[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
 HEARING TO EXAMINE THE U.S. DEPARTMENT OF AGRICULTURE'S RURAL BUSINESS
                     PROGRAMS AND TO REVIEW CURRENT
                          CONDITIONS FOR RURAL
               ENTREPRENEURSHIP AND BUSINESS DEVELOPMENT

=======================================================================



                                HEARING

                               BEFORE THE

   SUBCOMMITTEE ON RURAL DEVELOPMENT, BIOTECHNOLOGY, SPECIALTY CROPS,
                        AND FOREIGN AGRICULTURE

                                 OF THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 21, 2009

                               __________

                           Serial No. 111-32


          Printed for the use of the Committee on Agriculture
                         agriculture.house.gov




                  U.S. GOVERNMENT PRINTING OFFICE
53-444                    WASHINGTON : 2009
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001



                        COMMITTEE ON AGRICULTURE

                COLLIN C. PETERSON, Minnesota, Chairman

TIM HOLDEN, Pennsylvania,            FRANK D. LUCAS, Oklahoma, Ranking 
    Vice Chairman                    Minority Member
MIKE McINTYRE, North Carolina        BOB GOODLATTE, Virginia
LEONARD L. BOSWELL, Iowa             JERRY MORAN, Kansas
JOE BACA, California                 TIMOTHY V. JOHNSON, Illinois
DENNIS A. CARDOZA, California        SAM GRAVES, Missouri
DAVID SCOTT, Georgia                 MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                STEVE KING, Iowa
STEPHANIE HERSETH SANDLIN, South     RANDY NEUGEBAUER, Texas
Dakota                               K. MICHAEL CONAWAY, Texas
HENRY CUELLAR, Texas                 JEFF FORTENBERRY, Nebraska
JIM COSTA, California                JEAN SCHMIDT, Ohio
BRAD ELLSWORTH, Indiana              ADRIAN SMITH, Nebraska
TIMOTHY J. WALZ, Minnesota           ROBERT E. LATTA, Ohio
STEVE KAGEN, Wisconsin               DAVID P. ROE, Tennessee
KURT SCHRADER, Oregon                BLAINE LUETKEMEYER, Missouri
DEBORAH L. HALVORSON, Illinois       GLENN THOMPSON, Pennsylvania
KATHLEEN A. DAHLKEMPER,              BILL CASSIDY, Louisiana
Pennsylvania                         CYNTHIA M. LUMMIS, Wyoming
ERIC J.J. MASSA, New York
BOBBY BRIGHT, Alabama
BETSY MARKEY, Colorado
FRANK KRATOVIL, Jr., Maryland
MARK H. SCHAUER, Michigan
LARRY KISSELL, North Carolina
JOHN A. BOCCIERI, Ohio
SCOTT MURPHY, New York
EARL POMEROY, North Dakota
TRAVIS W. CHILDERS, Mississippi
WALT MINNICK, Idaho

                                 ______

                           Professional Staff

                    Robert L. Larew, Chief of Staff

                     Andrew W. Baker, Chief Counsel

                 April Slayton, Communications Director

                 Nicole Scott, Minority Staff Director

                                 ______

Subcommittee on Rural Development, Biotechnology, Specialty Crops, and 
                          Foreign Agriculture

                MIKE McINTYRE, North Carolina, Chairman

BOBBY BRIGHT, Alabama                K. MICHAEL CONAWAY, Texas, Ranking 
JIM MARSHALL, Georgia                Minority Member
HENRY CUELLAR, Texas                 DAVID P. ROE, Tennessee
LARRY KISSELL, North Carolina        GLENN THOMPSON, Pennsylvania
WALT MINNICK, Idaho                  BILL CASSIDY, Louisiana

                Aleta Botts, Subcommittee Staff Director

                                  (ii)

                             C O N T E N T S

                              ----------                              
                                                                   Page
Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................     3
    Prepared statement...........................................     4
McIntyre, Hon. Mike, a Representative in Congress from North 
  Carolina, opening statement....................................     1
    Prepared statement...........................................     2
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, prepared statement..................................     5

                               Witnesses

Canales, Judith, Administrator, Rural Business and Cooperative 
  Programs, U.S. Department of Agriculture, Washington, D.C......     6
    Prepared statement...........................................     8
    Supplementary material.......................................    43
Jones, Randall S., President and CEO, Lumbee River Electric 
  Membership Corporation, Red Springs, NC........................    17
    Prepared statement...........................................    18
Kangas, Ph.D., Arlen, President, Midwest Minnesota Community 
  Development Corporation, Detroit Lakes, MN.....................    24
    Prepared statement...........................................    25
Crystle, Amy Pyle, Community Supported Agriculture (CSA) Manager, 
  Lancaster Farm Fresh Cooperative, Leola, PA....................    29
    Prepared statement...........................................    31
Collins, Ph.D., Timothy, Assistant Director, Illinois Institute 
  for Rural Affairs, Western Illinois University, Bushnell, IL...    33
    Prepared statement...........................................    34
    Submitted letter.............................................    51
Hoehn, Leo J., General Manager, Stateline Bean Producers 
  Cooperative, Gering, NE........................................    36
    Prepared statement...........................................    37


                      HEARING TO EXAMINE THE U.S.
                   DEPARTMENT OF AGRICULTURE'S RURAL



                    BUSINESS PROGRAMS AND TO REVIEW
                      CURRENT CONDITIONS FOR RURAL



               ENTREPRENEURSHIP AND BUSINESS DEVELOPMENT

                              ----------                              


                      WEDNESDAY, OCTOBER 21, 2009

                  House of Representatives,
 Subcommittee on Rural Development, Biotechnology, 
          Specialty Crops, and Foreign Agriculture,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to call, at 10:52 a.m., in 
Room 1300 of the Longworth House Office Building, Hon. Mike 
McIntyre [Chairman of the Subcommittee] presiding.
    Members present: Representatives McIntyre, Cuellar, 
Minnick, and Conaway.
    Staff present: Aleta Botts, Claiborn Crain, Tyler Jameson, 
John Konya, James Ryder, April Slayton, Rebekah Solem, Patricia 
Barr, Mike Dunlap, Jamie Mitchell, and Sangina Wright.

 OPENING STATEMENT OF HON. MIKE McINTYRE, A REPRESENTATIVE IN 
                  CONGRESS FROM NORTH CAROLINA

    The Chairman. We will call this hearing of the Subcommittee 
on Rural Development, Biotechnology, Specialty Crops, and 
Foreign Agriculture to examine USDA's rural business programs 
and to review conditions for rural entrepreneurship and 
business development to order. I am Mike McIntyre from North 
Carolina, Chairman of this Subcommittee, and I welcome each of 
you here. We know this morning has already been a little bit 
hectic with the unexpected evacuation. That will affect our 
proceedings because we are all going to be now on a more 
cramped schedule given the possibility of votes. And so we are 
going to ask our witnesses to try to condense their testimony 
even further than we had previously at no fault of yours or 
ours, just realizing that is the nature of the circumstances 
today, and the nature of the beast of the situation we are 
operating under.
    But we are thrilled to have you. I am going to shorten my 
opening statement as well, just to say that this discussion 
about rural entrepreneurship and business development and the 
operations of the USDA rural business program are critical to 
help small business opportunities move forward in rural 
America. I know in North Carolina alone 85 percent, 85 percent 
of the state is considered rural, 85 of the 100 counties. I 
know that so often that it is easy to focus on just where the 
money tends to go, which is more towards the populated areas, 
metropolitan, urban, and suburban. But, we know that rural 
America can only thrive when rural small businesses have the 
opportunity to thrive and rural entrepreneurs find a way to do 
what they do best, and that is to be able to innovate.
    I was particularly thrilled in the farm bill last year that 
we had the opportunity to incorporate the Rural 
Microentrepreneur Assistance Program and the success that is 
forthcoming from this initiative. This will use organizations 
with years of experience in working with small business 
entrepreneurs to help provide training and services along with 
microloans to small businesses in rural areas. We have the 
opportunity for that entrepreneurial spirit which is so well 
known in America, and so integral to what American enterprise 
is about, to thrive in rural areas to make sure that no part of 
America is left behind, and that we have the opportunities to 
move forward in this regard.
    I am pleased the Department has finally issued a proposed 
rule in the program though I would have preferred to today be 
talking about the actual program instead of just about the 
rules under which it will operate. I trust that by this time 
next year there will be new entrepreneurs reaping the benefits 
from the Rural Microentrepreneur Assistance Program and rural 
business entrepreneur assistance that we have now incorporated. 
With that, I have only given about \1/3\ of what I planned to 
say in my opening remarks. I hope that that will suggest a 
pattern for all of our speakers and questions from our panel. I 
would encourage witnesses--we normally provide 5 minutes today, 
if the clerks will please take note, we are going to cut the 
timer back, okay, to 4 minutes, and that way we hope that will 
help us all move along.
    Please do not read your testimony unless you can read the 
complete testimony within the 4 minutes. I would suggest you 
read the highlights within the 4 minutes. And pursuant to our 
Committee rules, testimony along with questions and answers by 
Members will be stopped today under special conditions at 4 
minutes. Your complete written testimony, of course, can be 
submitted in its entirety in the record for the public to view. 
So that we are not hindering any openness with regard to the 
transparency required for your full statement. We welcome that, 
as well as Members' full questions and full inquiries that 
would follow up.
    [The prepared statement of Mr. McIntyre follows:]

