Contiguous Geographic Boundaries

Mr. Chris Dollar
Dollar Associates, LLC
194 Narrows Drive, Suite 104
Birmingham, AL 35242

RE: Contiguous Geographic Boundaries

Dear Mr. Dollar:

You contacted NCUA’s Office of Consumer Financial Protection and Access with a chartering and field of membership question pertaining to rural districts. More specifically, you asked if NCUA would consider several Hawaiian islands contiguous for purposes of NCUA's rural district regulation, despite the islands being separated by a body of water. We believe the geographic area of the islands you have described are “contiguous,” but only for the narrow purpose of the definition of that term as used in the rural district regulation and limited to the unique factual circumstances discussed below.

The Federal Credit Union Act (FCU Act) provides that a federal credit union’s membership may be comprised of persons or organizations within a rural district.¹ The rural district provisions in NCUA’s Chartering and Field of Membership Manual (Chartering Manual)² facilitate federal credit unions providing access to our national system of cooperative credit to persons who reside in rural areas. Residents of rural communities across America are in need of affordable financial services and often do not have ready access to such services.

The Chartering Manual provides that an area of any geographic size qualifies as a rural district if:

1. The proposed district has well-defined, contiguous geographic boundaries;
2. The total population of the proposed district does not exceed 1,000,000;
3. Either more than 50% of the proposed district’s population resides in census blocks or other geographic units that are designated as rural by either the Consumer Financial Protection Bureau or the United States Census Bureau, or the district has a population density of 100 persons or fewer per square mile; and
4. The boundaries of the well-defined rural district do not exceed the outer boundaries of the states that are immediately contiguous to the state in which the credit union maintains its headquarters (i.e., not to exceed the outer perimeter of the layer of states immediately surrounding the headquarters state).³

You have described the geographic area for consideration as a rural district as follows:

It is a geographic area that the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI) considers contiguous and that encompasses parts of each of the five counties in Hawaii. The area includes 152 census tracts, including 121 that are inhabited. You have also represented the area has a population of 562,400 and an aggregate density of 94.35 people per square mile. By county, the area’s population distribution is as follows:

Four out of the five counties in Hawaii are on separate islands or groups of islands. Specifically, Hawaii County encompasses its own island; Honolulu County encompasses several islands; Maui County encompasses several islands, one of which also includes Kalawao County; and Kauai County encompasses several islands.

Based on your representations of the characteristics of the geographic area under consideration, we believe the area qualifies as a rural district under the Chartering Manual. From your description of the area, it is clear on its face that it meets the population, population density, and perimeter criteria noted above. We also believe the area satisfies the contiguous geographic boundary test that is the subject of your inquiry.

We base that judgment on several factors. The FCU Act does not define “rural district,” thereby granting NCUA the broad authority to do so as the agency determines is appropriate. There is nothing in NCUA’s definition of “rural district” to suggest that the presence of a body of water precludes the existence of a rural district. The composition of the subject geographic area is unique, rural in nature, and, despite the body of water, some of the islands are part of the same county.

A number of metropolitan statistical areas (MSA), as designated by the Office of Management and Budget, transcend bodies of water; the territorial boundaries of census maps often extend into bodies of water; and rivers and other bodies of water often completely separate metropolitan areas. For example, Manhattan and Staten Island are completely separated from each other and other parts of New York City by rivers and bays, yet they are still part of the same city and MSA. In addition, with respect to Hawaii, OMB designates the Kahului-Wailuku-Lahaina MSA to encompass Kalawao County and Maui County, which are also separated by water. We note that these examples serve to support the position that the presence of a body of water in a geographic area does not preclude the area from satisfying the definition of “contiguous” in the rural district provisions of the Chartering Manual.

In this particular instance, based on the unique facts and circumstances surrounding the subject geographic area and your representations as to the nature of the area, we believe it qualifies as a rural district for purposes of the Chartering Manual. Please feel free to contact Staff Attorney Marvin Shaw (703 518-6553) if you have further questions.