Bond financing
programs for pollution control, a sales tax reduction for pollution control
equipment, a service program for undertaking pollution control functions, and a
real property tax exemption for pollution control equipment. In addition the
State of Maryland has its own grants program for municipal wastewater treatment
plants. The State also administers the Appalachian Regional Commission's
supplemental grant program for municipal wastewater treatment facilities.
1. Industrial Development Bonds
The State of Maryland has one Industrial Development Bond program which
operates as explained in Section II.B. Revenue bonds are issued by one of
the political subdivisions of the State of Maryland on behalf of corporations
installing pollution control equipment.
Maryland's other program is conducted through the Maryland Industrial
Development Financing Authority (MIDFA) which may include pollution control
equipment if it is a part of the financing for a larger project primarily
intended for jobs creation. Under the MIDFA program, the state can guarantee
up to 90% of the financing, making the bonds effectively general obligation bonds
of the State. This type of bond is likely to have lower interest rates than
a revenue bond since it is backed by the credit of the state. The remaining 10%
must be raised by the municipality or the company itself.
Under the Industrial Development Bond program conducted through the pol-
itical subdivisions, no fees are charged for the applicant; fees are charged under
the MIDFA Program. The fees in the latter program are one-half of one percent
IV-7
-------
per year on the declining balance of the financing. This fee can be waived
when the unemployment rate in the county is greater than 1% above the national
average.
Many private placement pollution control IDB financings have been
conducted in the State of Maryland under the MIDFA and the regular Industrial
Development Bond program. The minimum size of the private placement issues has
been approximately $90,000.
There are no standard forms used under the Industrial Development Program;
there are in the Maryland Industrial Development Authority Program.
The contact for the regular IDB program is the Director, Division of
Business and Industrial Development, Maryland Department of Economic and
Community Development, 2525 Riva Road, Annapolis, MD 21401; (301) 267-5514.
The contact for the MIDFA program is Executive Director, 1223 Munsey
Building Calvert and Fayette Streets, Baltimore, MD 21202; (301) 383-4348.
2. Sales Tax Exemption
The State of Maryland permits pollution control equipment to be classified
as manufacturer's machinery and equipment. As such, it is entitled to a 50%
reduction in the sales tax, which means a 2% rate as opposed to a 4% rate.
This program is administered by the Retail Sales Tax Division of the State's
Controllers Office located at 301 W. Preston Street, Baltimore, MD 21201. The
reduction in sales tax is permitted when the pollution control equipment is man-
dated by the county, state or federal government. The company need not show proof
when they are filing the sales tax forms that such a mandate has been required.
The company is, however, subject to audit to determine the mandated aspects of the
installation. There is no reduction in the sales tax benefit for pollution control
equipment which returns a saleable by-product.
IV- 8
-------
The value of the pollution control equipment that is classified as manufac-
turing machinery and equipment can include the cost of foundation for the
equipment.
3. Property Tax Exemption
Maryland permits pollution control machinery and equipment to be exempt
from state and/or local personal property taxes. The tax assessors provide
the exemption by not placing the value of the equipment in the assessment
base. No certification is required from a regulatory agency.
There is no such state exemption for real pollution control property
taxes.
Questions on taxes should be directed to the Department of Assessments
and Taxation, State Office Building, Baltimore, MD 21201.
4. Maryland's Environmental Service
The Maryland Environmental Service (MES) conducts pollution control
functions for municipalities or industry. MES has not yet performed this function
for industry. The way in which the service works is to fund itself through tax
free bonds at a low interest rate due to the State's high credit standing. The
proceeds of the issue are then used to build and operate the pollution control
facility for an industry or municipality. The Service then charges the user for
the system on a lease basis.
An industry of sufficient credit strength can request a political sub-
division to issue Industrial Development Bonds in the company's name and based
on it's credit position. However, if the bond rating of the company is less than
IV-9
-------
that of the Maryland Environmental Service, the MES should be considered.
The address and phone number of the Maryland Environmental Service
is State Office Building, Annapolis, MD 21401 (301) 269-3351.
5. State Grants and Loans to Municipalities
The State of Maryland provides one-half of the local share of construc-
tion costs of municipal wastewater treatment plants. One half of the local share
amounts to 12.5% of total costs, which along with a federal grant amounts to
87.5% of costs covered by grants. The state does not have an industrial pay-
back provision when the grant covers wastewater treatment costs for industrial
waste.
The state does not have grants for municipal treatment plant operating and
maintenance costs.
The state's grant program is funded annually by state legislation and
has been adequate in covering the needs of municipalities.
"Hie State does have a loan program for communities that are having
difficulty obtaining the final 12.5% of construction costs that is their respon-
sibility to provide. Industrial payback may be a part of such a loan program,
depending on the municipality's intention to repay the loan from taxes or from
allocated treatment costs.
6. Appalachian Regional Commission
In 1975, Maryland administered ARC grants of approximately $1.2 million
for water and wastewater treatment projects.
IV-10
-------
Pennsylvania
The State of Pennsylvania has the tax-free Industrial Development Bond
financing program for pollution control equipment, a sales and use tax exemp-
tion, rapid amortization of pollution control equipment for state income tax
purposes, and a capital stock tax exemption and franchise tax exemption for
pollution control equipment. Pennsylvania has a grant program for the municipal
wastewater treatment plant construction cost of low income areas. The state
also administers the Appalachian Regional Commission's grant program for munici-
pal water and wastewater treatment facilities.
1. Industrial Revenue Bond and Mortgage Program
In Pennsylvania, practically all sized companies can obtain tax-free
financing for pollution control equipment. This can be done under the
Industrial Revenue Bond program which is similar to that which is described in
Section II.B., or under a mortgage financing program established under the
Pennsylvania Industrial Development Authority (PIDA). Land and buildings can
be financed under the PIDA Mortgage Program; equipment can be financed under
the Industrial Revenue Bond program.
All applications for tax-free industrial development type financing of
pollution control equipment are channelled through a county Industrial Develop-
ment Authority. After approval at the county level, further approval must
also be obtained from the Director of Economic Development of the Pennsylvania
Department of Commerce. A fee for application is charged by most counties. The
amount of the fee will differ from county to county; where it is higher it
effectively minimizes the dollar expenditures that can be attractively financed
under the Industrial Development Bond program. However, by and large, pollution
IV-11
-------
control equipment expenditures of less than $100,000 can be financed under
a tax-free loan program, and in many instances expenditures as low as $25,000
or $30,000 have been financed by private placements on a tax-free basis.
2. Sales and Use Tax Exemptions
Until March, 1977, the State sales and use tax exemption for pollution
control equipment was only applicable if the company was recycling the materials
captured by the pollution control equipment. Thus when the pollution control
equipment merely removed the waste material without some form of recycling, the
equipment was not considered to be eligible for the tax exemption. Now, however,
the State sales and use tax exemption will apply to virtually all pollution
control equipment. A precise definition of pollution control equipment cannot
be determined as of the date of this writing since comments are being received by
the State as to the definition of pollution control equipment for this exemption
program. Certification from a State pollution control agency is not required
for this program.
3. Rapid Amortization of Pollution Control Equipment for State Income
Tax Purposes
The State permits pollution control equipment to be deducted from State
income taxes in the same fashion as the federal government; that is, rapid amortiz-
ation over a 60 month period. The one difference between the State and Federal
income tax deduction programs is that the State does not have an investment tax
credit. Pollution control equipment must be certified by the Department of
Environmental Resources. This has produced a problem in that the Department of
IV-12
-------
Environmental Resources will not certify equipment until it is operating.
For a company that takes up to two to three years to install pollution control
equipment, this prevents them from taking immediate deductions on the portions
of the plant that are installed.
There is no penalty in the State income tax deduction provision for by-
product recovery as there is in the Federal program.
4. Franchise Tax Exemption
A franchise tax is a charge paid by a company for the privilege of con-
ducting operations in a state. The tax is generally assessed as a percentage of
a corporation's net worth, income or assets. In Pennsylvania the tax is applied
to asset value. For franchise purposes, the exemption for pollution control
equipment is claimed by excluding the original cost value of the device from the
numerator of the tangible property fraction on which the tax is computed.
In order to obtain the franchise tax exemption,a schedule must be furnished
by the company reflecting the location, description and the amount of each pollu-
tion control device. In addition, a copy of the certification issued by the
Pennsylvania Department of Environmental Resources must be submitted annually in
support of the exemption. When a Federal certification or a notice of intent to
certify has been issued, a copy must also be submitted for the exemption.
5, Capital Stock Tax Exemption
Pennsylvania charges companies a capital stock tax. In order to compute
the capital stock tax for a company, the average net book value of pollution con-
trol equipment is deducted from the average total assets. In order to obtain the
IV-13
-------
capital stock tax exemption, the same procedures as explained for the franchise
tax exemption must also be followed by a company.
6. State Grants to Municipalities
The State has a 5% grant program for the construction of a municipal
wastewater treatment plant. These grants are applicable to low income areas.
The State examines all Step 1 and Step 2 applications for Federal construction
grant funding in order to determine which municipalities are considered low
income by their criteria. The municipalities are then offered the 5% supple-
mental grant. An industry does not have to pay bade a portion of the grant.
From 1973 to 1976, there have been approximately ten projects that qualify under
this program totalling approximately $1 million in value.
7. Appalachian Regional Commission
In 1975 Pennsylvania administered ARC grants of approximately $5.2 million
for water and wastewater treatment projects.
IV-14
-------
Commonwealth of Virginia
The Commonwealth of Virginia has the following financial assistance
programs for pollution control: industrial development bonds, the permission
for local municipalities to exempt pollution control equipment from property
taxation, a sales and use tax exemption, and a rapid amortization and investment
tax credit provision for Commonwealth income tax purposes. The Commonwealth
of Virginia also administers the federal Appalachian Regional Commission grant
program for municipal water and wastewater treatment facilities. Virginia is
also one of five states in the Coastal Plains Regional Commission which
occasionally provides supplemental grants for wastewater treatment.
1. Industrial Development Bonds Program
Virginia, as do all EPA Region III states, permits pollution control ex-
penditures to be financed by tax-free Industrial Development Bonds. Although
the Commonwealth has general authority over the program, the bonds are issued
through the local authorities. Fees are not charged by the local authorities
to cover administrative costs, though charges are made to cover direct costs
connected with the bond issue. However, some local authorities within Virginia
are beginning to more heavily promote the Industrial Development Bonds program.
To cover such expanded operations, some of the authorities now charge fees.
The conduct of the Industrial Development Bond program in the Commonwealth
of Virginia is as described in Section II.B. IDBs can either be sold publicly
or privately. There is no information at the Commonwealth level as to the
minimum size issue of Industrial Revenue Bonds placed privately.
2. Property Tax Exemptions
The Commonwealth of Virginia permits local municipalities to exempt
IV-15
-------
pollution control facilities from local property taxes and other ad valorem
taxes. The property must be certified by the appropriate air and water
pollution control authorities. Certification procedures for this purpose are
not as rigorous as they are for rapid amortization for federal income tax
purposes or for SBA financing certification.
3. Commonwealth Sales and Use Tax
The Commonwealth of Virginia exempts pollution control facilities
and equipment from Commonwealth sales and use taxes, as are all manufacturing
facilities and equipment.
4. Commonwealth Income Tax Program
The Commonwealth of Virginia permits pollution control equipment to be
treated for state income tax purposes in the same manner as pollution control
equipment is treated for federal income tax purposes. In other words, a company
in the Commonwealth of Virginia can use rapid amortization as described in Section
11.A for state income tax purposes. On the other hand, since the Commonwealth
of Virginia does not have a corporate income tax credit, the companies cannot use
the same 50 percent investment tax credit with rapid amortization that they can
use for federal tax purposes.
5. Grants to Municipalities
In fiscal year 1977, the legislators of the Commonwealth of Virginia did
not provide grant funds for the local construction costs of municipal wastewater
treatment facilities. In the previous year there was a_grants program under
, ' IV-16
-------
which municipal wastewater treatment facilities could obtain a 5% grant,
6. Appalachian Region Commission
In 1975, Virginia administered ARC grants of approximately $1.8 million
for water and wastewater treatment projects.
7. Coastal Plains Regional Commission (CPRC)
The CPRC consists of Virginia, North Carolina, South Carolina, Georgia
and Florida and was established under the Public Works and Economic Develop-
ment Act of 1965. Fiscal 1976 and 1977 budgets each totaled approximately
$10 million. The vast majority of funds are for development projects; only
small amounts are for environmental projects. The CPRC is legally capable of
providing funding for demonstration pollution control projects of a hardware
nature, but have not to this date. The Commission has provided supplemental
construction grants for municipal wastewater systems, but at modest amounts
of approximately $150,000 for each of the last two years. Virginia was not
a recipient of such funds.
IV-17
-------
West Virginia
The State of West Virginia offers pollution control the following
financial assistance programs: an industrial development authority financing
program and a tax credit against business and occupational taxes, a tax deduc-
tion against State Corporate Income Taxes, the absence of a sales tax for pollu-
tion control and other manufacturing equipment, and a personal property tax
exemption. The State of West Virginia also has its own grant program to pay
a portion of the municipal wastewater construction projects and also administers
the Appalachian Region Commission's grant program for water and wastewater
treatment facilities.
1. Industrial Development Bonds
Industrial Development Bond financing for pollution control systems is
conducted by corporations through the various industrial development authorities
of the counties and local municipalities of West Virginia. The program is
basically conducted as described in Section II.B.
Application fees are not charged by the local authorities for processing
and issuing poolution control IDBs. Private placement of pollution control
IDBs with banks or insurance companies is used extensively. The state does
not compile specific records, but private placements of as low as $50,000 are
known to have occurred.
The State Department of Commerce does lend money to local authorities
for the purpose of buying up to 30 percent of the cost of a project. Some
projects may include pollution control, but the major intent of such loans is
to create new jobs. Therefore, as a rule, projects for pollution control only
are not funded by this program.
IV-19
-------
2. Sales Tax Exemption
The btate of West Virginia has a consumer sales tax program. However,
pollution control and other manufacturing equipment are not subject to such tax.
3. Personal Property Tax Exemption
Under the State of West Virginia property assessment procedures, pollu-
tion control equipment is given an 85% tax exemption for its cost plus installa-
tion value. This exemption is conducted as follows: The State Tax Department,
when it receives notice of certification by one of the pollution control agencies,
visits the plant and assesses the value of the personal property that is used for
pollution control equipment. That value (cost plus installation) is then reduced
by 85%. The reduced value is then further reduced by the general assessment
fc
rate of 55%; therefore, only 7-1/2 to 8% of the value of the pollution control
equipment including installation is subject to the personal property tax
of the local authorities. There is no such exemption for pollution control
equipment that is considered land and improvements
4. State Tax Credit for Business and Occupational Tax
The State of West Virginia has a revenue tax called the Business and
Occupational Tax. Pollution control equipment expenditures are treated as a credit
against the tax liability under that tax program, although there is no legislation
IV-20
-------
specifically providing the credit. In fact, its treatment as a credit has
differed somewhat over the years. Past State of West Virginia administrations
have only permitted the credit when the company's financial position was
considered marginal. The matter is currently under review although presently
all pollution control equipment is eligible for the tax credit.
Equipment with a life of 8 years or more is allowed to have a 10%
Business and Occupational tax credit per year for the useful life of the
equipment. A $100,000 piece of equipment would result in the company's
deducting $10,000 from the taxes that it owes under Business and Occupa-
tional Tax program. The amount of the tax credit in any one year for any
one company is limited to 60% -of its tax liability. There is no carry for-
ward of any benefits not able to be used in any one year.
5. State Corporate Net Income Tax Deduction
The State of West Virginia does have a corporate net income tax,
and by law has declared pollution control equipment as eligible for a
deduction. The corporate net income tax is based on a company's federally
adjusted income. Starting from this point, the State then applies its own
systems of deductions or additions to that federal income base. Pollution
control is one of the deductions. The program allows for the entire amount of
the cost of pollution control equipment to be deducted from the corporate net
income tax in one year. If the size of such a reduction should result in
a loss for the company, the amount of the deduction can be carried forward
for up to three years. Although this tax deduction program for pollution
control equipment appears significant, the amount of cororate net income
IV-21
-------
taxes that corporations pay on a yearly basis is minimal.
6. State Grant Program for Municipal Wastewater Treatment Facilities
The State of West Virginia has two programs to assist municipalities
in building wastewater treatment facilities. The first program is to pro-
vide loans to municipalities to enable them to conduct the step 1 and
step 2 processes under the Federal construction grant program. These steps
essentially plan the type of waste water treatment facility that will be
used. The municipality can repay the loan out of the proceeds of the Federal
construction grant that is subsequently received.
In the other program, the State contributes 5% of the eligible cost
of construction as a grant. There is no payback provision on the part
of the municipality even if some of the funds in essence are for the treat-
ment of industrial waste. The State is also in the process of implementing
a special grant program for low income municipalities. This program would
call for 15% grants. The latter program is authorized by legislation of the
State of West Virginia but is not yet implemented; therefore, the status of
industrial payback is not yet determined.
7. Appalachian Regional Commission
In 1975 West Virginia administered ARC grants of approximately $1.7
million for water and wastewater treatment projects.
IV-22
-------
APPENDIX A
RAPID AMORTIZATION CERTIFICATION FORM
FORM APPROVED
OMO NO. 153-ROOI3
ENVIRONMENTAL PROTECTION AGENCY
APPLICATION FOR CERTIFICATION OF POLLUTION CONTROL FACILITY
(Pursuant to Section 169 of the Internal Revenue Code of 1954, as amended)
TO: REGIONAL ADMINISTRA TO R (Region, Street, City. State,
Zip Coda):
THRU: APPROPRIATE STATE WATER OR AIR POLLUTION
CONTROL AGENCY fA'a.719 ol Sta'.o Agency, Street, City, State,
Zip Code):
Application is hereby made for certification of
the pollution control facility described herein. The
following information is submitted in accordance with
provisions of Part 602 of Title 18 of the Code of
Federal Regulations (Volume 36, Federal Register,
page 9509, May 26, 1971) and to the best of my know-
ledge and belief is true and correct.
APPLICANT
I G N A r U H h.
STREET ADDRESS. CITY, STATE, ZIP CODE
NOTE: READ ACCOMPANYING INSTRUCTIONS CAREFULLY PRIOR TO COMPLETING FORM.
EPA Form 3300-1 (9-71) (Page 1)
ORIGINAL
A-l
-------
FORM APPROVED
OMB NO. 1 Sb- ROD I 3
SECTION A - IDENTITY AND LOCATION OF CONTROL FACILITY
I. FULL BUSINESS NAME OF APPLICANT
2. TYPE OF OWNERSHIP
Q INDIVIDUAL
Qj PARTNERSHIP
CORPORATION
OTHER (Describe):
3. PERSON TO CONTACT REGARDING THIS APPLICATION (Name and Title)
TEL EPHONE
ADDRESS (Street, City, Stale, Zip Code)
4. PERSON AUTHORIZED TO RECEIVE CE R Tl Fl CATION ([fame and Title)
ADDRESS (Street, City, State, Zip Coda)
s. BUSINESS NAME OF PLANT (It different trom Item 1) (Street, City, State, Zip Coda)
6. APPLICANT'S
EMPLOYER
IDENTIFICATION NO.
SECTION B - DESCRIPTION OF CONTROL FACILITY
I. DESCRIBE THE FACILITY FOR V.HICH CERTIFICATION IS SOUGHT. INCLUDE TYPE OF EQUIPMENT. MANUFACTURER AND MODEL
NUMBER. SU 0M! T DESIGN CRITERIA. ENGINEERING REPORT AND/OR PERFORMANCE SPECIFICATIONS V.HICH DESCRIBE
FUNCTION AND OPERATION OF FACILITY:
2. IS FACILITY IN OPERATION?
YES
A. IF "YtS" DATE FACILITY
WAS PLACED IN OPERATION
B. IF "NO" DATE FACILITY
IS EXPECTF.D TO BE
PLACED IN OPERATION
3.ir FACILITY CONSISTS OF A
BUILDING. IS IT EXCLUSIVELY
FOR CONTROL OF POLLUTION
D
SECTION C - DESCRIPTION OF COMMERCIAL PROCESS OR ACTIVITY
I. DESCRIBE PROCESS OR ACTIVITY IN CONNECTION WITH WHICH F ACILITY 15 OR WILL BE USED.
2. STANDARD INDUSTRIAL CLASSIFICATION ISIC) CODE NUMBER
3. DATtf THAT fc" A CH PLANT OR OTHER PROPERTY IN COr.'J F-CTION WITH WHICH FACILITY I5ORWILL REUSED, COMMENCCDOPFRATIO
DATE
PLANT OR PROPERTY
EPA Form 3300-] (9-7!) (Poge 2)
ORIGINAL
A-2
-------
FORM APPROVED
OMB NO. I58-RI003
SECTION C - DESCRIPTION OF COMMERCIAL PROCESS OR ACTIVITY
4A. IF FACILITY IS OR VI
PLANTS OR PROPER
JANUARY t, 1969, ST
PROPERTY(IES) IN C
ILL BE USED IN CONNECTION WITH MORE THAN ONE PLANT OR PROPERTY, AND IF ONE OR MORE OF THE
TIES IN CONNECTION WITH WHICH THE FACILITY IS OR WILL BE USED WAS NOT IN OPERATION PRIOR TO
ATE THE PERCENTAGE OF THE COST OF FACILITY WHICH IS ALLOCABLE TO THE PLANT(S) OR
PFRATION PRIOR TO THAT nATF. , y.
40. DESCRIBE THE REASONING AND FURNISH THE DATA USED TO ARRIVE AT THE PERCENTAGE GIVEN IN RESPONSE TO ITEM 41A).
5A. IF FACILITY PERFORMS A FUNCTION OR FUNCTIONS IN ADDITION TO THE ABATEMENT OF POLLUTION, STATE THE
PERCENTAGE OF THE COST OF FACILITY ALLOCA3LE TO THE ABATEMENT OF POLLUTION »
SB. DESCRIBE THE REASONING AND FURNISH THE DATA USED TO ARRIVE AT THE PERCENTAGE GIVEN IN RESPONSE TO ITEM 51A).
SECTION D - WASTEWATER CHARACTERISTICS (To be completed only in connection with focilities for the control of water pollution)
DESCRIBE THE EFFECT OF POLLUTION CONTROL f ACILITY IN TERMS OF QUANTITY AND QUALITY OF EFFLUENT
OR WASTEWATER DISCHARGED AND OF WASTES OR BY-PRODUCTS REMOVED, ALTERED OR DISPOSED OF. IF FEASIBLE,
ATTACH PROCESS FLOW OR SCHEMATIC DIAGRAM WITH MATERIAL BALANCES OF THE WASTE OR WASTEWATER STREAM
OR DISCHARGE. REPORT EITHER ON ACTUAL BASIS OR, IF FACILITY IS NOT YET IN OPERATION, ON DESIGN BASIS
(Use Standard Units pounds/gallon, gra-ns/hter, ppm, etc.)
1. HOURS PLAS.T OR PROPERTY IS IN OPERATION! 8. Per Month: Mil.
b. Per Year: Min.
2. WASTEV. ATER
D! SCH AP G~ IN
(A) GALLONS PEP
Ml NU TE, ( 3) MIL-
LIONS OF GALLONS
PER MO N TH.
WITHOUT POLLUTION CONTROL FACILITY WITH POLLUTION CONTROL FACILITY
3. a
l.r-
3.,1
1 f
t {
,
T h
3 i
MinT , . Max. Aver. ,
Min. Ma-, . Av f.
Mm. . , _ Mfiv. _ A \ P.
Mir- , , Mnvr .. AVI'. . ,
M -
""*
MI r). Mn v. A- .«-,
Mm M'iv A"
ML M'IX A -'
Mm. _ . . Mnv. Av^.
Min. Max. A\ g
Mm. . Mnv. A^
Mm. _ . Ma--:. Ayr-.
EPA Form 3300-1 (9-71) (Page 3)
ORIGINAL
-------
FORM APPROVED
OMB NO. 158-R1003
4. DtSCmBE METHOD (GRAB OR COMPOSITE] AND FREQUENCY OF SAMPLING AND METHODS USED TO DETERMINE QUANTITIES OF
POLLUTANTS.
5. IS FACILITY A PRETREATMENT FACILITY TO PREPARE WASTEWATER FOR RECEIPT BY ANOTHER FACILITY, PUBLIC OR
PRIVATE, FOR FURTHER TREATMENT? IF "YES", SKIP ITEMS 6, 7 AMD 8 AND IDENTIFY RECEIVING FACILITY. Q YES [~|NO
6. lOtNTIFY Twg BODY OR STREAM OF WATER INTO WHICH WASTEVYATER FROM THE PLANT OR PROPERTY, IN CONNECTION WITH
WHICH THE FACILITY IS USED, IS OR WILL BE DISCHARGED.
7. DESCRIBE LOCATION OF DISCHARGE OR OUTFALL WITH RESPECT TO RECEIVING WATERS.
IS THE RECEIVING BODY OR STREAM OF WATER A NAVIGABLE WATERWAY OF THE UNITED STATES OR A TRIBUTARY THEREOF'
(J YES [_J NO IF "NO," PROCEED TO ITEM 9.
A. IF "YES" HAS A U.S. ARVIY CORPS OF ENGINEERS DISCHARGE PERMIT BEEN APPLIED FOR? [ 1 YES [ 1 NO IF "NO,"
EXPLAIN, THEN PROCEED TO ITEM 9.
B. IF AN3V/ER TO ITEM B A IS "YES" HAS A U.S. ARMY CORPS OF ENGINEERS DISCHARGE PE RMI T BEEN 1CSUED? Q YES Q NO
tl) IT "YES," ATTACH COPY OR PFOVID^ PERMIT N U V 3 g p. OMI T ITEM 9.
(2) I T "NO," EXPLAIN, GIVING DATES OF ANY OFFICIAL ACTION I'll TH RESPECT TO APPLICATION.
3. IF ITEM 63 HAS MOT BEEN ANSWERED "YES," IDENTIFY APPLICABLE STATE AND LOCAL WATER POLLUTION CONTROL
REQUIREMENTS AND STANDARDS.
SECTION E - EMISSION CHARACTERISTICS (To be completed only in connection with facilities for the control of oir pollution)
DESCRIBE THE EFFECT OF POLLUTION CONTROL FACILITY IN TERMS OF QUANTITY AND QUALITY OF EMISSION AND
OF \YASTES OR BY-PRODUCTS REMOVED, ALTERED OR DISPOSED OF. IF FEASIBLE, ATTACH PROCESS FLOW OR
SCHEMATIC' DIAGRAM \UTH MATERIAL BALANCES OF POLLUTANTS IN THE EMISSION STREAM. REPORT EITHER ON
ACTUAL BASIS, OR, IF FACILITY IS NOT YET IN OPERATION, ON DESIGN BASIS.
I. HOURS PLANT OR PROPERTY IS IN OPEP.ATION:
a. Per Month: Mm.
b. Per Yea-: Mm.
T.Iax.
Max.
Avp.
A vg.
2. POLLUTANTS TO
B C CONTROLLED
(Specify OOC.V
3 . VOLUMETrilC r L O W
P A T E O P E: v: .-
SION (acfu^l tu6:c
WITHOUT POLLUTION CONTROL FACILITY
WITH POLLUTION CONTROL FACILITY
Mm.
Avf.
b. Mm. .
A. CONG F-M TF' ^ MOM
(in : o/(.'n:e "' '.,
d. Mi,
-°r
Av«. .
AvS.
Win.
Win.
. Max. Avg.
Mm. M.ix.
Mm. .
"F
Min.
Max.
Mm. .
EPA Forti 3300-1 (?-71) (Page 4)
ORIGINAL
A A
-------
FORM APPROVED
OMB NO. 153-ROOI3
7. DESCRIBE METHODS OF DETERMINING RATES, CONCENTRATION AND CHARACTERISTICS OF EMISSIONS.
8. IDENTIFY APPLICABLE STATE AND LOCAL AIR POLLUTION CONTROL REQUIREMENTS AND STANDARDS.
SECTION F - COST INFORMATION (See Note to instructions for this section)
1. IS THERE ANY BY-PRODUCT OR MATERIAL WHICH, WITHOUT T
RECOVERED THROUGH THE USE-OF THE FACILITY? [J YES
CONTROL FACILITY, WOULD BE LOST AND WHICH IS
NO
A. IF YETS. IDENTIFY
B. INDICATE THE DISPOSITION OF EACH TYPE O F RECOVERED M AT ERl AL. INCLUDING IF APPLICABLE, THE SALE OR
SIMILAR DISPOSITION OF RECLAIMED OR RECOVERED MATERIAL TO INDUSTRIAL WASTE RECOVERY FIRMS OR OTHERS.