Prepared Statement of Hon. Mike McIntyre, a Representative in Congress 
                          from North Carolina
    Good morning, and welcome to today's hearing to review conditions 
for rural entrepreneurship and business development and the operations 
of the USDA rural business programs. I want to thank all of you for 
being here as we examine this important topic, and I want to especially 
thank our witnesses who will be testifying before us today.
    Rural areas can thrive only when rural businesses thrive and when 
rural entrepreneurs find a way to do what they do best: innovate. 
Businesses in rural areas, certainly, provide jobs to rural residents 
and offer residents the ability to receive services locally. However, 
most importantly, rural businesses generate critical economic activity, 
ensuring a future for a community by providing local capital and a 
local tax base. A business owner or entrepreneur with ties to the local 
community is less likely to take the business in directions contrary to 
the best interests of that community. Unfortunately, many of us have 
seen all too often some businesses leaving communities in the quest for 
ever lower operating costs. A locally invested and a locally generated 
business is more likely to have a business plan with the local 
community in mind, rather than consider the area where they are located 
as a mere data point.
    Using Federal Government programs to incentivize the tremendous 
business innovation and creation power present in our rural communities 
is a win-win option. Communities win through the creation of local 
jobs, and the government wins through lower unemployment and higher 
levels of economic growth.
    Through these programs, farmers can create processing ventures for 
their commodities to ensure a greater share of the food dollar stays on 
the farm. Lenders can provide lower interest loans to businesses. 
Cooperative Development Centers can help individuals come together, 
pool their resources and their products, and create new marketing 
opportunities.
    Many of the rural business programs that we will discuss today are 
well known and have been around for many years. The Business and 
Industry Loan program made its first loans almost 25 years ago. Last 
year, the B&I program made almost $1.4 billion in loan guarantees, with 
over $52 million in North Carolina alone.
    While this program and many others have a great deal of success 
behind them, I am excited about the eventual roll-out of a new program 
that I co-authored in the 2008 Farm Bill, the Rural Microentrepreneur 
Assistance Program, and the success that I believe is forthcoming from 
such an initiative. This program uses organizations with years of 
experience in working with small entrepreneurs to help provide training 
and other services along with microloans to small businesses in rural 
areas. Rural areas possess tremendous business acumen and 
entrepreneurial spirit that hearkens back to the first settlement of 
many of these areas. The behavior that led pioneers to settle new lands 
is present in those that seek to develop new business ventures. They 
are willing to take a risk, find a way to make a new product or a new 
system work, and truly represent the best of American private 
enterprise. I am pleased that the Department has finally issued a 
proposed rule on the program, though I would have preferred to be 
talking about the actual program operations by this point. I hope by 
this time next year, new entrepreneurs will be reaping the benefits 
from the Rural Microentrepreneur Assistance Program.
    From all of the witnesses today, I look forward to hearing about 
their personal experiences with rural business programs, and about the 
benefits of these programs, but I also want to ensure that we listen 
for ways that the programs can be improved. We must always be ready to 
make changes to programs to ensure that, they reach the target 
recipients in the most cost-effective way possible.

    The Chairman. I would like to now recognize the Ranking 
Member, Representative Mike Conaway, for any opening comments 
he might have.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    Mr. Conaway. Thank you, Mr. Chairman. I will also ask that 
my full statement be made a part of the record. This hearing is 
especially timely because people throughout our economy are 
still struggling. Unemployment is nearing double digits 
nationally, and in some states has been a reality for many 
months. At the core of our economic machine is the small 
business economy. Small businesses account for more than \2/3\ 
of new jobs and employ about \1/2\ of all U.S. workers. Many of 
these businesses are located in small towns across America.
    Small and medium-sized firms in rural America provide food, 
fiber, and energy to the United States and the world. Every 
billion dollars in export creates 9,000 jobs. In addition to 
the food and fiber production in rural America a significant 
portion of rural employment is in the energy intensive sector 
such as construction, forestry and fishing, mining, and utility 
companies. It is imperative that Congress minimize the impact 
of regulatory burdens which might raise the cost of energy and 
of doing business, while at the same time provide programs 
which foster innovation and positive business environment.
    Some of the programs we will discuss today are designed 
with that coordinated, community-wide approach in mind. Earlier 
this year the Subcommittee heard a great deal of testimony 
attesting to the need for rural cooperation and rural 
development efforts. The 2008 Farm Bill includes instructions 
to USDA to coordinate programs at the Federal and state levels 
to ensure maximum impact. I am interested in an update on the 
activities being undertaken to achieve coordination among the 
88 programs administered by the 16 different Federal agencies 
which target rural development.
    It is disappointing that some of the Rural Development 
programs, included in the 2008 Farm Bill, are still in their 
beginning stages. While these programs might have been useful 
as we faced the tremendous economic downturn in this past 
fiscal year, we are now 4\1/2\ months into the farm bill 
implementation and still some of these award dates are not 
expected until after the beginning of 2010. I hope Ms. Canales 
can provide the Committee with assurances that an improved 
time-line will be in order.
    We have been watching with a keen eye how USDA is using the 
$150 million in additional funding provided to rural business 
programs through the stimulus bill. The stimulus was an 
imperfect approach to economic policy with an unprecedented 
increase in the size and cost of government. However, now that 
it is in place it is incumbent upon Congress to ensure that 
when the Administration spends over $1 trillion in stimulus 
money that it is directed to areas with the greatest impact 
possible. As we hear from our other witnesses today, we hope to 
glean from their testimony whether the programs we do have in 
place have provided the tools necessary to small businesses in 
rural America to overcome the economic and regulatory 
challenges they face.
    We also hope to receive feedback on the process applicants 
must use and whether this can be improved to make programs more 
accessible to small enterprises with limited time and 
personnel. I thank our witnesses in advance and look forward to 
their insight. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Conaway follows:]

  Prepared Statement of Hon. K. Michael Conaway, a Representative in 
                          Congress from Texas
    Thank you, Mr. Chairman, for calling this hearing today. This 
hearing is especially timely because people throughout our economy are 
still struggling. Unemployment is nearing double-digits nationally, and 
in some states has been a reality for many months. At the core of our 
economic machine is the small business. Small businesses account for 
more than \2/3\ of new jobs, and employ just over \1/2\ of all U.S. 
workers. Many of these businesses are located in small towns all across 
America.
    Small and medium-sized firms in rural America provide food, fiber, 
and energy to the U.S. and the world. Every $1 billion in exports 
creates more than 9,000 jobs, supporting \1/3\ of all jobs on the farm 
and \2/3\ off the farm in areas such as transportation, trade, food 
processing, and other manufacturing sectors.
    In addition to the food and fiber production in rural America, a 
significant portion of rural employment is in energy-intensive sectors 
such as construction, forestry and fishing, mining, and utility 
companies. It is imperative that Congress minimize the impact of 
regulatory burdens which might raise the cost of energy and of doing 
business, while at the same time provide programs which foster 
innovation and a positive business environment.
    Some of the programs we will discuss today are designed with a 
coordinated, community-wide approach in mind. Earlier this year this 
Subcommittee heard a great deal of testimony attesting to the need for 
regional cooperation in rural development efforts. The 2008 Farm Bill 
includes instructions for USDA to coordinate programs at the Federal 
and state levels to ensure the maximum impact possible. I am interested 
in an update on the activities being undertaken to achieve coordination 
among the 88 programs administered by the 16 different Federal agencies 
which target rural economic development.
    It is disappointing that some of the Rural Development programs 
included in the 2008 Farm Bill are still in their beginning stages. 
While these programs might have been useful as we faced a tremendous 
economic downturn this past fiscal year, we are now a year and 4 months 
into farm bill implementation, and still some award dates are not 
expected until after the beginning of 2010. I hope Ms. Canales can 
provide the Committee with assurances for an improved timeline.
    We have been watching with a keen eye how USDA is using the $150 
million in additional funding provided to rural business programs 
through the stimulus bill. The stimulus was an imperfect approach to 
economic policy, with an unprecedented increase in the size and cost of 
government. However, now that it is in place, it is incumbent upon 
Congress to ensure that when the Administration spends over a trillion 
dollars authorized in the stimulus, it is directed to the areas with 
the greatest impact possible.
    As we hear from our other witnesses today, we hope to glean from 
their testimony whether the programs we do have in place have provided 
the tools necessary to small businesses in rural American to overcome 
the economic and regulatory challenges they face. We hope to also 
receive feedback on the process applicants must use and whether it can 
be improved to make programs more accessible to small enterprises with 
limited time and personnel.
    I thank all our witnesses and look forward to their insights. Thank 
you Mr. Chairman.

    The Chairman. Thank you, Mr. Conaway. The chair would now 
request that other Members submit their opening statements for 
the record so that the witnesses may begin their testimony, and 
we make sure in a timely manner under the restricted time 
conditions we unfortunately have today, so that we can move 
forward.
    [The prepared statement of Mr. Peterson follows:]

  Prepared Statement of Hon. Collin C. Peterson, a Representative in 
                        Congress from Minnesota
    Thank you, Chairman McIntyre, for holding this hearing today to 
look at how USDA's rural business development programs are working and 
to hear about some of the new and innovative things being done to 
expand entrepreneurship and business opportunities in rural America.
    USDA has a long history of supporting the development and growth of 
businesses in rural America. By providing loans, grants and technical 
assistance to people in rural areas, these programs create jobs and 
investments that keep these communities strong.
    By partnering with Community Development Corporations and other 
organizations, USDA's rural business development programs are reaching 
even more people. I want to particularly recognize the work of one of 
our witnesses, Arlen Kangas and the Midwest Minnesota Community 
Development Corporation, which is one of the country's largest 
Community Development Corporations. Thanks to the work they do, 
thousands of Minnesotans have been able to raise the capital they need 
to create and expand business enterprises, purchase homes and invest in 
community infrastructure.
    I want to thank our witnesses for joining us here today to take a 
closer look at these important programs and for advising us about ways 
that we can make these programs work better.

