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Sunday, March 04, 2007

2-in-5 rule hell

First off, I'm surprised at how applicant-friendly the SLD's new 2-in-5 rule changes are. It creates a whole bunch of new procedures for the SLD, and it seems to me they've gone beyond what the FCC ordered. But maybe the SLD figured that the FCC was going to make them do it, anyway, and this way they could avoid appeals.

There was one unfriendly wrinkle: The 30% rule will be combined with the 2-in-5 rule, so if you put a building in Block 4 that's used up its 2 years along with two buildings that have not, then the 30% rule means the whole FRN is denied. Harsh. (OK, let's see, 2-in-5 could be written 2/5, so it's the 30%/2/5 rule, which your calculator would tell you is the 3% rule, but if you first convert 30% to .3 and 2/5 to .4, then you have the .3/.4 rule, which would be the .75 rule. Dang, even the nickname gives me a headache.)

The ability to go back and remove buildings from Block 4 of previous applications is really applicant-friendly Applicant-friendly, yes. Simple, no. It's going to be way beyond what most applicants will want to do. Which, of course, is good news for consultants like me.

The SLD said that if removing a building would lower the discount level below the funding threshold for that funding year, then the whole FRN gets denied. But it doesn't say what happens if the removal causes the discount to go up....

I would say that we can expect a lot of appeals because of the 30%/2-in-5 combo and the retroactive threshold denial, but this process is so beyond most applicants, I don't think many applicants will be trying it.

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