2. ANNUAL COST
RE CO Vcl RY
A. MATERIAL RECOVERED AND SOLD
B. OTHER
C. TOTAL
3. TOTAL AVERAGE ANNUAL MAINTENANCE AN D OPERATIN G COSTS
(7Vo( applicable it no coat recovery is reported in Item 2}
EPA Form 3300-1 (9-71) (Page 5)
ORIGINAL
A-5
-------
FORM A°PROVED
OMB NO. 158-R0013
ENVIRONMENTAL PROTECTION AGENCY
NOTICE OF STATE CERTIFICATION
(Pursuant to Section 169 of tha Internal Revenue
Code of 1954, as amended)
STATE
WATER OR AIR POLLUTION CONTROL AGENCY OR
AUTHORITY
It is hereby certified that the control facility described in the attached application is in conformity with State and local programs and
requirements for the control of D \vater pollution CD air pollution, as required by section 169 of the Internal Revenue Code of 1954, as
amended, and regulations issued thereunder. According to the applicant, this control facility 1 1 was placed 1 1 will be placed in operation on
, 19
In the case of control facility not yet in operation, this notice is certification only that the control facility, if constructed and operated
in accordance with the application, will be in conformity with State and local programs or requirements for abatement or control of water or
air pollution.
1. NAME OF APPLICANT 2
ADDRESS (Street, City, State, Zip Code)
3. DESCRIPTION Or CONTROL, FACILITY
4. LOCATION OF CONTROL FACILITY (Street, City, State, Zip Code) 5.
PERSON AUTHORIZED TO RECEIVE CERTIFICATION
TITLE
ADDRESS (Street, City, State, Zip Code)
RECEIVING BODY OR STREAM OF V/ATER, IF ANY
6. USE OF THE CONTROL FACILITY CERTIFIED HEREBY IS IN CONFORMITY WITH THE FOLLOWING APPLICABLE STATE PLAN OR
REQUIREMENTS FOR THE CONTROL OF l~l WATER POLLUTION l~l AIR POLLUTION.
ISSUED S
THIS DAY OF 19
STATE CERTIFICATION NUMBER T
GNED (Ofjicial of State Agency)
TLE
EPA Form 3300-2 (9-71)
A-6
-------
FORM APPROVED
OMB NO. 158-R0013
ENVIRONMENTAL PROTECTION AGENCY
NOTICE OF FEDERAL CERTIFICATION
(Pursuant to Section 169 of the Internal Revenue Coda of 1954, as amended)
MXASF, TAKE NOTICE that pursuant to section 169 of the Internal Revenue Code of 1954, as amended, and Part 602 of Title 18 of the
Cod3 ot" Federal Regulations, the control facility identified herein
tH Is certified O Will, if constructed, reconstructed, acquired, erected, installed
and operated in accordance with the accompanying application,
be certified
as being in compliance with the applicable regulations of Federal agencies and the general policies of the United States for cooperation with
the States in the prevention and abatement of Q water pollution [_) air pollution under the Federal Water Pollution Control Act, as
amended (33 U.S.C. 1151 et scq.) or the Clean Air Act, as amended (42 U.S.C. 1857 ei seq.). This certification is based on facts furnished
by the applicant, and is valid for purposes of section 169 only to the extent that such facts are complete and accurate.
1. NAME OF APPLICANT
2. EMPLOYER IDENTIFICATION NUMBER
ADDRESS (Street, City, State, Zip Code)
3. PERSON AUTHORIZED TO RECEIVE CERTIFICATION:
NAME
TITLE
ADDRESS (Street, City, State, Zip Cods)
4. DESCRIPTION OF CONTROL FACILITY
5. LOCATION OF CONTROL FACILITY (Street, Q!y, State, Zip Code)
6. EFFLUENT DISCHARGED TO
7. THE CONTROL FACILITY IDENTIFIED HEREIN Q DOES Q DOES NOT GENERATE PROFITS THROUGH THE RECOVERY AND SALES
OF WASTES, OR OTHERWISE.
8. THE CONTROL FACILITY IDENTIFIED HEREINLU IS LJ IS NOT A BUILDING THE ONLY FUNCTION OF WHICH IS THE ABATEMENT OR
CONTROL OF POLLUTION, AS DETERMINED IN ACCORDANCE WITH SECTION 1.169-2 (2) (I) OF THE INCOME TAX REGULATIONS.
[~] A. THE CONTROL FACILITY IDENTIFIED HEREIN IS USED ONLY IN CONNECTION WITH PLANTS OR PROPERTIES THAT WERE IN
SERVICE: ON OR BEFORE DECEMBER 31,1968.
D B. .% OF THE AMORTIZAOLE BASIS OF THE FACILITY IS ALLOCADLETO ITS USE IN CONNECTION WITH PLANTS OR PROP-
EL' I 1^3 THAT WERE IN SERVICfc. ON OR BEFORE DECEMBER 31, 1968.
A. THE CONTROL FACILITY PERFORMS NO FUNCTION IN ADDITION TO THE ABATEMENT OR CONTROL OF POLLUTION.
B. «,, OF THE AMORTIZADLE BASIS OF THE CONTROL FACILITY IS ALLOCABLE TO THE ABATEMENT OR CONTROL OF
SGUuD
THIS
f ATtfcLi;.
SIGNATURE
DAY OF
.)N NUMBER
EPA Foi'm 3';.'j- i p-/
A-7
-------
APPENDIX B
TUESDAY, FEBRUARY 8, 1977
PART II
ENVIRONMENTAL
PROTECTION
AGENCY
Federal Water Pollution
Control
SMALL BUSINESS
CONCERNS; FINAL
RULEMAKING
-------
8082
RULES AND REGULATIONS
Title 40Protection of Environment
CHAPTER IENVIRONMENTAL
PROTECTION AGENCY
SU3CHAPTEF* AGENERAL
IFRL 599-1]
PART 21SMALL, BUSINESS
Final Rulemaking
Notice is hereby given that the Envi-
ronmental Protection Agency intends to
amend and make final Subchapter A,
Chapter I, Title 40, CFR Part 21, to im-
plement section 8 of the Federal Water
Pollution Control Act Amendments of
1972 (Pub. L. 92-500). This part was pub-
lished in interim final form on August 16,
1974, 39 PR page 2D692. The Small Busi-
ness Administration under 15 TJ.S.C. 636,
is authorized to make loans to assist
small business concerns in adding to or
altering their equipment,,, facilities, or
methods of operation to meet Federal or
State water pollution control require-
ments established under;, the Federal
Water Pollution Control Act. A prerequi-
site to receiving such a loan Is a written
statement issued by the Environmental
Protection Agency or (if appropriate) a
State, certifying that the additions, al-
terations, or methods of operation are
"necessary and adequate1.' to comply with
pollution control requirements estab-
lished pursuant to the AetyThese regula-
tions describe the uniform rules for issu-
ing such statements.
Small business concerns may be eligible
for an SBA loan if the additions, altera-
tions, or methods of operation necessary
for pollution control result from their
engaging in one or more of the following
activities:
1. The business has a discharge requiring
permitting under '.ecclon 402 of the Act.
2. Thf buv.nes"; discharges Into a publicly
owned treatment works which requires pre-
treatrnent by the business.
3. The bus-ness plans to discharge Into a
municipal sewer system through, the con-
struction of a later.il or interceptor sewer,
4. The business is subject to the require-
ments of a Stafe or areawide authority tor
controlling the disposal at pollutants that
may affect groundwater.
5. The business requires a Corp of Engi-
neers permit for dredged or fill material.
6. The business is subject to Coast Guard
or State requ.rements regarding the stand-
ard of performance of marine sanitation de-
vices controlling sewage from vessels.
7. The business is Implementing a plan to
control or pr.n'ent the discharge or .spill of
oil or other hazardous substances.
Additionally an applicant for a certifi-
cation statement must meet eligibility
standards set forth by the Small Busi-
ness Administration. SBA small business
size standards are set out in the FEDERAL
REGISTER, Volume 40, No. 13, January 20,
1915, title 13, Chapter I, part 123. These
standards will be amended as appropri-
ate from time to time. ^
EPA's role under these regulations is
to determine the necessity and adequacy
of the proposed additions or alterations
of equipment, facilities, or methods of
operation in meeting water pollution con-
trol requirements. To receive the requi-
site statement from EPA, or the State
agency which hr\s assumed the program,
an applying small business must demon-
strate that its activities or discharges
will meet the applicable requirements of
the Federal Water Pollution Control Act
for the particular discharge for which
certification is being requested.
An applicant must show that the addi-
tions, alterations, or methods of opera-
tion for which it is applying for SBA
financing are necessary and adequate
for compliance with all of the require-
ments of one or more of such applicable
requirements or is in pursuance of a
known requirement of the Federal Wa-
ter Pollution Control Act of 1972.
EPA, at the time of certification, may1
advise SBA, as well as the applicant, of
compliance steps required to meet any-
other requirements within the specified;
category of eligibility for which an SBA,
loan is being applied.
EPA will not determine the cost-effect
tiveness of the proposed additions or al-!
terations nor will it assess whether or
not other more efficient or technically!
superior alternatives exist. However/,
EPA will attempt to identify those com- -
ponents of the proposed additions,. al-i
terations, or methods of operation whictu '
appear to be extraneous to the achieve-
ment of the degree of pollution abate-
ment required by an applicable standard,
EPA will not issue statements to ap-
plicants for loans to be applied solely
to the preparation or undertaking of
plans to determine the feasibility of or
the design for the anticipated construc-
tion. However, this provision does not
later preclude SBA financial assistance
being utilized for design, plans, and spec-
ification work which are a part of the
additions, alterations, or methods of op-
eration deemed necessary and adequate
by EPA. This exclusion results from the
very nature of the activity conducted, in
that no determination can be made of
the adequacy or necessity of designs,
plans,-, or specifications until they have
been finished. EPA will also not certify
any addition, alteration, or method or
operation for which an SBA loan is not
intended to be sought.
The review by EPA will be a technical
review, with review of the applicant's el-
igibility as a small business and for the
amount of financial assistance requested
to be conducted by SBA. As noted in
§ 21 13 of these regulations, the certifi-
cation by EPA or a State for SBA Loan
purposes in no way constitutes a determi-
nation by EPA or the State that the fa-
cilities certified (1) will be constructed
within the time specified by an applica-
ble standard or (2) will be constructed
and installed in accordance with the
plans and specifications submitted in the
application, will be operated and main-
tained properly, or will be applied to
process wastes which are the same as
described in the application. The certifi-
cation in no way constitutes a waiver by
EPA or a State of its authority to take
appropriate enforcement action against
the owner or operator of such facilities
for violations of an applicable standard.
The application for EPA-issued state-
ments will not generally be subject to
public notice or hearings but will be
available for public inspection during
the period of review by the Regional Ad-
ministrator or during the period of ap-
peal. However, information adequately
identified to the Regional Administra-
tor as being entitled to protection as a
trade secret shall be treated confiden-
tially by the Agency. The Regional Ad-
ministrator shall, when necessary, pro-
vide public notice and conduct a public
hearing regarding a specific application
if he believes that the proposed addition,
alteration, or method of operation may
adversely aSect an interest of the nubile.
Applicants are reminded that the pen-
alties provided under 18 U.S.C. 1001 and
18 U.S.C. 286 can be applied against in-
dividuals who modify, change, or alter
any statements as issuedr or who submit
an application containing false informa-
tion.
Section 7 or the Small Business Act
makes no attempt to apportion responsi-
bilities between the States and EPA.
However, provision is made for States,
upon application to EPA and approval by
EPA, to conduct a program for issuing
statements under these regulations. Since
many applications for additions, altera-
tions, or methods of operation are de-
signed to meet requirements issued and
enforced by the States pursuant to pro-
grams under various sections of the Act,
States are encouraged to accept the re-
sponsibilities for conducting such a
program, and may use funds authorized
under section 106 of the Act for this
purpose.
Applicants will also be subject to sep-
arate regulations promulgated by the
Small Business Administration with re-
gard to their type of business and finan-
cial eligibility and which establish pro-
cedures concerning applications to SBA
for loan assistance.
This regulation does not apply to re-
quests for loans to assist small businesses
in meeting a compliance requirement
under the Clean Air Act as authoxizedJiy,
the Small Business Act, section^TO)) (5)y
A separate program and procedures-ate
established in Title 13Business Credit
and Assistance, Chapter ISmall Busi-
ness Administration, Part 123Disaster
Loans, in Volume 40, No. 13 of the FED-
ERAL REGISTER, page 3210D, January 20,
1975, for these loans. The Small Business
Administration will coordinate directly
with the individual State air pollution
control agencies in this regard.
In a proposed form, these regulations
were reviewed by other Federal agen-
cies and States. Comments were received
from the Departments of Commerce and
Interior, the Small Business Administra-
tion, and the State of Pennsylvania.
Comments were solicited from the Re-
gions who have had nearly two years ex-
perience in the program, as well as from
the SBA, the general public, and profes-
sional and trade associations. The final
regulations reflect those responses.
These final regulations will become ef-
fective March 10,1977.
Dated: January 27, 1977.
JOHN QBARLES,
Acting Administrator.
FEDERAL REGISTER, VOL. 42, NO. 26TUESDAY, FEBRUARY 8, 1977
B-2
-------
RULES AND REGULATIONS
8083
Sec.
21.1 Scope.
21.2 Definitions.
213 Submission of applications.
21.4 Review of applications.
21.5 Issuance ot statements.
21.6 Exclusions.
21 7 [Reserved].
21.8 Resubnussion of application.
219 Appeals.
21.10 Utilization of the statement.
21.11 Public participation.
2112 State issued statements.
21.13 Effect of certification upon authority
to enforce applicable standards.
AUTHORITY: (15 U.S.C. R381. as amended
by Pub. L. 92-500.
§ 21.1 Scope.
This' part establishes procedures for
the issuance by EPA of -the statements,
referred to in section T(g; of the Small
Business Act and sectfoTTS of the Federal
Water Pollution- Control Act Amend-
ments of 1972, to the effect that additions
to or alterations in the equipment, fa-
cilities (including the construction of-
pretreatment facilities and interceptor
sewers), or methods of operations of
small business concerns are necessary
and adequate to comply with require-
ments established under the Federal
Water Pollution Control Act, 33 U.S.C.
1151, etseq.
§ 21.2 Definitions.
(a) "Small business concern" means a
concern defined by section 2 [3] of the
Small Business Act, 15 U.S.C. 632, 13
CFR Part 121, and regulations of the
Small Business Administration promul-
gated thereunder.
(b> For purposes of paragraph 7'g) (2)
of the Small Business Act, "necessary
and adequate" refers to additions, alter-
ations, or methods of operation in the
absence of which a small business con-
cern could not comply with one or more
applicable standards. This can be deter-
mined with referenc to design specifica-
tions provided by manufacturers, sup-
pliers, or consulting engineers; includ-
ing, without limitation, additions, alter-
ations, or methods of operation the de-
sign specifications of which will provide
a measure of treatment or abatement of
pollution in excess of that required by
the applicable standard.
(c) "Applicable Standard" means any
requirement, not subject to an excep-
tion under § 21.6, relating to the qual-
ity of water containing or potentially
containing pollutants, if such require-
ment is imposed by:
<1> The Act;
(2) EPA regulations promulgated
thereunder or permits issued by EPA or
a State thereunder;
(3) P^egulations by any other Federal
Agency promulgated thereunder;
(4) Any State standard or require-
ment as applicable under section 510 of
the Act;
(3) Any requirements necessary to
comply with an areawide management
plan approved pursuant to section 208
(b) of the Act;
<6) Any requirements necessary to
comply with a facilities plan developed
under section 201 of the Act (see 35 CFR,
Subpart E);
(7) Any State regulations or laws
controlling the disposal of aqueous pol-
lutants that may affect groundwater.
(d) "Regional Administrator" means
the Regional Administrator of EPA for
the Region including the State in which
the facility or method of operation is
located, or his designee.
(e) "Act" means the Federal Water
Pollution Control Act, 33 U.S.C. 1151, et
seq.
(f) "Pollutant" means dredged spoil,
solid waste, incinerator residue, sew-
age, garbage, sewage sludge, munitions,
chemical wastes, biological materials,
radioactive materials, heat, wrecked or
discarded equipment, rock, sand, cellar
dirt and industrial, municipal, and agri-
cultural waste discharged into water.
For the purposes of this section, the
term also means sewage from vessels
within the meaning of section 312 of the
Act.
(g) "Permit" means any permit issued
by either EPA or a State under the au-
thority of section 402 of the Act; or by
the Corps of Engineers under section
404 of the Act.
(h) "State" means a State, the Dis-
trict of Columbia, the Commonwealth-
of Puerto Rico, the Virgin Islands,
Guam, American Samoa, and the Trust
Territory of the Pacific Islands.
Comment: As the SB A does not extend Its
program to the Canal Zone, the listing of
the Canal Zone as a State for the purposes
of meeting a requirement imposed by sec-
tions 311 or 312 of the Act Is not effective in
this regulation.
(i) "Statement" means a written ap-
proval by EPA, or if appropriate, a
State, of the application.
(j) "Facility" means any building,
structure, installation or vessel, or por-
tion thereof.
(k> "Construction" means the erection,
building, acquisition, alteration, remodel-
ing, modification, improvement, or ex-
tension of any facility; Provided, That
it does not mean preparation or under-
taking of: Plans to determine feasibility;
engineering, architectural, legal, fiscal,
or economic investigations or studies;
surveys, design, plans, writings, draw-
ings, specifications or producedures.
Comment: This provision would not later
preclude SBA financial assistance being
utilized for any planning or design effort
conducted previous to construction.
(I) The term "additions and altera-
tions" means the act of undertaking con-
struction of any facility.
(m) The term "methods of operation"
means the installation, emplacement, or
introduction of materials, including those
involved in construction, to achieve a
process or procedure to control: Surface
water pollution from non-point sources
that is, agricultural, forest practices,
mining, construction; ground or surface
water pollution from well, subsurface, or
surface disposal operations; activities
resulting in salt water intrusion; or
changes in the movement, flow, or cir-
culation of navigable waters or ground-
waters.
(n) The ternv"vessel" means every
description of watercraft or other artifi-
cial contrivance used, or capable of being
used, as a means of transportation on
the navigable waters of the United States,
other than a vessel owned or operated
by the United States or a State or a
political subdivision thereof, or a foreign
nation; and is used for commercial pur-
poses by a small business concern.
(o) "EPA" means the Environmental
Protection Agency.
(p) "SBA" means the Small Business
Administration.
(q) "Areawide agency" means an area-
wide management agency designated
under section 208(c) (1) of the Act.
(r) "Lateral sewer" means a sewer
which connects the collector sewer to the
interceptor sewer.
tsi "Interceptor sewer" means a sewer
whose primary purpose is to transport
wastewaters from collector sewers to a
treatment facility.
§ 21.3 Submission of applications.
(a) Applications for the statement de-
scribed in § 21.5 of this part shall be
made to the EPA Regional Office for the
Region covering tthe State in which the
additions, alterations, or methods of
operation covered by the application are
located. A listing of EPA Regional Of-
fices, with their mailing addresses, and
setting forth the States within each
Region is as follows:
Region
Address
I
II
III
IV
V
VI
VII
VIII
IX
Regional Administrator, region I, EPA, John V. Kennedy
Federal Bldz., room 230.1, Boston. Mass. (K2l'3.
Regional Administrator, rea-on If. EPA, 26 Federal Plaza,
room M'8. New York, N.Y. t'Wr?
Regional AdTmnistmtor, region III. El'A.. Curtis Bid? ,
6th and WalnutSts., Philadelphia, Pa 19106
Regional Administrator, region IV, EPA, ?Ao CourtUnd
bt. NE . Atlanta, Ga. 30308.
Regional Administrator, region V. TPA, 230 South Dear-
born St , Chicago. III. e»604
Regional Administrator, region \ T, KPA. 1J01 Elm St.,
27th floor, Iirst International l!ld«., 71) Dallas, Tex.
75201
Ke?iorrtl Administrator, region VII, F. PA, 1735 Baltimore
Ave.. Ka.-.vis City, Mo. 641C8.
Rrcionul \diuiristralor, reckon VTII, EPA, 1350 Lincoln
M . sui'e '«X>. Denver, Colo SO-'in.
RcBiunri) AdTi ilalritor, i"ch 'JS1U1.
Conneticut, Maine, Massachusetts, N'aw
Hampshire, Rhode Island, and Vermont.
Ke.v Jersey, New Yorfc, \ir£in Islands, and
Puerto Rico.
IV! iware. District of Columbia, TVnns> Ivama,
Mari 1'tnd, \ iryima, and Wos> \ :r£im,i.
AIal>aina. Florida. Georgia, Kentucky, Mis-
S'.vippi, North Carolina, South ( arohna, and
I'C'P.M^SSO'-
1'hnois. Indiana, Michigan, Mii'ne:>ota, Ohio,
and \\ :s"on.Mn
Ark xn^as lAHnsiana, New Uex.to. Oklahoma,
and Tex.is.
To'.va, Kansas, Missouri, and N'-brosVa.
Color ido, Montana, North I) ikota, ?outh
Dako'a. I't.vii. .tnd Wyonimjr
An/mi i r ih'orni-i, IHwau, NVv.ula. Guam,
A.:i"ii. in Xi'noa 'uid Trust T. rntory of the
1'iM'i" 1 Iird-s
Al i-^k \ Id iho, Ort^on. and W.uslirn^ton.
FEDERAL REGISTER, VOL 42, NO. 26TUESDAY, FEBRUARY 8, 1977
B-3
-------
8084
RULES AND REGULATIONS
(b) An application described In para-
graph (1) of § 21.3(c) may be submitted
directly to the appropriate State, where
a State has assumed responsibility for is-
suing the statement. Information on
whether EPA has retained responsibility
for certification ov whether it has been
assumed by the State may be obtained
from either the appropriate Regional
Administrator or the State Water Pollu-
tion Control Authority in which the fa-
cility is located.
(c) An application need be in no par-
ticular form, however, it must be in
writing and must include the following:
(1) Name of applicant (including
business name, if different* and mail-
ing address. Address of the affected fa-
cility or operation, if different, should
also be Included.
(2) Signature of the owner, partner,
or principal executive officer reouesting
the statement.
' (3) The Standard Industrial Classi-
fication number for the^ business for
which an application is being submitted.
Such SIC number shall be-obtained from
the Standard Industrial "Classification
Manual, 1972 edition. If, the applicant
does not know the SIC for the business, a
brief description of the type of business
activity being conducted should be pro-
vided.
(4) A description of the process or
activity generating the pollution to be
abated by the additions, alterations, or
methods of operation covered by the ap-
plication, accompanied by a schematic
diagram of the major equipment and
process, where practicable.
(5) A specific description of the addi-
tions, alterations, or methods of opera-
tion covered by the application. Where
appropriate, such description will in-
clude'a summary of the facility con-
struction to fcs undertaken; a listing of
the major equipment to be purchased or
utilized in the operation of the facility;
the purchase of any land or easements
necessary to the operation of the fa-
cility; and any other items that the ap-
plicant deems pertinent. Any informa-
tion that the applicant considers to be
a trade secret shall be identified as such.
(6) A declaration of the requirement,
or requirements, for compliance with
which the alterations, additions, or
methods of operation are claimed to be
necessary and adequate.
(i) If the requirement results from a
permit issued by EPA or a State under
section 402 of the Act, the permit num-
ber shall be included.
(ii) If the requirement results from a
permit issued by EPA or a State for a
publicly owned treatment works, the
municipal permit number shall be in-
cluded alonjj witii a written declaration
from the authorized agent for the pub-
licly owned treatment works that re-
ceived the permit detailing the specific
pretreatment requirements being placed
upon the applicant.
(iii) If the requirement initiates from
a plan to include the applicant's effluent
in an existing municipal sewer system
through the construction of lateral or in-
terceptor sewers, a written declaration
from the authorized agent from the pub-
licly owned treatment works shall be in-
cluded noting that the sewer construc-
tion is consistent with the integrity of
the system; will not result in the capacity
of the publicly owned treatment works
being exceeded; and where applicable, is
consistent with a facilities plan developed
under section 201 of the Act (see 35 CFR
Part 907).
(iv) If the requirement results from a
State order, regulation, or other enforce-
able authority controlling pollution from
a vessel as provided by section 312(f) (3)
of the Act, a written declaration from
the authorized agent of the State speci-
fying the control measures being required
of the applicant shall be included.
(v) If the requirement is a result of
a permit issued by the Corps of Engineers
related to permits for dredged or fill ma-
terial as provided by section 404 of the
Act, a copy of the permit as issued shall
be included, i
(vi) If the requirement results from
a standard of performance for control
of sewage, from vessels as promulgated
by the Co&st Guard under section 312(b)
of the Act, the vessel registration num-
ber or documentation number shall be
included.
(vii) -If the requirement results from
a plan to'control or prevent the dis-
charge or spfll of pollutants as identified
in section 311 of the Act, the title and
date of that plan shall be included.
(viii> If the requirement is the result1.
of an order by a State or an areawide-
management agency controlling the dis-
posal, of aqueous pollutants so as to pro-
tect groundwater, a copy of the order as
issued shall be included.
(7) Additionally, if the applicant has
received from a State Water Pollution
Control Agency a permit issued by the
State within the preceding two years,
and if such permit was not issued under
the authorities of section 402 of the Act,
and where the permit directly relates to
abatement of the discharge for which a
statement is sought, a copy of that per-
mit shall also be included.
Comment: Some States under State permit
programs, separate and distinct from toe
KPDES permit program under the Act, con-
duct an engineering review of the facilities
or equipment that would be used to control
pollution. The results of sv.ch a review would
be materially helpful In determining the ne-
cessity and adequacy of any alterations or
additions.
(8) Any written information from a
manufacturer, supplier or consulting en-
gineer, or similar independent source,
concerning the design capabilities of the
additions or alterations covered by the
application, including any warranties,
warranty limitations or certifications ob-
tained from or provided by such sources
which would bear upon these design and
performance capabilities. The Regional
Administrator may waive the require-
ment for this paragraph if it appears
that there is no independent source for
the information described herein; as, for
example, when the applicant has de-
signed and constructed the additions or
alterations with in-house capability.
(9) An estimated schedule for the
construction or implementation of the
alterations, additions, or methods of op-
eration.
(10) An estimated cost of the altera-
tions, additions, or methods of operation,
and where practicable, the individual
costs of major- elements of the construc-
tion to be undertaken.
(11) Information on previously re-
ceived loan assistance under this section
for the facility or method of operation,
including a description and dates of the
activity funded.
(d) A separate application must be
submitted for every addition, alteration,
or method of operation that is at a sepa-
rate geographical location from the ini-
tial application.
Comment: As an example, a chain naa
four dry cleaning establishments scattered
through a community. A separate application
would have to be filed for each.
(e) No statement shall be approved
for any application that has not included
the information or declaration require-
ments imposed by paragraph (c) (6) nr
§ 21.3.
(f ) All applications are to be submit-
ted in duplicate.
(g) All applications are subject to the
provisions of 18 U.S.C. 1001 regarding
prosecution for the making of false
statements or. Ihe.concealing of material
(h) Instructional guidelines to assist
in the submission of applications for EPA
certification are available from EPA or
a certifying State.
§ 21.4 Review of applications*.
'a) The Regional Administrator or
his designse will conduct a review of the
application. This review will consist of a
general assessment of the adequacy of
the proposed alterations, additions, or
methods of operation. The review will
corroborate that the proposed altera-
tions, additions, or methods of operation
are required by an applicable standard.
The review will identify any proposed
alterations, additions, or methods of op-
eration that are not required by an
applicable standard, or that are extran-
eous to the achievement of an applicable
standard.
(b) The assessment of adequacy will
be conducted to ensure that the proposed
additions, alterations, or methods of
operation are sufficient to meet one or
more applicable standards whether alone
or in conjunction with other plans. The
assessment will not generally examine
whether other alternatives exist or which
would be more meritorious from a cost-
effective, efficiency, or technological
standpoint.
