[Code of Federal Regulations]

[Title 33, Volume 3]

[Revised as of July 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 33CFR241.4]



[Page 338-339]

 

                TITLE 33--NAVIGATION AND NAVIGABLE WATERS

 

 CHAPTER II--CORPS OF ENGINEERS, DEPARTMENT OF THE ARMY, DEPARTMENT OF 

                                 DEFENSE

 

PART 241_FLOOD CONTROL COST-SHARING REQUIREMENTS UNDER THE ABILITY TO 

PAY PROVISION--Table of Contents

 

Sec.  241.4  General policy.



    (a) Procedures described herein establish an ``ability to pay'' test 

which will be applied to all flood control projects. As a result of the 

application of the test, some projects will be cost-shared by the non-

Federal interest at a lower level than the standard non-Federal share 

that would be required under the provisions of section 103 of Pub. L. 

99-662, 33 U.S.C. 2213. The ``standard share'', as used herein, refers 

to the non-Federal share that would apply to the project before any 

ability to pay consideration.

    (b) Section 103(m) requires that all cost-sharing agreements for 

flood control covered by the terms of section 103(a) or 103(b) be 

subject to the ability to pay test. The test must therefore be applied 

not only to projects specifically authorized by Congress, but to the 

continuing authority projects constructed under section 14 of the 1946 

Flood Control Act (33 U.S.C. 701r), section 205 of the 1948 Flood 

Control Act (33 U.S.C. 701s), and section 208 of the 1954 Flood Control 

Act (33 U.S.C. 701g), all as amended.

    (c) The ability to pay test shall be conducted independently of any 

analysis of a project sponsor's ability to finance its ultimate share of 

proposed project costs. The ability to finance is addressed in a 

statement of financial capability which considers current borrowing 

constraints, alternative sources of liquidity, etc. It is therefore much 

more narrowly defined than the ability to pay test, which considers the 

underlying resource base of the community as a whole. The ability to pay 

test shall not be used to affect project scope, or to change budgetary 

priorities among projects competing for scarce Federal funds.

    (d) Any reductions in the level of non-Federal cost-sharing as a 

result of the application of this test will be applied to construction 

costs only. Operations, maintenance and rehabilitation responsibilities 

are unaffected by the ability to pay test.

    (e) When projects are eligible for credits as outlined in ER 1165-2-

29, reference Sec.  241.3(e), the ability to pay test will be applied 

before any adjustments are made for credits. If the ability to pay test 

results in a lower non-Federal



[[Page 339]]



share, the allowable amount of credits will be limited by the lower 

share.

    (f) The test is based on the following principles:

    (1) Since the standard non-Federal cost-share is substantilly less 

than full costs in every case, the ability to pay test should be 

structured so that reductions in the level of cost-sharing will be 

granted in only a limited number of cases of severe economic hardship.

    (2) The test should depend not only on the economic circumstances 

within a project area, but also on the conditions of the state(s) in 

which the project area is located. Although states' policies with 

respect to supporting local interests on flood control projects are not 

uniform, the state represents a potential source of financial assistance 

which should be considered in the analysis.

    (3) The alternative level of cost-sharing determined under the 

ability to pay principle should be governed in part by project benefits. 

If, as a result of the project, local beneficiaries receive more income, 

or are required to use fewer resources on flood damage repair or 

replacement, or on flood insurance, a portion of these resources should 

be available to pay for the non-Federal share, even in those cases where 

an analysis of current economic conditions indicates that there are 

relatively limited resources in the project area and its state.

    (4) Since project benefits represent availability of resources in 

the future, but not the present, project sponsors should be permitted to 

defer a certain percentage of the non-Federal share whenever current 

economic circumstances suggest that non-Federal resources may be 

limited.

    (g) The Non-Federal interest may, at its discretion, waive the 

application of the ability to pay test. In this case, the Non-Federal 

interest shall be considered to have the ability to pay the standard 

cost-share and no further economic inquiry will be required.