RURAL COMMUNITY ADVANCEMENT PROGRAM.

SEC. 761. RURAL COMMUNITY ADVANCEMENT PROGRAM. The Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) is amended by adding at the end the following: “Subtitle E— Rural Community Advancement Program “SEC. 381A. DEFINITIONS. “In this subtitle: “(1) Rural and rural area.— The terms ‘rural’ and ‘rural area’ mean, subject to section 306(a)(7), a city, town, or unincorporated area that has a population of 50,000 inhabitants or less, other than an urbanized area immediately adjacent to a city, town, or unincorporated area that has a population in excess of 50,000 inhabitants. “(2) State.— The term ‘State’ means each of the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United States, American Samoa, the Commonwealth of the Northern Mariana Islands, the Trust Territory of the Pacific Islands, and the Federated States of Micronesia. “(3) State director.— The term ‘State director’ means, with respect to a State, the Director of the Rural Economic and Community Development State Office. “SEC. 381B. ESTABLISHMENT. “The Secretary shall establish a rural community advancement program to provide grants, loans, loan guarantees, and other assistance to meet the rural development needs of local communities in States and federally recognized Indian tribes. “SEC. 381C. NATIONAL OBJECTIVES. “The national objectives of the program established under this subtitle shall be to— “(1) promote strategic development activities and collaborative efforts by State and local communities, and federally recognized Indian tribes, to maximize the impact of Federal assistance; “(2) optimize the use of resources; “(3) provide assistance in a manner that reflects the complexity of rural needs, including the needs for business development, health care, education, infrastructure, cultural resources, the environment, and housing; “(4) advance activities that empower, and build the capacity of, State and local communities to design unique responses to the special needs of the State and local communities, and federally recognized Indian tribes, for rural development assistance; and 110 STAT. 1140 “(5) adopt flexible and innovative approaches to solving rural development problems. “SEC. 381D. STRATEGIC PLANS. “(a) In General.— The Secretary shall direct each of the Directors of Rural Economic and Community Development State Offices to prepare a strategic plan— “(1) for each State for the delivery of assistance under this subtitle in the State; and “(2) for each federally recognized Indian tribe for the delivery of assistance under this subtitle to the Indian tribe. “(b) Assistance.— “(1) In general.— Financial assistance for rural development provided under this subtitle for a State or a federally recognized Indian tribe shall be used only for orderly community development that is consistent with the strategic plan of the State or Indian tribe. “(2) Rural area.— Assistance under this subtitle may only be provided in a rural area. “(3) Small communities.— In carrying out this subtitle in a State, the Secretary shall give priority to communities with the smallest populations and lowest per capita income. “(c) Review.— The Secretary shall review the strategic plan of each State and federally recognized Indian tribe not later than 60 days after receiving the plan, and at least once every 5 years thereafter. “(d) Contents.— A strategic plan of a State or federally recognized Indian tribe under this section shall be a plan that— “(1) coordinates economic, human, and community development plans and related activities proposed for an affected area; “(2) provides that the State or federally recognized Indian tribe, as appropriate, and an affected community (including local institutions and organizations that have contributed to the planning process) shall act as full partners in the process of developing and implementing the plan; “(3) identifies goals, methods, and benchmarks for measuring the success of carrying out the plan and how the plan relates to local or regional ecosystems; “(4) in the case of a State, provides for the involvement, in the preparation of the plan, of State, local, private, and public persons, State rural development councils, federally recognized Indian tribes in the State, and community-based organizations; “(5) identifies the amount and source of Federal and non-Federal resources that are available for carrying out the plan; and “(6) includes such other information as may be required by the Secretary. “SEC. 381E. RURAL DEVELOPMENT TRUST FUND. “(a) Establishment.— There is established in the Treasury of the United States a trust fund which shall be known as the Rural Development Trust Fund (in this subtitle referred to as the ‘Trust Fund’). “(b) Accounts.— There are established in the Trust Fund the following accounts: “(1) The rural community facilities account. “(2) The rural utilities account. 