(c) An application which proposes
additions, alterations, or methods of
oneration whose design, in anticipation
of a future requirement, will achieve a
level of performance above the require-
ments imposed by a presently applicable
standard shall be reviewed and approved
by EPA or a State \\ ithout prejudice. The
amount of financial assistance for such
an application will be determined by
SBA.
FEDERAL REGISTER, VOL 42, NO. 26TUESDAY, FEBRUARY 8, 1977
B-4
-------
RULES AND REGULATIONS
8085
(d) The Regional Administrator shall
retain one copy of the application and a
summary of the action- taken on it. Upon
completion of his review, the Regional
Administrator shall return the original
application along with any other sup-
porting documents or information pro-
vided to the applicant along with a copy
to the appropriate SBA district office for
processing.
§ 21.5 Issuance of statements.
(a) Upon application by a small busi-
ness concern pursuant to § 21.3 the
Regional Administrator will, if he .finds
that the additions, alterations, or meth-
ods of operation covered by the applica-
tion are adsquate and necessary to com-
ply with an applicable standard, issue a
written statement to the applicant to
that effect, within 45 working days fol-
lowing receipt of f.he application, or with-
in 45 working days following receipt of
all information required to be submitted
pursuant to $ 21.3(c), whichever is later.
Such a written statement shall be
classified as a full approval. If an appli-
cation is deficient In any respect, with
regard to the specifications for submis-
sion listed in § 21.3(c), the Regional Ad-
ministrator shall promptly, but in no
event later than 30 working days follow-
ing receipt of the application, notify the
applicant of such deficiency.
(b) (1) if an application contains pro-
posed alterations, additions, or methods
of operation that are adequate and nec-
essary to comply with an applicable
standard but also contains proposed al-
terations, additions, or methods of opera-
tion that are not necessary to comply
with an applicable standard, the Re-
gional Administrator shall conditionally
approve the application within the time
limit specified in paragraph (a) of this
section, and shall also identify in the ap-
proval those alterations, additions, or
methods of operation that he determines
are not necessary.
(2) Conditional approvals as con-
tained in a statement will satisfy the
requirements for approval by EPA for
those alterations, additions, or methods
of operation determined to be necessary
and adequate. Such conditional approv-
als may be submitted to SBA in satis-
faction of the requirements of section
7(g) '2) (3) of the Small Business Act.
(3) Conditional approvals will not sat-
isfy the requirements for approval by
EPA for those alterations, additions, or
methods of operation included in the
application that are determined not to
be necessary. Unnecessary alterations,
additions, or methods of operation are
those which are extraneous to the
achievement of an applicable standard.
(4) Conditional approvals may be ap-
pealed to the Deputy Administrator by
an applicant in accordance with the
procedures identified in § 21.8.
(c) If the Regional Administrator de-
termines that the additions, alterations,
or methods of operation covered by an
application are not necessary and ade-
quate to comply with an applicable
standard, he shall disapprove the appli-
cation and shall so advise the applicant
of such deterhiination within the time
limit specified in paragraph (a) of this
section, and shall state in writing the
reasons for his determination.
(d) Any application shall be disap-
proved if the Regional Administrator de-
termines that the proposed addition, al-
teration, or method of operation would
result in the violation of any other re-
quirement of this Act, or of any' other
Federal or State law or regulation with
respect to the protection of the environ-
ment.
( e ) An_ application need not demon -
strate ffiat" ~~~ ~
"operatloT""
^
The applicant need only cSemonstratS
that the additions, alterations, or meth-
ods of operation will assist in ensuring
compliance with one or more- of the ap-
plicable standards for which financial
assistance is being requested.
Comment: As an example, a small busi-
ness has two discharge pipes one for proc-
ess water, the other for cooling water. The
application for loan assistance is to control
pollution from the process water discharge.
However, EPA or a State may review the
applicant's situation and Identify for SBA
that the applicant Is subject to other re-
quirements for which the applicant has not
sought assistance
(f) An application should not include
major alternative designs significantly
differing in scope, concept, or capability.
It is expected that the applicant at the
time of submission will have selected the
most appropriate or suitable design for
the addition, alteration, or method of
operation.
fg) EPA will not provide assistance in
the form of engineering, design, planning
or other technical services to any appli-
cant in the preparation of his applica-
tion.
(h) An applicant may be issued a cer-
tification for additions, alterations, or
methods of operation constructed or un-
dertaken before loan assistance was ap-
plied for by the applicant. Any such
applications would be reviewed by SBA
for eligibility under SBA criteria, includ-
ing refinancing and loan exposure.
§ 21.6 Exclusions.
(a) Statements shall not be issued for
applications in the following areas:
(1) Local requirements. Applications
for statements for additions, alterations,
or methods or operation that result from
requirements imposed by municipalities,
counties or other forms of local or Re-
gional authorities and governments, ex-
cept for areawide management agencies
designated and approved under section
208 of the Act, shall not be approved;
except for those requirements resulting
from the application of pretreatment re-
quirements under section 307(b) of the
Act; or those resulting from an approved
project for facilities plans, and devel-
oped under section 201 of the Act, (See
35 CFR Subpart 3) ; or under a delega-
tion of authority under the Art.
C2i Cost recovery and user charges..
Applications for statements involving a
request for financial assistance in meet-
ing revenue and service charges imposed
upon a small business by a municipality
conforming to regulations governing a
user charge or capital cost system under
section 204(b) (2) of the Act (See 35
CFR 925-11 and 925-12) shall not be
approved.
(3) New facility sewer construction.
Applications for statements involving
projects that involve the construction of
a lateral, collection, or interceptor sewer,
at or for a facility that was not in exist-
ence on October 18, 1972, shall not be
approved. Applications for additions,
alterations, or methods of operation for
new facilities that do not involve sewer
construction are not affected by this pre-
clusion. Further, if an applicant is com-
pelled to move as a result of a relocation
requirement but operated at the facility
prior to October 18,1972, the cost of con-
struction for a lateral, collection, or in-
terceptor sewer can be approved for the
new, relocated site. For the purpose of
this exclusion lateral, collection, or in-
terceptoi sewer is determined as any
sewer transporting waste from a facility
or site to any publicly owned sewer.
(4) Other non-water related pollution
abatement additions, alterations, or
methods of operation which are not in-
tegral to meeting- the requirements of
the Act, although they may be achieving
the requirements of another Federal or
State law or regulation.
Comment: An example would be where
stack emission controls were required on
equipment that operated the water pollu-
tion control facility. This emission control
equipment as an integral part of the water
pollution control system would be approv-
able. However, emission control equipment
for a general purpose incinerator that only
incidentally burned sewage sludge would not
be approvable. The general purpose incin-
erator might also receive loan assistance but
under separate procedures than those set out
for water pollution control.
(5) Privately owned treatment facility
service or user costs. Applications for
statements involving financial assistance
in meeting user cost or fee schedules re-
lated to participating in a privately
owned treatment facility not under the
ownership or control of the applicant
shall not be approved.
(6) Operation and maintenance
charges. Applications for statements
containing a request for, financial assist-
ance in meeting the operations and'
maintenance costs of operating the ap-
plicant's additions, alterations, or meth-
ods of operation shall not be approved
for any elements relating to such areas
of cost.
(7) Evidence of financial responsibil-
ity. Applications for statements contain-
ing a request for financial assistance in
meeting any requirements relating to
evidence of financial responsibility as
provided in section 311 (p) of the Act
shall not be approved.
§21.7 [Reserved]
Comment- Applications for a statement re-
sulting from a requirement to control pol-
lution from non-point sources as identified
In section 304(e) (2) (A-P) of the Act and
described In § 21.2(m) will not presently b»
FEDERAL REGISTER, VOL. 42, NO. 26TUESDAY", FEBRUARY 8, 1977
B-5
-------
8086
RULES AND REGULATIONS
Issued a statement under 5 21.5 unless the
requirement Is established through a permit
under Section 402. There Is no requirement
under the current Act that the Federal gov-
ernment directly control pollution from such
sources, and the nature and scope of State
or area wide management agency proposals or
programs to control such sources cannot be
determined at this time. As State and area-
wide plans for control of nonpotnt sources
being prepared under 208 of the-Act, will not
be completed for several years, this section
is being reserved pending a future determi-
nation on the eligibility ot applications re-
lating to nonpomt sources tcf receive a state-
ment under this part.
§ 21.8 Re<\ibnii3«ion of application.
(ai A small business- concern whose
application is disapproved may submit
an amended or corrected application to
the Regional Administrator at any time.
The applicant shall provide the date of
any previous application.
§21.9 Appeals. :'^f ,
(a) An applicant aggrieved by a deter-
mination of a Regional' Administrator
under §21.5 .may appeal, la/writing to
the Deputy Administrator of the Envi-
ronmental Protection Agency, within 30
days of the date of th&-> determination
from which an appeal is taken; provided
that the Deputy Administrator;may, on
good cause shown, accept- an appeal at a
later time.
(b) The applicant in requesting such
an appeal shall submit to the Deputy
Administrator a copy of the complete
application as reviewed by the Regional
Administrator.
(c) The applicant should also provide
Information as to why It believes the
determination made by the Regional
Administrator to be in error.
(d) The Deputy Administrator shall
act upon such appeal within 60- days of
receipt of any complete application for a
review of the determination.
(e) Where a State has been delegated
certification authority, the procedure for
appeals shall be established in the State
submission required in § 21.12.
§ 21.10 Utili/ation of the statement.
(a) Statements issued by the Regional
Administrator will be mailed to the
small business applicant and to the dis-
trict office of the Small Business Admin-
istration serving the geographic area
where the business is located. It is the
responsibility of the applicant to also
forward the statement to SBA as part of
the application of a loan.
(b) Any statement or determination
issued under § 21.5 shall not be altered,
modified, changed, or destroyed by any
applicant in the course of providing such
statement to SBA. To do so can result
in the revocation o£ any approval con-
tained in the statement and subject the
applicant to the penalties provided in 18
U.S.C. 1001.
(c) If an application for which a state-
ment is issued under § 21.5 is substan-
tively changed in scope, concept, design,
or capability prior to the approval by
SBA of the financial assistance requested,
the statement as issued shall be revoked.
The applicant must resubmit a revised
application under § 21.3 and a new re-
view must be conducted. Failure to meet
the requirements of this subparagraph
could subject the applicant to the pen-
alties specified in 18 U.S.C. 1001 and 18
U.S.C. 286. A substantive change is one
which materially affects the performance
or capability of the proposed addition,
alteration, or method of operation.
(d) An agency, Regional Administra-
tor, or State issuing a. statement under
§ 21.5 shall retain a complete copy of the
application for a period of five years after
the date of issuance of the statement.
The application shall be made available
upon request for inspection or use at any
time by any agency of the Federal
Government.
(e) No application for a statement or
for financial assistance under this sec-
tion or statement issued under this sec-
tion shall constitute or be construed as
suspending, modifying, revising, abrogat-
ing or otherwise changing the require-
ments imposed on the applicank^by the
terms, conditions, limitations or sched-
ules of compliance contained in an appli-
cable standard, permit, or other provi-
sion established or authorized under the
Act or any State or local statute, ordi-
nance or code.
(f) No statement as issued and re-
viewed shall be construed as a waiver to
the applicant's fulfilling the require-
ments of any State or local law, statute,
ordinance, or code (including building,
health, or zoning codes).
(g) An amended application need not
be submitted if the facility, property, or
operation for which the statement is is-
sued is sold, leased, rented, or transferred
by the applicant to another party prior
to approval by SBA of the financial as-
sistance: Provided, That there is or will
be no substantive change in the scope,
concept, design, capability, or conduct of
the facility or operation.
Comment: However, eligibility for financial
assistance would be reexamlned by SBA with
regard to any such sales, lease, rental or
transfer.
(h) The Regional Administrator may
include in any statement a date of ex-
piration, after which date the approval
by the Regional Administrator contained
in the statement shall no longer apply.
The date of expiration shall not become
effective if the applicant has submitted
the statement to the SBA, prior to the
date of expiration, as part of the appli-
cation for financial assistance.
§ 21.11 Public participation.
(a) Applications shall not generally be
subject to public notice, public comment,
or public hearings. Applications during
the period of review as stated in § 21.5,
or during the period of appeal as pro-
vided in § 21.8, shall be available for
public inspection. Approved applications
as provided hi § 21.10(d) shall be avail-
able for public inspection at all times
during the five year period.
(b) The Regional Administrator, if he
believes that the addition, alteration, or
method of operation may adversely and
significantly affect an interest of the
public, shall provide for a public notice
and/or public hearing on the application.
The public, notice and/or public hearing
shall be conducted in accordance with
the procedures specified for a permit
under 40 CFR 125.32 and 40 CFR 125.34
(b).
(c) Where the applicant is able to
demonstrate to the satisfaction of the
Regional Administrator that disclosure
of certain information or parts thereof
as provided in § 21.3(c) (5) would result
in the divulging of methods or processes
entitled to protection as trade secrets,
the Regional Administrator shall treat
the information or the particular part
as confidential in accordance with the
purposes of section 1905 of Title 18 of the
United States Code and not release it to
any authorized person. Provided, how-
ever, That if access to such information
is subsequently requested by any person,
there will be compliance with the proce-
dures specified in 40 CFR Part 2. Such
information may be disclosed to other
officers, employees, or authorized repre-
sentatives of the United States concerned
with carrying out the Act or when rele-
vant in any proceeding under the Act.
§ 21.12 State issued statements.
(a) Any State after the effective date
of these regulations may submit to the
Regional Administrator for his approval
an application to conduct a program
for issuing statements under this section.
(1) A State submission shall specify
the organizational, legal, financial, and
administrative resources and procedures
that it believes will enable it to conduct
the program.
(2) The State program will constitute
an equivalent effort to that required by
EPA under this section.
(3) The State organization responsible
for conducting -the program should be
the State water pollution control agency,
as denned in section 502 of the Act.
(4) The State submission shall pro-
pose a procedure for adjudicating appli-
cant appeals as provided under § 21.9.
(5) The State submission shall identify
any existing or potential conflicts of in-
terest on the part of any personnel who
will or may review or approve applica-
tions.
(i) A conflict of interest shall exist
where the reviewing official is the spouse
of or dependent (as defined in the Tax
Code, 26 U.S.C. 152) of an owner, part-
ner, or principal officer of the small busi-
ness or where he has or is receiving from
the small business concern applicant 10
percent of gross personal income for a
calendar year, except that it shall mean
50 percent gross personal income for a
calendar year if the recipient is over 60
years of age and is receiving such portion
pursuant to retirement, pension, or simi-
lar arrangements.
(ii) If the State is unable to provide
alternative parties to review or approve
any application subject to conflict of in-
terest, the Regional Administrator shall
review and approve the application.
(b) The Regional Administrator, with-
in 60 days after such application, shall
approve any State program that con-
forms to the requirements of this sec-
FEDERAl REGISTER, VOL 42, NO. 26TUESDAY, FEBRUARY 8, 1977
B-6
-------
RULES AND REGULATIONS
8087
tion. Any such approval shall be after
sufficient notice has been provided to the
Regional Director of SBA.
(o If the Regional Administrator dis-
approves the application, he shall notify
the State, in writing, of any deficiency
in its application. A State may resubmit
an amended application at any later
time.
(d) Upon approval of a State submis-
sion, EPA will suspend all review of ap-
plications and issuance of statements for
small businesses in that State, pending
transferral. Provided, however, That in
the event of a State conflict of interest
as identified in I 21.12(a) (4) supra, EPA
shall review the application and issue the
Statement.
(e) Any applications shall, if received
by an EPA Regional Office, be forwarded
promptly to the appropriate State for
action pursuant to section 7(g) (2) of the
Small Business Act and these regula-
tions. /
(f) Cl> EPA will generally not review
or approve individual statements issued
by a State. However, SBA, upon receipt
and review of a State approved state-
ment may request the Regional Admin-
istrator of EPA to review the statement.
The Regional Administrator, upon such
request can further approve or disap-
prove the State issued statement, in ac-
cordance with the requirements of § 21.5.
(2) The Regional Administration will
periodically review State program per-
formance. In the event of State program
deficiencies the Regional Administrator
will notify the State of such deficiencies.
<3) During that period that any
State's program is classified as deficient,
statements issued by a State shall also
be sent to the Regional Administrator
for review. The Regional Administrator
shall notify the State, the applicant, and
the SBA of any determination subse-
quently made, in accordance with § 21.5
of this part, on any such statement.
(i) If within 60 days after notice of
such deficencies has been provided, the
State has not taken corrective efforts,
and if the deficiencies significantly affect
the conduct of the program, the Regional
Administrator, after sufficient notice has
been provided to the Regional Director
of, SBA, shall withdraw the approval
of the State program.
(U) Any State whose program is with-
drawn and whose deficiencies have been
corrected may later reapply as provided
in 5 21.12(a).
(gi Funds appropriated under section
106 of the Act may be utilized by a State
agency authorized to receive such funds
in conducting this program.
§ 21.13 Effect of certification upon au-
thority to enforce applicable stand-
ards.
The certification by EPA or a State for
SBA Loan purposes in no way constitutes
a determination by EPA or the State
that the facilities certified (a) will be
constructed within the time specified by
an applicable standard or (b) will be
constructed and installed in accordance
with the plans and specifications sub-
mitted in the application, will be oper-
ated and maintained properly, or will be
applied to process wastes which are the
same as described in the application. The
certification in no way constitutes a
waiver by EPA or a State of its authority
to take appropriate enforcement action
against the owner or operator of such
facilities for violations of an applicable
standard.
[FR Doc.77-3866 Piled 2-7-77;8:45 am]
FEDERAL REGISTER, VOL. 42, NO. 26TUESDAY, FEBRUARY 8, 1977
B-7
-------
X
II
Q
LU
a,
CL,
co
CQ
§
"Z,
tu
o
ct
tu
Q
2;
to
tu
to
to
tu
a:
a
t 1
1 1
to
to
1
f^
CD
LO
LO
t4
CM
0
rt
\Q
CD
P
H
3
to
*v
X
f>
,£>
o
,-j
p
to
CD
^g
\
O
f-4
rt
^
0"
to
JH
CD
f-vf
O
O
a
, !
rt
O
O
CTl
r-f
t-H
t 1
to
to
1
f-v.
CTl
LO
LO
,4
CM
O
O
rt
CD
P
H
|3
co
*\
X
,0
0
p
to
rt
W
f\
O
fn
rt
^
cf
co
f-l
CD
O
CD
Q
t i
rt
0
O
CT)
i I
LO
CM
OO
to
1
CM
00
t^
i i
r^
jj
O
CD
4_)
co
ro
c
^^
4-*
j_j
o
2:
t i
, t
i
^
CO
0
f-H
I-~
i~4
T^-
O
^f
^O
1
CO
CM
CO
r^.
ti
r^
4_)
CD
CD
£-4
P
co
p^
H
rt
S
to
^j-
to
tl
o
r~*.
00
t 1
>3-
ai
CM
vD
1
t 1
t^
LO
CM
O
to
LO
14
O
to
^
c2
X
bO
T3
t 1
CQ
p I
rt
CD
^0
(D
H_
*
4J
CD
f-i
CO
tiQ
c
H
J^
^j.
^j-
00
, i
O
CO
t-4
tl
t4
to
to
1
CM
vO
CT.
tl
0
to
*T3
rt
o
CM
i-^
M
o
0
o
00
^
0
CM
I 1
CM
tl
*o
^*
to
1
^J-
CM
\D
,-j-
O
to
ci
-a
, i
ca
to
CD
T3
C
^
O
,-J
rk
1 1
O
to
p
DH
s
P
CD
^4
P
CO
*"O
£_l
to
.
py^
C7i
O
t 1
-4
O
to
vO
CM
t^~
CM
CM
t-4
1
to
rt
to
-j-
0
to
OO
CM
vD
CD
P
H
3
CO
*i
rt
tsl
rt
&!
i i
rt
C
O
H
P
rt
PJ
o
P
t/i
CD
i-H
JH
rt
U
t-4
O
to
LO
CM
t 1
t-4
to
to
1
rt
vO
CM
t t
rt
rM
0
rH
g
c2
^>
<^
X
p
H
3
to
3S
£2^
\
4_)
.
s=
w>
3
to
^
j^
rt
t-H
U
o
Q
<^
^>
.
31
c
o
p
10
CD
r-4
^
rt
r£*
°
O
ca
rt
H
C
rt
i i
X
to
C
C
CD
CL,
^j-
bo
j_i
3
,£)
to
P
P
H
CU
O
a
rt
H
C
H
IX
H
TJ
O
^
CJ
H
O
Q
CJ
a
c
o
p
c:
H
x:
rt
CD
o
«
§
H
bo
I
O
O
H
M-l
O
P
O
P
t/)
H
Q
O
Q
O
O
H
O
o
rt
CQ
I
o
CQ
C-l
-------
APPENDIX D
SMALL BUSINESS ADMINISTRATION
APPLICATION FOR LOAN
(See Initructioni on Page 2)
SBA LOAN NUMBER
1 APPLICANT (Show official name without abbrcviationa utllesa in abbreviation in a part ot the official name. For proprietor or parlnerahip, ahow name(a)
followed br d/b/a and trade name u>ed, if any)
City
County
State
ZIP Code
Tele No
Employer's I D Number
Date of Application
Amount of Loon Requested
Maturity Requested
Type ol Business
Date Established
Franchise I I Yes
No If Yes, Submit Copy
[~~1 Exi sting Bu siness
Q New Business
Number of Employees (Including aubaid-
lanea and affiliates)
At Time of Application
If Loan is Approved
2 Use ol Proceeds
Land Acquisition $ _
New Building or plant construction J_
Debt Payment I.
_ Acquisition and/or repair of machinery and equipment t _
_ Working Capital t
_Other t
Total t
a SUMMARY OF COLLATERAL OFFERED (Attach detailed list of collateral offered - See Hem 8(16), page 2)
-ost Net Book Value Present Li«ns Or
(Cost Less Depreciation) Mortgage Balance, If Any
Land and Buddings .
Business machinery and equipment ,
Business furniture and fixtures, .
Inventory . ... . .
Other (specify) ,
4 AS ADDITIONAL SECURITY, PAYMENT OF THE LOAN WILL BE GUARANTEED BY
Nome and Address (Include ZIP Code and Social Security Number of Guarantors) N et W°r'h Outside
(Each principal must submit a signed perioanl balance sheet BS of the same date as the applicant's balance sheet) Interest In
Applicont Compony
$
5 DISCLOSURE OF SPECIAL INFORMATION REGARDING PRINCIPALS (a) List below the names of any SBA employees or SBA adv.aory board members
who are related by blood, marriage or adoption to, or who have any present or have had any past, direct or indirect, financial interest in or in association
with, the applicant, or any of its partners, officers, directors or principal stockholders (such interest to include any direct or indirect financial interest in
anv other business entity or enterprise) (b) When the proprietor, or any partner, officer, director, or person who holds 10 percent or more of the applicant's
stock is an investor in a licensed Small Business Investment Company, or a proposed investor in an SB/C which has filed for a license, detailed informa-
tion shall be submitted with this application, and (c) Likewise, if any person identified in (b) above, or their spouse, is an employee of the U S Govern-
ment (including members of the armed forces), detailed information shall be submitted with this application (Use separate sheet if necessary)
If none, check here f" (a) [^] (b) Q Icl
Name and Address (Include ZIP Code) Details of Relationship or Interest
6 MANAGEMENT 11) Names of all owners, officers, directors or partners and theirannual compensation, including salaries, fees, w.thdrawals, etc (complete
all columns). (21 Names and compensation of all employees receiving in excess of 117,500 annually (3) All stockholders having a 20% or more interest
Nome (List first, middle, maiden & last ) .in
, r ,,, rtic i, i , Annual Percent Guaranty Corned for
(If no middle name, so state Office Held ,- -, , rt,, , , ,
Compensotion Ownership Offered Benefit of
Home Address (Include ZIP Code) - {Yes Qf No}
*Life insurance on ownerfs? or pnncipsKs) will bf required ONLY when specifically included as a condition of an approved loan.
7 RECENT EFFORTS TO OBTAIN CREDIT (For D.recf Loan Applicant. Only)' The SEJA ,. authorized to make loans to buainess enterprises only when the
declining tu participate with SBA mult b« obtained from the following lending institution* (a) The applicant's bank of account, and (b) If the amount of the
CREDIT INFORMATION Applicant expressly authorizes disclosure of .11 information submitted m connection with this spuhcation and any resulting loan
desired) ^ _^
PARTICIPATION Will any lending institution participate with SBA in the loan requested' Q Yes Q No If "Ye," institution .h.11 execute Appli-
PAGE 1 OF .
SBA FORM 4 (11-71) REF ND 510-1 A REPLACES APPLICATION FOR LOAN PARTS OF SBA FORMS 4 PARTI 4 A, 6B . 527, 528 A.
394, 652 AND 6528
D-l
-------
INSTRUCTIONS TO APPLICANT
Direct Loans - Submit one copy of this form and all supporting documents la SBA
Participation Loans - Submit two copies of this form and all supporting documents to the participating bank
All attachments must be signed and dated
(0 SBA Form 912 must be submitted in quadruplicate by the proprietor, if a sole proprietorship, by each partner, if a
partnership, by each officer, director, and each holder of 20 percent or more of the voting stock, if a corporation,
and other person, including a hired manager, who has authority to speak for and commit the borrower in the manage-
ment of the business. In addition, applicant must submit a signed copy of SHA Form 641, "Request (OY Counseling,"
w ith trie application.
(2> Attach to application a brief description and history of ;he business
(3) Comment briefly on the benefits the business will receive if the loan is obtained.
(4) Attach a schedule on all installment debts, contracts, notes and mortgages payable, showing to whom payable,
original amount, original dale, present balance, rale of interest, maturity date, monthly payment, security and
whether current or delinquent. (Amounts on this schedule should agree with the figures on the applicant's financial
statement.) Indicate by an astenk (*), items to be paid by loan proceeds and reason for paying same.
(5) If construction is involved, slate the estimated cost, source of any additional funds which may be required to com-
plete the construction and whether temporary financing for the construction is available. Furnish preliminary plans
and sppcifiraMnns wfh 'he application. Finaj__jjlans and specifications must be submitted for SBA/Lender approval
prior to commencement of construction if loan is approvei"J! "" ~ " " "
(6) Where loan funds will be used for construction purposes, and the contract or subcontracts are in excess of $10,000,
the Applicant must execute and submit with the application "Applicant's Agreement of Compliance," SBA_£oiQl-fiDl-,
which is a non-discrimination agreement issued pursuant to LVeculive Order 1 1 246.
^ (7) Where purchase of machinery and equipment is involved, furnish a detailed list of items to be purchased and the
estimated cost thereof.
(8) For each person listed in "Management" give brief description of education, technical training, employment and
business experience.
(9) Attach balance sheets for the past 3 fiscal years
(10) Attach balance sheel dated within 90 days from date of filing application with aging of acrounls receivable and
payable.
(11) Attach Profi t and Loss Statement for pa si three fiscal years and for tis much of current vear as is available. (If
operating statements arenol available, explain why not and enclose corresponding Federal income tax returns in
lieu thereof.) If pasi earnings do nut show ability to repay proposed loan and existing obligations, attach an esti-
mated profit and loss statement for at leasl one full year
(12) Reconciliation of net worth sh
-------
9 POLICY AND REGULATIONS CONCERNING REPRESENTATIVES AND THEIR FEES An apphcam lop a loan Iron, SBA mat obtam Ihe .ssulance of
ar,y attorney, accountant, engineer, appraiser or other representative lo aid him in the preparation of his application to SBA, however, such representa-
tion is not mandatory In the event a loan is approved, the services of an attorney may be necessary lo assist in iht preparation of closing documents,
title abstract", etc SBA will allow the payment of reasonable fees or other compensation for services performed by such reprpsentatives on behalf of
the applicant.