    The Chairman. So with that, we will begin with our first 
panel. We welcome Ms. Judy Canales, the Administrator of the 
Rural Business-Cooperative Services for USDA. Ms. Canales, 
please begin.

  STATEMENT OF JUDITH CANALES, ADMINISTRATOR, RURAL BUSINESS-
     COOPERATIVE SERVICES, U.S. DEPARTMENT OF AGRICULTURE, 
                        WASHINGTON, D.C.

    Ms. Canales. Good morning. Mr. Chairman and Members of the 
Subcommittee, thank you for this opportunity to testify on 
behalf of the United States Department of Agriculture's Rural 
Business-Cooperative Services. This is my first time to appear 
before you, so I will hope this will be the beginning of a 
great working relationship. As you all know, we are in a tough 
economic time, but with your commitment and the work of the 
Obama Administration, we have the funds, the skills and the 
dedication to turn our economy around. I appreciate the 
opportunity to discuss our programs today.
    First of all, I do want to just give you a little bit of 
background about myself. I had the privilege of serving as the 
Deputy State Director for the U.S. Department of Agriculture 
Rural Development in Texas for 5 years, and I also worked for 2 
years at the Department of Housing and Urban Development during 
the Clinton Administration, so I have 7 years of Federal 
service. And, also, over the last 8 years, I worked in economic 
development, and I also taught at our local community college 
in rural south Texas, so I am thrilled to come back to Rural 
Development and to serve in the Administration now as the 
Administrator.
    My objective today is to talk to you all about the real 
accomplishments that we have made since May 19, and also to 
talk about what our goals are for this Administration. When 
Secretary Tom Vilsack first took office, he outlined his 
priorities to ensure that all staff was operating on the same 
page as the voice of rural issues in the Obama Administration. 
He challenged us to build rural communities that can create 
wealth, that are self-sustaining, repopulating, and that are 
thriving economically. Rural business has an important role to 
play in this effort and we were challenged by the Secretary to 
do so.
    First of all, local food systems will expand and support 
local and regional food systems to foster wealth creation. That 
is supported by our business and loan guarantee program, 
specifically among other programs that we have within rural 
business. Second, alterative energy: We will conduct 
feasibility studies and develop and invest in new energy 
alternatives by administering our portion of the 2008 Farm 
Bill. We have $910 million in funding over 4 years of the 2008 
Farm Bill that we will use for energy audits and to expand 
advanced biorefineries, renewables, and energy efficiency 
systems.
    Third, regional collaboration and strategic partners: As 
the Ranking Member mentioned, we know that we can't do this 
alone. Obviously, using our Rural Utility and Rural Housing 
Services, and then the leadership and support, locally, to 
create collaborative and regional partnerships between 
communities, states, and other interested parties. We are 
looking at how we can use this authority to ensure that 
communities and stakeholders work together and that our tax 
dollars are used most effectively. These efforts aren't just a 
reflection of a new Administration but also a reflection of the 
American Recovery and Reinvestment Act of 2009, the 2008 Farm 
Bill, and the needs of our constituents.
    Now I manage among the economic stimulus programs two 
programs that received stimulus funding, the B&I Guaranteed 
Loan Program, which I mentioned earlier, and the Rural Business 
Enterprise Grant. The B&I program has been Rural Development's 
flag ship job creation and capital expansion business program 
since 1974. Through our regular funding at the close of the 
2009 Fiscal Year, we invested $1.2 billion in rural America 
with the B&I program. In Fiscal Year 2010, we have $993 million 
of program level funding, and of course in a very large way we 
have $1.7 billion of economic stimulus funding. And I am 
pleased to announce today for the first time before the 
Committee that we have now obligated $71 million which have 
targeted 20 projects around the United States, and we are 
announcing this today as our first of many economic stimulus 
projects within the Business and Industry Loan Guarantee 
program.
    Additionally, the second Recovery Act program, which is our 
Rural Business Enterprise Grant, provided funds for activities 
that will positively impact employment opportunities. We have 
$19.4 million available and more than $15.3 million was 
allocated on July 28. We are going to finish allocating the 
rest of the monies by the end of October and make more 
announcements on the rest of these economic stimulus monies for 
the Rural Business Enterprise Grant. Now in regards to the farm 
bill, the Rural Microentrepreneur Assistance Program is going 
to help us expand by providing capital access, business-based 
training, and technical assistance to the smallest businesses 
and startups. The proposed rule was published in the Federal 
Register on October 7. We are now soliciting comments from 
everyone, and we, of course, will be beginning the funding for 
this program near the first of calendar year 2010.
    Additionally, other energy programs that were created 
within the farm bill, we are, of course, directed to use energy 
investments in rural America, agriculture and farm-based energy 
generation. We can reduce greenhouse gas emissions, improve the 
nation's security, and foster sustainable development. Our 
other flagship programs, of course, are cooperatives, and I 
would like to focus on that for a moment. The cooperative form 
of government is a cornerstone of business development for 
rural communities, whether in the traditional form of 
agriculture producers or also non-traditional, which have to do 
with a variety of services such as day cares and other kinds of 
services to rural America.
    On September 15, we reinforced our commitment to 
cooperatives when we announced the Know Your Farmer, Know Your 
Food initiative that USDA Deputy Secretary Kathleen Merrigan is 
leading. Now in regards to the Value-Added Producer Grant 
program, you may remember when our Under Secretary Dallas 
Tonsanger testified on June 10, he spoke about the VAPG 
program. This, of course, encourages independent agriculture 
commodity producers to refine or enhance their products or 
increase their value to end-users. The Notice of Funding 
Availability for the Value-Added Producer Grant was published 
on September 1. We are soliciting projects right now, and of 
course we will be looking at rules and other enhancements to 
the rules on the first of calendar year 2010, but we are 
getting the money out this calendar year for the VAPG program.
    In conclusion, we are using all of these funding sources, 
annual appropriations, disaster supplementals, Recovery Act, 
and the 2008 Farm Bill, something we have never had before, 
this type of opportunity for support for rural America and new 
rural business ventures, as we do today. We are committing to 
improving the lives of rural Americans and to distributing 
funds that show promise and innovative ways to support our 
communities. Let me again thank the Subcommittee and the 
Congress for the generous support that you have provided over 
the years to Rural Development, and I look forward to greater 
and further collaboration because our goal, as is yours, is to 
build a future for rural America. We have a new Administration, 
new priorities, and a new opportunity for relationship building 
here. I am both honored and humbled to sit here and speak to 
you all about this, and for the opportunity to return to Rural 
Development in this position as the Administrator for Rural 
Business and Cooperative Services. So thank you, and I look 
forward to our discussion.
    [The prepared statement of Ms. Canales follows:]

