(a) Grant funds may not be used to:
(1) Assist any city or town with a population in excess of 10,000 inhabitants according to the most recent decennial census of the United States. Facilities financed by RUS may be located in non-rural areas. However, loan and grant funds may be used to finance only that portion of the facility serving rural areas, regardless of facility location.
(2) Assist a rural area that has a median household income in excess of the statewide nonmetropolitan median household income according to the most recent decennial census of the United States.
(3) Finance facilities which are not modest in size, design, cost, and are not directly related to correcting the potable water quantity or quality problem.
(4) Pay loan or grant finder's fees.
(5) Pay any annual recurring costs that are considered to be operational expenses.
(6) Pay rental for the use of equipment or machinery owned by the rural community.
(7) Purchase existing systems.
(8) Refinance existing indebtedness, except for short-term debt incurred in accordance with Sec. 1778.9(h).
(9) Make reimbursement for projects developed with other grant funds.
(10) Finance facilities that are not for public use.
(b) Nothing in paragraph (a)(1) of this section shall preclude rural areas from submitting joint proposals for assistance under this part. Each entity applying for financial assistance under this part to fund their share of a joint project will be considered individually.