There ar no "authorized represent at i VPS" of SBA, other than <
:«]
SBA Regulations (Part 103. Sec 103 13-5(c)} prohibit representatives from charging or proposing lo charge any contingent fer for any services performed
in connection with an SBA loan unless the amount of such fee bears a necessary and reasonable relationship to the services actually performed or to
charge any fee which is deemed by SBA to be unreasonable for the services aclually performed, or lo charge for any expenses which are not deemed bv
SBA to have been necessary m connection with the applxalion The Regulations (Part 122, Sec 122 19) also prohibit the payment of anv bonus, brok-
In line with ihese Regulations SBA will not approve placement or finder's fees for the u*e or attempt^ u -
an SBA loan, or fees based solelv upon a percentage of the approved loan or any part thereof
obtaining or (rvmg !
upon the time and effort required, the qualifications of the representative and the nature and extent of the services rendered b\ surh representative
It is the responsibililv of the applicant to set forth in the appropriate section of the applit
of the applicant. Applicants are required to advise the SBA Field Office in writing of the
cant subsequent to the filing of the application
An> loan applicant having an\ question concerning the payment of fees, or the re-ts*
ihf application is filed.
10 NAMES OF ATTORNEYS, ACCOUNTANTS, AND OTHER PARTIES The names of all attorneys, accountant-,, appraisers, agen
(whether individuals, partnerships, associations or corporations) engaged by or on behalf of the applicant (whelher on a salary, r
whether in money or other property of any kind whatever, by or for the account of the applic ant, together wi(h a d esc rip t ion of such <
to be rendered, are as follows
Name and Address (Include ZIP Code)
Descnpt.on of Services
Rendered and to be Rendered
Total Co'npen sahon
Agreed to be Pa>d*
Enn
"Unknown," "Undetermined" orothe
11 AGREEMENT OF NON EMPLOYMENT OF SBA PERSONNEL In consideration of the making bv SBA to applicant of all or an> part of the loan applied
for sn this application, applicant hereby agrees with SBA (hat applicant will not, for a period of l*o years after di "bursemenl by SBA In apphc an I of said
loan, or any part thereof, employ or tender any office or employment to, or retain for professional services, any person who, on the date of such disburse-
ment, or within one year prior to said date, (a) shall have served as an officer, attorney, agent, or employee of SBA and (b) as such, shall have occupied
a position or engaged in activities which SBA shall have determined, or may determine, involve discretion with respect to the granting of assistance un-
der the Small Business Act, Or Economic Opportunity Act or said Acts as they ma\ be amended from time to time
12 CERTIFICATION, I hereby certify thot
(a) The Applicant has read SBA. Policy and Regulations concerning representatives and their fees ($9 abovel and has not paid or incurred any obligation
to pay, directly or indirectly, any fee or other compensation fur obtaining the loan hereby applied for
(b) The applicant has nol paid or incurred any obligation to pay to any Government Employee or special Government employee any fee, gratuitv or any-
thing of value for obtaining the assistance hereby applied for If such fee, gratuity, etc has been solicited by anv such employee, the applicant
agrees lo report such information lo the Office of Security ind Investigations, SBA, 1 141 ! Street % W Washington, D C 20116
(c) All information contained above and in exhibits attached hereto are true and complete to the best knowledge and belief of the applicant and are sub-
mitted for the purpose of inducing SBA to grant a loan or to participate in a loan by a bank or other lending institution to applicant Whether or not
sals, etc , performed by non-SBA personnel
of applicant
(d) The applicant hereby covenants, promises, agrec-s and gives herein the Assurance as required by 13 CFR 112 8 and CFR 113 4 that in connection
with any loan to applicant which SBA may make, or m which SBA may participate or guaranty as a result of this application, it will comply with the
requirements of Parts 112 and 113 of SBA Regulations and Title VI of Civil Rights Act of 1%4 u, the extent that said Parts 112 and 113 are applic-
able to such financial assistance, and further agrees that in the event it fails to comply with said applicable Parts 112 and 112, SBA may call, can-
cel, terminate, accelerate repayment or suspend in whole or in part the financial assistance provided or to be provided by SBA, and that SBA, or the
United States Government may take any other action that may be deemed necessary or appropriate to effectuate the nondiscrimmation requirements in
said Parts 112 and 113, including the right to seek judiciai enforcement of the terms of this ASSURANCE OF COMPLIANCE These requirements
prohibit discrimination on the grounds of race, color or national origin by recipients of federal financial assistance, including but not limited to em-
ployment practices, and require the submission of appropriate reports and accegs to books and records, these requirements are applicable to af[ trans-
(Individual, general partner, trade name or corporation)
(Title)
By
Title
Date Signed
Whoever makes any statement knowing it to be false, or whoever willfully overvalues any security, for the purpose of obtaining for himself or for an applicant
any loan, or extension thereof by renewal, deferment of action, or otherwise, or the acceptance, release, or substitution of security therefor, or for the purpose
of influencing in any way the action of the SBA, or for the purpose of obtaining monev, property, or anvth.ng of value, under the Small Business Act, as amend-
ed, shail be punished under Section I6(a) of the Small Business Act, as amended, by fine of not more than IT,000 or b\ imprisonment for not more than two
years, or both.
D-3
PAGE 3 OF 4
-------
APPLICATION FOR PARTICIPATION OR GUARANTY AGREEMENT
(For use only by bank or other financial institution)
We propose to make a (check one)
L~71 Guaranteed loan Bank Share %, SBA Share
Bonk Transit No.
Immediate participation loan with bank to make and service, Bank Share_
%, SBA Share
To the Applicant named on page 1 of this application. We hereby make application for the type of participation agreement checked above subject to the
following loan conditions (use separate sheet if necessary)
(1) Terms and Conditions
(a) Term of loan years. Monthly payments, including lender's interest at % per annum, simple, in the amount of $_
(b) Collateral and hen position
(c) Guarantors
(d) Insurance L ife, Hazzard, Federal Flood.
>2) Participation SBA prefers that a lender participate beyond the total existing debts owed the lender which are to bf refinanced through the loan.
Existing obligations owed to the lender may be refinanced through the loan, in accordance with the mimmums set forth below, only v.hen the lender
certifies in writing that such debt is in good standing (payments and other obligations handled substantially as agreed) and is satisfactory in all
respects Lenders minimum share of a loan shall be
lal Guaranty 10"£ for SHA loans and as currently applicable for Economic Opportunity Loans.
(b) Immediate Participation - 25% provided the legal lending limit permits, lO'f for Economic Opportunity [ oans.
U) Interest Rate Lender may establish its own interest rate provided it is legal and reasonable, subject to SBA's approval, H tender's interest ex-
ceeds 8 pfn eni per ^nnum i simple] on a guaranteed loan SBA will pay accrued m'erest to the date of purchase on its guaranteed portion at the sim-
ple annual rate of R per cent without any future adjustment for unpaid accrued interest in excess of this effective rate Lender may use an add-on
interest provided di State law permits. (11) the face of the SBA Note shows the principal amount of the actual dollar amount disbursed or to be dis-
bursed u> (he borrower under the loan and all other SBA documents show this amount of principal, (m> interest is converted to R simple annual inter-
em rate and such converted rate is shown on all SBA documents other than the note (The add-on interest rate should be specified on the Note, if
necessary, to comply with State law, otherwise show the simple interest rate.)
i 4^ Comments of the Dank, which may be in the form of a letter or memorandum, shall
n P\ aluation of ability of Applicant's management, its past record of handling obligations, your expression as to v,hat the loan will rto
cant applicant'^ rcpavment ability. ,ind other pertinent information If \pphrnnt or an\ of its officer* ha\e been adjudicated a bankrupt
collateral if available and \our evaluation of 11 * ddequacv to secure the loan.
(b) state whether an> officer, direcior or substantial stockholder of Bank has a financial interest in Applicant and. if so, the extent thereof,
(c) indicate whether Applicant, its subsidiaries or affiliates, is indebted to the Bank, the amount, terms, and how secured, including any guaranties,
and whether applicant's loans have been met substantially as agreed. (Include all such loans made during the past 12 months, showing high and
low credit by months If no loans were made during the period, so state.)
Without the participation of SB^ to the extent applied for we would not be willing to make this loan In our opinion, the financial assistance applied
for is not otherwise available on reasonable terms.
- and address of bank (Include ZIP Code)
Telephone No
Authorized Officer
SBA, FORM 4 (11-711
PAGE 4 O F 4
-------
PERSONAL FINANCIAL STATEMENT
As or
Return to:
Small Business Administration
Far SBA Use Only
SBA Loan No.
Name and Address. Including ZIP Cod* (of person and spouse
submitting Statement}
SOCIAL SECURITY NO.
Business (of person submitting Statement)
This statement is submitted in connection with S B.A. loan requests
or granted to the mdividuaf or firm, whose name appears below;
Nam* and Address of Applicant or Borrower, Including ZIP Code
Please answer all questions using "No" or "None" where necessary
ASSETS
LIABILITIES
Cash on Hand & in Banks ...
Savings Account in Banks
U S Government Bonds . , . .
Accounts & Notes Receivable
Life Insurance-Cash Surrender Value Only
Other Stocks and Bonds . .
(Describe - reverse side - Section 3)
Real Estate . , .
(Describe - reverse side - Section 4)
Automobile - Present Value
Other Personal Property
/Describe - reverse side - Section 5)
Other Assets
(Describe - reverse side - Section 6)
Accounts Payable
Notes Payable to Banks ....
(Describe faefow - Section 2)
Notes Payable to Others
(Describe below - Section 2)
Installment Account (Auto) .
Monthly Payments S
Installment Accounts (Other) . .
Monthly Payments S _ , _
Loans on Life Insurance ....
Mortgages on Real Estate
(Describe reverse side - Section 4)
Unpaid Taxes
(Describe - reverse side - Section 1)
Other Liabilities
/Describe - reverse side - Section 8)
Total Liabi httes
Net Worth . .
Total
Section t. Source of Income
{Describe tjelow oil items hsttd in ihis Section)
CONTINGENT LIABILITIES
Salary
Net Investment Income.
Real Estate Income
Other Income (Describe)
As Endorser or Co-Maker
Legal Claims and Judgments
Provision for Federal Income Tax
Other Special Debt
Description of items listed in Section I
Ltfe Insurance Held (Give face amount of policies - name of company and beneficiaries)
SUPPLEMENTARY SCHEDULES
Section 2. Notes Payable to Banks and Others
Name and Address of Holder of Note
Amount of Loan
Original Baj. Present Bal
Terms of
Repayments
Maturity
of Loan
How Endorsed, Guaranteed,
or Secured
D-5
-------
No of Shares
Names of Securities
Cost
Market Value Si
Quotation
itemtnt Date
Amount
Section 3 Other Stocks and Bonds
listed and unlisted Stocks and Bonds (Use seporate sheet if necessary)
Section 4 Real Estate Owned (List each porce/ separately Use suppfementol sheets if necessary Each sheet must be identified as a
supplement to this stotement ond signed) (Also odvises whether property is covered by title insurance, abstroct of tit'e, or both)
Type of property
Address of property (Cny and State)
Original Cost to (me) (us) J,
Date Purchased
Present Market Value S ,
Tax Assessment Value $_
Name ind Address of Holder of Mortgage (City .ind State)
Date of Mortgage
Ongmal Amount
Balance
Maturity
Terms of Payment
Status of Mortgage, i e , current or delinquent If delinquent describe delinquencies
Section 5 Other Personal Property (Describe ond if any is mortgaged, state name and address of mortgage holder and amount of mortgage
terms of payment and if delinquent, describe delinquency }
Section 6 Other Assets (Describe)
Section 7 Unpaid Taxes ('Describe in deroi/ as to type, to whom payable, when due, amount, and what, if any, property a tan den, if
on/ attaches)
Section 8 Other Liabilities (Describe in deiail)
(I) or (We) certify the above and the statements contained in the schedules herein is a true and accurate statement of (my) or (our) financial
condition as, of the date stated herem. This statement is given for the purpose of: (Check one of the following)
Q Inducing S B.A. to grant a loan as requested in application, of the individual or firm whose name appears herein, in
connection with which this statement is submitted.
LjFurmshing a statement of (my) or (our) financial condition, pursuant to the terms of the guaranty executed by (me) or
(us) at the time S B A granted a loan to the individual or firm, whose name appears herein.
Signature
Page 2
D-6
GPO 802.622
-------
SMALL BUSINESS ADMINISTRATION
REQUEST FOR COUNSELING
I request appropriate management or technical assistance from the Small Business Administration.
It is understood that such assistance will be provided to me free of charge and that I incur no
obligation to reimburse SBA or its counselor(s) providing such assistance.
I authorize SBA to furnish information and data concerning me to the counselors) providing such
assistance.
I understand that the counselor(s) providing assistance to me have agreed that they will not:
(1) recommend the purchase of goods or services from sources in which he has an interest.
or represents, and
(2) accept fees or commissions from third parties who have supplied goods or services
to me on their recommendations
This request may be withdrawn at any time upon written notice to SBA unless I am an
SBA borrower.
In consideration of the furnishing of management and technical assistance to me, I waive all
claims against SBA personnel or counselors arising in connection with this assistance.
SCORE-ACE
Type of Service Requested (Check Appropriate Box)
SBI
406
Prof. Assoc.
Complete Below and Sign
Name of Company
Telephone
Address (Include ZIP Code)
Referred to SBA By
Type of Business
Signature and Title of Company Official
Date
SBA FORM 641 (6-75) PREVIOUS EDITIONS ARE OBSOU ETE. PLEASE BE SURE TO COMPLETE REV ERSE SIDE OF TH IS FORM
D-7
-------
Data To Be Completed By Applicant
For the assignment of a qualified counselor(s). p/eose complete this questionnoire before returning to S8A. Any infor-
mation given here or during counseling will be held in strictest confidence. (SBA personnel: insert address of your
local office below)
soon os you hove completed this form and returned it to the address given above, j counselor will be assigned
to you.
I request counseling regarding (check appropriate boxes):
CD My present business Year founded CD Starting a new
I I Purchasing a business No. of employees business
[3D Sole Proprietorship
CD Partnership
CD Corporation
Kind of business and goods (or services) offered are as indicated below:
CD Retail (Selling)
CD Service (Kind)
CD Manufacturing (Product)
CD Wholesale (Selling)
CD Other (Specify)
Years of experience in
this kind of business _
Can you furnish a recent balance sheet? CD Yes CD No Have you ever applied for an SBA loan? CD Yes CD No
Can you furnish a recent profit-and-loss Do you now have an SBA loan? CD Yes CD No
statement?
CD Yes CD No
Check the problem areas for which you seek counseling
CD'- Sales promotion & advertising
CD 2. Purchasing
CD 3. Engineering and research
CD 4- Financial analysis
CD 5. Foreign trade
CD 6. Records & Credit Collections
CD 7- Market Research
CD 8- Personnel
CD 9- Office & Plant Management
CD'O- Government Procurement
C.] 11 Merchandising, inventory
selection & control
CD 12.
CDi3.
CD 14.
CD 15. Other
If the following information is available please complete, if not, leave blank.
Employer's ID # (IRS)
Social Security Number
Loan Number
Viet. Veteran
LI Yes CjNo
Veteran
CD Yes C J No
Name of County
What in your opinion is the greatest problem in your business operation?
SBA FORM «41 (6-751
GPO 697.938
Pace 2
D-8
-------
Return Fxecuted Copies 1 2 and 3 To SBA
United States of America
SMALL BUSINESS ADMINISTRATION
STATEMENT OF PERSONAL HISTORY
Pleas* R«od Car*Mly Print or Typ*
Each member ot the small business concern requesting
assistanie 01 the development compaiiy must submit this
form m TRIPLICATE for filing with the SBA application
This foirn must be filled out and submitted
I I* o so'ft propr etorship by the proprietor
2 tf o partnership by eoch fjnrtnei
3 If a corporation or o development fompany by eoch oHite
dirertor and additionally by eoch holder of 20% or mare
of the vot.ng stock
4 Any other person including a hired manager, who has
authority to speak for and commit ihe borrower m the
management of trie business
Name and Address of Applicant (Firm NameKStreet, City. State and ZIP Code)
1 Personal Statement of (State name in full, if no middle name, state
(NMN), or If initial only, indicate initial) If married include name of
spouse List atl former names used, and dates each name was used
Use separate sheet tf necessary
First Middle Maiden Last
Name of Spouse (Include former married names and maiden name)
3. Place ot Birth (City & State or Foreign Country)
4 Give the percentage of ownership or stocK owned or to be owned in the
small business concern or the Development Company
5 Present residence address
From To
Immediate past residence address
From To
SBA District Office and City
Amount Appfied for
2 Date of Birth (Month, day and year)
U.S. CiM«n*
yes
If no, give alien registration
a
Social Security No
City
State
Address
BE SURE TO ANSWER THE NEXT 3 QUESTIONS CORRECTLY BECAUSE THEY ARE IMPORTANT.
THE FACT THAT YOU HAVE AN ARREST OR CONVICTION RECORD WILL NOT NECESSARILY DISQUALIFY YOU.
BUT AN INCORRECT ANSWER WILL PROBABLY CAUSE YOUR APPLICATION TO BE TURNED DOWN.
6 Are you presently under indictment onparole or probation7
Yes
If yes furnish details in a separate exhibit List name(s) under wh-ch h« id if applicable
7 Have you ever b^en charged with or arrested 'or any criminal of/ense other than a minor motor vt "iclo wolatun'*
LZJ Yes L_l No If yes furnish details m a separate exhibit LIST namelsJ under which charged if applicable
8 Have /oj e^er been convicted of any cnmnal offense other than a minor mn'or vehicle vio'ition?
l__J Yes I 1 No If >es furnish details in a separate exhibit Lisl name's) under which convicted t! applicable
9 Name and address nf participat'ng bank
The information on this form will be used m connection with an investigation of your character Any information you wish to
submit, that you feel will expedite this investigation should be set furth
Whoever makes an> statement knowing it to be false, for the purpose of obtaining for himself or for iny applicant, an\ loan, or
lojrt extension by renewal, deferment or otherwise, or for the purpose of obtaining, or influencing SBA toward, anjthmg of value
under the Small Business Act. as amended, shall be punished under Sec'ion 16(dt of that Act. \,y a fine of not more than $5000, or
by imprisonment for not more than 2 years, or both.
Signature
Date
!' is ogartsf SBA s pol'Cy 'o provide OiSfS'once to oerso^s not of good character aid i^e'^fore consxtero' on $ j'v-
iro Is of o person favorable and unfavorable relo'ing thereto mriud -ig bchavio- inte^riiy condor and disposit ; *~
e!iec> of such assi-Honce wiH be to encourage or support directly or J'.iJ'r
tcol to the Secwrjty o{ 'he U'>'c-d Stores
SBA FORM 912 (4-75) SOP 50 1O 1 PREVIOUS EDITIONS ARE OBSOLETE
D-9
SBA FILE COPY
-------
PAGE 1
Summary of Collateral
OFFERED BY APPLICANT AS SECURITY FOR LOAN AND SBA APPRAISER'S VALUATION REPORT
Name and Address of Applicant: I Include Zip Code)
EMPLOYER ID NO.
SBA LOAN NO.
IMPORTANT INSTRUCTIONS FOR PREPARING THE LISTING OF
COLLATERAL OFFERED AS SECURITY FOR LOAN
Page 1. Summary Of Collateral Offered By Applicant As Security For The Loan; This is a summarization
of the detailed listing on SBA Form 4, Schedule A. If collateral is to be acquired, with proceeds of loan describe the col-
lateral in detail on an attachment to Schedule A with the notation "To be acquired".
Show exact cost. If assets were acquired from a predecessor company at a price other than cost less depreciation.
The figures to be entered in the net book value column must agree with the figures shown in the balance sheet, on page
2 of the application, except for the assets, if any, not being offered as collateral and non-business assets, if any, which are
being offered to secure guarantees.
If a recent appraisal has been made of the collateral offered, it should be submitted with the application.
Any leases on land and buildings must be described, giving date and term of lease, rental, name and address of owner.
Page 2. Real Estate;
Item 1 - 1-anil And Improvements! I a I legal description from deed on the land location city where deed is re-
corded. Book and page numbers of Official Records. Describe the land improvements such as paving, utilities, fence, etc.
Ib) cost of land when purchased.
Item 2 - Buildings; I a I general description, describe each building or structure on the land. Include size, type of
construction, number of stories, date erected, use and condition, tbl amount of taxes and the assessed value from tax bills.
Icl total amount of income received In owner from rental of the described properly, id) cost of building when purchased.
INADEQUATE OR POORLY PREPARED LOAN APPLICATION AND LISTING OF COLLATERAL ON PAGE
3 WILL CAUSE RELAY IN THE PROCESSING OF LOAN APPLICATIONS.
Page 3 - It is most IMPORTANT that applicants make an ACTUAL PHYSICAL INVENTORY OF THE EQUIP-
MENT being offered as collateral. DO NOT TAKE FROM BOOK RECORDS. Actually list each in accordance with
the classification, e.g.: 1 Machiner\ and Equipment: 2. Automotive Equipment: 3. Office furniture and equipment; 4. Other-
jigs, dies, fixtures, airplanes, etc.
Page 4 - Is a continuation of Equipment being offered.
Group items in accordance with the above classifications
Show: manufacturer or make, model and serial numbers, size. )ear, whether purchased new, used, or rebuilt.
BE SURE ITEMS LISTED CAN BE READILY INSPECTED BY SBA APPRAISERS
NUMMARY
Item
1. Land and land improvements
2. Buildings
3 Machinery and Equipment
4 Automotive Equipment
5. Office furniture and equipment
6. Other
7. Total
8. Real and chattel mortgages (Not to be
paid from SBA loan req. ) Attach details
9. Equity
10. To be acquired (Cost)
11. Total
Cost
X X X X
xxxx
Net Book Value
XXXX
by applicant
THE APPRAISER CERTIFIES thai he has personally and thoroughly inspected the collateral as listed in this Report. Furthermore,
at, of -_ the market values shown in the above Summary are fair and reasonable as of that dale. Additional com-
ments are attached to this Report.
BA Appraiser's Signature
Date of Report
SBA Form 4 Schedule A (8 66) REF ND 5KM4 prevlo
of therli 1,2 and 3 a
-------
PAGE 2
Real Estate
OFFERED BY APPLICANT AS SECURITY FOR LOAN AND SBA APPRAISER'S VALUATION REPORT
Name and Address of Applicant (include Zip Code)
Parcel number
SBA LOAN No.
Address of Realty Offered
Title data: Q Title Insurance D Abstract
D Other (indicate)
Realty in name of
Recorded Book Page County.
1. Land and land improvement* (Do not include buildings see Sec. 2 below)
Cost-
Legal description (Attach if too long) *
date acquired-
1 If available, attach plat iiirvey.
2. Improvements
Cost (If separate from land) t-
Biiilding description: List each building separately with brief description and dimensions.
facome if Applicable.
Rent |-
Monlh D Annually D Lease Q
Term.
Assessed Value
Land
Improvements
Taxes _____
SBA Form 4 Schedule A (8-B«) prevfoiu Hltiona are obsolete
D-ll
-------
PACE 3
Personal Property (Chattels)
OFFERED BY APPLICANT AS SECURITY FOR LOAN AND SBA APPRAISER'S VALUATION REPORT
Mir fnllowmg dcsdibcd i battels art- located or headquaitered at timlude Zip Code)
\bn\e location Downed 1 t leased ( 1
EMPLOYER ID NO
SBA LOAN NO.
II is most IMPORTANT that applicants make an ACTUAL PHYSICAL INVENTORY OF THE EQUIPMENT
liein« olTried as collateral. DO NOT TAKE FROM BOOK RECORDS. Actually list each item in accordance with the
classify jiiun. ep.:* 1. Machinery and Equipment 2. Automotive Equipment 3. Office furniture and equipment
4. Other - jigs, dies, fixtures, airplanes, etc.
Show: manufacture! o\ make, model and serial numbers, size, year, whether purchased new, used or rebuilt.
List chattels at different locations on separate sheets.
" Description of
Model
Serial
Number
New
Used
Rebuilt
NOT TO BE USED
BY APPLICANT
Cond.
Carry Tolais of Each Classification to Page 1 Total
(Summary) Lines 3, 4, 5, and 6.
Market
Value
INADEQUATE OR POORLY PREPARED LOAN APPLICATION AND LISTING OF COLLATERAL WILL
CAUSE DELAY IN THE PROCESSING OF LOAN APPLICATIONS. BE SURE ALL ITEMS CAN BE READILY
INSPECTED BY SBA APPRAISER.
1
(Signature of owner, partner, or corporation officer) (Title)
"f I*1"
(Niime of Firm)
certify that the above mat him-r> and i qmpment listing represents an actual physical inventory taken on
Mark item*. 1 in » olumn 21 with an asterisk if they are subject to conditional bills of sale or chattel mor
he paid off from an sli\ loan. Carry total of such balances to line 8, page I (Summary).
(date)
gages the balance of which will not
SBA. fcorm 4 Schwlule A. lS-bb) previous e
-------
PACE 4
Continuation of Personal Property (Chattels)
Description of
Model
i
Serial
Number
New
Used
Rebuilt
NOT TO BE USED
BY APPLICANT
Cond.
( din Inidh of Ej(h Classification tu Pag.- 1 Total
1 summjr^ i line-, t 4, S. and 6
Market
Value
D-13
-------
SUMMARIZED LIST OF COLLATERAL
Abcr/v lo~9.-,ion is Orn-ii ( ) Leased ( )
«It is ir^o-tant thAi applicants cake an AjtujJL r'hysical Inventory Of the Equipment
offered aj collateral/ Do not take froa book recjoi-ds. Actually list eaca itsra in
:cordanca vlth the cla33ifieatior., «.-.: *1. Machinery and equipment 2. Autcsotire equip-
sri 3. Office fur.nit'Are and equipment.
Other - jigs, dies, fixtures, airplanes, etc.
^ Show: Manufacturer or make, nodel and serial rubber, size, year, vhether purchased
new, used or rebuilt'.
I
List Chattels at different Serial
locations on neparat" sheets Model Kuaber New, Used,
" built
t
r
j
i
j
t
I
I
4
e or ^oorly -srsDir^d lo=iri application and listins of coll^!;eral vill cause jl^liy in
oro ; : 3 a i .T^ or lo?.n applic?.tioas. D-14
-------
AUTHORIZATION TO DISCLOSE n^03MATioi:
The undersigned, applicant for Soall business Administration financial
assistance, vhether in the fors of a direct loan or a participation lean, dees
expressly authorize Srall Business Administration to disclose any or all
Inforrr-ation subrarfcted "by the touiersigaed in connection \rith the urtdartJignsd'e
Application for financial assistance to undersigned's oanlc of accoi^nt, if any,
and to any otrzer financial institution qualiixea -co participate vith. Scroll
Business Adoinist.ra.tion;^ pro^T-ded,, hovavar, that any such, disclosure -rd.il "be
solely for tha purpose of inducing such financial institution to grant -the
financial assistance requested either directly or in participation vith Strail
Business Adoinistration.
Executed the day of __ , 19
Coroorate Seal By
D-15
-------
SOPPLEMBI'IT TO APPLICATION FOR SMALL LOAN
NAME:
LIST I-JAI-S3 A'.'D ADDRESSES 0? YOUR EMPLOYERS FOR TKS PAST FIVS YEARS
Present Employer:
(Naniej (Address)
Previous Employer:
Previous Saployerr
(Llase) ' 'Address V
PLZAJE INDICATE YOUR ILAP.IIAL STATUS BELOW
X^rried Seoarated Divorced
Sin~lc (never xarried) Nirnber of dependent chilcran.
LIST NAI-S3 A!ID ADDRESSES O7 CHEDIT REFERSL'CES:
"[HJUT-e) (Address) (Acct. Nunbar,
rAddress) (Acct;. :.'unbar )
(Address) (.Acct. Llunoer
f i ;?.r.3) (Adaress) (Acct. 2::x~:b2r
LIST THE NAME AiiD ADDRESS OF YOUR h'SARfoT RZu\Tr/E NOT L.r/n;3 -.-/ITh' YOU
D-16
-------
M
0
rH
O
O
-H
C
cJ
0
IzO
a
O
O
-p
!
O
-p
to
CJ
h
O
O
O
O
0)
O
O
O
eS
§
O
O
O
o>
S3
O
o;
OT
CJ
H
O
H
P
'.1
.
O
D-17
-------
APPENDIX E
PILOT PROGKAM GUIDELINES AND PROCEDURES
FOR THE POLLUTION CONTROL, FINANCING PROGRAM
November 17, 1976
The information contained herein is for the purpose of establishing
some basic guidelines and procedures under which to operate a "pilot
program" for the pollution control financing program and will be changed
from time to time as experience dictates. Final Rules and Regulations
will be published for comment at a later date and may or may not take
the form outlined in these Guidelines and Procedures.