  Prepared Statement of Judith Canales, Administrator, Rural Business-
 Cooperative Services, U.S. Department of Agriculture, Washington, D.C.
Introduction
    Mr. Chairman, Members of the Subcommittee, thank you for your 
invitation to testify regarding the United States Department of 
Agriculture's Rural Business-Cooperative Services (RBS). This is my 
first time appearing before you, and I hope it will be the beginning of 
a great relationship. As we all know, we are in a tough economic time, 
but with your commitment and the work of the Obama Administration, we 
have the funds, the skills and the dedication to turn our economy 
around. I appreciate the opportunity to discuss our USDA business 
programs today.
Background
    At the start, I would like to give you a brief overview of my 
background and my work with rural America. I had the privilege of 
serving as the Deputy State Director for Rural Development in Texas for 
5 years and I spent 2 years working at the U.S. Department of Housing 
and Urban Development during the Clinton Administration. For the last 8 
years I worked in economic development and taught at a community 
college in rural South Texas. I am thrilled to have the opportunity to 
come back to Rural Development and to serve as the Administrator for 
RBS.
    My objective today is to show you not just the goals we have for 
Rural Development, but the real accomplishments we have made since I 
started on May 19, 2009, and since the Administration took office on 
January 20, 2009.
New Administration--Priorities
    Secretary Tom Vilsack outlined his priorities for USDA to ensure 
that all staff was operating on the same page, as the voice of rural 
issues for the Obama Administration. He challenged us, ``to build rural 
communities that can create wealth, that are self-sustaining, 
repopulating and that are thriving economically.'' Within RBS we have 
an important role to play, and I will talk briefly about the programs 
we have to address the Secretary's challenge.
Local Food Systems
    We will expand and support local and regional food systems to 
foster wealth creation. As part of the Business & Industry (B&I) Loan 
Guarantee Program, entities can receive loan guarantees to assist 
enterprises that process, distribute, aggregate, store, and market 
locally or regionally produced agricultural food products. The Agency 
is required by the Food, Conservation, and Energy Act of 2008 (2008 
Farm Bill) to reserve a minimum of five percent of available funds from 
the B&I Program for this purpose until April 1 of each year through 
Fiscal Year (FY) 2012; however, applicants are encouraged to apply for 
loan guarantees throughout the year. RBS is committed to supporting 
local and regionally produced agricultural food products and continuous 
funding is available for this purpose.
Alternative Energy
    We will conduct feasibility studies, and develop and invest in new 
energy alternatives by administering our portions of the 2008 Farm 
Bill. We have $915 million in funding--over 5 years--that we will use 
for energy audits and to expand advanced biorefineries, renewables and 
energy efficiency systems through grants, loan guarantees and payments.
Regional Collaboration and Strategic Partners
    We know that we cannot do this alone, but we, along with the Rural 
Utilities Service and Rural Housing Service, will provide leadership, 
education and training, and technical support to create collaborative 
and regional partnerships between communities and interested parties. 
We are examining how we can use the authority you have provided us to 
ensure that communities and stakeholders work together and that tax 
dollars are used in most effectively.
    These strategies are not just a reflection of a new Administration, 
but a reflection of the American Recovery and Reinvestment Act of 2009 
(ARRA), the 2008 Farm Bill and the needs of our constituents. These 
priorities drive our work and I am here to give you a progress report 
on our efforts.
Business Programs
B&I Guaranteed Loan Program
    Within RBS, I manage two programs receiving ARRA funding, the B&I 
Guaranteed Loan Program and the Rural Business Enterprise Grant Program 
(RBEG). The B&I Guaranteed Loan Program has been Rural Development's 
flagship job creation and capital expansion business program since 
1974. Through our regular funding, for FY 2009, we obligated $1.2 
billion, totaling 487 loans. A project example is a $7.3 million loan 
guarantee to expand a manufacturing plant that makes HVAC equipment in 
a persistent poverty and high unemployment area. It provided much 
needed funding to assist in closing the gap in opportunities for 
underserved and rural populations. In FY 2010, there is $52.9 million 
in budget authority to support a program level of approximately $993 
million for businesses of all types.
    The B&I Guaranteed Loan Program has been very popular during 
regular funding cycles and we expect growing participation under ARRA. 
We retooled our loan assistance to improve access to capital and we 
have an additional $1.7 billion to bring to the table due to ARRA 
funding.
Rural Business Enterprise Grant Program
    The second program receiving ARRA funding is RBEG. RBEG provides 
funds for activities that will positively impact employment 
opportunities. The total funding available under ARRA is $19.4 million 
and more than $15.3 million was awarded on July 28, 2009, during the 
first round of funding. About $4.1 million is still available, but we 
fully expect the requests to utilize all available funding in the 
second round. Our goal is to submit project recommendations to 
Secretary Vilsack by the end of October 2009.
Farm Bill
Rural Microentrepreneur Assistance Program
    Another new source of funding is the Rural Microentrepreneur 
Assistance Program (RMAP), established under the 2008 Farm Bill. RMAP 
will provide capital access, business-based training and technical 
assistance to the smallest of small businesses, including start-ups 
(ten employees or less). The proposed rule was actually just published 
in the Federal Register on October 7, 2009. We have $4 million in 
mandatory funding for FY 2009 and an additional $4 million for FY 2010. 
We expect permanent regulations to be in place January 2010. RMAP will 
allow rural Americans that lack start-up capital to achieve their 
dreams of becoming small business owners.
Energy
    Other 2008 Farm Bill programs significantly expanded our energy 
portfolio. These programs are directed at finding ways to use energy 
investments in rural America to boost our economy. Agriculture and 
farm-based energy generation can reduce greenhouse gas emissions, 
improve the nation's energy security and foster sustainable 
development.
    On May 5, President Obama emphasized his commitment to the 
deployment of advanced biofuels. In that announcement the President 
also underscored his commitment in a directive to Secretary Vilsack to 
make the renewable energy provisions from the 2008 Farm Bill available 
within 30 days. We are happy to report we met this directive and our 
programs are underway.
Section 9003: Biorefinery Assistance Program.
    The new Biorefinery Assistance Program (Section 9003) funds are 
used to assist in the development of new and emerging technologies for 
the development of advanced biofuels. This provision allows for loan 
guarantees and grants to develop, construct and retrofit commercial-
scale biorefineries for second and third generation feedstock. 
Currently, funding is only available for loan guarantees, as indicated 
in the Notice of Funds Availability (NOFA) that was published on 
November 20, 2008. The first application window closed on December 31, 
2008, and two projects, one for cellulosic ethanol and another for 
retrofitting, received loan guarantees. We anticipate making grants 
once permanent regulations are developed. A proposed rule is expected 
to be published for comment in January 2010.
Section 9004: Repowering Assistance.
    The Repowering Assistance Program (Section 9004) funds are for 
replacing fossil fuels used for heating or powering biorefineries (that 
were in existence at the time the 2008 Farm Bill was passed) with 
renewable biomass. A NOFA was published June 12, 2009, and we are 
currently reviewing applications for payments. A proposed rule is 
expected to be published for comment in December 2009.
Section 9005: Bioenergy Program for Advanced Biofuels.
    The Bioenergy Program for Advanced Biofuels (Section 9005) provides 
payments for eligible producers to expand production of advanced 
biofuels. Since the publication of the NOFA on June 12, 2009, we have 
received 180 applications and payments will be made in early FY 2010. A 
proposed rule is expected to be published for comment in December 2009.
Section 9007: Rural Energy for America Program.
    Last, but certainly not least, is the most popular 2008 Farm Bill 
program we have, the Rural Energy for America Program (Section 9007). 
It expands and renames the Renewable Energy Systems and Energy 
Efficiency Improvements Program (Section 9006) under the Farm Security 
and Rural Investment Act of 2002 (2002 Farm Bill). Section 9007 has 
provided more than 2,000 grants and loan guarantees from FY 2003-2008 
for energy efficiency and renewable energy projects ranging from 
biofuels to wind, solar, geothermal, methane gas, and other biomass 
projects. A change from the 2002 Farm Bill now allows us to fund 
hydroelectric, ocean source technologies and energy audits.
    In 2009, funding was obligated as $26.6 million in grants, $8.5 in 
loan guarantees, and $76.8 million in grant and loan guarantee 
combinations.
    The 2008 Farm Bill provides us with programs to spur deployment of 
advanced biofuels, develop renewable energy technologies and to shift 
to second and third generation feed stocks. We recognize the compelling 
need to diversify away from fossil fuels for national, environmental, 
and energy security reasons. We know that biofuels are a historic 
economic opportunity for agricultural producers and rural America and 
we are committed to their growth.
Cooperatives
    I just covered our Rural Business programs and I would now like to 
focus on the Cooperative Services programs. The cooperative form of 
organizational governance is another cornerstone of business 
development in rural communities, whether in the traditional form of 
agricultural producers or in the non-traditional form that brings day 
care services to rural communities or new generation biofuel 
cooperatives that lessen our dependence on foreign oil. Cooperatives 
provide rural residents with new job opportunities, enhanced 
educational and health care services and products that enable them to 
compete with their urban and suburban counterparts. Opportunities are 
created locally and revenues are maintained and re-circulated locally.
    The participatory, self-help foundation, upon which cooperative 
organizations are based, exemplifies the very grassroots efforts that 
made our nation great and have served our rural communities well. Our 
Cooperative Programs help our constituents adjust to continually 
changing economic forces and allow them to operate and compete in 
today's global marketplace.
    We have over 80 years of experience working with the cooperative 
sector and remain the only Federal agency charged with that 
responsibility. We support 2,473 U.S. farmer, rancher, and fishery 
cooperatives who reported gross sales of $191.9 billion in 2008.
    A March 2009 study, done in conjunction with the University of 
Wisconsin, found that the total gross revenue generated by cooperatives 
in the U.S. is $653 billion and that cooperatives pay the wages of 
853,000 workers. USDA has seen an increased demand for high quality 
research and technical assistance for the cooperative business model. 
Given current economic conditions, we expect demand to increase over 
the coming years. There is evidence, according to multiple studies 
including a USDA study in 2003, Measuring the Economic Impact of 
Cooperatives in Minnesota (by the University of Wisconsin), that a 
community which relies more heavily upon cooperatives will be more 
successful in retaining wealth and reducing the boom-and-bust cycles 
often associated with businesses controlled from outside the community.
    On September 15, 2009, we announced funding to help local 
cooperatives as part of the `Know Your Farmer, Know Your Food' 
initiative that Deputy Secretary Kathleen Merrigan is leading. Twenty-
eight organizations in 21 states were selected to receive $4.8 million 
in grants as part of our regular Rural Cooperative Development Grant 
program.
    For example, Rural Development is awarding a $200,000 grant to The 
Ohio State University Research Foundation to support the foundation's 
efforts to help individuals and new and emerging cooperative business 
entities. The Foundation will provide technical assistance to a 
statewide farmers' market management network cooperative, and a newly 
formed purchasing cooperative for businesses in Appalachia.
    Meanwhile, the Value-Added Agriculture Development Center in 
Pierre, S.D., has been selected to receive a $200,000 grant to continue 
supporting the creation of producer-owned, value-added agriculture. The 
Center will help local growers educate the public, lenders and 
producers about the benefits of value-added agriculture. These efforts 
often increase sales of locally grown crops in addition to increasing 
local agriculture's contribution to area residents' health and to the 
local economy.
Value-Added Producer Grant program
    When Under Secretary for Rural Development, Dallas Tonsager, 
testified before you on June 10, 2009, he spoke about our Value-Added 
Producer Grant Program (VAPG). The VAPG program encourages independent 
agricultural commodity producers to further refine or enhance their 
products, thereby increasing their value to end-users and increasing 
their returns to producers. Since 2001, Cooperative Programs has 
awarded over 1,200 planning and working capital grants for a wide array 
of products, including projects for specialty meats, vegetable and 
dairy products, forest products and renewable energy.
    The FY 2009 NOFA for the VAPG program was issued on September 1, 
2009, and to ensure that potential recipients have the greatest 
opportunity to apply, we extended the application period to 3 months, 
pushing the award date into early 2010. With a new focus on local foods 
and value chains, or food systems, we are anticipating many creative 
applications. Farms and rural economies are interdependent and value-
added agriculture drives sustainable development across the board in 
rural communities. I look forward to working with this Subcommittee to 
ensure that we maximize the potential of this program.
Conclusion
    Using all of our funding sources--Annual Appropriations Acts, 
disaster supplementals, ARRA and 2008 Farm Bill--we have never had as 
much funding available to support rural America and fund new rural 
business ventures as we do today. We are committed to improving the 
lives of rural Americans and to awarding loans, grants, loan guarantees 
and payments that show promise and innovative ways to support our 
communities.
    In closing, let me again thank this Subcommittee and Congress for 
the generous support you have provided over the years to Rural 
Development. I look forward to greater collaboration because--
ultimately, we are here for the same reason--to build the future of 
rural America. We have a new Administration, new priorities and an 
opportunity for new relationships. I am both honored and humbled by the 
opportunity to return to Rural Development as the Administrator for 
Rural Business-Cooperative Services and I look forward to many more 
discussions in the future.