110 STAT. 1141 “(3) The rural business and cooperative development account. “(4) The national reserve account. “(5) The federally recognized Indian tribe account. “(c) Deposits Into Accounts.— Notwithstanding any other provision of law, each fiscal year— “(1) all amounts made available to carry out the authorities described in subsection (d)(1) for the fiscal year shall be deposited into the rural community facilities account of the Trust Fund; “(2) all amounts made available to carry out the authorities described in subsection (d)(2) for the fiscal year shall be deposited into the rural utilities account of the Trust Fund; and “(3) all amounts made available to carry out the authorities described in subsection (d)(3) for the fiscal year shall be deposited into the rural business and cooperative development account of the Trust Fund. “(d) Function Categories.— The function categories described in this subsection are the following: “(1) Rural community facilities.— The rural community development category consists of all amounts made available for— “(A) community facility direct and guaranteed loans under section 306(a)(1); or “(B) community facility grants under section 306(a)(19). “(2) Rural utilities.— The rural utilities category consists of all amounts made available for— “(A) water or waste disposal grants or direct or guaranteed loans under paragraph (1) or (2) of section 306(a); “(B) rural water or wastewater technical assistance and training grants under section 306(a)(14); “(C) emergency community water assistance grants under section 306A; or “(D) solid waste management grants under section 310B(b). “(3) Rural business and cooperative development.— The rural business and cooperative development category consists of all amounts made available for— “(A) rural business opportunity grants under section 306(a)(11)(A); “(B) business and industry guaranteed loans under section 310B(a)(1); or “(C) rural business enterprise grants or rural educational network grants under section 310B(c). “(e) National Reserve Account.— “(1) Transfers into account.— “(A) Initial transfer.— Each fiscal year, the Secretary shall transfer to the national reserve account of the Trust Fund from each account specified in subsection (c) not more than the applicable percentage of the amount deposited in each such account for the fiscal year under subsection (c). “(B) Repooling of unobligated funds allocated among the states.— Not earlier than July 15 of each fiscal year, the Secretary shall transfer to the national reserve account from each account specified in subsection (c) any amount in the account that is allocated for any 110 STAT. 1142State, and has not been obligated by the State director or obligated for specific approved projects in the State. “(2) Use.— The Secretary may use amounts in the national reserve account of the Trust Fund, pursuant to any authority described in subsection (d)— “(A) in the case of a fiscal year other than fiscal year 2001 or 2002— “(i) to meet situations of exceptional need; “(ii) to meet emergency situations; or “(iii) to provide funds to entities whose applications for funds provided under this subtitle have been approved and who have not received funds sufficient to meet the needs of the projects described in the applications; or “(B) in the case of fiscal years 2001 and 2002— “(i) to meet situations of exceptional need; or “(ii) to meet emergency situations. “(3) Applicable percentage defined.— In paragraph (1), the term ‘applicable percentage’ means, with respect to a fiscal year— “(A) 15 percent for fiscal year 1997; “(B) 12.5 percent for fiscal year 1998; “(C) 10 percent for fiscal year 1999; “(D) 7.5 percent for fiscal year 2000; “(E) 5 percent for fiscal year 2001; and “(F) 5 percent for fiscal year 2002. “(f) Federally Recognized Indian Tribe Account.— “(1) Transfers into account.— Each fiscal year, the Secretary shall transfer to the federally recognized Indian tribe account of the Trust Fund 3 percent of the amount deposited into the Trust Fund for the fiscal year under subsection (d). “(2) Use of funds.— The Secretary shall make available to federally recognized Indian tribes the amounts in the federally recognized Indian tribe account for use pursuant to any authority described in subsection (d). “(g) Allocation Among States.— The Secretary shall allocate the amounts in each account specified in subsection (c) among the States in a fair, reasonable, and appropriate manner that takes into consideration rural population, levels of income, unemployment, and other relevant factors, as determined by the Secretary. “(h) Availability of Funds Allocated for States.— The Secretary shall make available to each State the total amount allocated for the State under subsection (g) of this section that remains after applying section 381G. “SEC. 381F. TRANSFERS OF FUNDS. “(a) General Authority.