CONTENTS
Page
I. INTRODUCTION I
A. Background 1
B. Scope 1
C. Projection of Demand 2
II. APPLICATION PROCEDURES 3
A. Basic Requirements 3
(1) Size Determination 3
(2) Longevity and Profitability 3
(3) Evidence of Need 3
(4) Terms 4
(5) Amount 4
3. Additional Requirements 4
C. Credit Criteria and Requirements 5
D. The Issuer 6
E. SBA Commitments 6-7
UJ. DETERMINATION OF F EES 7
A. Guarantee Fee 7
B. Processing and Administrative Fees 7-8
IV. LOSS MITIGATION 8
A. Statutory Provisions 8
B. Compliance with the Statute 9-10
V. APPLICATION FORMS Appendix
A. Part I - Small Business Concern Appendix
Part n - Qualified Sponsor Appendix
B. Issuer's Request for Guarantee Commitment .... Appendix
F-l
-------
I. INTRODUCTION
A. Background: Public Law 94-305, effective June 4, amends Part A
of the Small Business Investment Act to authorize SBA'to guarantee
the payments under qualified contracts entered into by existing
small business concerns for which there exists a financial or
operational disadvantage, for the purpose of acquiring pollution
control facilities. The statute specifically provides that the finan-
cing of the pollution control facilities may be provided through
industrial revenue bonds, issued by a'STaTeTor political subdivision,
on which the interest is exempt from federal income tax under the
income Tax Code.
This type of financing has been extensively utilized by large busi-
nesses for their financing of pollution control facilities. Essentiall
a public entity issues tax exempt revenue bonds on which repayment
is based solely on the credit of the business. The payments on and
redemption of the bonds are made by a trustee for the public entity
from those payments received from, the business in fullfillment of
its contract between the business and the public entity. The public
entity is the nominal owner of the property; the property is conveye
to the business under a lease, lease-purchase, installment sales or]
similar contract. In addition to the tax exempt advantage, the
business can also utilize other tax advantages such as the investment
credit and accelerated depreciation. I
Because of its generally limited credit history and the small size of
its financing requirements, a small business is usually unable to
utilize this method of financing. PL 94-305 makes available SBA's
guarantee on the payments made by a small business to a public
entity so that the small business can take advantage of this type of
low cost financing.
B. Scope: The primary purpose of using tax exempt industrial revenue
boncTTinancing for pollution control facilities is to obtain the most
advantageous interest rates and repayment terms possible. Tax
exempt bonds may be issued with a sinking fund provision for
redemption at particular dates or may be in serial form with varyinM
'maturities up to 25 or 30 years. The interest rate may be the same"
for the full issue or it may vary according to maturity and market
conditions. Discussions with bond underwriters revealed that the
interest rate for a bond issue with SBA's guarantee of the underlyin
. payments would be comparable to AAA municipal bond rates.
1
-1-
E-2
-------
Most favorable interest rates are /fenerally available only on large
bond issues ($5 million and up). Therefore, it is envisioned that
the pollution control financing needs for several small businesses
would be combined into a single bond issue rather than several
small issues. SBA would then provide a guarantee of the payments
of each small business on the underlying contract which are assigned
(by a public entity - the Issuer) to a trustee. The payment of the
bond issue v/ould be tailored to meet the needs of the small businsses
involved and the prevailing conditions in the tax exempt market.
While industrial revenue bond financing normally provides for the
most favorable repayment terms and the lowest cost to the borrower
there are instances where the small business may need a relatively
small amount of financing. In those instances where the small business
certifies that revenue bond financing is impractical or when the project
may not qualify for the tax-exemption, it may be possible that financing
'Section 7(a)(5) or 7(g) of the Small Business
Act, or that a guarantee may be provided to a lender under a straight
(taxable) loan.
Projection of Demand: Available data is sparce en the needs 01
small business for their pollution control financing. A study
conducted for the Environment Protection Agency* estimated that
between 38, 000 and 56, 000 small firms have permits to disc/large
into streams and rivers. The number of these requiring financing
for pollution control can only be guessed at. No similar figures
are available on air pollution, but the number is believed to
be larger.
The following estimates were developed in 1973 by the SBA and
representatives of several bond underwriting firms. No new data
is available that would change these estimates. The estimates are
based on the assumption that the average financing for a single
small business would be $400, 000. The information is presented
in dollars of bond financing, anticipated number of small businesses
and the number of bond issues for the first 2 years of the program
after an initial pilot period. Each bond issue is expected to provide
the financing for 5 to 10 small businesses.
Most
First Year Pessimistic Probable Optimistic
Amount "oTlTinancing 5TO~ million" $1~00 million $1?I>0 million
No. of Small Businesses 100 250 500
No. of Bond Issues 10-20 25-50 50-100
* Alet Associates Inc. "Analysis of Allemate Procedure for certification
of Sec. 8 Small Business Water Pollution Control Application"
Cambridge, Mass., April 1976.
-2-
E-3
-------
Second Year Pessimistic Probable Optimise
Amount of Financing $100 million $300 million $600 mil
No. of Small Businesses 250 750 150(l
No. of Bond Issues 25-50 75-150 150-3
Because of the time limitations inherent in the Environmental laws,
it is anticipated that applications for financing will be at substantial
levels through 1982 and assuming no changes in the laws, the number
of applications received should decline rapidly to a point where no
new applications are received. At this point, only servicing of
outstanding contract will be required. However, because by its
nature environmental protection (pollution control) is an ongoing
problem, it is difficult to determine at what point there will no
longer be a need for SBA's assistance to small business in this
area.
II. APPLICATION PROCEDURES
A. Basic Requirements:
The statute requires the SBA guarantee to be for the full amount of
the payments due under the qualified contract. The statute also
requires the SBA to make a determination that a reasonable expecta-
tion exists that the small business concern can meet the conditions
and covenants of the underlying qualified contract.
Because of the expected long useful life of pollution conti^ol facilities,
the term of financing required is also expected to be long. These
facilities, by their nature, are non-productive assets of a business,
therefore amortization of the loan to finance their purchase must
come from existing cash flow.
SBA recognizes that there is substantial risk involved in guarantying
100% of the payments on long-term contracts where the equipment
involved is a non-profit making asset. Therefore, the following
basic requirements have been established:
Dste rmination : The applicant must meet the size standards
set forth in Section 121. 3-11 of the SBA Rules and Regulations.
(2) Longevity and Profitability: The applicant must have been in
BUslness for a minimum of five years, and have a history of
profitable operations, on average over the last three fiscal
years.
(3) Evidence of Need: The applicant must provide evidence of the
neecfTor the pollution control facility (from the state or federal
pollution regulatory authority).
E-4
-------
(4) Term: The repayment term of the requested guarantee shall
not exceed 25 years.
(5) Amount: The amount of payments to be guaranteed shall
riot exceed $3, 000, 000.
B. Additional Requirements:
The SBA guarantee under this program extends to the payments due
by the small business concern under a qualified contract to acquire
a pollution control facility. Therefore, the small business concern
is required to submit to the SBA, the Qualified Sponsor, the Issuer
or other such designated entity the following additional information:
(1) SBA Form 912 on all officers, directors, holders of 20% or
more of the voting stock, all partners and proprietor of the
applicant small business.
(2) Annual financial statements for trie preceding three fiscal years.
(Audited statements are required from those applicants where
the guarantee request is $500,000 or greater, and annually
from all applicants subsequent to SBA's issuance of its guaran-
tee).
(3) Interim financial statements (not older than 90 days).
(4) Proforma financial statements after giving effect to the financing
applied for.
(5) Financial data on all affiliates.
(6) Description of the components and estimated total cost of the
pollution control facility to be financed.
(7) A certificate or a copy of the permit to operate from the
appropriate pollution regulatory agency that the pollution
control facility, when completed in accordance with the
plans and specifications, will help prevent, reduce, abate,
control noise, air or water pollution or contamination.
(8) An opinion from the consulting engineer responsible for the
design of the facility, that the facility when completed will
meet the required pollution control standards or regulations.
(9) Evidence that the construction/installation of the facility
is on a fixed price basis and the construction/installation
and the cost of material and equipment is adequately covered
by surety bonds.
(10) The personal piiarantee of the applicants principals and/or
life insurance lor the amount of the contract may be required.
-4-
E-5
-------
C. Credit Criteria and Rcquii emc-nts:
The statute requires that before SBA can issue its guarantee it
must determine that there exists a reasonable expectation that the
small business concern will perform the covenants and conditions
of the qualified contract. Accordingly, SBA has established cer-
tain credit criteria to satisfy this requirement and with which to
determine that:
(1) The applicant's general business trends compares favorably
to that of its industry.
(2) The proforma cash flow reflects the ability of the applicant
not only to meet the obligations under the qualified contract
but also the additional debt burden of maintenance and
service of the facility.
(3) The proforma cash flow, current ratio, tangible net worth
ratio and the "Fixed Obligation Coverage Ratio"*, after
consideration of the new financing, are realistically adequate
for the applicant to meet its obligations under the financing.
Net Available Cash Inflow
*Fixcd Obligation Coverage Ratio =
Total Required Cash Payments
Net Available Cash Inflow: Total Required Cash Payments^
Add: Net Income After Tax Add: Interest on Debt
Interest on Fixed Obligations Lease Obligations
Lease Obligations (Real Debt Repayments
Estate and others)
Depreciation
Less: Fixed Asset Expenditure (Cash Portion)
The Procedures to determine eligibility and creditowrthiness
of the applicant business \vill be a complete review and analysis
of the application, financial information, certifications, etc. by
the qualified sponsor, the issuer of the bonds and SBA.
In addition to the data and opinions required in Part II of the
application, the qualified sponsor (usually the bank of account
of the small business), after its review and analysis, will issue
an opinion to the Issuer and SBA as to the creditworihiness of
the small business in accordance with SBA established credit
criteria and requirements. The financial analysis must include
the composition and adequacy of the small busines concern's:
-5-
E-6
-------
1. Annual fixed debt requirement.
2. Past and projected earnings.
3. Working capital sufficiency to support projected
4. Debt to net worth ratio.
5. Realistic cash flow projections to meet bond indebtness
and other amortized debt.
6. Economic outlook of the industry of which the small
business is a part.
7. Interim financing if required.
8. Estimated construction time of the facility.
9. The age, health and track record of principals (manage-
ment).
10. The additional financing necessary, if entire amount of
purchase not eligible for tax-exemption
11. The likelihood for the need to purchase management
and/or technical assistance.
In those situations where appropriate, the qualified sponsor may be
required to furnish its opinion of the market value of other collator
offered under a forced sale situation (with a list of the existing
amount of outstanding liens thereon).
D. The Issuer:
The state, a political subdivision thereof or other public
body having the authority to issue revenue bonds v/ill
usually be the entity to request SBA's commitment for
guarantee. The request from the issuer for the SBA
guarantee must be accompanied by the applications and
required statements of the small business and the qualified
sponsor and must include a copy of the certificate or permit
from the appropriate pollution regulatory authority that the
facility when completed for each small business involved,
will help prevent, reduce, abate, or control noise, air or
water pollution or contamination.
E. SBA Commitments:
When the review and analysis procedures have been completed
and SBA determines that all criteria have been met, a commit-
ment letter will be issued (usually to the bond issuer) stating
the requirements necessary for SBA to issue its guarantee.
Generally, the basic requirements will be that, in addition
to the information required in the "issuer's Request for
Guarantee Commitment," the Issuer furnishes SBA v/ith a copy
of:
-6-
-------
(1) The approved qualified contract between the small busine
concern and the Issuer-if a lease, a copy of the lease
agreement (including ground lease if any).
(2) The initial resolution of the Issuer to provide the financiJ
through tax-exempt revenue bonds.
(3) The Bond Counsel's opinion as to the tax exempt status
of the issue.
(4) The Bond Indenture.
(5) The Bond Purchase Agreement.
(6) The certification of the named trustee empowering it to
act as Trustee
(7) The Trust Agreement between the Trustee and the Issuer
Upon SBA's issuance of its guarantee, the guarantee fee and the
remainder of the application fee is payable to SBA.
in. DETERMINATION OF FEES
A. Guarantee Fe_e_:
The statute provides for the establishment of a revolving fund
into which all monies, assets or property received under the
program are to be deposited, and from which all expenses
and payments on defaults are to be made. While the language
of the statute does not require the program to be operated on
a self-sustaining basis, the legislative history makes reference
to self-supporting, and it is SBA's intent, to the extent practi-
cable, to operate the program on a self-sustaining basis.
The law provides for a guarantee fee which may not exceed
3-1/2% per annum of the minimum annual guaranteed payments
under a qualified contract. SBA has determined that the guar-
antee fee shall be set at the maximum 3-1/2% payable upon
issuance of the guarantee. Should experience indicate that a
change is necessary, adjustments may be considered at a later
date.
B. Processing and Administrative Fees: '
The law also permits SBA to fix a uniform fee for processing
and administrative expenses in connection with the applications
for guarantee under this program. Accordingly, SBA has
determined that the processing fee will be charged in accordance
with the following schedule:
- 7 -
-------
Amount of Contract Base Additional
Payments Guaranteed Fee Fee
Up to $500,000 $1,000
$500,001 to $1,000, 000 $1,000 + . 002 of above $500, 000
$1,000, 001 to $2, 500, 000 $2,000 + . 0015 of above $1, 000, OOC
Over 2,500,00 $4,250 + . 001 of above $2,500,000
Each small business application submitted to SBA shall be
accompanied by $500 of the above fee, which is not refundable.
The remainder of the fee is payable upon request for the
issuance of the guarantee.
IV. LOSS MITIGATION
A. Statutory Provisions:
Section 404(d) of the statute contains certain elements for
minimizing the financial risk assumed by SBA under its
guarantee. Sections 404(d)(l) and (c) provide for an escrow
deposit (to be paid by the borrower) of up to 1/4 of the
average annual guaranteed payments and requires further
that these escrow deposits be utilized for the period such
funds are available, to make... "reasonable and diligent
efforts to eliminate or minimze losses...."
Section 404(d)(3) provides that any guarantor of the qualified
contract will be a successor to the obligor to collect any pay-
ments in arrears from the defaulting borrower.
Section 404(d)(4) permits the establishment by SBA of any
other provisions it deems necessary for loss mitigation.
Section 404(d)(3) requires SBA to determine that there exists
a reasonable expectation that the smrll business concern will
perform the convenants and conditions of the qualified contract.
B. Compliance with the Statute:
1. SBA will require the small business to make a payment, into
a escrow account., in an amount equal to 1/4 of the average
annual guaranteed payments. This escrow will be held by
the trustee under the industrial revenue bond financing,
or by a designated depository if the financing is obtained
otherwise. The escz'ow payments may be left on deposit or
E-9
-------
invested in securities which are acceptable to the SBA. In
the event of default, the escrow deposit and interest earned
thereon will be utilized by the trustee to make those payments
which are in default and this amount shall be totally exhausted
before a claim may be filed with SBA. If no defaults occurs,
the escrow deposit plus interest thereon shall be used to make
the final payments under the qualified contract.
The guarantee agreement specifies that upon payment of a claim
by the SBA, the trustee will provide SBA with appropriate
documents which effectively transfer to SBA the trustee's
right to legally pursue the defaulting small business for the
amount of the claim paid.
2. Other requirements necessary to minimize loss, which are a
part of the guarantee agreement and/or the qualified contract,
are:
(a) The trustee must file written notice of default by the
borrower within the time required in the qualified contract
simultaneously to the borrower and the SBA.
(b) That upon receipt of the notice of default, SBA
either directly or through the qualified sponsor (usually
the lender of account) would make an evaluation of the
situation to determine the likelihood of a resumption
of payments by the borrower.
(c) That if. the loan is not brought current within.
the time prescribed in the underlying qualified contract,
the trustee shall take appropriate action to secure pos-
session of the property and/or any collateral provided
under the contract, unless advised in writing by SBA to
forego such action.
(d) That the trustee shall be required:
a. to provide possession of the repossessed property tol
to the SBA, and
b. to accept any successor business as obligee.
(e) That the SBA may, in specific situations, determine that
in order to minimize loss, the small business should
maintain possession of the property. In those situations,
the SBA may instruct the trustee to forego any action to
the trustee onbehalf of the small business.
-9-
E-1G
-------
(f) That the trustee shall tnko prompt action against any
guarantors of the underlying obligation lo insure that the
borrower's obligation is brought current or fully satisfied.
(g) That claims for defaulted payments, which become due
after the escrow funds and/or reserve funds (if any) are
exhausted, will be paid by SBA when all the above require-
ments have been complied with. (If evidence that a failure
to comply is not the fault of the trustee, SBA may extend
the period for ccompliance and pay the garanteed payments
as they become due).
(h) That the small business is required to furnish audited
annual financial statements (for the full period of the SBA
guarantee) to the qualified sponsor which shall prepare a
summary analysis of the statements and the analysis will
be forwarded to the SBA within sixty (50) days of receipt
by the qualified sponsor.
-10-
E-ll
-------
APPLICATION FOR POLLUTION CONTROL FINANCING GUARANTEE
PART I - SMALL BUSINESS CONCERN
T. TWO copies of Part I of TTiis application signed by the Applicant along with TWO oT~e
of the documents and exhibits required in Section 9 must be submitted. Omissioi oi
any item will result in delay of processing until the item is received. (Use sepa: ii<
sheets if more space is needed. )
2. Applicant:
Name:
Address:
City: County: State:__ Zip Code: _
Employer I. D. No. (IRS No. ) SIC No. (s):
No. of employees: ( ) Corporation ( ) Partnership ( ) Proprietc si
Veteran: Franchise: Women Principals: Minority:
( ) Yes ( ) No ( ) Yes ( ) No ( ) Yes ( ) No (specify)
Outstanding SBA Loans: ( ) Yes ( ) No (if yes, give Loan Number (s)
3. Guarantor (s), (if any)
Name: _______
Address:
City: r County: State: Zip Code:.
Relationship to applicant (Relative, stockholder, affiliate, etc. )
4. Qualified Sponsor:
Name: Address:
City: County: State: Zip Code:
5. References of Applicant (First Name, Position and Address):
a. Banking (indicate name of contact officer)
b. Business Suppliers (3 largest accounts)
c. Ma'jor Customers (3 largest. Show % of gross business obtained from each)
E-12
-------
'5. Has Applicant ever been a recipient of funds obtained through tax exempt or taxubl
revenue bonds for pollution control financing?
O Yes ( ) No (if "ye^" S^vc details on sepnrate sheet.)
Y . Project and Financing Information:
a. Type of Pollution Control to be financed:
{ ) Air ( ) Water ( ) Air/Water ( ) Noise ( ) Solid Waste
b. Anticipated Starting Date ____ Estimated Completion Date
c. Estimated Cost of: d. Estimated annual operating an
maintenance costs of the facil
equipment $
Construction $
e. Requested repayment terms:
Installation $
Materials &. Equipment $
f. Estimated useful life of the
Other costs: (list) $ faciliiy/equipment
Total Principal
8. Non-refundable Application Charge Deposit of: $ 500. 00 is enclosed; remainder
payable'upon request for issuance of the SEA guarantc:eT
9, The following applicable documents and exhibits are enclosed (TWO copies of eacl
[ ] a. Financial Statements for the past three (3) fiscal years (audited if the
requested guarantee is $500, 000 or greater).
[ ] b. Interim Financial Statements no more than ninety (90) days old.
[ ] c. A brief history of the applicant small buiness, including type of business,
date established, ownership, affiliates, number of employees and the
background and experience of key management personnel.
[ ] d. Proforma financial statements after giving effect to the financing applied fc
[ ] e. Financial data on all affiliates.
f J f. Current personal Balance Sheet(s) of proposed individual guarantors(s).
[ ] g. Financial Statements on proposed corporate or affiliate guarantor(s) for th
past three (3) years, also indicate relationship, if any, to applicant.
E-13
-------
9. Continued..
[ ] h. Copy of an appraisal of the value of other collateral tendered as additional
security for the financing (including the cxistance and amount of outstanding
liens thereon).
[ ] i. SBA Form 912 on officers, 20% or greater stockholders, partners, proprieto
[ ] j. Copy of bid proposals or esitmates including plans and specifications lor all
construction/installation sork, and cost of materials and equipment connecte-
with the project.
[ ] k. Evidence from the state or federal authority of the need for the facility,
including type of pollution to be controlled.
[ ] 1. Description of the facility's compliance with standards and regulations,
including emission and discharge levels.
[ ] m. Copy of an opinion from the consulting engineer/architecht responsible for tm
design, that the the facility, when, completed, will meet the required pollution
control standards and regulations.
10. AGREEMENT OF NONEMPLOYMENT OF SBA PERSONNEL
In consideration of the issuances of the guarantee applied for in this application,
applicant hereby agrees that for a period of 2 years after the effective date of the
the guarantee, applicant will not employ, or tender any office or employment to,
or retain for professional services, any person who, on the effective date of sucl
guarantee or within one year prior to such date, (a) shall have served as an officer
attorney, agent, or employee of SDA and (b) as such, shall have occupied a posit1^
or engaged in activities which SBA shall have determined, or may determine, to
involve discretion with respect to tnc granting of assistance under any laws admin-
istered by Small Business Administration or said laws as may be amended from.
time to time.
11. The undersigned applicant agrees that this application is made pursuant to Title
IV of the Small Business Investment Act of 1958, as amended, 15 U.S. C. 694-1
arid Title 13, Part 111, Code of Federal Regulations and that the cited law and
regulations shall control transactions between the Small Administration and the
applicant, and certifies that:
a. All information conntained in this application and in the documents attached
are true and correct to the best knowledge of the applicant and are submitted
for the purpose of inducing SBA to guarantee the payments set forth in the
qualified contract for pollution control facilities.
b. No employee of the SBA or any member of SBA advisory board who are
related by blood, marriage or adoption, have or have had any past, direct or
indirect, financial interest in or in association with, the applicant, or any of
its partners, officers, directors or principal stockholders (such interest to
include any direct or indirect financial interest in any other business entity
or enterprise).
-------
12. STANDARDS FOR AUDITED AND UNAUDITED FINANCIAL STATEMENTS:
Financial Statements include three basic statements: Balance Siicct, Income
Statement, and Statement of Chnntre in Financial Position. The statements are
to be prepared in accordance with Generally Accepted Accounting Principles
adopted by the Financial Accounting Standards Board (FASB), and adequate
footnote disclosure so as to make the statements not misleading is required.
When audited statements are required, such audits are to be made by an indepcnd-
ant auditor in accordance with Generally Accepted Accounting Standards.
13.
Signature (Applicant): Date;
Title:
Whoever makes any statement knowing it to be false for the purpose of obtaining
for himself or for any applicant any guarantee or for the purpose of influencing
in any way the action of SBA, or for the purpose of obtaining a guarantee under
the Small Business Investment Act, as amended, shall be punishable under Section
16{a) of the Small Business Act, as amended by a fine of not more than $5, 000
or by imprisonment for not more than tvo yecirs, or both.
E-15
-------
Pollution Control Financing
Issuer's Request for Guarantee Commitment
1. Issuer (Authority issuing the bonds):
Name:
ADDRESS:
City:
County
State
Zip Code
Pollution Regulatory Authority: ( ) Air
( ) Other Identify
( ) Water
( ) Financing
.Contact Person:
Title
Phone No.
2. 'Estimated Aggregate Amount of Requested Guarantee: $_
-3. Estimated Net Interest Cost:
4. Estimated Maturity Schedule:
% Per annum.
5. Name and Address of Trustee: (required prior to issuance of guarantee).
Name: Address:
City:
State:
Zip Code:
6. Name and Address of Underwriter: (required prior to issuance of guarantee)
Name: Address:
City:
State
Zip Code:
7. A copy of the following is attached:
t
( ) The certificate or permit from the appropriate pollution regulatory authority that ti
facility when completed, and/or the equipment when installed for each applicant srnaTI
business concern, will meet the required pollution control standards and regulations..
( ) A summary, including the name type of contract (lease or purchase) and the estimate
amount of requested guarantee and repayment terms for each applicant small business
( ) The resolution of the Pollution Control Authority to provide me financing through
tax-exempt revenue bonds.
Signature:
Title:
Date:
E-16
-------
Part II - QUALIFIED SPONSOR
1. Qualified Sponsor:
Name:
Address:
City: State: Zip Code:
Case Officer! Name: ~ "
Title: Phone No.
2. Applicant (Small Business Concern)
Nam e :
'Address: City:
County: ^ip Code:
3. Two copies of the following are enclosed:
[j a. Opinion that the applicant business and its affiliates meet the size
standards set forth in Section 121. 3-11 of the SBA Rules and Regulations.
[] b. Copy of a summary review of the financial statements of the applicant small
business for the last three (3) fiscal years and the interim period (not more
than 90 days old).
[] c. Copy of up-to-date credit reports on the applicant small business and all
affiliates (not older than 60 days from date of submission).
[] d. Statement of Judgment (signed by two officers, including one senior
officer), regarding the applicant's creditv/orthiness for the financing
requested, including an analysis made in accordance with the credit
criteria established by SBA.
[] e. Statement of opinion as to the financial or operational disadvantage to the
small business applicant.
4. The undersigned certifies that the information furnished by the Small Business
Concern (Part I, item 9, sections a through h, ) named in item 2 of this Part II is
and shall remain on file and shall be open at all times to reveiw and/or audit by
the Small Business Administration.
Note: (During the pilot program copy of all supporting date shall be forwarded to SBA).
5.
Signature: Title: Date:
E-17
-------
APPENDIX F
Form Approved; OMB No. 41-R2098
FORM ED-201 U.S. DEPARTMENT OF COMMERCE
(REV. 7-71)
ECONOMIC DEVELOPMENT ADMINISTRATION
APPLICATION FOR COMMERCIAL OR INDUSTRIAL LOAN
(Under Section 202 of Public Low 89-136)
FOR GOVERNMENT USFONLY
Project number
State
Redevelopment area
Name and address of applicant (Street, city, county, state and zip code)
Date received
Amount of loan requested
$
Telephone No.
Communicate with Mr. _
Area Code .
Maturity requested
1. PROPOSED PROJECT
o. Location (£1 other than above) (Street, City, County, and State)
b. This is a (Check one)
[ | Completely new business
Q^j Branch facility of an existing business
[" ] Expansion of existing facility at the site
| | Restoration of facility destroyed or damaged by fire, etc.
c. Principal products or services
2. BUSINESS
Date Established
a. Subsidiaries and Affiliates - List on an attached sheet the names and addresses of all subsidiaries or affiliates.
b. Dual Interests - Have the partners, incorporates or shareholders of applicant_any financial interest in (1) Vendors of project
items or (2) are they prospective customers of applicant's production? [_J Yes PH No
If "yes," give details.
c. Receivership - Bankruptcy- Has applicant or any officer of the applicant or affiliates or any other
concern with which such officer has been connected ever been in receivership or adjudicated a
bankrupt. (It "yes," give names and details on sever at e sheet) [ j Yes
3. COST OF PROJECT (Do nof include working eopifofj
For the purchase or acquisition of:
a. Land (Attach plat)
b. Buildings (Attach plan and cost estimates)
C. Machinery and equipment (Attach itemized separate schedule and cost estimates)
d. Other (Itemize) (Exclude organizational and promotional fees)
e. Contingency
f. Total
U5COMM-DC 59090-P7Z
F-l
-------
4. PROPOSED FINANCING
0. I PA (Maximum 65%)
b. Hanks
C. Other pru ate (Insurance
Conipuiy, etc.)
Subordinate funefs:
d. Sfatc or local development
Pig an 1 Cation (Minimum 5%)
% of project Terms
cost Years
Name and address
Name and address
Name and address
e. Equity's contribution or loan (/Von-Government source)
f. Other
9- Total aggregate cost (Should agree with Total of Item 3) 100%
4. WORKING CAPITAL (Please cover
Interest
S
s
fu/fy in on affachmenfj
a. Borrowers funds
b. Loans ([ndi ca t& source)
c. Other sources
Total
$
$
APPLICANT SHOULD IMMEDIATELY NOTIFY EDA OF ANY CHANGE IN OR ADDITION TO THE INFORMATION ABOVE.
