Loan and grant funds may not be used to finance:

Facilities which are not modest in size, design, and cost;

Loan or grant finder's fees;

The construction of any new combined storm and sanitary sewer facilities;

Any portion of the cost of a facility which does not serve a rural area;

That portion of project costs normally provided by a business or industrial user, such as wastewater pretreatment, etc.;

Rental for the use of equipment or machinery owned by the applicant;

For other purposes not directly related to operating and maintenance of the facility being installed or improved; and

A judgment which would disqualify an applicant for a loan or grant as provided for in § 1780.7(g).

Grant funds may not be used to:

Reduce EDU costs to a level less than similar system cost;

Pay any costs of a project when the median household income of the service area is more than 100 percent of the nonmetropolitan median household income of the State;

Pay project costs when other loan funding for the project is not at reasonable rates and terms; and

Pay project costs when other funding is a guaranteed loan obtained in accordance with 7 CFR part 1779 of this title.

Grants may not be made in excess of the following percentages of the RUS eligible project development costs. Facilities previously installed will not be considered in determining the development costs.

75 percent when the median household income of the service area is below the higher of the poverty line or 80% of the state nonmetropolitan median income and the project is necessary to alleviate a health or sanitary problem.

45 percent when the median household income of the service area exceeds the 80 percent requirements described in paragraph (c)(1) of this section but is not more than 100 percent of the statewide nonmetropolitan median household income.

Applicants are advised that the percentages contained in paragraphs (c)(1) and (c)(2) of this section are maximum amounts and may be further limited due to availability of funds or the grant determination procedures contained in § 1780.35 (b).