— Subject to subsection (b) of this section, the State Director of any State may, during any fiscal year, transfer from each account specified in section 381E(c) a total of not more than 25 percent of the amount in the account that is allocated for the State for the fiscal year to any other account in which amounts are allocated for the State for the fiscal year. “(b) Limitation.— Except as provided in subsection (c) of this section, a transfer otherwise authorized by subsection (a) of this section to be made during a fiscal year may not be made to the extent that the sum of the amount to be transferred and all amounts 110 STAT. 1143so transferred by State directors under subsection (a) of this section during the fiscal year exceeds 10 percent of the total amount made available to carry out the authorities described in section 381E(d) for the fiscal year. “(c) Exceptions.— Subsections (a) and (b) shall not apply to a transfer of funds by a State director if the State director certifies to the Secretary that— “(1) there is an approved application for a project in the function category to which the funds are to be transferred but funds are not available for the project in the function category; and “(2) (A) there is no such approved application in the function category from which the funds are to be transferred; or “(B) the community that would benefit from the project has a smaller population and a lesser per capita income than any community that would benefit from a project in the function category from which the funds are to be transferred. “SEC. 381G. GRANTS TO STATES. “(a) Simple Grants.— “(1) Mandatory grant.— The Secretary shall make a grant to any eligible State for any fiscal year for which the State requests a grant under this section in an amount equal to 5 percent of the total amount allocated for the State under section 381E(g). “(2) Permissive grant.— Before July 15 of each fiscal year, the Secretary may make a grant to any State to defray the cost of any subsidy associated with a guarantee provided by an eligible public entity of the State under section 381H in an amount that does not exceed 5 percent of the total amount allocated for the State under section 381E(g). “(3) Source of funds.— The Secretary shall make grants to a State under paragraphs (1) and (2) from amounts allocated for the State in the accounts specified in section 381E(c), by reducing each such allocated amount by the same percentage. “(b) Matching Grants.— “(1) In general.— Subject to paragraph (2), the Secretary shall make a grant to any eligible State for any fiscal year for which the State requests a grant under this section in an amount equal to 5 percent of the amount allocated for the State for the fiscal year under section 381E(h). “(2) Eligibility.— A State shall be eligible for a grant under paragraph (1) if the State makes commitments to the Secretary to— “(A) expend from non-Federal sources in accordance with subsection (c) an amount that is not less than 200 percent of the amount of the grant; and “(B) maintain the amounts paid to the State under this subsection and the amount referred to in subparagraph (A) in an account separate from all other State funds until expended in accordance with subsection (c). “(3) Source of Funds.— If the Secretary makes a grant under paragraph (1) before July 15 of the fiscal year, the grant shall be made from amounts allocated for the State in the accounts specified in section 381E(c) for the fiscal year, by reducing each allocated amount by the same percentage. 110 STAT. 1144 “(c) Use of Funds.— A State to which funds are provided under this section shall use the funds in rural areas for any activity authorized under the authorities described in section 381E(d) in accordance with the State strategic plan referred to in section 381D. “(d) Maintenance of Effort.— The State shall provide assurances to the Secretary that funds provided to the State under this section will be used only to supplement, not to supplant, the amount of Federal, State, and local funds otherwise expended for rural development assistance in the State. “(e) Appeals.— The Secretary shall provide to a State an opportunity to appeal any action taken with respect to the State under this section. “(f) Administrative Costs.— Federal funds shall not be used for any administrative costs incurred by a State in carrying out this subtitle. “(g) Expenditure of Funds by State.— “(1) In general.— Payments to a State from a grant under this section for a fiscal year shall be obligated by the State in the fiscal year or in the succeeding fiscal year. A State shall obligate funds under this section to provide assistance to rural areas. “(2) Failure to obligate.— If a State fails to obligate payments in accordance with paragraph (1), the Secretary shall make an equal reduction in the amount of payments provided to the State under this section for the immediately succeeding fiscal year. “(3) Noncompliance.— “(A) Review.— The Secretary shall review and monitor State compliance with this section. “(B) Penalty.