6- AS ADDITIONAL SECURITY, PAYMENT OF THE LOAN WILL BE GUARANTEED BY
Name and address of guarantors Net worth outside
(Lo ch principal must submit a signed personal balan ce sh set a s of the same date as the orincecSCln
applicant's balance sheet) applicant company
S
6. WHAT WERE THE RESULTS OF EFFORTS'TO OBTAIN OTHER FINANCING?
Name baqks or other institutions, give dates, amount and terms of loans applied for, and results, including any alternative
financing tc.rms offered. Attach copies of banks or other decline letters evidencing such efforts.
8. OTHER FEDERAL ASSISTANCE. Are you requesting or receiving assistance from the Federal
Government for a project which is similar to the one for which assistance is requested in this
(If t'Yt'S," pro vide the rtamc(s) of the other A gen cy(ies) and pro f act nitmber(s) as a separate
attachment.)
n Yes cu NO
FORM EO-2"^ 'PF.V. 7-71)
USCOMM-DC 59090.plZ
F-2
-------
9. EMPLOYMENT AND OTHER ECONOMIC EFFECTS
NOTE: It is the intent of the Economic Development Act to assist redevelopment areas by the: devel
ne« ,ind existing facilities to create new long-term employment opportunities.
A rc-.ihstic projection of employment is necessary to the planning of a business as well as for EDA's
ect. The applicant should include an exhibit with a complete manning table, showing employment by
Subsequent to start of facility operation, information on actual employment will be requested.
o. Current and Projected Employment:
NOTE: Under columns 1, 2, and 3,
the past 12 months. Under columns
Average per month line or total per
in for columns 7, 8, and 9.
Month /\ ear
Jan. 197
Feb. 197
Mar. 197
Apr. 197
May 19"
June 197
July 197
Auj?.19~
Sep. 19"
Oct. 197
Nov. 197
Dec. 197
Average per month
Total per year
Potential net gain
upment and expansion of
evaluation of the proj-
sex and rates of pay.
monthly entries must be completed if the facility has been operational at any time during
7, 8, and 9, monthly entries are required only if the facility will be seasonal in operation.
year line must be filled m for columns 1 through 9- Potential net gain line nvust be filled
Existing jobs, if any
Employment in past 12 months
Number
Male
(1)
'; r"
' '' ;Y~~"?
Female
(2)
....,.
Payroll ($
omit cents)
(3)
s
'"'"' ' . . '
$
* * "
Anticipated jobs
At start of operations
Number
Male
(4)
b. How soon after start of operations will facility be fully operati
Female
(5)
_.-
:maP.
Payroll (5
omit cents)
(6)
* '.
' . . >
S
*
When fully operational
Number
Male
(7)
Female
(8)
Years
Payroll ($
omit cents)
(9)
$
&
$ (A nnuat)
Months
c. When facility is fully operational:
(1) Industrial
Maximum number of units of
production
Number of shifts
(2)
Commercial
Projected dollar amount of sales
(3)
Recreational
Maximum no. of customer days
accommodated
D. Directly related employment anticipated to be generated by this project. (New, or saved, permanent full-time or full-time equiva-
lent ;obs - other than those in the facility which receives or directly benefits from EDA assistance - that can be specifically
identified as being dependent for their existence on (he EDA assisted facility. This includes loggers and truckers required to
supply a new sawmill, increased number of employees of suppliers of raw materials, tourism auxiliary employment, etc. Such
employment must be in the redevelopment area or in a redevelopment area immediately contiguous thereto.) Describe the cate-
gories or types of jobs which would be effected by the EDA assisted facility, and the number in each category or type. If this
employment represents an increase on the number of existing jobs, show also the number of jobs which existed at time of project
applic uion.
e. Hill operation of this facility result
operated bv the applicant or its faci
f. IJen: if teat ion number used for this
. nl th
FORM EO-201 IREV. 7-71)
in a reduction of emplo% merit in other facilities now
licies' ' [~~lYes C No
company on Employers Quarterly Federal "lax Return (U.S. Treasury Department 941)
IS number does not exist at time of application, it will be provided upon availability.)
Page 3
F-3
USCOMM-DC 55090-P72
-------
Oa. MANAGEMENT - Names of all officers, directors or partners and their annual compensation, including salaries, bonuses, fees,
v. irhJr.i \\ als, etc. (complete a!l columns).
Name
Annual
compensation
Office held
Percent
ownership
Net worth
outside of applicant
Insurance c .\rried
for benefit of appl.
b. Attach personal history sheet (Supplement 1) giving personal histories of key officers and employees of the company, each'
director and each holder of 20% or more of the applicant's voting stock, andeach officer, partner or proprietor of applicant.
Marital Status - If not a corporation, give name of spouse for each married partner or owner.
11. NAMES OF ATTORNEYS, ACCOUNTANTS, AND OTHER PARTIES. The names of ail attorneys, accountants, appraisers, agents,
and all other parties (whether individuals, partnerships, associations or corporations) engaged by or on behalf of the applicant
(whether on a salary, retainer or fee basis and regardless of the amount of compensation) for the purpose of rendering profes-
sional or other services of any nature whatever to applicant, in connection with the preparation or presentation of this applica-
tion or with any loan to applicant which EDA may make, or in which EDA may participate, as a result of this application, or
such loan or participation; and all fees or other charges or compensation paid or to be paid therefor or for any purpose in con-
nection with this application whether in money or other property of any kind whatever, by or for the account of the applicant, to-
gether with a description of such services rendered or to be rendered, are as follows:
Name and address
Description of services
rendered and to be rendered
*Total compensation
agreed to be paid
*Compensatfon
already paid
*Subject to EDA approval. Compensation contingent upon loan approval is not allowed. In the event of loan approval, EDA forms
setting forrh details of services performed or to be performed, must be executed by applicant and the parties, if any, listed above.
IT IS NOT REQUIRED THAT AN APPLICANT EMPLOY REPRESENTATIVES IN ORDER TO FILE A LOAN APPLICATION WITH EDA.
12. AGREEMENT OF NONEMPLOYMENT OF EDA PERSONNEL. In consideration of the making by EDA to applicant 6f all or
any part of the loan applied for in this proposal, applicant hereby agrees with EDA, that applicant will not? for a period of two
years after disbursement by EDA to applicant of said loan, or any p,art thereof, employ or tender any office or employment: to,
or retain for professional services, any person who, on the date of such disbursement, or within one year prior to said dace,
(a) shall have served as an officer, attorney, agent, or employee of EDA and (b) as such, shall have occupied a position or
engaged in activities which EDA shall have determined, or may determine, involve discretion with respect to the granting of
assistance under the Economic Development Administration, or said Act as it may be amended from time to time.
13. DISCLOSURE OF ANY FAMILY RELATIONSHIP OR FINANCIAL INTEREST OF ANY EDA EMPLOYEE. List below the
names of any EDA employees or advisory board members who are related by blood, marriage or adoption to, or who have any
present or have had any past, direct or indirect, financial interest in or in association with, the applicant, or any of its part-
ners, officers, directors or principal stockholders (such interest to include any direct or indirect financial interest m any other
business entity or enterprise):
Name and address
Details of relationship or interest
FORM ED-201 (REV, 7-71)
Page 4
F-4
USCOMM-DC 53030-P72
-------
14. CERTIFICATION. I hereby certify that:
(a) 7 he Applicant has not paid or incurred any obligation to pay, directly or indirectly, any fee or other compensation for ob-
taining the loan hereby applied for.
(b) All information contained above and in exhibits attached hereto are true and complete to the best knowledge and belief of
the applicant and are submitted for the purpose of inducing EDA to make a loan or to participate in a loan by a bank or
other lending institution, to applicant. Whether or not the loan herein applied for is approved, applicant agrees to pay or
reimburse EDA for the cost of any surveys, title or mortgage examinations, appraisals, etc., performed by non-EDA person-
nel with consent of applicant,
(tt'hoever makes any statement, knowing it to be false, on an application for Financial Assistance under the Economic De-
velopment Administration is subject to a maximum fine of $10,000 and/or imprisonment of up to five years.)
MOTE - EDA is authorized to disclose any information contained in the application and supporting documents to outside con-
sultants or private lenders on a confidential basis.
(Individual, general partner, trade name or corporation)
Corporate Seal By.
Attest Title
(Title)
15. CERTIFICATE OF APPROVAL - The undersigned certify that they are officers of an instrumentality of the state or political
subdivision in which the project proposed in the foregoing request is to be located and are directly concerned with the problems
of economic development in said state or subdivision; that they have considered the qualifications of the applicant in the fore-
going request and do for the purpose of qualifying with the requirements of the Economic Development Act approve said appli-
cant; that they have carefully considered the project proposed and in accordance with the provisions of the Economic Develop-
ment Act do hereby find that said project is consistent with the approved overall program for the economic development of the
area and that it is not prohibited by the laws of the state or local political subdivision in which it is to be located.
(Local Agency) (State Agency)
By By.
Title Title.
Date Date
Note: A < '_rtificate of Non-Relocation and a Certificate of Compliance (Civil Rights Act 196-i ) must be filed with application.
FOP'/ FE-211 (REV. 7-711 KlfrC 5 HSCOMM-DC 50090-P72
F-5
-------
INSTRUCTIONS FOR GUIDANCE OF APPLICANTS IN PREPARING
AN EDA LOAN APPLICATION (FORM ED-201)
The information requited by this loan application is the minimum necessary for proper evaluation and is similar to that re-
quired by moot private banks not having previous knowledge of the applicant. These minimum requirements may be supple-
mented by any additional data which would be of mutual benefit to the applicant and EDA. If additional space is required
for completion of the information requested in the application, or additional data the applicant desires to submit, supple-
mental attachments should be prepared and submitted in the same number of copies as the application. Do not condense
the information furnished at the expense of clarity.
It is recommended that the applicant make full use of the EDA Economic Development Representative for such assistance
as may be necessary to complete the application. Administrative, financial and engineering personnel can be made avail-
able in case of need. It is not necessary for the applicant to incur the expense of employing outside agents to prepare
this application. Applicant should immediately notify EDA of any change in or addition to the information set forth in this
application.
A more detailed explanation of the requirements of this application follows:
Item 3 - Cost of Project - Cost of Project relates solely to the acquisition cost of fixed assets and should not include
organizational, promotional or other expense in the development of the project.
Item 5 - Working capital . Working Capital sufficient to carry operations into profitable production will be required but is
not to be included in project cost.
Item 6 Guarantees - Where applicants make a relatively small contribution to the cost of a project, EDA may require the
individual or corporate principals personally to guarantee repayment of the loan.
Item 9 Employment EDA is required to realistically assess the benefits of a proposed project to the area in which it is
located. The form is designed to cover projects of varying types: seasonal; recreational; commercial and industrial. A
complete manning table, showing employment by sex and rates of pay, planned for the facility when fully operational, is
required.
Page 6
FORM ED-201 (REV. 7-71) USCOMM-DC 59090-P72
F-6
-------
APPENDIX G
UNITED STATES DEPARTMENT OF AGRICULTURE
Form FHA -400-1
(Rev. 6~?6-72) FARMERS HOME ADMINISTRATION
EQUAL OPPORTUNITY AGREEMENT
This agreement, dated _ between
(herein called "Recipient" whether one or more) and the Farmers Home Administration, United States Department of
Agriculture, pursuant to the rules and regulations of the Secretary of Labor (herein called the 'Secretary') issued under the
authority of Executive Orde; 11246, as amended, witnesseth:
I In consideration of financial assistance (whether by a loan, grant, loan guaranty, or other form of financial assistance)
'made or to be made by the Farmers Home Administration to Recipient, Recipient hereby agrees, if the cash cost of construction
work performed by Recipient or a construction contract financed with such financial assistance exceeds 510,000unless
(exempted by rules, regulations or orders of the Secretary of Labor issued persuant to Section 204 of Executive Order 11246 of
September 24, 1965.
1. To incorporate or cause to be incorporated into any contract for construction work, or modification thereof, subject
to the relevant rules, regulations, and orders of the Secretary or of any prior authority that remain in effect, which is paid
for in whole or in part with the aid of such financial assistance, the following "Equal Opportunity Clause":
During the performance of this contract, the contractor agrees as follows:
(a) The contractor will not discriminate against any employee or applicant for employment because of race, color,
religion, sex or national origin. The contractor will take affirmative action to ensure that applicants are employed,
and that employees are treated during employment, without regard to their race, color, religion, sex or national
origin. Such action shall include, but not be limited, to the following: employment, upgrading, demotion or transfer;
recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; and
selection for training, including apprenticeship. The contractor agrees to post in conspicuous places, available
to employees and applicants for employment, notices to be provided by the Farmers Home Administration setting
forth the provisions of this nondiscrimination clause.
(b) The contractor will, in all solicitations or advertisements for employees placed by or on behalf of the contractor,
&tate that all qualified applicants will receive consideration for employment without regard to race, color, religion,
sex or national origin.
(c) The contractor will send to each labor union or representative of workers with which he has a collective bargaining
agreement or other contract or understanding, a notice, to be provided by the Farmers Home Administration,
advising the said labor union or workers' representative of the contractor's commitments under this agreement as
required pursuant to section 202(3)- of Executive Order 11246 of September 24, 1965, and shall post copies of the
notice in conspicuous places available to employees and applicants for employment.
(d) The contractor will comply with all provisions of Executive Order 11246 of September 24, 1965, and of all rules,
regulations and relevant orders of the Secretary of Labor and of any prior authority which remain in effect.
(e) The contractor will furnish all information and reports required by Executive Order 11246 of September 24, 1965,
rules, regulations, and orders, or pursuant thereto, and will permit access to his books, records, and accounts by the
Farmers Home Administration, Office of Equal Opportunity, U. S. Department of Agriculture, and the Secretary of
Labor for purposes of investigation to ascertain compliance with such rules, regulations, and orders.
(0 In the event of the contractor's noncompliance with the Equal Opportunity (Federally Assisted Construction) clause
or with any of the said rules, regulations, or orders, this contract may be cancelled, terminated, or suspended in
whole or in part and the contractor may be declared ineligible for further Government Contracts or Federally Assisted
construction contracts in accordance with procedures authorized in Executive Order No. 11246 of September 24, 1965,
and such other sanctions may be imposed and remedies invoked as provided in Executive Order No. 11246 of
September 24, 1965, or by rule, regulation or order of the Secretary of Labor, or as provided by Law.
(g) The contractor will include the provisions of this Equal Opportunity (Federally Assisted Construction) clause in
every subcontract or purchase order, unless exempted by the rules, regulations, or orders of the Secretary of Labor
issued pursuant to Section 204 of Executive Order No. 11246 of September 24, 1965, so that such provisions will
be binding upon each such subcontractor or vendor. The contractor will take such action with respect to any
subcontract or purchase order as the Farmers Home Administration may direct as a means of enforcing such
provisions, including sanctions for noncompliance: Provided, however, that in the event the contractor becomes
involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction by the
Farmers Home Administration, the contractor may request the United States to enter into such litigation to protect
the interest of the United States.
rosttlon 6 FHA 400-1 (Rev. 6-26-72)
G-l
-------
2. To be bound by the provisions of the Equal Opportunity Clause in construction work performed by Recipient and paid
for in whole or in part with the aid of such financial assistance.
3. To notify all prospective contractors to file the required 'Compliance Statement', Form FHA 400-6, with their bids.
4. Form AD-425, Instructions to Contractors, will accompany the notice of award of the contract.
Bid conditions for all nonexempt Federal and Federally assisted construction contracts require inclusion of the appropriate
"Hometown" or "Imposed" plan affirmative action and equal employment opportunity requirements. All bidders must comply
with the bid conditions contained in the invitation to be considered responsible bidders and hence eligible for the award.
5. To assist and cooperate actively with the Farmers Home Administration and the Secretary in obtaining the compliance
of contractors and subcontractors with the provisions of the Equal Opportunity Clause and the said rules, regulations, and
orders, to obtain and furnish to the Farmers Home Administration and the Secretary, Form AD560, Certification of
Nonsegregated Facilities, to submit the Monthly Manpower Utilization Report, Optional Form 66, as required and such other
information as they may require for the supervision of such compliance, and to otherwise assist the Farmers Home
Administration in the discharge of its primary responsibility for seci-ring compliance.
6. To refrain from entering into any contract, or extension or other modification of a contract, subject to such Executive
Order with a contractor debarred from Government contracts or federally assisted construction contracts pursuant to Part II,
Subpart D, of such Executive Order or to prior authority; and to carry out such sanctions and penalties for violation of the
provisions of the Equal Opportunity Clause as may be imposed upon contractors and subcontractors by the Farmers Home
Administration or the Secretary pursuant to such Subpart D.
7. That if Recipient fails or refuses to comply with these undertakings, the Farmers Home Administration may take any
or all of the following actions: (a) cancel, terminate, or suspend said financial assistance in whole or in part; (b) refrain
from extending any further assistance under the program involved until satisfactory assurance of future compliance has been
received from Recipient; and (c) refer the case to the Office of Equal Opportunity, U. S. Department of Agriculture for
Appropriate action.
Witness the due execution hereof by Recipient on this, the date first above written.
Recipient
Recipient
(CORPORATE SEAL)
Attest:
Name of Corporate Recipient
By
President
Secretary
-------
Form FI1A44')-!
15-18-73)
I
F
I
I
Position 3
UNITED STATES DEPARTMENT 01 AGRICULTURE
FARMERS HOME ADMINISTRATION
APPLICATION FOR LOAN AND GUARANTEE
I OR\1 APPROVED
OMB NO. 40-R3868
Employer's 1. D. Number
I HA Case Number
APPLICANT (Show official name uithout abbreviations unless an abbreviation is a part of the official name for proprietor or partnership, show
mined) followed by d/b/a j;id trade name used, if any)
Street
Ot>
elcphone Ni>
County
Date of Application
State
Amount of Loan Requested
ZIP Code
Maturity Requested
1 ranchise
DYCS
D No
If Yes, Submit Copy
[_J Existing Business
d New Business
Date hmerpmt' Established
DESCRIPTION 01 JOBS (INCLUDE SUBSIDIARIES AND AFFILIATES)
Tune of Application (If There is an Existing Operation)
Nu;nber
Occupation or Skill Type
Average
Vva^e/rmployec:
Including 1 rinsie liencfits
t
TOTVL
i
f Loan is Approved
[
I
OTAL
I
I
ISriM \1T U IAXLS TO BE PAID BY 1'KOJKT
Income l( (tr
Payroll
Lxcise
Real 1 state
I ranch nc
TOT\l
TLDERAL
XXX
STA1 1
LOCAL
XXX
LOC X'HO.N 01 PROJECT
I
I
I
i-ifviicd ( ontutufiitv
Project .so
(if avail.'blc)
Sponsoring Agency /Location
Present
Status.
G-3
-------
5. Use of Proceeds-
Land A.ctfuisition
New Building or plant construction
Deb! Payment
Working Capital
Acquisition and/or repair of
machinery and equipment
Tofnl
6. SUMMARY Of- COLLATERAL OFFERED (Attach detailed list of collateral offered - See Item 10 (g) page 3
Cost
Net Book Value
(Cost Less Depreciation)
Present Liens Or
Mortgage Balance, If Any
Land and Buildings
Machinery and equipment..
Furniture and fixtures
Accounts receivable
Inventory ,
Other (s»ecit'y)
7. AS ADDITIONAL SECURITY, PAYMENT OF THE LOAN WILL BE GUARANTEED BY:
Name and Address (Include ZIP Code and Social Security Number of Guarantors)
(Each principal must submit a signed personal balance sheet as of the same date as the applicant's)
(Form FHA 449-5 may be used.)
Net Worth Outside Of Interest In
Applicant Company
DISCLOSURE OF SPECIAL INFORMATION REGARDING PRINCIPALS: (a) List below the names of any FHA employees who are related b>
blood, marriage or adoption to, or who have any present or have had any past, direct or indirect, financial interest in or association with, the
applicant, or any of its partners, officers, directors or principal stockholders (such interest to include any direct or indirect financial interest m
any other business entity or enterprise): (b) When the proprietor, or any partner, officer, director, or their spouse, is an employee of the U. S
Government (including members of the armed forces), detailed information shall be submitted with this application. (Use separate sheet if
necessary)
Check boxes if (a) or (b) above is not applicable (a) | | (b) | |
Name and Address (Include ZIP Code)
Details of Relationship or Interest
Page 2
G-4
-------
MAN.\GKMEtyT - Enter (u) names of all owners, officers, directors 01 partners and their annual compensation,
including salaries, fees, withdrawals, etc. (b) names and compensations of all employees receiving in excess of SI 7,500
annually, (c) hired manager, and (d) for all additional stockholders having a 20/£ or more interest in applicant.
complete' all columns except annual compensation.
Name (List iirst. middle, maiden & last )
(If no middle name, so state)
| Annual
Office Hold Compensation
Percent
Ownership
Personal
Guaranu
Offered'
(Yes or No)
Insurance
Carried for
Benefit of
Applicant *
). INSTRUCTIONS TO APPLICANT (Attachments):
Guaranteed Loans - Submit two copies of this form and all "supporting documents to the approved lender. All
attachments, must be signed and dated.
(a) Form FHA 4494, Statement of Personal History must be submitted in quadruplicate by the proprietor, if a
sole pioperietorship, by each partner, if a partnership, by each officer; director, and each additional holder of
20 percent or more of the voting stock, if a corporation; and other persons, including a hired manager, who have
authority to speak for and commit the borrower in the management of the business.
(b) Attach to application a brief description and history of the business.
(c) Comment-briefly on the benefits the business and community will receive if the loan is made.
(d) -\tuch a schedule on all installment debts, contracts, notes and mortgages payable, showing to whom payable.
original amount, original date, present balance, rate of interest, maturity date, monthly 01 other peiiodic
payments, security and whether current or delinquent. (Amounts on this schedule should agree with the
figures on the applicant's financial statement.) Indicate by an asterick (*), items to be paid by loan proceeds and
attach statement showing reason for paying same.
(e) If construction is involved, state the estimated cost and source of estimate, source of any additional funds which
may be required to complete the construction, and whether temporary financing for the construction is available.
Furnish preliminary plans and specifications with the application. Final plans and specifications must be submitted
for Lender approval prior to commencement of construction if loan guarantee is tentatively approved.
(f) \Vhere loan funds will be used for construction purposes, and the contract or subcontracts are in excess of
S 10.000, the Applicant must execute and submit with the application Form FHA 400-1, "F.qual Opportunity
Agreement" which is a non-discrimination agreement issued pursuant to Executive Order ! 1 246.
(g) A description of collateral is required whether now owned or to be acquired. Attach Form FHA 449-2.
(h) I DI each person listed in "Management" give brief description of education, technical training, employment
and business experience.
(i) Attjch audited financial statements for the past 3 fiscal years.
(j) Attach balance sheet and income statements dated within 90 days from date of filing application with aging of
accounts receivable and payable.
(k) Rcvo.'icihjtion of net worth shall be provided for items (i) and (j) above.
"Life mvirance on owner(s), pnnupal(s), or key man will bz required ONLY when specifically included a> a condition
of an approved loan.
Page 3
G-5
-------
(1) Furnish earnings projection (estimated profit and loss statement) for at least three full years together with a
detailed monthly cash flow for the first full year and quarterly cash flow statement for the next two years.
(in) Personal Financial Statements must be submitted for proprietors, each partner, each officer, and each additional
stockholder with 20% or more ownership. For this purpose the enclosed FHA Form 449-5 will be used.
(n) Details must be given of any pending or anticipated litigation, whether applicant be plantiff or defendant or any
litigation that involves management of the applicant listed in "m" above.
(o) Subsidiaries and Affiliates - List on an attached sheet the names and addresses of (1) all concerns that may be
regarded as subsidiaries of the applicant, including concern m which the applicant holds a controlling (but not
necessarily a majority) interest, and (2) all other concerns that are in any way affiliated, by stock ownership,
management contracts, or otherwise, with the applicant. The applicant should comment briefly regarding the
trade relationship between the applicant and such subsidiaries or affiliates, if any, and if the applicant has no
subsidiary or affiliate, a statement to this effect should be made. Signed and dated balance sheets, operating
statements -and reconcilement of net worth must be submitted for all subsidiaries and affiliates in the same
manner as required of applicant.
(p) Purchase and sales relations with others - Does applicant buy from, sell to, or use the services of, any concern in
which an officer, director, large stockholder, or partner, or proprietor of the applicant has a substantial interest?
I I Yes [_J No If'"Yes" give names of such officer, directors, stockholders, and partners, and names of
any such concern on attached sheet.
(q) Receivership - Bankruptcy - Has applicant or any officer of the Applicant or affiliates or any other concern with
which such officer has been connected ever been in receivership 01 adjudicated a bankrupt? [ ( Yes j_ | No
If "Yes" give names and details on separate sheet.
(r) Previous-Financing - List assistance received, requested, or any pending applications. (Include direct, participation,
insured, or guarantee loans and grants from any Federal agency.)
Name of Agency or Department
* If not approved \viite "Declined."
Amount
Requested
Date of
ApprovaK*)
Present
Balance
Status (Current,
Delinquent, Matur-
ity Accelerated,
Liquidated or Paid
in Full)
11- POLICY AND REGULATIONS CONCERNING REPRESENTATIVES AND THEIR FEES -
(a) An applicant for a loan may obtain the assistance of any attorney, engineer, appraiser, or other representative to
aid it in the preparation of its application, however, such representation is not mandatory. In the event a loan is
approved, the services of an attorney may be necessary to assist in the preparation of closing documents, title
examination, etc. Fees or other compensation which FHA considers reasonable for services performed by such
representatives on behalf of the applicant may be paid from loan proceeds.
(b) There are no "authorized representatives" of FHA. other than our regular salaried employees. Payment of any
fee or gratuity to FHA employees is illegal and will subject the parties to such a transaction to prosecution.
(c) FHA will not approve placement or finder's fees for the use or attempted use of influence in obtaining or
trying to obtain a loan, or fees based solely upon a percentage of the approved loan or any part thereof.
(d) 1 ees which will be approved will be limited to reasonable sums for services actually rendered in connection with
the application or the closing, based upon the time and effort required, and the nature and extent of the services
rendered by such representative. Representatives of loan applicants will be required to execute an agreement as
to their compensation and services to be rendered in connection with the loan.
(c) It is the responsibility of the applicant to set forth in Section 12 of this application the names of all persons or
firms engaged by or on behalf of the applicant Applicants are also required to advise FHA in writing of the
names and fees of any representatives engaged b\ the applicant subsequent to the filing of the application
Failure to so notify FHA constitutes "misrepresentation" and will void FHA's guarantee it lender had knowledge
of this omission.
Page 4
G-6
-------
(0 Any applicant having any question concerning the payment ol tees, or the reasonableness of fees, should
communicate with FHA before the application is filed for a loan guarantee.
12. XAMKS OF ATTORNEYS, ACCOUNTANTS, A\D OTHER FARTIhS The names of all attorneys, accountants,
appuisers, agents, and ail other parties (whether individuals, partnerships, associations or corporations) engaged by or
on behalf of the applicant (whether on a salary, retainer or fee basis and regardless of the amount of compensation) for
the purpose of rendering professional or other services of any nature whatever to applicant, in connection with the
precaution or presentation of this application to a lender, and all fees or other charges or compensation paid or to be
paid therefor or for any purpose in connection with this application or disbursement of the loan whether in money or
other property of any kind whatever, by or for the account of the applicant, together with a description of such
services rendeied or to be rendered, are as follows.
Name and Address (Include ZIP Cods)
Description of Services
Rendered and to be Rendered
Total Compensation
Aereed to be Paid*
Compensation
Already Paid*
13. AGREEMENT OF NONEMPLOYMENT OF FHA PERSONNEL. In consideration of FHA guaranteeing any part of
the loan applied for in this application, the applicant hereby agrees with FHA that applicant will not, for a period of
two years after date of guarantee of any part of the loan, employ or tender any office or employment to, or retain for
professional services, any person who, on the date of such disbursement, or within one year prior to said date, (a)
shall have served as an officer, attorney, agent, or employee of FHA and (b) as such, shall have occupied a position or
engaged in activities which FHA shall have determined, or may determine, involved discretion with respect to the
granting of assistance under the Consolidated Farm and Rural Development Act and other Acts administered by FHA
from time to time.
14- CERTIFICATION. The applicant hereby certifies that
(a) The Applicant has read FHA Policy and Regulations concerning representatives and their fees (11 above) and
has not paid or incurred any obligation to pay, directly or indirectly, any fee or other compensation for obtaining
the loan hereby applied for, other than for services and expenses authorized pursuant to paragraph 11 above.
