[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1780.11]

[Page 1036-1037]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1780--WATER AND WASTE LOANS AND GRANTS--Table of Contents
 
              Subpart A--General Policies and Requirements
 
Sec. 1780.11  Service area requirements.

    (a) All facilities financed under the provisions of this part shall 
be for public use. The facilities will be installed so as to serve any 
potential user within the service area who desires service and can be 
feasibly and legally served. This does not preclude:
    (1) Financing or constructing projects in phases when it is not 
practical to finance or construct the entire project at one time; and
    (2) Financing or constructing facilities where it is not 
economically feasible to serve the entire area, provided economic 
feasibility is determined on the basis of the entire system and not by 
considering the cost of separate extensions to or parts thereof; the 
applicant publicly announces a plan for extending service to areas not 
initially receiving service from the system; and potential users located 
in the areas not to be initially served receive written notice from the 
applicant that service will not be provided until such time as it is 
economically feasible to do so.
    (b) Should the Agency determine that inequities exist within the 
applicants service area for the same type service proposed (i.e., water 
or waste

[[Page 1037]]

disposal) such inequities will be remedied by the applicant prior to 
loan or grant approval or included as part of the project. Inequities 
are defined as unjustified variations in availability, adequacy or 
quality of service. User rate schedules for portions of existing systems 
that were developed under different financing, rates, terms or 
conditions do not necessarily constitute inequities.
    (c) Developers are normally expected to provide utility-type 
facilities in new or developing areas in compliance with appropriate 
State statutes. RUS financing will be considered to an eligible 
applicant only in such cases when failure to complete development would 
result in an adverse economic condition for the rural area (not the 
community being developed); the proposal is necessary to the success of 
a current area development plan; and loan repayment can be assured by:
    (1) The applicant already having sufficient assured revenues to 
repay the loan; or
    (2) Developers providing a bond or escrowed security deposit as a 
guarantee sufficient to meet expenses attributable to the area in 
question until a sufficient number of the building sites are occupied 
and connected to the facility to provide enough revenues to meet 
operating, maintenance, debt service, and reserve requirements. Such 
guarantees from developers will meet the requirements in 
Sec. 1780.39(c)(4)(ii); or
    (3) Developers paying cash for the increased capital cost and any 
increased operating expenses until the developing area will support the 
increased costs; or
    (4) The full faith and credit of a public body where the debt is 
evidenced by general obligation bonds; or
    (5) The loan is to a public body evidenced by a pledge of tax 
revenue or assessments; or
    (6) The user charges can become a lien upon the property being 
served and income from such lien can be collected in sufficient time to 
be used for its intended purposes.