— If the Secretary finds that there has been misuse of grant funds provided under this section, or noncompliance with any of the terms and conditions of a grant, after reasonable notice and opportunity for a hearing— “(i) the Secretary shall notify the State of the finding; and “(ii) no further payments to the State shall be made with respect to the programs funded under this section until the Secretary is satisfied that there is no longer any failure to comply or that the noncompliance will be promptly corrected. “(C) Other sanctions.— In the case of a finding of noncompliance made pursuant to subparagraph (B), the Secretary may, in addition to, or in lieu of, imposing the sanctions described in subparagraph (B), impose other appropriate sanctions, including recoupment of money improperly expended for purposes prohibited or not authorized by this section and disqualification from the receipt of financial assistance under this section. “(h) No Entitlement to Contract, Grant, or Assistance.— Nothing in this subtitle— “(1) entitles any person to assistance or a contract or grant; or “(2) limits the right of a State to impose additional limitations or conditions on assistance or a contract or grant under this section. 110 STAT. 1145 “SEC. 381H. GUARANTEE AND COMMITMENT TO GUARANTEE LOANS. “(a) Definition of Eligible Public Entity.— In this section, the term ‘eligible public entity’ means any unit of general local government. “(b) Guarantee and Commitment.— The Secretary, on such terms and conditions as the Secretary may prescribe, may guarantee and make commitments to guarantee notes or other obligations issued by eligible public entities, or by public agencies designated by the eligible public entities, for the purposes of financing rural development activities authorized and funded under section 381G. “(c) Limitation.— The Secretary may not make a guarantee or commitment to guarantee with respect to a note or other obligation if the total amount of outstanding notes or obligations guaranteed under this section (excluding any amount repaid under the contract entered into under subsection (e)(1)(A)) for issuers in the State would exceed an amount equal to 5 times the sum of the total amount of grants made to the State under section 381G. “(d) Payment of Principal, Interest, and Costs.— Notwithstanding any other provision of this subtitle, a State to which a grant is made under section 381G may use the grant (including program income derived from the grant) to pay principal and interest due (including such servicing, underwriting, or other costs as may be specified in regulations of the Secretary) on any note or other obligation guaranteed under this section. “(e) Repayment Contract; Security.— “(1) In general.— To ensure the repayment of notes or other obligations and charges incurred under this section and as a condition for receiving the guarantees, the Secretary shall require the issuer to— “(A) enter into a contract, in a form acceptable to the Secretary, for repayment of notes or other obligations guaranteed under this section; “(B) pledge any grant for which the issuer may become eligible under this subtitle; and “(C) furnish, at the discretion of the Secretary, such other security as may be considered appropriate by the Secretary in making the guarantees. “(2) Security.— To assist in ensuring the repayment of notes or other obligations and charges incurred under this section, a State shall pledge any grant for which the State may become eligible under this subtitle as security for notes or other obligations and charges issued under this section by any eligible public entity in the State. “(f) Pledged Grants for Repayments.—Notwithstanding any other provision of this subtitle, the Secretary may apply grants pledged pursuant to paragraphs (1)(B) and (2) of subsection (e) to any repayments due the United States as a result of the guarantees. “(g) Outstanding Obligations.— The total amount of outstanding obligations guaranteed on a cumulative basis by the Secretary pursuant to subsection (b) shall not at any time exceed such amount as may be authorized to be appropriated for such purpose for any fiscal year. “(h) Purchase of Guaranteed Obligations by Federal Financing Bank.— Notes or other obligations guaranteed under this section may not be purchased by the Federal Financing Bank. 110 STAT. 1146 “(i) Full Faith and Credit.— The full faith and credit of the United States is pledged to the payment of all guarantees made under this section. Any such guarantee made by the Secretary shall be conclusive evidence of the eligibility of the obligations for the guarantee with respect to principal and interest. The validity of the guarantee shall be incontestable in the hands of a holder of the guaranteed obligations. “SEC. 381I. LOCAL INVOLVEMENT. “An application for assistance under this subtitle shall include evidence of significant community support for the project for which the assistance is requested. In the case of assistance for a community facilities or infrastructure project, the evidence shall be in the form of a certification of support for the project from each affected general purpose local government. “SEC. 381J. INTERSTATE COLLABORATION. “The Secretary shall permit the establishment of voluntary pooling arrangements among States, and regional fund-sharing agreements, to carry out projects receiving assistance under this subtitle. “SEC. 381K. ANNUAL REPORT. “(a) In General.