(b) The applicant has not paid or incurred any obligation to pay to any Government employee or special Government
employee any fee, gratuity or anything of value for obtaining the assistance hereby applied for. ff such fee,
gratuity, etc. has been solicited by any such employee, the applicant agrees to report such information to the
Office of Inspector General, USDA, Washington, D. C. 20250.
(e) All information contained above and in exhibits attached hereto are true and complete to the best knowledge
and belief of the applicant and are submitted for the purpose of inducing FHA to guarantee a loan by a bank or
other lender to the applicant. Whether or not the loan herein applied for is approved, applicant agrees to pay or
reimburse the lender for the cost of any surveys, title or mortgage examinations, appraisals, etc., performed by
nonlender personnel with consent of the applicant.
(d) The applicant hereby covenants, promises, agrees and gives herein the ASSURANCE that in connection with any
loan to applicant which FHA may guarantee as a result of this application, it will COMPLY with the requirements
of Executive Order 1 1246 to the extent that it is applicable to such financial assistance The applicant further
agrees that in the event it fails to comply with said applicable provisions. FHA may cancel, terminate, accelerate
repayment of or suspend in whole or in part the financial assistance provided or to be pio\ided by FHA. and that
FHA or the United States Government may take any other action that may be deemed necessary or appiopnatc
to effectuate the nondiscnmination requirements, including the right to seek judicial enforcement of the terms
of this ASSURANCE OF COMPLIANCE. These requirements prohibit discrimination on the grounds of lace.
religion, color, sex, or national origin by recipients of federal financial assistance, including but not limited to
employment practices, and require the submission of appropriate reports and access to books and records. Ihcse
requirements are applicable to all transferees and successors in interest.
1 nte
,'i specific dollar amounts or hourly rates. "Unknown," "Undetermined" 01 other imprecise terms are not sufficient.
PageS
G-7
-------
(Individual, general partner, trade name or corporation)
CORPORATE SEAL B\
Title.
Attest . . Date Signed.
(Title)
Whoever makes any statement knowing it to be false, or whoever willfully overvalues any security, for the purpose of
obtaining for himself or for an applicant any loan, or guarantee or extension thereof by renewal, deferment, of action ,
or otheiwise. or the acceptance, release, or substitution of security therefor, or for the purpose of obtaining money.
propert>, or anything of value from the United States of America or an agency thereof under the Consolidated Farm
and Rur.il Development Act. may be subjected to criminal prosecution.
Bank Transit No.
15. REQUEST FOR CONTRACT OF GUARANTEE
(For use only by bank or other lender)
We propose to make and service a loan to the Applicant named on page 1 of this Application. We hereby make
application for a Contract of Guarantee subject to the provisions of the applicable Lenders Handbook (B & I). We
understand that the prohibition in 11 (b) of the foregoing application against payment of fees or gratuities and the
non-employment agreement in paragraph 13 of said application are binding on us.
(a) Terms and Conditions of Loan.
(1) Term of loan years. payments, including lender's interest at % per annum,
in the amount of S
(2) Collateral and lien position.
(3) Planned Disbursements
(4) Guarantee.
(5) Insurance: Life, Hazard, Federal Flood.
(6) Other
Page 6
G-8
-------
(I)) Comments of the Lender which may be in the form of a letter or memorandum, shall:
(I) include an evaluation of ability of Applicant's management, its past record of handling obligations, an
expression as to what the loan will do for applicant, applicant's repayment ability, and other pertinent
information. If Applicant or any of its officers have been ajudicated bankrupt or connected with a
receivership or been involved in any criminal or other legal proceedings, give details.
(2) state whether any officer, director, substantial stockholder, or employee of the Lender has a financial
interest in Applicant and, if so, the extent thereof.
(3) indicate whether Applicant, its subsidiaries or affiliates, is/are indebted to the Lender. If so show the
amount, terrm, and how secured, including any guarantee, and whether applicant's loans have been met
substantially as agieed. (Include all such loans made during the past 12 months, showing high and low
credit by months. If no loans were made during the period, so state.)
(c) In our opinion, the loan will be sound and it appears that all FHA requirements in the Lenders Handbook can and
will be met.
Name and address of bank (Include ZIP Code)
Telephone No.
Date
Authorized Officer
OU. S. GOVERNMENT PRINTING OFFICE: 1975--668526/82 REGION NO. 6
Page 7
G-9
-------
SFATHMHNT OI C'OLLATKRAI.
USD-VI I! l j
Appraiser '
Market Value \
'
{
SUMMARY Oh COl.LMI R \L TO BE ACQUIRED
CLASSIFICAIION
1.
L.'ind Acquisition
2 Nc\\ Buildings or Plant Construction
3.
4
5
6
\> quisition of Maclnneiy and Equipment
Acquisition of Automotive Fqiupment
\i4U!s:tion of Office Furiutuie and Equipment
Oi'u-i
"? 1 n'.ii ("i o Item 10 above)
I \act Cost
X X X X
X X X X
X X X X
X X X X
X X X X
X X X X
X X X X
For Use ot
Appra:>ei
Maiket Vain:
mi s
estimated t.i.
above Sin,;,.
V.SEK CERT1M1 S that he iias personal!) and
In: of the collateral to be jeq'iired Furthcmu>r
i:e fair and reasonable as of that date -\dditn >
inspected the tolLueial as listed in llns Rep'n.
the maiki't values S|M
ents are attached to this Repor'
G-in
-------
RLAL tSTA'It O\\.\hi)
Vimr .111(1 VlUri'xS
ol' AppliL.int
IlK-illd,- ZIP Cod,- . . _.._..
EMPLOYER ID NO.
FHA CASL NL'MBI R
Parcel nuinhci
Address of Re.ilu Offered
I itle data | I Title Insurance [ j Abstract
I I Other (indicate)
Realu in name ol
Recorded- Book Page
County
Land and land impiovements (Do not include buildings-see Sec 2 be!o\v) (Land improvements such as paving,
utilities, fences, etc.)
Date acquired
Legal description (Attach if too long)'
: It available attjcli plat survev
Total Acres
2. Buildni.;-, (MiuA square footage of each) Cost (If separate from land) S
Date acquired
Ijtiilduu iL'xciiption. List ejcl) building separate!)' with hue) iL^cnption
ol sioiK-s da'c erected, use, and condition
g si^e, type of constuiUion. nunibei
Assessed Value
Impiovemenis
I axes
Rent if App: , 'ble S _
Can\ "I oi.i|, LI P,JMO |
(Siiinni,ii\ i I in . | ^iij 2
I Month [__ j \Mniia!K [_j I ease
G-ll
."I 01 m ol Lease
-------
ol Rc.ilH Ottered
Rl-.AL LSTA1L rO BL ACQUIRED
N.ime
ot
Inclnd
Applicant
- /IP f ,,,|,-
LMl'LOYtR ID NO
I HA ( ASI. M MM R
"I;;!edJta I ' Title InsLiiance L, Abstiac
' ' Other (indicate)
1 I and and land improvements (Do not include buildup - see Sec 2 helms) (Land improvements such as pavnm. iinhlicv
tcncev water rights, etc )
l.cjiai desciiption (Attach i! tuu long)*
It availabie. attach plat suivcy
7,itdl -Vies
(Show iquurc footage ot each) Cost (11 v:paur_ nom land) S
Hinidi'is; debLiipti'jn*. List each building sepai.,i-M\ uit' Kiel description including
l Muiie-.. date elected, use. and condition
/e. tspe "I coiiitiuclion. nu.nbcr
iU it e \isting building 01 to be
Applicable S .
[ |
Month Annual!) [ | I ea-e
-------
PLRSON'AL PROP1 Rl\
( \nd am fixture^ not included uith Real 1 stdic or Duildi/ij; on Paiie -1)
Ill'.-vl plopoilv . . . .
[I n f ,'(,'ri -t f
! ' U-jNOdl-.
Name of \pplitanl
1 HA C\SI NO
\i>()ii..:ni- u .'.,!.,-.IP \('ll,\I Pinsi! \I 1\VI N'lOKY Oh lilt I'l KS()\ \L I'ROl'l R I'Y beinu ofleied a^ colkik-i.i! DO \() I
I \kl I !\' )M II1 it >K l\l l ()R[)S l.isi caJi ik'in ni .itdM cl.iiin.' \\ ill 'he classi heat ion nunihcis on pace !, o.s
I M M.K'PII. t .iiiJ I quipmenl (4) ,\viioinoti\c l.qinpinent (5) Oiii^c furniture and equipment (6) Othei t'oi example' jigs tii
lAluroi .iiiplin^ oil. (Libt piopertv al dilteien! iooalioiib on separate page-.)
Model \uinlvi
Ke
( oud
Maikel
111 Si Rl Mill! MS ( \N HI R!
G-13
-------
|(And .in
1 )>.- fiill.iv 11. i' il.'M'iihf.l pmpprty
^ , * T ^ - >; ' "1 i >t trfi-i i'(l fit
i *H 1 1 -"1 -1 'ip ' r ' ' i i i
HUUI ^4 ,
' "jti-ih :> ws .i,ili 1 lojscdl 1
1,,, ,:,[
i ...
Item Vinu M.iiuil'jcturer-Make
"
I
'
1
1
_
' , 1 ..UK Dl 1 ,iJi ( : ^
CON UN
\ 1 !\IlllL'S III
Dito
\t quired
"i v.ihi'ii ii
i:.\TIC)\ 01- PI R->(J\
>t included u ith Roal 1 -
|
Model i .Vi.J
1 Niinib.'i
I
I'.i'je 1
\L PKOI'I \<\\
late 01 liuildnii; uu I',IL\
\ev.
l\ed (OS[
Rebuilt
h.i.i'i
:>
\anic nl \
1 II \ ( .ise
\1 1
HOOK
1
ppht_;int
\n
1 Ol 1 'SL1 ()
t t)l)U
Appuiis^'i
\Uukot
G-14
-------
PI RSONAL PROP! KTY IO BL ACQU1RI I)
(Am! any lixiiues no! included »nh Real Ksiate 01 Buildmt: on Page 3)
The to!lo\Miu' dcsuiivd pioperty
is to he located 01 hcadqnaiteicd at
Include /ip ^ode i 1 t ,
Location is tuMicd ! ! leased! 1
n-,*.,f,",r, ,,n
Item Xaii!e-\lji in lac tin ci -Make
Date to
he
Acquired
i
Model
Capacity
1
i
i
X'esv
Used
Rebuilt
Name of Applicant
HL\(\i>eNo
COST
1
i
Lor Use of Appraiser
C'ond
Market
Value
1
!
(
1
,
i
1
1
i
i
(.'i<\ 1 ot.ils of f Jell ( ljss,'iK\iti
1
\ X \
(i nt (i
G-15
-------
USDA-FmHA
Form FmHA 449-4
(Rev. 7-28-75)
STATEMENT OF PERSONAL HISTORY
FORM APPROVED
OMB NO. 40-R3869
INSTRUCTIONSrThls form must be completed by the proprietor
(owner) If the applicant Is » sola proprietorship; or by each general
and each limited partner If the applicant Is a partnership; or by each
officer, director, key employee and stockholder holder 20 percent
or more of the applicant's voting stock except for those corporations
that are listed on a major slock exchange.
Failure to report full, complete and accurate Information may
result In FmHA's not making or guaranteeing the loan requested.
Name and address of loan applicant (F-irm name) (Street, City, State
and Zip code)
Type of business
(Check one)
I I Sole owner
1I Partnership
I I Private corporation (for profit)
II Private corporation (non-profit)
II Public corporation (non-profit)
Emplujur ID Number
1 Personal Statement of. (State name in full, if no middle name,
(NMN), or if initial only, indicate initial)
First Middle Maiden Last
Name of Spouse
2. Marital Status I 1 Married (~j Single {"""] Other
3. a. Place of birth (City and State or foreign country)
b. Date of birth (Month, day, year)
4. Citizen of United States? ( I I I
LJ Yes LJ No
5. Social Security No.
6. a. Relationship to Applicant.
b. Give the percentage of ownership or stock owned or to be
owned in the applicant.
7. Are you presently under indictment, on parole or probation? if yes furnish details on a separate sheet.
D
Yes
DN°
8. HJVC >ou ever been charged with or arrested or convicted of any criminal offense other than a minor motor
vehicle violation? If yes, furnish details on a separate sheet
D Yes DNo
Stalling with present address, list residence addresses during the last ten years.
Djte Street and number City
State
10. Starting with present employer list all employers during last ten years
From To Employer
Address
The infor,nation on this form will be used in connection with an investigation of your character. Any information you wish to submit,
which you feel will expedite this investigation, should be set forth below and on the back of this form, if needed.
Date
Title
Signature
uiT, 19/T-0-665-664/1720
FmHA 449-4 (Rev. 7-28-75)
G-16
-------
Position 3
'SDA-F11A
FormFHA 44<>-S
?} RSONAL FINANCIAL STATEMENT
19
FORM APPROVED
OMB NO. 40-R3870
INSTRUCTIONS: This form must be completed by the proprietor
fowner) if the applicant is a sole proprietorship, or by each general and
| each limited partner if the applicant is a partnership, 01 by each officer,
, each director, each key employee, and each stockholder holding 20* or
! more of applicant's voting stock, if the applicant is a corporation.
sme and of loan applicant (1 inn name) (Street, Citv , S'ate
id Zip codel
Employer ID Number
Name and Address, Including ZIP Code (of person and spouse
bmitting Statement;
Jiancial Institutions and Account Numbers of person submitting statement
T> pe of business . ,
(Check one) |
1 1 Sole owner L_
1 1 Partnership 1
' 1 Other fF.xpl.un)
Business (ot person submitting Stat<-
Private corporation (for profit)
Private corporation (non-profit)
Public corporation (non-profit)
merit)
Social Security No (of person submitting Statement)
Relationship to Applicant
Please answer all questions using ''No'' or ''None" where necessary
ASSETS
LIABILITIES
r-ish on Hand & In Banks $ .
.vings Account in Banks
"F S. Government Bonds
Accounts & Notes Receivable
Ke Insurance-Cash Surrender Value Onl)Z_
her Stocks and Bonds (From Sec. 3)
Real Estate (From Sec. 4) _
(tomobile - Present Value
:ier Personal Property (from Sec. 5)
Utner Assets (From See 6)
Accounts Payable S .
Notes Payable to Banks (From Sec. 2)
Notes Payable to Others (From Sec. 2)
Installment Acct. (Auto,) (Pymt S )
Installment Acct (Other) (Pymt. S ) _
Loans on Life Insurance
Mortgages on Real Estate (From Sec. 4)
I npaid Taxes (From Section 7)
Other Liabilities (From Section 8)
Total Liabilities
I
Total Assets S-
Net Worth _
Total Liabilities & Net Worth S-
Section 1. Source of Income (Describe below all items listed in this Section)
CONTINGENT LIABILITIES
I
t Investment Income. .
Real Estate Income
Income (Describe)
I
As Endorser or Co-Maker
Legal Claims and Judgments
Provision for Federal Income Tax..
Other Special Debt
scripHon of items listed in Section 1 .
t
I
I
'e Insurance Held (Give face amount of policies - name of company and beneficiaries).
r
G-17
-------
SUPPLEMENTARY SCHEDULES
Section 2. Note-. Payable to Banks and Others
Name and Address of Holder of Note
Amount
Original B.\l.
S
of Loan
Present Bal.
S
Tenm of
Repayments
S
Maturity
of Loan
How Endorsed, Guaranteed,
or Seemed
Section 3. Other Stocks and Bonds' Give listed and unlisted Stocks and Bonds (Use separate sheet if necessary)
Face Value
or
No. of Shares
Names of Securities
Cost
Market Value as
Quotation
of Statement Date
Amount
Section 4. Real Estate Owned. (List each parcel separately. Use supplemental sheets if necessary. Each sheet must be identified as a supplement
to this statement and signed.) (Also advise whether property is covered by title insurance, abstract of title, or both).
Title is in name of
Address of propert> (City and State)
Name and Address of Holder of Mortgage (City and State)
Type of property
Oriffinal Poet tn (mpl (i|«) X
Datft Pnrrh.iscrl
Prpspnt Martpt Vnlnf! S .. .
T,i\ AMi(>.«mcnt V^lni-
P.itf of M^rtoig^ , .
Original Arnounf S
Hi!,) urn X , , ,
M.itiinrv
Terr"1: "f Payment
S;atus of Mortgage, i e . current or delinquent. If delinquent describe delinquencies
5. Other Personal Property. (Describe and if any is mortgaged, state name and address of mortgage holder and amount of mortgage, terms
of payment and if delinquent, describe delinquency.)
Paee 2
G-18
-------
Uoi' 6. On' " \vsecs (Describe)
,^B;tion 7. UnjJU'J Tax^S (Describe in detail, a^ to type, to whom payable, when due, amount, and what, it any, property tax liens exist.}
SectionS. Other Liabilities. (Describe in detail)
di or (\Ve) ro;ti!> ti . aKne and the statements comai'ied in the schedules herun i> j true and accurate statement of (my) or (our) financial condition
, of the date stated herein Tins statement i^ :;ivi;n for the purpose of inducing a lending institution to make a loan as requested in application, of the
.Mdual or fir,.i ^hoio name appears here and to induce the United States of America to guarantee a portion of such loan.
Signature Signature
G-19
-------
FORM APPROVED
USI>'\-K1I\ OMB NO. 40-R3S72
'' ^'W'° APPLICANT'S ENVIRONMENTAL IMPACT EVALUATION
Name .iiul Addiess of Applicant (Firm Name) (Steel, Cit> , State and Zip Code)
t'MI'LOYLR ID NO.
IHACASt NO.
In order to evaluate the specific impact your proposed project will have on the environment, please complete the following item:
Is a i-edjial waste discharge permit required under the Federal \\ater Pollution Control Act
Amendments of 1972? QYes Q Nc.
If no, complete parts I through VIII If yes, has an application been made foi the permit? PJ Yes f~]No
If so. what is the status of that application'' Q Appioved Q Pending [~1 Disapproved9
If above application for permit did not co\er all facilities in your project please identify those not covered and complete balance of
form, as it per tains, to those you list It the application for permit covered all facilities complete Parts I, VI. VII and VIII.
I OI-MiRAL (Briefly describe',
A Location of facility - Provide map if possible to show project location and areas which might be affected by the facility.
B Cluidctei of the surrounding area (include terrain, population densitv. etc )
( I \ pe ol pioicct (nature of activity )
If \oiir project must conform to approved standards established by the Federal or your state or local environmental piotection
agencies, please identify for each of Parts II (Air), III (Water). IV (Solid) and V (Other) the appropriate regulating agencies and
go on to the next section. If you are not required to conform to such standards, please complete all questions to the best ot
your knowledge in each part for which standards are not set. "H)u ma> wish to consult with appropriate St no or local agencies
in preparing your answers.
\l li POL I IiTION (include name and address ol agenue-* u itli cogni/.nice o\ei yom pio|Cct. II yon ii'iiv v
^tJlldalds set by these agencies go on to pait III )
( !' ll'l', ph )|L\ I \
\ \i ;n iiK-, wind) ,nc like1!) in puulikc' an pollution MU!> .1-- nui neialn^ exhaust s\ slcnis. III-,M! I uel inn mug uiuis and
G-20-
-------
M:;ho
-------
A IVwnbe activities that me likely to pioduce watei pollution.
H Dexuilv ujtei pollution conno! codes and/or regulations appl'.-jMc to the pioiect
( DON, nl1: me tli (id ;md sen^m equipment used to del ei mine quantity. and 01 t\ pe ol uatet poll tit u MI
[) \\li.ii le\eK (coix-entiauous ot the tolU
Mandai di peiintt you to discliaige in }
.nving contamma-m-- to ie>ult fioni > oui pio|ect ) do \oui locul
oui sewage ancl'or ivjstc uatei''
uaiei
S'l-.K'InL'J MM! i v'l
S3
I 1
^JMi;Liv.'C -WMW \'.jonts
Dhehaige
expected
Ironi yotii
piu|e^t
Standard
Disehaige
expected
from yotii
pioject
\eidn\
Alkalinity
pH (h\ drogen ion
Concentration)
Hardness
Color
Biochemical oxygen
viemand
C hcniical ox>gc
Jemand
n
L>.sM>h ed ox\ sen
Turbidity
Temperature
Specillc gra\it\
( mul'UMuce
On
Stundjul
G-22
-------
I-.. I'letieaiment facilities, that is. pll neuuah/crs. oil separators, screens, pie-settling nasins. etc.
I. Is .1 municipality, otliei local government entity, ot industry lequiicd to have prctreatmcnt
lacilines" d Yes Q No
2. ll'jii industrial borrowei or substantial diieci beneficial"1- what ty pe ot pietieatment f.iulities do you plan''
F. Samtaiy sewage discharge (Check one and describe}:
^1 Municipal ticutment Q Septic tank I I Local ticatinent plant
£] Local body of water Q Other
H Industrial waste discharge (Check one and describe):
^j Municipal treatment plant Q Industrial treatment plant [ I Local body of watei
Oilier
II. Are sanitary and industrial waste water drainage (lows coribined'' LJ Yes I _ I \»
Is storm tlow combined with one or botii? Q Yes ^] No
If one, which?
I. Will the project create a substantial increase in the volume of sewage treated by a given facility'' Q Yes
If yes. identify major contributors and kind of discharge from each.
IV. SOLID1-', \STI:DISPOSAL (include name and address of ag. .vies with cognizance o\er VOID project. !t y ou must
to sta,'1' i-ik set by these agencies, go on to part V.)
A. Does jiioiect produce amounts of solid waste which cannot be readily disposed of Q] Yes
I'or example, combustibles such as paper, bags, boxes. nonv.omhustibles such as glass, sand
plastics, salvageable materials, sludges or filter lesidue^, tars 01 oiU. undeis 01 fl\ ash. 01
others It yes. identify the solid wastes.
B. What laws, ordinances, or practices go\ern solid waste management
('. How ate Milid wastes disposed ot1'
D. A:e the equipment and techniques employed adequate for the collection, haiulh. and dispos,.. ot
solid w:\stes? LJ Yes [ | No
l)i' rhe\ cause noise or dust? Q Yes p~] No
H. \\iiithe\accommodatetheincreasedloadcausedbytheproject? Q Yes j~| No
4
G-23
-------
V. Oflll R I OKMS OF POLLUTION (these may include, but not be limited to radiation, noise, radio fiequency
Iinu'Me.e/ie. vi-,tul)
A. \\h.,i ,ne the.V
I
I
I
I
I
I
I
C. Do Lode-s and/or appropriate regulations govern such pollution to be expected from your project7 Q Yes [~1 No
It "Yes", identify.
GENLRM PROJECT EFFECTS
A. Desuibe existing land use, such as Industrial, Recreational. Residential, Sound barriers. Commercial, Semi-private,
Public, Farm, etc., including any existing zoning classifications.
B Descnbe LluiiMs in land use.
C Will :1-e piu|eet atTect transportation, by Highway, Rail, Water or Air1' fj Yes [~] Nc
It \es ho'A''
D. \\ili i' e pK'ieet affect fish, wild life, water-fowl refuges, beaches, historical sites, forested and
scei.K area-, etc. fl Yes
> II. PLL \S1 1)1 SCRIBE TIIL INDIRLC'T KFT1.CTS THE PROPOSf D PROJECT IS EXPHCTED TO HAM: ON THE
fc\\TRO\\ll NT (In this section include changes which, although brought about by the proposed proj>
caused i-\ the project itself. An access road to serve a proposed industrial park might be included here"1
jj_ ' !'ON i V \LL \TION OF THE INFORMATION SUPPLIED ABOVE. OR ON THE BASIS OF INFORMATION SUPPLIED
"" 10 111! i i Dt-RAL OR STATE ENVIRONMENTAL PROTECTION AGENCY, PLEASE PROVIDF. A BRIEF SUMMARY
Oh Till ! NV! RON MENTAL IMPACT OF THE PROPOSED PROJECT The summary shall include a description of the
extent to \\hich the project significantly affects the environment, as provided by the National Environmental Quality Act ot
196C) including consideration of:
A. i he environmental impact of the proposed project,
B An;. ..'I'.i'ise en\nonnienial effects which cannot be avoided should the proposed project be implemented.
G-24
-------
D. The lelationship between local short teim uses of man's environment and the maintenance and enhancement of
king-term pioductivity, and
E'. Am ineveisible and irretrievable commitments of resources which would be involved in the proposed project should
it he undei taken,
F. Have any questions or objections been raised by any governmental agency, private organi/ation
or individual which might indicate that this proposal is, or will become, controversial9 II Yes LJ No
If yes, please describe
IX. TO BE SIGN1-D BY APPLICANT.
Date Applicant
fi-25
-------
U3U
Form
(Rev.
TO:
TmHA 149-14 CONDITIONAL COMMITMENT FOR GUARANTEE
1-2-75)
Lender (Holder)
Lender's Address
Borrower
Case No.
State
County
Type of Loan
Principal Amount of Loan
$
From an examination of information supplied by the lender on the above proposed loan, the county committee certification
or recommendation if required, and other relevant information deemed necessary, it appears that the transaction can
properly be completed.
Therefore, the United States of America acting through the Farmers Home Administration (FmHA) hereby agrees that, in
accordance with applicable provisions of the FmHA regulations published in the Federal Register and related forms, it will
execute Form FmHA 449-17, "Contract of Guarantee," on the above loan at the time, subject to the conditions and
requirements specified in said regulations and below.
If the Contract of Guarantee is executed, the guarantee fee rate payable periodically by the lender or holder to FmHA while
the Contract of Guarantee is in effect, the initial loan subsidy rate, if any, payable by FmHA to such lender or holder, and
the interest rate payable by the borrower in cases in which that rate is limited by statute or is fixed from time to time
pursuant to statutory formula, will be those rates in effect on the date of this conditional commitment. Such rates and
related information may be ascertained from any FmHA office or by consulting the Federal Register.
Additional Conditions and Requirements: I/
This conditional commitment will expire 2J days from the date hereof unless the time is extended in
writing by FmHA, or upon the lender's earlier notification to FmHA that it does not desire to obtain an FmHA guarantee.
UNITED STATES OF AMERICA
By:
Date: FmHA .
(Title)
iy Insci t any additional conditions or requirements in this space or on an attachment referred to in this space, otherwise,
insert "NONE"
2/ Insert number of days estimated to include issuance of the Conrract of Guarantee.
FmHA 449-14 (Rev. 1-2-75)
Position 2
G-26
-------
Acceptance or Rejection of Conditions
(Except in Farmer Loan Cases)
*To: Farmers Home Administration (FmHA):
The conditions of Form FmHA 449-14 on the other side of this page:
1. ( I are acceptable and the undersigned lender intends to proceed with the loan transaction and to request issuance of
of a Contract of Guarantee at the appropriate time.
2. | I are acceptable, but for other reasons the undersigned lender does not desire a Contract of Guarantee.
3. rj are not acceptable and for that reason the undersigned lender does not desire a Contract of Guarantee.
4. F 1 are not acceptable, but would be acceptable if the following changes were made:
if block number "1" above is checked:
(a) It is understood that the following information may now be released upon request: Name and address of applicant,
njme and address of lender, amount of loan, and general purpose of the loan.
(b) Jt is anticipated that the Contract of Guarantee will be requested in approximately months.
(Name of Lender)
By:
(Date) (Signature for Lender)
(Date) (Signature of Applicant)
* Return completed and signed copy of this form to FmHA office from which it was received, except in Farmer loan cases.
** Required in B&I and RH-MF cases, not in other cases.
On front of form at bottom of page, insert:
NOTE TO LENDER AND APPLICANT: Complete and execute the Acceptance or Rejection of Conditions as indicated
on the back of the copy of this form and return it to FmHA except in Farmer loan cases.
G-27
-------
^SDA-F-niHA
Form Ki'iHA 449-22
.cv. 6-23-75)
Position 3
CERTIFICATION OF NON-RELOCATION
AND
MARKHT AND CAPACITY INFORMATION REPORT
(To be completed by applicant)
FORM APPROVED
OMB NO. 40-R39P2
This form is to be executed by applicants for financial assistance for loan guarantees and/or grants under provisions of the
Consolidated 1 aim and Rural Development Act.
Name ot Applicant:
Location of Proposed Project:
2a. Employer ID No.