    The Chairman. Thank you very much, and as a common 
courtesy, we allow the official representatives of the U.S. 
Government an extension of time in case people were wondering 
about the 4 minutes, which we will have to enforce with our 
second panel. Thank you, being the only witness on this panel, 
and for taking the time to explain those programs. Very 
briefly, I am also going to shorten my questions because of the 
time constraints today. You mentioned that the first of the 
year in the calendar year 2010 is when you expect the funding 
to be made available for the Rural Microentrepreneur Assistance 
Program, is that correct?
    Ms. Canales. That is correct, Congressman, yes.
    The Chairman. Okay. And multiple renewable energy programs 
are your responsibility. Tell me how you are doing on an 
outreach program to ensure that there be a wide range of 
entities that could effectuate assistance for renewable energy 
programs.
    Ms. Canales. We were tasked by Secretary Tom Vilsack. He 
saw--he is, of course, the former Governor of Iowa. He saw that 
his home state had highly participated in the program, but he 
strongly stated to us this is a national program, and so I am 
asking you to develop a marketing plan, which we are doing 
right now. We have also identified energy coordinators in all 
states so that energy coordinator is the person that I would 
want--as you all know, I have come from the state office. I 
always want to make sure that your local offices are working 
with our state and local area offices to work with that energy 
coordinator who is being educated, is being trained, and we are 
very cognizant of wanting to create a vibrant national energy 
program supported by our division.
    The Chairman. Have those coordinators been appointed in all 
50 states?
    Ms. Canales. Yes, sir. Yes, Mr. Chairman.
    The Chairman. Thank you. If you would, would you make 
available that list to Members of the Committee within the next 
10 days?
    Ms. Canales. Absolutely.
    The Chairman. So each Member--I know some could not be here 
for other reasons, but I think it is important for them to be 
aware that there is an energy coordinator appointed. Is this 
for overall energy needs or just renewable energy?
    Ms. Canales. This would be for all of the energy programs 
that we direct within Rural Development.
    The Chairman. Okay. All right. Great. Just in the few 
moments I have left for questions, can you tell me how you work 
with other Federal agencies? You say you have energy 
coordinators with the state vis-a-vis other Federal agencies 
such as specifically the National Renewable Energy Laboratory 
in Golden, Colorado, and then generally the Department of 
Energy. How are you set up to coordinate efforts with them?
    Ms. Canales. Very much so. We have contracts with the NREL 
that you mentioned in Colorado. The Department of Energy, once 
again, Secretary Vilsack as well as Secretary Chu and the 
Department of Energy direct an energy task force for the entire 
Administration, and so we work very closely with them. And we 
also have tasked our energy coordinators to work locally also 
with the state agencies because many states are very innovative 
in energy funding. So, that is how, as you well know, you get 
your bigger bang for the buck in investing in those projects by 
partnering with the states. And some communities are also 
investing in energy so we are really seeking that out.
    The Chairman. Thank you. I know I was at an alternative 
energy summit at the University of North Carolina Wilmington on 
July 20 that was very well attended from the Federal, state, 
and local level. We found that similar coordination was of 
great assistance when you can cross those lines sometimes that 
people tend to work only on their own turf, but on things like 
energy clearly all Americans benefit. We want to have every 
coordination across every jurisdictional line that we can. I 
might also mention that with regard to your efforts in energy, 
we commend you to continue to go forward on that. The Biofuels 
Center of North Carolina is an example of one of those 
innovative places where they are looking ahead for new ventures 
and some of the great ideas on renewable energy.
    They are based in Oxford, North Carolina, so if you have 
would have your staff note to please contact the Director of 
Biofuels Center of North Carolina, and I will be happy to let 
our Agriculture Committee staff, and my staff, direct you to 
who those persons would be. And with that, I want to conclude 
actually ahead of schedule. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. Ms. Canales, welcome 
and welcome to your new role. The Value-Added Producer Grant 
Program, you said, I guess, Notice of Funding Availability came 
out on September 1, and you expect to have all of those grants 
granted by the calendar year 2009 or 2010?
    Ms. Canales. CY 2009 right now. Basically we are getting a 
tremendous amount of interest and so we will be announcing the 
VAPG awards during the first quarter of calendar year 2010.
    Mr. Conaway. Okay. We are about 16 months into the program, 
so I know you are as disappointed as we are that it has taken 
this long to get that program--if it has value, and we will see 
if it does, the results have been delayed in getting here, the 
RMAP program, how long is the comment period for the----
    Ms. Canales. Forty-five days for the Rural 
Microentrepreneur Assistance Program.
    Mr. Conaway. And that started October 9?
    Ms. Canales. October 7. Yes, Congressman.
    Mr. Conaway. So can you assure us that by early 2010 you 
will have absorbed all those comments, made the changes, done 
what you needed to do, and be able to move forward?
    Ms. Canales. We actually have a very aggressive schedule 
that we have been working very closely with the Office of 
Management and Budget, and certainly within our own resources 
at USDA for all of these programs. So, actually all the energy 
programs for this calendar year, and then specifically as you 
mentioned on the Rural Microentrepreneur Assistance Program, to 
be able to finish the entire process by the first of January 
for the final rule to also be available, the Notice of Funding 
Availability. So, all of that will be coming very----
    Mr. Conaway. So you are going to have the Notice of Funding 
Availability before you have the final rule?
    Ms. Canales. Right. At the same time. At the same time the 
Notice of Funding Availability will be announced.
    Mr. Conaway. Yes. So you are developing the rules. Okay.
    Ms. Canales. For the Rural Microentrepreneur Assistance 
Program.
    Mr. Conaway. Right. Right. I just want to make sure you 
don't get the cart before the horse.
    Ms. Canales. The proposed rule is out right now, and we are 
in a comment period. Once we get the comments back----
    Mr. Conaway. So you will publish a final rule. You will 
have already implemented the final rule before it is published?
    Ms. Canales. The final rule will be published at the same 
time that we are soliciting funding.
    Mr. Conaway. Okay. So, in effect, you will have implemented 
the rule with that final publication, right? You can't put 
together the Notice of Funding Availability without knowing 
what the rule is going to say. We can't know what the rule is 
going to say until you finally publish it, so are you going to 
do all that before it is published?
    Ms. Canales. It will be simultaneously.
    Mr. Conaway. That is an interesting approach. You 
mentioned, and I didn't catch the lead in, $71 million and 20 
projects. Can you give us a flavor of some of those 20 projects 
to what that does? Give me the program it is under.
    Ms. Canales. The Business and Industry Loan Guarantee 
Program, the specific funding being the economic stimulus 
monies. So, this is a huge announcement for us because this is 
the beginning of the $1.7 billion for the B&I Loan Guarantee 
Program.
    Mr. Conaway. Is this the five percent that has to go into 
this program or is that a different set of monies?
    Ms. Canales. There is a five percent regarding the 
locally--I am sorry. What did you ask?
    Mr. Conaway. The five percent B&I requirement that it goes 
to a certain area related to local processing, distribution and 
storage, marketing of agriculture products, is that this five 
percent or is that something else?
    Ms. Canales. The locally grown foods is the five percent 
you are referring to and that is within the B&I program.
    Mr. Conaway. Right. So the $71 million satisfies the five 
percent or it is separate and apart from the five percent?
    Ms. Canales. Oh, no, no, no, $71 million is just our first 
group of $1.7 billion of loans. It is our first announcement.
    Mr. Conaway. Okay. We will ask the second question in a 
second round. Thank you.
    The Chairman. Thank you, Mr. Conaway. Mr. Cuellar.
    Mr. Cuellar. Thank you very much, Mr. Chairman. I just want 
to say something. I have known Ms. Canales for many years. I 
have worked with her down there in south Texas, and she has 
always done an outstanding job, and we appreciate it and 
welcome her back to the Federal Government again. Ms. Canales, 
I have, I guess, two related questions. Many of the Rural 
Development programs will require matching funds. During times 
that revenues have gone down and dollars are hard to get, how 
do we help those communities or those applicants that are 
trying to get those dollars, but they are having trouble with 
the matching funds? Is there any way we can get creative?
    Ms. Canales. Thank you, Congressman, and that is a very 
good question, because having just come from being in that 
position where I had to fund raise myself, it is very 
challenging. So, what we do is we have to remember that so many 
of our programs are also--extra points are given to persistent 
poverty areas, to areas that are going to be 125 percent 
regarding the comparison to the unemployment rate. We have a 
lot of targeting, and so we are trying to get the monies to 
those areas that are most in need, but what we are also doing 
is that some of our programs within the Rural Business 
Enterprise Grant, for example, they do not require the 
matching. So, some--I am actually responsible for--you can get 
extra points if you do get matching but they are not required.
    But, just overall, what we are doing--and the good thing 
about being now in the rulemaking process is that we can look 
at the applications. And I know I just came from Oregon and met 
with a focus group that was looking at energy programs, and 
that was one of their top concerns was matching. And we 
basically said we will take a look at it in our rulemaking 
process right now because this is the time to be able to 
identify which programs can, perhaps, most support the matching 
and which programs we can look at that don't necessarily 
require matching.
    Mr. Cuellar. And on the rulemaking process, I would ask you 
that when we talk about the matching to just be as creative as 
possible as to what meets the definition of a matching 
contribution. The other thing is I do want to echo some of the 
things that my other colleagues--the speed as to how we get 
those dollars down there is so important. Coming from our area 
in south Texas there is always a feeling that Washington takes 
too long to get the dollars down here. And so I would ask you 
to move on the speed as soon as possible, and of course the 
other thing of interest to me is what performance measures are 
you using to measure results?
    I guess my question is do you have any performance measures 
that you could share with the Committee if you could present 
that to us?
    Ms. Canales. I would be happy to so some further research, 
but you are absolutely correct regarding the performance 
because these are valuable Federal dollars. They are hard to 
come by and they are also something in which, in so many of our 
programs, they are so competitive. Some of these programs are 
very highly subscribed.
    Mr. Cuellar. I know your staff is good staff at handing you 
information. Do you all have any performance measures if 
somebody can pass you a note on that?
    Ms. Canales. One of the comments that I have just received 
is certainly job creation, how many jobs were created, and that 
is one of the biggest items, certainly, within rural business. 
Because, the fact is that we are geared towards business 
investment in: the number of jobs created, number of jobs 
retained, and then also the number of businesses that are 
assisted.
    Mr. Cuellar. And again my time is over, but I would ask you 
to please give us your performance measures. I am very 
interested. We are measuring results and not just activity. 
Thank you. Good seeing you again, Ms. Canales. Thank you, Mr. 
Chairman.
    The Chairman. Thank you. Mr. Minnick, do you have any 
questions?
    Mr. Minnick. No questions, Mr. Chairman.
    The Chairman. All right. Thank you. I believe Mr. Conaway 
does have one remaining short question.
    Mr. Conaway. Yes. I had asked about some specifics of the 
20 projects. Can you give us a flavor of what some of those--
just a couple actually do?
    Ms. Canales. Yes, sir.
    Mr. Conaway. Thanks.
    Ms. Canales. Specifically, we have a project in South 
Carolina that was to guarantee a $3 million loan and it was for 
a company that is assembling gates, you have those businesses 
and mounting systems, and the purpose of these particular 
monies are to restructure debt and purchase new machinery and 
equipment. That is one of them. I know one of the other 
projects was for manufacturing. The company actually was based 
on Wisconsin, but they had different manufacturing sites, one 
in New York, and one also in Michigan. And so it is 
manufacturing, it is health care related. It is a whole variety 
that, obviously, in the long run were highly scrutinized 
because of the fact that we wanted to make sure that the whole 
job creation and leveraging, and leveraging in the sense of 
what does the business put in for other entities.
    Mr. Conaway. Okay. The gate manufacturing, how many new 
jobs or sustained job does your sheet show, how many jobs 
involved?
    Ms. Canales. I don't have it on this particular project as 
far as the jobs that were created, but we have another one 
actually that was for--in Ohio a farmer-owned cooperative that 
will receive a $7.5 million loan guarantee and this will help 
50,000 livestock farmers in Ohio, Kentucky, Michigan, Indiana, 
Illinois and Missouri. For this particular loan it will 
maintain insurance for nearly 500 employees, and also in this 
instance, the counties have unemployment rates that are 125 
percent greater than the national average.
    Mr. Conaway. Okay. We will talk later about the specifics 
of guaranteeing insurance. We will talk later. Thanks, Mr. 
Chairman.
    The Chairman. Thank you so much. We appreciate your time 
this morning and we look forward to working with you and to 
having your full testimony submitted again before the panel. 
Any further questions that the Members may submit to you we 
would ask you to please supplement with written answers and any 
other supplementary material within the next 10 days. So with 
that, thank you very much.
    Ms. Canales. Thank you, Mr. Chairman.
    The Chairman. And you have a blessed day.
    Ms. Canales. Yes. And thank you, Ranking Member from Texas.
    The Chairman. And then we will welcome our second panel if 
they would be taking their positions, and in the interest of 
time I am going to go ahead and announce for the record who 
those are. Mr. Randall Jones, President and CEO of Lumbee River 
Electric Membership Cooperation, Red Springs, North Carolina; 
Arlen Kangas, Ph.D., President of Midwest Minnesota Community 
Development Corporation, Detroit Lakes, Minnesota; Ms. Amy 
Crystle, CSA Manager, Lancaster Farm Fresh Cooperative of 
Leola, Pennsylvania; Dr. Timothy Collins, Assistant Director 
for the Illinois Institute for Rural Affairs out of Macomb, 
Illinois; and Mr. Leo Hoehn, General Manager of Stateline Bean 
Producers Cooperative, Gering, Nebraska.
    We welcome each of you as you come forward. We apologize 
again for the delay beyond anyone's control with the emergency 
alarms that sounded earlier that we had to evacuate the 
building. We are trying to move along and honor people's time 
and stay within the appointed schedule. As you are having a 
seat, I would especially like to welcome a friend of mine, who 
I have worked with in many different capacities who is well 
known and well respected in my home county of Robeson County, 
North Carolina, my constituent Mr. Randy Jones, as I mentioned, 
the President and CEO of Lumbee River Electric Membership 
Corporation.
    Mr. Jones was born in Laurinburg, North Carolina just about 
30 miles down the road from my hometown of Lumberton. And he 
has worked with Lumbee River Corporation for over 25 years. His 
work there and his combined efforts with the regional medical 
center, Robeson County public schools, and through many other 
civic and church activities are well known and well respected. 
It is an honor, sir, to have you come up from our Congressional 
district and from our home county to be here today. I know Mr. 
Jones has quite a history also of working with our local 
Chamber of Commerce which he and I made many trips together to 
Washington long before I was elected to Congress. So thank you, 
Randall, for being with us today. Mr. Jones, you are up first, 
so if you will proceed with your testimony, and I remind the 
witnesses that we have reduced the time to 4 minutes.