— The Secretary, in collaboration with State, local, public, and private entities, State rural development councils, and community-based organizations, shall prepare an annual report that contains evaluations, assessments, and performance outcomes concerning the rural community advancement programs carried out under this subtitle. “(b) Submission.— Not later than March 1 of each year, the Secretary shall— “(1) submit the report required by subsection (a) to Congress and the chief executives of the States participating in the program established under this subtitle; and “(2) make the report available to State and local participants. “SEC. 381L. RURAL DEVELOPMENT INTERAGENCY WORKING GROUP. “(a) In General.— The Secretary shall provide leadership within the Executive branch for, and assume responsibility for, establishing an interagency working group chaired by the Secretary. “(b) Duties.— The working group shall establish policy for, coordinate, make recommendations with respect to, and evaluate the performance of, all Federal rural development efforts. “SEC. 381M. DUTIES OF RURAL ECONOMIC AND COMMUNITY DEVELOPMENT STATE OFFICES. “In carrying out this subtitle, the Director of a Rural Economic and Community Development State Office shall— “(1) to the maximum extent practicable, ensure that the State strategic plan referred to in section 381D is implemented; “(2) coordinate community development objectives within the State; “(3) establish links between local, State, and field office program administrators of the Department of Agriculture; “(4) ensure that recipient communities comply with applicable Federal and State laws and requirements; and 110 STAT. 1147 “(5) integrate State development programs with assistance under this subtitle. “SEC. 381N. ELECTRONIC TRANSFER. “The Secretary shall transfer funds in accordance with this subtitle through electronic transfer as soon as practicable after the date of enactment of this subtitle. “SEC. 381O. RURAL VENTURE CAPITAL DEMONSTRATION PROGRAM. “(a) In General.— The Secretary may designate for each fiscal year up to 10 community development venture capital organizations to demonstrate the utility of guarantees to attract increased private investment in rural private business enterprises. “(b) Rural Business Investment Pool.— “(1) Establishment.— To be eligible to participate in the demonstration program, an organization referred to in subsection (a) shall establish a rural business private investment pool (referred to in this subsection as a ‘pool’) for the purpose of making equity investments in rural private business enterprises. “(2) Guarantee.— From amounts in the national reserve account of the Trust Fund, the Secretary shall guarantee the funds in a pool against loss, except that the guarantee shall not exceed an amount equal to 30 percent of the total funds in the pool. “(3) Amount.— The Secretary shall issue guarantees covering not more than $15,000,000 of contingent liabilities for each of fiscal years 1996 through 2002. “(4) Term.— The term of a guarantee provided under this subsection shall not exceed 10 years. “(5) Submission of plan.— To be eligible to participate in the demonstration program, an organization referred to in subsection (a) shall submit a plan that describes— “(A) potential sources and uses of the pool to be established by the organization; “(B) the utility of the guarantee authority in attracting capital for the pool; and “(C) on selection, mechanisms for notifying State, local, and private nonprofit business development organizations and businesses of the existence of the pool. “(6) Competition.— “(A) In general.— The Secretary shall conduct a competition for the designation and establishment of pools. “(B) Priority.— In conducting the competition, the Secretary shall give priority to organizations that— “(i) have a demonstrated record of performance, or have a board and executive director with experience, in venture capital, small business equity investment, or community development finance; “(ii) propose to serve low-income communities; “(iii) propose to maintain an average investment of not more than $500,000 from the pool of the organization; “(iv) invest funds statewide or in a multicounty region; and “(v) propose to target job opportunities resulting from the investments primarily to economically dis-110 STAT. 1148advantaged individuals, as determined by the Secretary. “(C) Geographic diversity.— To the extent practicable, the Secretary shall designate organizations in diverse geographic areas.”.