2b. Labor File No.
This Proje< t is:
LJ A new business venture
D A new branch or facility
O An expansion of an existing facility
5 Affiliate or Subsidiary of:
D Refinance of Existing Loan
D A Transfer of Ownership
D Other (explain)
Amount of Loan/Grant:
Purpose ot Loan or Grant - (Specify)
8.
Intoi [nation about your products or services: (Note: Describe each principal product or service to be furnished
through chis project. Do not list products or services already being offered unless this project also offers them and
they are essentially an expansion of past activities. Enter in Column 6 the same information as provided in Column 4
except it should relate to employment at full capacity. Be specific. For example, "MANUFACTURE "FURNITURE-
OFFICE-WOOD DESKS".
Principal
Product
>1. (1)
P.-oduct #1
« Value
i Units
Product^ 2
S Value
i Units
1., .duct #3
S Value
i Units
I iduct H 4
S Value
1 Units
Products or Services
and S.I.C. Number
(2)
Projected Annual Sales and Average Employment to be
Generated by each product:
Latest Annual Total
Sales
(3)
Employment
(4)
At Full Capacity
Sales
(5)
Employment
(6)
G-28
FmHA 449-22 (Rev. 6-23-75)
-------
b. Principal Occupations:
Occupational Job Title
Col. (1)
Average Employment and Wage Rates
Current Period
Employment
(2)
Average
Wage Rate
(3)
Wlicn Fully Operational
Employment
(4)
Average
Wage Rate
(5)
INFORMATION ABOUT YOUR MARKET
List below, for each principal product or service, the states in which you expect to make the greatest part of your sales.
You need Hit only those stat.s in which you expect to sell at least 5 percent of your total volume. If your sales are
nationwide, enter the word "NATIONAL" in the righthand column. If more than 5 percent of your total projected sales
are to be in any standard metropolitan statistical area (for example, Chicago and its nearby suburbs), enter the name of the
area. If possible, give the approximate percentage of your total sales which you expect to make in the states and metropolitan
areas listed. (See sample entry in the table below.)
Principal Product
or Service
(Sample entry)
Product "X"
States and Standard
Chicago (8%)
Kentucky (15%)
Metropolitan Statistical Areas in
Indiana (12%)
Iowa (20%)
Which Sales Are Projected
Wisconsin (20%)
Nebraska (10%)
10. INFORMATION ABOUT YOUR COMPETITORS
Please list the principal competitors offering the same or a similar service or manufacturing a similar or identical product,
regardless of where they are located, but only chose who are selling in the market area you have indicated in Section 9 above,
where you intend to sell. Also indicate the location of your competitor's plant(s) from which he is most likely to be serving
your market irea. If your market is national, omit a listing of competitors shipping points.
NOTE: In terms of the following listing, a competitor should be considered an enterprise offering essentially similar
services or products. Thus, a summer resort providing golf, swimming and tennis is not competitive with a winter resort
offering only skiing and skating. By the same token, gypsum board or particle board are not considered competitive with
plywood, nor wood furniture with metal furniture.
A, Names of Competitors Location of plants serving market
2.
3.
4.
5.
B. To the best of your knowledge, has any competitor recently ceased operations or withdrawn from your market area?
Give name ,'nd state reason, if known.
G-29
-------
Are ) ou aware of any potential new entries or planned expansions which will be competitive in your market area? If know.
describe by name and location.
Applicant must check one of A, B, or C below: (NOTE: ''Related Company" as used in thib form means any affiliate,
subsidiary, or~other business entity under direct, indirect or common control with applicant.)
[ [ A. New Business Venture. This project is a new business venture unrelated to existing business facilities, and that the
applicant is not a company related to an existing business facility. (NOTE: If applicant or a related company has
ceased or substantially reduced operations during the 24 months preceding the date of this request, the information
required by Section 14 below must be attached.)
( I B. Expansion of Applicant's Only Business Facility. This project is an expansion of an existing business facilit;
located at:
Which carries on the following operations:
t I C. Applicant or Related Company with Business Facility at Another Location. Applicant has attached Pages
containing the information required by Section 14 of this form concerning business operations conducted by the
Applicant or by a related company at other locations than the location of the proposed Project. Applicant has
included business operations which have ceased or have been substantially reduced during the 24 months preceding
the date of this Request if such operations were conducted by Applicant or a related company.
It is not the intention of the Applicant or any related company to relocate any present operation as a result of the
proposed Project; that to the extent said Project is undertaken to assist in the expansion of the operations of
Applicant through the establishment of a new branch, affiliate or subsidiary of Applicant, such expansion will not
result in an increase of unemployment in the area of original location or in any area where Applicant or any related
company now conducts related business operations; that any such expansion is not being undertaken with the
intention of closing down or curtailing any existing operations of Applicant or of any related company; and that
such project is not being undertaken with the intention of performing as contractor or subcontractor work
heretofore performed by Applicant or a related company, the transfer of which work would result in the transfer of
employment opportunities from one location to another and an increase in unemployment at the previous location
of such work.
I agree further that if within one year of the commencement of operations of the Project for which the Farmers
Home Administration (FmHA) has made a grant, loan, or guarantee, there should occur a significant and related
decline in employment in a present location or locations conducted by Applicant or a related company, the lender,
pursuant to instructions from FmHA, shall liquidate the loan or accelerate the repayment of any financial assistance
guaranteed, insured, or provided by FmHA. I understand that there shall arise a rebuttable presumption that a
decline in employment in a present location or locations is significant and related to FmHA assistance to the Project,
if the reduction in average employment in present facilities and location is equal to (a) 50% for all locations or (b)
25% for one location, of the level of employment in this FmHA assisted Project. These understandings and
agreements are applicable to all transferees and successors in interest.
The information required by this Section must be supplied if Applicant or a related company now conducts business
operations at a location other than the location of the proposed Project, or if Applicant or a related company has ceased or
substantially reduced operations within the 24 months preceding the date of this application. A separate sheet of paper
should be used for each location. Give the following information:
(1) Name of company, (2) Full address of site on which business operations are or were conducted, (3) Relationship of
Applicant to business entity conducting operation, (4) Brief description of articles produced or services provided at location,
(5) Underline production articles or services provided which are similar to articles to be produced or services to be provided
by the proposed Project, (6) Average number of persons employed at the location, (7) Average number of persons employed
in production of articles or services similar to those provided by the proposed Project, (8) If applicable, date on which
operations ceased, or were substantially reduced, and (9) if applicable, the size of the reduction.
G-30
-------
13. Please give below name, address, telephone number and title of person to be contacted if any questions arise concerning
this form.
14. CERTli (CATION: I, the undersigned, hereby certify that the information reported on this form, and any attachments
thereto, are to the best of my belief and knowledge, truly representative of the facts and reflect the future intentions of the
Applicant as they are as of this date :
(Date) (Signature of authorized official)
___
G-31
-------
APPENDIX H
MEMORANDUM OF UNDERSTANDING BETWEEN
THE SMALL BUSINESS ADMINISTRATION
AND THE UNITED STATES DEPARTA! ENT OF AGRICULTURE
F ^RMERS HOME ADMINISTRA TION
PREAMBLE
Public Law 94-305, which amended the Srnall Business Act,
authorized the Small Business Administration (SBA) to assist
small bxisinesses engaged in farming and related activities under
its existing programs. This legislation did not create any new
SBA loan programs but merely included the agricultural industries
among the industries eligible for SBA assistance. Neither did the
legislation diminish, in any way, the responsibility of the Farmers
Home Admin stration (FmllA) to meet the financial and other needs
of farmers.
This joint m< morandum reaffirms the mutual desire of SBA and
FmliA to cooperate in the use of their respective Joan making
authorities to complement the activities of each other and, to
the extent possible, to improve and expand the delivery of
financial ass'siance to the agricultural prediction segment of the
country: all vilh the least possible c' .gree of overlapping, confusing
or duplicating activities.
GENERAL GUIDELINES
1. The Fml A administers its financial assistance programs
through us State, District and County offices.
The SB \ administers ii s financial assistance programs through
its Regie nal, District and Branch offices.
FmllA S at? Directors and SBA District Directors will exchange
address* s of their offices a 'id idcntilV the geographical ^vcas
served by each. This information wiH bo available in all
field office"" of both rg^neies so rnplic mts can be refer*, o-d to
the a]")}"!1 . pi'iite r-ffirv;-, . Yheso .-W'e ' t"iYir-ls viil ma!;:1 :~i\r<' flu-
Otlioj' ag MH---'P cut ivi' lo.ri i'V^';i:v:. ml .- crvic I1."-, policy ^o tb^
rcforral r'.lvice .^r.-ca to potetitial oppl'cnnts v/iJl bo AS acouraic-
H-l
-------
2. FmllA and SBA will establish a liaison at l>oth the State
" Director/ District Director level and tiie National level and
periodically coordinate their activities to: (a) exchange detailed
information concerning loan programs, (b/ define areas of
cooperation between the two agencies, (c) assure that thei)-
programs are servicing the intended recipients, (d) establish
new methods to serve the public more expeditiously, and (e)
achieve maximum utilization of their respective resources.
The SBA and the FmllA agree that the interests of agricultural
industries will be best served and that each agency will achieve
better utilization of available resources through the following
operating guidelines:
3. Potential applicants may contact either agency for an interview
but may file an application with only one agency at a time.
However, SBA will encourage those potential applicants that
have been or are borrowing through the Fr iIIA to continue
their relationship with that agency.
4. Potential applicants meeting FmllA eligibility requirements
will, at the time of initial interview, be ac vised by SB A to
contact the appropriate FmllA County Office for assistance.
FmHA persennel will, at the time of initial interview, refer
potential applicants who are not eligible for FmTIA assistance,
(such as cor Derations, partnerships or alions, applying for
certain loans) to SBA if they appear to be eligible for SBA
assistance.
5. Potential applicants are not to be referred back and forth
between Fm IA and SBA. Representatives of each agency
must be rea ^onably certain that the applicant and proposed
use of proceeds may be eligible for assistance from the other
agency before a referral is made.
6. Neither agency will refuse a loan request 1'rom an applicant
who prefer:, to file with that agency.
7. Agricultural applicants filing for financial assistance from either
agency \\ill give written permission for Fi'iIIA and SBA to
exchange whatever prior or current loan r jplication ;vH lorn
experience information, including apprius '!>', either
-------
8. Applicants who are denied FmllA assistance for any reason,
including lack of FmHA funding, may contact SBA for assistance.
9. Applicants fili1 g for financial assistance fro n either agency must use
the forms and procedures of the agency being requested to provide the
assistance. An applicant who is denied assistance by either agency
must use a new application to file with the other in accordance with that
agency's forms and procedures.
10. Applicants should not have to apply to two Federal agencies to borrow
funds for a single purpose. Therefore, if either FmHA or SBA can make
the entire loan, the applicant should not bo referred to the other agency
for part of the funds needed. If either FmJJA or SBA cannot make the
entire loan, the applicant should be referred to the other agency. Joint
funding with shared collateral between the agencies is not encouraged anr,1
should be usec only as a last resort.
DESCRIPTION OF LENDING POLICIES
11. The FmlTA ma^cs guaranteed loans and insu *cd loans. Guaranteed loans
arc loans whore the lending institution advat OPS the- entire funds from
its account and the FmlL'V guarantees repayi lent of a certain percentage
of principal ard interest. Insured lor is arc those made from one of
FmllA's insurance funds.
The SBA makes guaranteed, immediate participation and
direct loans. The guaranteed loans arc thos-3 where the
lending institution advances the entire loan c nd the SBA
agrees to purchase a percentage of the outstanding
balance at time of default. Immediate participation loans
are those whe^e SBA disburses a percentage- of the loan and
the lender dis uirses the remainder- from its account. Direct
loans are mace with SBA funds alone.
FmHA LOAN PROGRAMS FOR FARMERS
12. Operating Lorr.s.
a. legibility:
Be a citiz-n of the United States
H-3
-------
Be unable to obtain credit cls*e\vhcre (exclusive of SBA).
Be the operator of a family farm.
Note: .A "family farm" is defined as "one that will produce
agricultural commodities for sale in sufficient quantities
so that it is recognized as a i'arm rather than a rural '
residence; one that will provide substantial income by itself and
which together v.ith any other dependable income v.lll enable
the family to pay necessary family and other operating expenses,
including maintenance of essential chattel and real property
and pay debts; and one for which the operator and his Immediate
family provide the management and are actively engaged in the
operation by providing a major amount of the farm and any
nonfarm enterprise labor. A reasonable amount of hired
labor may bo used during seasonal pcakload periods. "
b. Loan Pu ^poses:
Finance Livestock, machinery and operating expenses.
Refinance debts.
Finance ion-farm enterprises.'
c. Terms:
Up to seven years with five-year renewal.
Interest rate based on the cost of Treasury
borrowings.
d. Loan Limit - $50,000.
13. Farm Ownership Loans.
a. Lli
-------
Be xmaMc to obtain the cnvclit from other poi'm-::
(exclusive of SDA).
Bo the owner-operator of a family farm after loan is
closed.
b. Loan purpose:'
Buy land.
Construct and repair farm buildings.
D2velop land and pollution control measures.
Develop farm irrigation facilities c'.nd domestic water
supply.
Refinance Debt.
Finance non-farm enterprises.
c. Terms:
Up to 40 years.
Five (5) percent interest rate.
d. Loan Limits:
$100,000.
Maximum debt on security v/ith other credit is $225,000.
14. Soil and Water Loans.
a. Eligibility:
Be unable to obtain the credit elsewhere (exclusive of SF>A)
Be a farm tenant, o\vner, partner 'hip or corporation engog
in farming.
b. Loan Purposes:
I)o\-o]op 1'Mid and pollution control pr'Tl 'cer.
Watei- IievelopmcMif.
Purforos related to soil nn:1 v/atei con.-'o)-. 'iV.n
-------
c. 'JVrms:
Up to 40 years.
Five (5) percent interest.
d. Loan Limits:
$100,000.
Maximum debt on security with other credit is $225,000.
15. Recreation Loans.
a. Eligibility:
Be a citizen of the United States.
Be unable to obtain the credit elsewhere (exclusive
of SBA).
Be an in lividual engaged in farming when the loan is
applied ;or.
b. Loan Purposes:
Convert all or part of the farm to outdoor recreation
enterprises.
Acquire land and easements for recreational uses.
Refinance, debts.
c. Terms:
Up to 40 years.
Five (r>) percent interest rate.
H-6
-------
b. Loan Limits:
$100,000.
Maximum debt on security \vith other credit is $225,000.
16. Rural Housing.
a. Eligibility:
Be a U. S. citizen or permanent resident.
Be unable to obtain credit elsewhere (exclusive of SBA).
Be a farmowner without decent, safe and sanitary housing
for his own use or the use of tenants, sharecroppers,
farm laborers or farm manager.
b. Loan Purpose:
Buy, build or ^epair dwellings of molest size, design
and cost.
c. Terms:
Up to 33 years.
Interest rate established periodical!.; based on hous-
ing money market rate.
d. Loan Limit:
The cost of providing 711 ode si, decen , safe and sanitar}'
housing.
17. Business and Industry Loans.
a. Eligibility:
If an individual, a U.S. Citiren.
A cooperative, corporation, partnership, trust, Indian
tribe, c,r <>'< IK-I J, ,;;] oni ity.
H-7
-------
b. Loan Purpose:
Pollution control measures.
c. Terms:
Up to 30 years.
Interest rate is negotiated bet\veen lender and
applicant.
d. Loan Limits:
No statutory dollar limit; determined by cost of project
and credit factors.
18. Grazing Assoc iation Loans.
a. Eligibility:
Be a nonp .-ofit association.
Be unable to obtain credit else\vhere (exclusive of SBA).
Provide saasonal grazing for association members.
b. Loan Purposes:
Acquire 1'ind for gra/ing.
Develop land for grazing.
Pollution control measures incidental to other
authorized purposes.
c. Te rm s:
Up to 40 vcars.
Five (5) percent interest rate.
d. Loan T ,ir 'its:
\o -,1;i1. . ;_- ;)> "'vi'l .'. (ir1-" ]_'''' i "Mmi - - c!Cvtct" "! inrd 1)(
vr, li'o (S' -. ;-ii]'J'. - .
H-8
-------
19. Irrigation, rrninage ond soil r-nd water association lor, us.
a. Eligibility:
Be an association composed primarily of farmers and oilier
rural rf sidents.
Be' unable to obtain credit elsewhere (exclusive of SB.A).
Provide a facility to serve farmers and other rural residents
within the service area.
b. Loan Purpose:
Install cr improve drainage facilities.
Install, repair or enlarge irrigation facilities.
Install cr improve soil conservation aid water control
facilities including pollution abatement.
Special-purpose machinery and equipi lent.
c. Terms:
Up to 4( years.
Five (5) percent interest rate.
d. Loan Li .nit:
No statutory or regulatory dollar limit --determined
by value of security.
NOTE: In addit on to the eligibility requirements for specific
programs listed above, the following eligibility require-
ments must be met by all FmllA boz-rowers:
Have th > experience to corry out the proposed operation
to be fii'iii
Have th ambition to carry out the proposed
operations.
H-9
-------
Hove the management ability <-n rarry oui llic obiigal ion5-; required
in connection \\iih the ]o;in.
SBA LOAN PROGRAMS FOR AGRICULTURAL KT\'Th'RPRiSlvS
In addition to the specific eligibility fact rs listed under
the following ISI3A programs, n borrov/oi' must be of good
character, he an eligible small business utidor SI}A Rules and
Regulations (13 CFR Parts 121 and 122), be organized for profit,
and be able to evidence reasonable assurance of ability to repay
the loan from the profits of the business. Can be pi'oprietorship,
partnership or corporate business organization, and need not be
a citizen of the U. S. A.
20. Regular Business Loans--7(a).
a. Eligibility:
Be eligible under SBA Rules and Regulations (13 CFR Part 120).
Be unable to obtain the credit from ron -Federal sources
through utilization of personal resources or otherwise.
'b. Loan Purpose:
Purchase of land and buildings and li nd improvements
(fencing, irrigation systems, etc. ) including pollution
control facilities essential to the smiill business.
Construction, renovation or improvement (including wrter
systems) o? (i) farm building other than residential bui'c'ings
or (ii) residential buildings essential to ihc business it nc>t
available from other Federal source ;.
Purchase of farm machinery and eqi ipmcnt (appliances
and other household contents used for residential purposes
are not eligible).
Operati.10, expenses di redly related -sonr'l or fan ilv rlflr'.
H-10
-------
c. Terms:
The interest rate on direct ;,>.',! SIJA .shore of immediate
participation loans is based on a .legislative formula.
The lendc -'s interest rate on inimedial .: participation and
guaranty pai ticipation loans is established by the landing
institution, \vithin SHA policy, but cannot exceed SHA's
maximum which is periodically published in the Federal
Register.
Maturit}' of the loans vdll generally not exceed one year for
annual seed, feed, fertilizer and other annual needs, 7 years
for that portion of the loan user! for v/orl:ing capital, 10 years
for that portion of the loan used for li\ estock and/or farm
machinery and equipment, and 20 years for that portion
of the loan used for acquisition or construction of real
estate, liowevcr, all borrowers are expected to repay .
the loan as soon as possible r.nd these maximum maturities
are not ai tomatically available in every case.
SBA loan; arc generally repaid in even monthly payments
of princip il and interest. Hov.ever, quarterly, semiannual,
annual or seasonal payments can be arranged when
necessary.
d. Loan Lim its:
Direct loans have an administrative limit of $150,000.
Immediate participation loans have an administrative limit
of $1 f)0, 000, SJ"JA share. (Both the direct and immediate
participation administrative limits can be waived in exceptional
situations by SBA's Regional Directors. )
Guaranty participation loans ha\e a limit of $r>50, 000,
SBA share, except that in exceptional .situations the SBA
share can be increased to c'500, 000.
The limits on a borrower's toial indeb1 odness to SBA on all
outstandi g loans is (i) the rr-gre^ate cl>" direct and the
SP.A shar1^ of immediate participation loans cannot excor-d
$350, O'JO and (ii) the agf;rei;:1e of direct, and the Si-JA share
of iin nu.'f! ;af < f>ar'l3'^in."'1 ion r i;d :',ua rrni > partifipal ic.'ti loans
cannot ex -red sf..OO, OfiQ ;'.{ c11^' ore 1ini".
H-ll
-------
21. Economic Opi ortuiuly 1 .onus.
a. Eligibility:
Must be economically or socially disndvantagcd.
Meet the . ligibility requirements set j. >rth in SBA. Rules and
Regulations (1 3 CKR Parts 119 and 120).
b. Loan Purposes:
Can be used for the same purposes as Regular Business Loans.
c. Terms:
Interest on direct and SBA share of immediate participation
loans is subject to a legislative formula, and is subject to
change quarterly.
The lender's interest on immediate ard guaranty participation
is the same as for regular business leans.
Maturities of these loans are generally restricted to 10
years for uorking capital other than annual operating
expenses and farm machinery and equ'pment and to the
legislative limit of 15 years for X|eal estate purposes.
However, no borrower will receive a longer maturity
than is necessary for the loan to be repaid from ihe
business income.
d. Loan Limits:
These loans cannot exceed $100,000 SBA shore, whether
direct, immediate participation or gu iranty.
22. Water Pollution Control Loans.
Alccl cli' iiij 1 i I', re'iuirt'm cnf s set forth in Hi\ Ruli-s
He^uk,l: >i- (I.'. Ci'll Paris I'^O and I"1.).
Must ha<. o a statement from LPA of t~e mx essitv and
H-12
-------
b. Loan Purposes:
Only to make modifications and change." necessary 1o meet
the Federal standards established under the .Federal Water
Pollution Control Act or State siandai\ s established in
compliance v/ith the Federal Water Pollution ControJ Act.
c. Terms:
Interest rate same as for Regular Business Loans.
Maturity not to exceed 30 years.
d. Loan Limits:
No dollar limit.
23. Other Substantial Economic Injury Programs.
The SBA has loan authority to aid small businesses that
suffer substantial economic injury as a result of a Federal
action or Federally directed action, such as Occupational
Health and Safety regulations, Air Polluti in Control
regulations or being displaced by a 'eder i]ly financed
construction project. These programs ai e more completely
described in 13 CFR Part 123.
ADMINISTRATIVE GUIDELINES
24. The services of FmllA and SBA to lender;; and applicants are,
by mutual agreement, those that each agency would provide
any eligible applicant in the normal course of business and there
will be no reimbursement by cither agency to the other for such
services.
25. The National Office of FinllA and the Cen ral Office of SBA will
cooperate v/ith each oilier in counseling t ieir field offices and
in resolving pi-obJenis in specific cn^e<.
2C. This IMcmor mdinn of Understanding in ru v/av alters or
supersedes 'ho existing Alemorandums b l-v^on Hie tv.-o
agencies co% c I-VT f)if;ir di-:actor (frarr^c ncy) loan rmthoiitv
and F.rli \' . ' : li-:^ ' -i"! f.r-r i I'r.'-.r-i- n<-.
H-13
-------
27. This Agreement in ay be amended at any time by written
agreement of both pax-tics.
28. This agreemcn shall take effect upon the dc- e of execution
thereof.
Name
Administrator
SBA
Dote:
Name
Administrator
FmllA
Date:r.
H-14
-------
APPENDIX I
INDUSTRIAL DEVELOPMENT BOND FEES
FINANCIAL EXPENSES
- DELAWARE -
All expenses incurred by the Department of Community Affairs and Economic Development are charged to
the appropriate project to which they apply. These expenses include, but are not limited to:
1. The basic service charge for the costs of processing the bond issue, and the annual service fee for the
maintenance of the project. These costs are indicated below.
a. GENERAL OBLIGATION BONDS
Basic Service Charge:
BOND ISSUE CHARGE
S 200,000 to S 600,000 1.0%
$600,001 to $1,200,000 $6,000 plus .7% of amount
over $600,000 to $1,200,000
$1,200,001 to $3,000,000 $10,200 plus .5% of amount
over $1,200,000 to $3,000.000
Annual service fee on each project is 1%% of the annual payment of interest plus principal.
b. REVENUE BONDS
Basic Service Charge:
BOND ISSUE CHARGE
$ 0 toS 500,000 $2,500
$500,001 to $1,200,000 $2,500 plus .5% of amount over
$500,000 to $1,200,000
$1,200,001 to $2,000,000 56,000 plus .4% of amount over
$1,200,000 to $2,000,000
$2,000,001 to $3,000,000 - $9,200 plus .3% of amount over
$2,000,000 to $3,000,000
$3,000,001 to $5,000,000 - $12,200 plus .2% of amount over
$3,000,000 to $5,000,000
Annual service fee on each project is $400 based on 20 hours a year at S20 per hour.
Time spent over 20 hours will bs billed at the rate of $20 per hour.
-------
TECHNICAL REPORT DATA
(Please read Instructions on the reverse before completing/
1 REPORT NO.
EPA-340/1-77-023
3. RECIPIENT'S ACCESSIOC*NO.
4 TITLE AND SUBTITLE
Major Financial Assistance Programs Available for
Industrial Pollution Control Expenditures-Federal and
EPA Region III State Programs
5 REPORT DATE
June 1,. 1977
6. PERFORMING ORGANIZATION CODE
7. AUTHOR(S)
Charles R. Marshall
8. PERFORMING ORGANIZATION REPORT NO.
9 PERFORMING ORGANIZATION NAME AND ADDRESS
JACA CORP.
506 Bethlehem Pike
Ft. Washington, Pa. 19034
10. PROGRAM ELEMENT NO.
11. CONTRACT/GRANT NO.
68-01-3154
12. SPONSORING AGENCY NAME AND ADDRESS
Environmental Protection Agency
Region III
6th and Walnut Streets
Philadelphia, Pa. 19107
13. TYPE OF REPORT AND PERIOD COVERED
Final
14. SPONSORING AGENCY CODE
15. SUPPLEMENTARY NOTES
Prepared for Fred Knapp, Project Officer
16. ABSTRACT
industrial and farming sectors in the EPA's Region III have recourse to
many federal and state programs aimed at reducing pollution control expenditures.
The federal programs provide more significant cost reductions than the state programs.
The mining and manufacturing sectors have recourse to four federal financing
programs that provide low interest, long term loans, including Industrial Development
Administration loans and two specially funding Small Business Administration programs.
The farm sector has recourse to five pollution control programs, namely those of the
Farmers Home Administration and the Small Business Administration.
In addition to financing, all existing businesses may amortize pollution
control equipment rapidly for federal income tax purposes. However, rapid amortizati,i
is only attractive for equipment with a useful life greater than 12 years and wffere
their own discount rate exceeds 10 percent.
Businesses that have their wastewaters treated by a publicly owned treatment
works have an additional benefit of the absence of an interest cost for at least
75 percent of the construction costs of the works.
All end-of-line pollution control equipment is eligible for federal and
state programs, however, several programs exclude process changes.
The diversity of assistance programs for pollution control is even greater
at the state level.
KEY WORDS AND DOCUMENT ANALYSIS
DESCRIPTORS
Rapid Amortization Financing
Small Business Administration Depreciation
Industrial Development Bonds Pollution Control
User Charges Certification
Industrial Cost Recovery
Farmers Home Administration
Economic Development Administration
b.IDENTIFIERS/OPEN ENDED TERMS
c. COSATI Field/Group
13 DISTRIBUTION STATEMENT
Release Unlimited
19. SECURITY CLASS (This Report/
21. NO. OF PAGES
20 SECURITY CLASS (This page)
22. PRICE
_224_
20-1 (9-73)
* U S GOVERNMENT PRINTING OFFICE. J977 720-335/6020
-------
n
c*>
ro
CO
o 21
>
z
m
0
C
>
r
O
o
o
O
3
C
z
H
-<
m
o
r
O
-<
m
30
30
(D
8
9J
o
-n
-n
n
>
r
CO
C
SINESS
ii
3-
H
n*
3
(O
0*
?
^~
Z
n
M
xi
^j
^
o
^
8
2,
>
a
3
5'
istration
H
(D
O
31
3
8
-g
c
CT
o'
&)
rt
6'
3
CO
01
3
O
3-
m
Z
<
33
O
Z
s
m
Z
>
r
-o
30
O
H
ECTION
>
O
m
Z
n
£
m
Z
° -D
Z O
S en
m -I
Z >
H O
5 Z
5 o
Q
m
Z
O
------- | |