STATEMENT OF RANDALL S. JONES, PRESIDENT AND CEO, LUMBEE RIVER 
        ELECTRIC MEMBERSHIP CORPORATION, RED SPRINGS, NC

    Mr. Jones. Thank you, Congressman McIntyre. It is my 
pleasure to be with you. I am Randall Jones, President and CEO 
of Lumbee River Electric Membership Corporation. I would be 
remiss to say that I don't feel somewhat like I felt that 
morning 39 years ago when I first gave my speech in a speech 
class at the university, so bear with me, please. I am 
delighted to appear before you today to tell our story and make 
comments about the current situation and future needs.
    Lumbee River EMC is proud of our long history of effective 
use of USDA funds since 1939 from the Rural Electrification 
Administration. Lumbee River EMC provides electric to over 
50,000 members along 5,000 miles of line and 1,400 square miles 
of service territory. During the last 15 years with Lumbee 
River, I have worked with USDA Rural Development loan programs. 
My primary concentration on lending has been with IRP, 
Intermediary Relending Program, for the last 9 years. We speak 
of this bad economy now, but the four-county area in the 
southern part of North Carolina was already suffering from low 
cotton prices, the transfer of textile jobs to other countries, 
and more recently the tobacco buy-out with reduction in acreage 
of production and fewer local jobs.
    The major banks have either left the area or transferred 
the business lending talent, loan decision-makers and 
underwriters to major cities. Some regional and local banks 
remain but they have not focused on rural businesses, unless 
the lending family has an abundance of assets as collateral. It 
is ironic that rural lending programs developed by Farmers Home 
Administration during the 1930's depression are ideal today and 
are really needed to recover from this current bad economy. The 
number of IRP loans approved by USDA Rural Development to date, 
five approvals for $3,550,000; the number of REDLG loans and 
grants approved, eight approved for $3,780,000. The number of 
IRP loans have been 25, and the number of REDLG loans and 
grants have been eight. The number of jobs created, over 1,000; 
new LREMC loans made, over $6 million; capital investment, over 
$100 million; new businesses created, over 100.
    The USDA loan funds, along with LREMC's own resources, 
allowed our Cooperative to be awarded the National Rural 
Electric Cooperative Association's National Community Service 
Award for community investment in 2006. Our economic 
development started small and the initial activity began over a 
decade ago. A substantial portion of the Lake Rim area/Hwy. 401 
development began with a LREMC loan for the initial sewer 
lines, and you see a picture in your handouts of that major 
growth that has developed due to that sewer they have placed 
there through that loan.
    COMtech, a centrally located educational, medical and light 
industry park, received electric infrastructure early on along 
with LREMC leadership on the board. Some of the new firms have 
received long-term USDA Rural Development loans. There are 
approximately three REDLG loans and two IRP loans to businesses 
in that park. Current concerns: Since the Federal bailout of 
major banks last November, our new borrowers are told that new 
policies, guidelines and regulations prevent the bank from 
making loans beyond 5 years even with an interest rate cap. So, 
the bank's part of the needed long-term set of loans is really 
a 5 year loan with a big balloon.
    If rates increase, this shifts all of the interest rate 
cost to the borrower and the refinancing risk to LREMC. Related 
activities: Recent North Carolina law required that each 
electric utility obtain a modest percentage of electricity from 
green sources. We are cooperating with NC Farm Center for 
Innovation and Sustainability, a new and local nonprofit 
organization that includes a 6,000 acre farm that is being 
dedicated to practical demonstration projects. A carbon offset 
trading program is under development. This center plans to 
assemble a large network of landowners in order to access the 
market for extensive carbon and ecosystems credit resources.
    Also, a $500,000 grant from USDA's Natural Resources 
Conservation Service has just awarded to the North Carolina 
Farm Center to demonstrate the benefits of using a mobile 
Paralysis unit which produces Biochar. The Biochar is produced 
by converting agro-forest waste biomass to carbon-rich charcoal 
to be added to the crop land.
    [The prepared statement of Mr. Jones follows:]

