Section 206.373 - Eligibility criteria(a)Local government.(1) The local government must be located within the area eligible for assistance under a major disaster declaration. In addition, State law must not prohibit the local government from incurring the indebtedness resulting from a Federal loan.(2) Criteria considered by FEMA in determining the eligibility of a local government for a Special Community Disaster Loan include the loss of tax and other revenues as result of a major disaster, a demonstrated need for financial assistance in order to perform essential governmental functions, the maintenance of an annual operating budget, and the responsibility to provide essential services to the community. Eligibility for other assistance under the Stafford Act does not, by itself, establish entitlement to such a loan.(b)Loan eligibility - (1)General. To be eligible, the local government must show that it may suffer or has suffered a substantial loss of tax and other revenues as a result of a major disaster or emergency, and it must demonstrate a need for financial assistance in order to provide essential municipal services. Loan eligibility is based on the financial condition of the local government and a review of financial information and supporting documentation accompanying the application.(2)Substantial loss of tax and other revenues. The fiscal year of the disaster or the succeeding fiscal year is the base period for determining whether a local government may suffer or has suffered a substantial loss of revenue. Criteria used in determining whether a local government has or may suffer a substantial loss of tax and other revenue include the following disaster-related factors: (i) Whether the disaster caused a large enough reduction in cash receipts from normal revenue sources, excluding borrowing, which affects significantly and adversely the level and/or categories of essential services provided prior to the disaster;(ii) Whether the disaster caused a revenue loss of over 5 percent of total revenue estimated for the fiscal year in which the disaster occurred or for the succeeding fiscal year.(3)Demonstrated need for financial assistance. The local government must demonstrate a need for financial assistance in order to perform essential governmental functions. The criteria used in making this determination may include some or all of the following factors:(i) Whether there are sufficient funds to meet current fiscal year operating requirements;(ii) Whether there is availability of cash or other liquid assets from the prior fiscal year;(iii) Current financial condition considering projected expenditures for governmental services and availability of other financial resources;(iv) Ability to obtain financial assistance or needed revenue from State and other Federal agencies for direct program expenditures;(v) Debt ratio (relationship of annual receipts to debt service);(vi) Displacement of revenue-producing business due to property destruction;(vii) Necessity to reduce or eliminate essential services; and(viii) Danger of municipal insolvency. 70 FR 60446 , Oct. 18, 2005