City officials frequently contact GMA looking for sources of grant and loan funding for a variety of projects ranging from city parks to police vehicles to city hall renovations. While grant funding for projects like these is scarce, there are programs available to provide assistance to local governments. For example, an excellent resource for rural cities to access grant and low-interest loan money is the USDA Rural Development Community Facilities program. City officials should learn more about the eligibility requirements for this flexible funding program.

What is the USDA Rural Development Community Facilities program?
The Community Facilities program is designed to help local governments in rural areas of the state to provide essential facilities and services. Funding available through this program includes guaranteed loans, direct loans and grant funds. Grant funds may be used in combination with Community Facilities loan funds, local revenues or loans and grants from other sources. Cities in Georgia are not eligible for guaranteed loans.

What is USDA’s goal in sponsoring this program?
USDA seeks to insure that public-use community facilities are readily available to all rural communities. These facilities include schools, libraries, childcare, hospitals, medical clinics, assisted living facilities, fire and rescue stations, police stations, community centers, public buildings and transportation. Specific examples of the types of facilities that have received USDA loans and grants can be found on the USDA website.

What cities are eligible to apply for Community Facilities funds?
Any city with a population of 20,000 or less qualifies as “rural” for the purposes of determining eligibility for Community Facilities loan or grant program assistance. To qualify, applicants must demonstrate that they are unable to obtain the necessary project financing from other sources.

What is the community Facilities Direct Loan Program?
USDA Rural Development can make direct loans for 100 percent of eligible project costs to eligible applicants who are unable to obtain the financing from the sources and/or their own resources at rates and terms they can afford. Approval of the loan is subject to adequate security, ability to repay the loan, the applicant’s authority to borrow and availability of funds.

What can direct loan funds be used for?
Loan funds may be used to construct, enlarge or improve community facilities for health care, public safety and public services. This can include costs to acquire land needed for a facility, pay necessary professional fees and purchase equipment required for its operation. Refinancing existing debts may be considered an eligible direct loan purpose if the debt being refinanced is a secondary part of the loan, is associated with the project facility and if the applicant’s creditors are unwilling to extend or modify terms in order for the new loan to be feasible.

What are the interest rates and terms?
Loan repayment terms may not exceed the applicant’s authority (under state law or organizational structure), the useful life of the facility or a maximum 40 years. The interest rate is currently 4.5 percent.

What are the security requirements for direct loans?
Loans to cities may be backed by bonds or notes pledging taxes. USDA Rural Development will also accept real estate mortgages, financing statements or security agreements for direct loans.

What else do we need to know if our city is interested in applying for guaranteed or direct loans?
There is a two-step application process for both guaranteed and direct loans. Applicants must submit a preapplication package with the Rural Development Area office. Once Rural Development has confirmed applicant and project eligibility, applicants are invited to file a formal application subject to availability of funds. All direct or guaranteed Community Facility funds must be expended before grant funds will be made available.

What is the Community Facilities Grant program?
In addition to the guaranteed and direct loan programs, rural cities may also apply for Community Facilities grants to aid in the provision of essential community facilities. A grant may be made in combination with other Community Facilities financial assistance such as a direct or guaranteed loan, applicant contributions or loans and grants from other sources.

What is the maximum grant award?
Grant assistance may be approved for up to 75 percent of the total project cost. The maximum award amount varies and is based on median household income, population, economic feasibility and availability of funds. Projects are selected based on a priority point system based on whether they serve small communities (with a population of 5,000 or less); low-income communities (median household income below the poverty line or 60 percent of the state rural median household income), or provide healthcare, public safety or public and community services.

What are some examples of projects in Georgia that have received Community Facilities Grant funds?
Recent grant awards made in FY 2008 were made to cities throughout Georgia for projects such as patrol cars, pumper trucks, police surveillance equipment, city hall renovations, wood chippers, furniture, fixtures and equipment for city hall, garbage trucks, tractors and mowers.

What are examples of projects or costs that are ineligible for Community Facilities Grant funds?
USDA Rural Development may require projects, including recreation facilities, to incorporate a combination of loan and grant funds. Additionally, Community Facilities grant funds may not be used to:

• Pay annual recurring costs, including purchases or rentals that are generally considered to be operating and maintenance expenses 
• Construct or repair electric generating plants, electric transmission lines or gas distribution lines to provide services for commercial sale. 
• Pay costs to construct facilities to be used for commercial rental where the applicant has no control over tenants and services offered. 
• Construct facilities primarily for the purpose of housing state, federal or quasi-federal agencies.

Cities interested in applying for Community Facilities Grant funds are encouraged to contact the appropriate USDA Rural Development Area Office to find out whether a project is eligible for grant funding.

Where can I find more information about USDA Rural Development Community Facilities programs?
To learn more about Community Facilities programs and other USDA grant and loan programs, please contact your USDA Area Office. These offices can provide technical assistance for all USDA grant and loan applications. Additional information can be found on the USDA Rural Development State Office website.