Prepared Statement of Randall S. Jones, President and CEO, Lumbee River 
            Electric Membership Corporation, Red Springs, NC
    Introduction: First, I am delighted to appear before you today 
briefly tell our story and make comments about currents situation and 
future needs. Second, Lumbee River EMC is proud of our long history of 
effective use of USDA funds, since 1939 from the Rural Electrification 
Administration.
    Lumbee River EMC provides electricity to over 50,000 members along 
5,000 miles of line in 1,400 square miles of service territory. During 
the last fifteen of my nearly thirty years with LREMC, I have worked 
with USDA-RD loan programs. My primary concentration on lending has 
been with the IRP for the last 9 years.
    History: We speak of this ``Bad Economy'' now, but our four county 
area in the southern part of North Carolina was already suffering from 
low cotton prices, the transfer of textile jobs to other countries and 
more recently the tobacco buy-outs with reductions in acres of 
production and fewer local jobs. The major banks have either left the 
area or transferred the business lending talent, loan decisions maker 
and underwriters to major cities. Some regional and local banks remain 
but they have not focused on rural businesses, unless the landed family 
has an abundance of assets as collateral.
    It is ironic that the rural lending programs developed by Farmers 
Home Administration during the 1930's depression are ideal today and 
are really needed to recover from this current ``Bad Economy''.
LREMC Loan Programs by volume:

    1. Number of IRP loans approved by USDA-RD to date.

          Five approvals for $3,550,000

    2. Number of REDLG loans approved by USDA-RD to date.

          Eight approvals for $3,780,000

    3. Number of IRP loans that have been funded.

          Twenty five

    4. Number of REDLG loans that have been funded

          Eight
LREMC Loan Programs by results:
    The minimum but broad accomplishment numbers are as follows:

        Jobs Created: Over 1,000

        New LREMC Loans Made: Over $6,000,000

        Capital Investment: Over $100,000,000

        New businesses Created: Over 100

        New Homes from Water, Sewer or Electricity Availability: Over 
        1,000

    The use of the USDA loan funds, along with LREMC's own resources, 
allowed our Cooperative to be awarded the NRECA's National Community 
Service Award for Community Investment in 2006.
    Illustrations: Our economic development started small and the 
initial activity began over a decade ago. A substantial portion of the 
Lake Rim area/Hwy. 401 development began with a LREMC loan for the 
initial sewer line.




    Rather than risk the criticism of competition from the few local 
banks, we have taken a cooperative attitude. If we have a loan inquiry 
that a bank believes that it wants, the bank can take the situation and 
then make and service the loan. Since a business needs a banking 
relationship, we try to do shared collateral with separate loans but on 
similar interest rates and terms.
    Current Concerns: Since the Federal Bailout of major banks last 
November, our new borrowers are told that new policies, guidelines and 
regulations prevent the bank from making loans beyond 5 years even with 
an interest rate cap. So, the bank's part of the needed long-term set 
of loans is really a 5 year loan with a big balloon. If rates increase, 
this shifts all of the interest rate cost to the borrower and the 
refinancing risk to LREMC. A 15 or 20 year amortizing loan with a 5 
year balloon is akin to a credit card bank offering a one percent 
teaser interest rate for 6 months when the cardholder does not have the 
capability to pay off the entire balance. Small businesses should not 
need to switch to another lender. If this ``no cap avoidance'' by banks 
is allowed to continue, we may have to stop shared lending or start 
doing 5 year loans with a big balloon. However, the businesses really 
need longer-term loans with a predetermined interest rate exposure. I 
am sure that rural America is the first hit by this new defensive 
action of the banks.
    Related Activities: Recent North Carolina law required that each 
electric utility obtain a modest percentage of electricity from 
``green'' sources. We are cooperating with NC Farm Center for 
Innovation & Sustainability, a new and local nonprofit organization 
that includes a 6,000 acre farm that is being dedicated to practical 
demonstration projects. A Carbon Offset Trading Program is under 
development. This Center plans to assemble a large network of 
landowners in order to access the market for extensive Carbon & 
Ecosystems Credit resources. Also, a $500,000 grant from USDA's Natural 
Resources Conservation Service has just awarded to the NC Farm Center 
to demonstrate the benefits of using a mobile Paralysis unit, which 
produces Biochar. This Biochar is produced by converting agro-forest 
waste biomass to carbon-rich charcoal to be added to the crop land.
    Existing Economy: Nearly one in four Americans has suffered a job 
loss over the past year, according to a survey released by the Economic 
Policy Institute. Nearly one in ten Americans is officially unemployed, 
and the real-world jobless rate is worse. An article in the Winston-
Salem Journal dated October 7, 2009 and titled ``Numbing Numbers for 
N.C.'' states: ``Jobs for middle-class workers are expected to rebound 
slowly, a dire sign for growth, in the near future of both personal 
income taxes and sales-tax collections in North Carolina.''
    Current Challenge: Rural America needs more funds for fixed rate, 
long term loans. As you know, job creation by the firm at the local 
level continues to be a proven, major factor for economic and 
employment recovery. Again, USDA loans have a successful seventy 5 year 
history.
Lumbee River EMC IRP Loan Recipients


 Thank you, Mr. Jones. We are over 5 minutes so we are going to have to 
        suspend your testimony, but I think you have just a couple more 
        paragraphs, which we can take note of, concerning the existing 
        economy and the current challenge. Thank you very much. We will 
    go to our next witness, please, Dr. Kangas.Dr. Kangas. It is Arlen 
Kangas is my name.
    The Chairman. Thank you, Dr. Kangas. I am sorry.

    STATEMENT OF ARLEN KANGAS, Ph.D., PRESIDENT, MIDWEST MINNESOTA 
          COMMUNITY DEVELOPMENT CORPORATION, DETROIT LAKES, MN

    Dr. Kangas. Thank you for the opportunity to appear here today. 
MMCDC is a nonprofit company based in northwest Minnesota, which has 
partnered with USDA since 1988. Although already short, I will 
abbreviate my remarks even further trying to beat the clock of 4 
minutes, which seems to go pretty quickly. We are a commercial lender 
having accessed $400 million of Intermediary Relending Program funds. 
We are a Rural Business Enterprise grantee and a specialty lender under 
the Business and Industry Guarantee Program. In short, we are a 
consumer of the USDA programs. Overcoming the economic crisis which 
began just over 1 year ago will require resumption of the free flow of 
credit to businesses and homeowners. Unfortunately, commercial loans 
are not only difficult to come by, but banks struggling with stiff 
regulatory pressures are calling in loans versus making new ones.
    Fortunately, for individuals, businesses, and communities Rural 
Development is active and aggressive in extending credit as the 
Administrator earlier described. I would like to provide both recent 
and historical examples of our use of these Rural Development programs. 
We are presently working with our state RD office to obtain a B&I 
guarantee for $7 million to support a local manufacturing company and 
help retain 800 manufacturing jobs. Last year the company lost money 
causing the bank to pull in their line of credit. However, this loan 
will be well secured and allow the company enough time to overcome a 
difficult year.
    Another example, in the mid-1990s a local community lost its major 
employer for a total of 550 jobs. The RBEG program provided us a grant 
to support the creation of a replacement business. Not only were 70 
jobs created but that business became the first tenant in a new 
industrial park now providing thousands of dollars in property tax 
revenues, and nearly as many jobs as were originally lost. The 
Intermediary Relending Program began for us with a $4 million loan from 
USDA and a half million of our own capital which has provided $18 
million in total loans out of that fund plus leveraging another $27 
million in other capital since its inception.
    I think the IRP program is important in good economic times, but 
absolutely vital in times like these. These programs are important but 
from my perspective could be improved. Specifically, the B&I program 
should implement the low-doc program similar to the SBA. Access to 
Federal credit enhancement will expedite banks to, again, start lending 
to small and medium sized businesses, as well as diversify USDA's 
portfolio. The IRP, Intermediary Relending Program, should allow both 
the sale of participations as well as the purchase of participations. 
Third, rather than attempting to spread IRP funds among many applicants 
with more but smaller loans, I would recommend making fewer and larger 
loans to allow intermediaries to generate economies of scale.
    Rural Business Enterprise Grants should have an expiration of 
reporting after 5 to 10 years, rather than in perpetuity, as is now the 
case subject to the requirement that the nonprofit use these Federal 
funds with an intent that was similar to what was originally required. 
And there should be greater flexibility to combine the B&I guarantee 
with the New Markets Tax Credit program, and specifically, allowing 
guarantees for upper-tier lenders in a leveraged new markets 
transaction. These Rural Development programs are valuable to us that 
live in rural America. The IRP, RBEG and B&I create real jobs in rural 
areas. They are important in good times, but become critical when the 
flow of credit has slowed and will play an important part in economic 
recovery.
    [The prepared statement of Dr. Kangas follows:]

Prepared Statement of Arlen Kangas, Ph.D., President, Midwest Minnesota 
          Community Development Corporation, Detroit Lakes, MN
    Thank you for the opportunity to appear here today. MMCDC is a 
nonprofit company, based in northwest Minnesota, which has partnered 
with USDA since 1988. Rural Development is unique due to its delivery 
mechanism which involves local and state offices as well as their 
National Office. No other Federal agency combines as much local 
knowledge with Federal policy making as USDA.
    Our company provides loans to home owners via the Section 502 
guaranteed program and we are one of the largest providers of those 
loans in Minnesota. But my comments today focus on commercial lending. 
We are a commercial lender having accessed $4 million of Intermediary 
Relending Program funds; we are a Rural Business Enterprise grantee; 
and a `specialty lender' under the Business and Industry Guarantee 
program.
    Overcoming the economic crisis which began just over 1 year ago 
will require resumption of the free flow of credit to businesses and 
home owners. Unfortunately, commercial loans are not only difficult to 
come by, but banks faced with stiff regulatory pressures, are calling 
in loans versus making new ones.
    Fortunately for individuals, businesses and communities Rural 
Development is active and aggressive in extending credit. I would like 
to provide both recent and historical examples of our use of these 
Rural Development programs.
    We are presently working with our state RD office to obtain a B&I 
guarantee for a $7 million loan to support a local manufacturing 
company and help retain 800 jobs. Last year the company lost money 
causing the bank to pull in their line of credit. This loan will be 
well secured and allow the company enough time to overcome a difficult 
year.
    In the mid-1990s a local community lost its major employer and a 
total of 550 jobs. The RBEG program provided us a $450,000 grant to 
support the creation of a replacement business. Not only were 70 jobs 
created but that business became the first tenant in a new industrial 
park. That industrial park is now full and generates tens of thousands 
of annual property tax revenues and nearly as many jobs as were 
originally lost. The RBEG program also helped us establish a 
cooperatively owned construction company that has produced over 140 
homes, supporting the workforce for local employers.
    The Intermediary Relending Program that began with a $4 million 
loan and $500,000 of our own equity has provided over $18 million in 
total loans and has leveraged another $27.2 million in other capital 
since its inception. I think the IRP program is important in good 
economic times, but absolutely vital in times like these.
    These USDA programs are important but, at least from my 
perspective, could be improved. Specifically:

   The B&I program should implement a `low-doc' component 
        for smaller loans similar to the SBA. Access to credit 
        enhancement will expedite banks again lending to small and 
        medium sized businesses and diversify USDA's portfolio.

   The Intermediary Relending Program should allow both the 
        sale of participations as well as the purchase of 
        participations. Participations are loans sold in fractions of 
        the total. This will not impair USDA's collateral position but 
        greatly improve the flow of capital and the ability to manage 
        portfolios that span wide geographic distances.

   Rather than attempting to spread IRP funds among 
        applicants with more but smaller loans, I would recommend 
        making fewer and larger loans to allow intermediaries to 
        generate economies of scale.

   Rural Business Enterprise Grants should have an 
        expiration of reporting after 5 to 10 years, rather than in 
        perpetuity, subject to the requirement that the nonprofit use 
        these Federal funds for a similar intent.

   There should be greater flexibility to combine the B&I 
        guarantee with the New Markets Tax Credit program; specifically 
        allowing guarantees for upper-tier lenders in a leveraged NMTC 
        transaction.

    These Rural Development programs are valuable to rural America. The 
IRP, RBEG and the B&I programs create real jobs in rural areas. They 
are particularly important in good times, but they become critical when 
the flow of credit has slowed and will play an important part in 
economic recovery.
  End of Oral Testimony With Added Information on RBEG and IRP Below:
RBEG
    Concerning the RBEG program, the five RCDCs surveyed are using the 
grant funds for a variety of projects. They are also leveraging other 
sources of funding and are having a significant impact on the rural 
communities they serve. For example:

   Northern Communities Investment Corporation (NCIC), Coastal 
        Enterprises, Inc. (CEI), and Northeast Economic initiatives 
        Corporation (NEIC) have used their RBEG grant dollars to 
        capitalize revolving loan funds, thereby maximizing the impact 
        of the grant and enabling the CDCs to provide an ongoing source 
        of business financing. NCIC has utilized its six RBEG grants 
        totaling $1,180,000 to establish four revolving loan funds, 
        which together have extended 56 loans totaling $2,171,587. 
        These funds have also leveraged $4,869,241 in additional funds 
        and created/maintained 209 jobs. Among the small businesses 
        NCIC has assisted with its revolving loan funds are a building 
        construction firm in Northern Vermont that wanted to expand and 
        a catering firm in New Hampshire that desired to move into the 
        restaurant business. CEI's $1,149,000 in RBEG grant dollars 
        have supported a wide range of small businesses in rural Maine, 
        including a tortilla maker, a trucking company, a metal 
        construction company, an aquaculture firm, and a business that 
        combines seafood and blueberry process wastes to manufacture 
        high-end gardening compost. These funds have leveraged dollars 
        from other sources on a three to one basis such that the 
        $1,149,000 has brought in an additional $3,447,000 for a total 
        financing of over $4,600,000. NEIC have used its two RBEG 
        grants totaling $1,500,000 to capitalize two revolving loan 
        funds targeted to small businesses. NEIC has made 17 loans for 
        $715,819 in financing, which have leveraged an additional 
        $300,000 from other sources.

   MMCDC received a total of $650,000 in RBEG grant funds in 
        1995 and 2004. Of that amount, $450,000 was used to build a 
        22,000 square foot manufacturing facility, creating 45 jobs in 
        rural Minnesota. This project also leveraged an additional 
        $450,000. In addition, MMCDC made a $150,000 loan for working 
        capital to a producer of Native American foods located on the 
        White Earth Indian Reservation as well as a $50,000 technical 
        assistance grant. This loan allowed the producer to purchase 
        its raw inventory (wild rice, syrup, etc.) from low income 
        Native American households.

   Kentucky Highlands Investment Corporation (KHIC) has 
        received a total of $1,793,000 in RBEG grant funds over the 
        last 6 years. In FY 2006, it used its $199,000 Non-EZ/EC RBEG 
        Grant to fund loans to two companies--Wells Collision Center, 
        LLC ($143,280) and Information Capture Solutions, LLC 
        ($55,720). Wells Collision Center, an automotive body, paint 
        and repair shop located in Somerset, Kentucky. The RBEG funds 
        already have leveraged $166,720 in additional KHIC program 
        dollars. Information Capture Solutions, a Williamsburg, 
        Kentucky-based company providing such services as document 
        imaging, data capture, and document storage/destruction, plans 
        to hire an additional 30 to 40 people as a result of this 
        financing. These RBEG funds have leveraged an additional 
        $99,280.

    Since 1993, Impact 7 (I-7) in Wisconsin has made 16 RBEG loans 
totaling $1,227,500. The list of businesses benefiting from the program 
includes American Bronze Castings, Ltd., Benchmark, Dynatronix, Inc., 
Eagle Security, LLC, Horizon Manufacturing, Inc., Just In Time Machine 
Corporation, Lake Country Dairy, Lake Country Tool, Living Adventure, 
Northern Optiks, Inc., OEI, Scope Moldings, Stevens Point Deli, and 
Traxx Motorsports. These businesses have leveraged other sources of 
funds for an additional $2,768,840. In addition, these projects have 
made a substantial contribution to the employment prospects in these 
rural areas, creating 83.5 new jobs and retaining 153 existing 
positions.
IRP
    In rural America small businesses (business with 500 or fewer 
employees) account for 90% of rural business establishments. According 
to the Federal Reserve Bank of Kansas City, over one million rural 
businesses have fewer than 20 employees. This is almost 75 % of all 
businesses located in rural America. Yet these businesses are 
increasingly unable to gain access to capital.
    The upheaval in the financial services industry has resulted in 
credit drying up for businesses in low income communities--loan to 
value ratios are falling, lines of credits are disappearing, and 
commitments are evaporating. As a result of the precipitous decline of 
the availability of credit from private financial institutions, demand 
is increasing for the entire range of local, regional and national loan 
funds, microloan programs, venture capital and intermediary 
organizations to fill this expanding void created by the reluctance of 
private financial institutions to provide credit. At the same time 
these same mission driven organizations are also facing a liquidity 
shortage as traditional non-governmental sources of capital--from 
private philanthropic organizations, the bond market, and private 
financial institutions--are no longer available.
    To offset the change many rural communities and organizations have 
put to use an Agriculture Department program: Intermediary Relending 
Program (IRP). The IRP makes loans to public and private non-
intermediaries that in turn loan to private business enterprises in 
rural areas. In many cases the loans made available through the IRP are 
one of the few sources of fix rate term financing for small rural 
businesses for working capital, lines of credit and equipment. With an 
average loan size of $100,000 and an upward limit of $250,000, the IRP 
is targeting small businesses that are the backbone of the rural 
economy.
    USDA has administered the IRP since 1988. At this time, USDA had 
some 400 borrowers of over $700 million in IRP funds. The agency has 
not suffered a single default.
    Beyond the importance of the patient, flexible capital provided by 
the IRP, there are two other factors of note:

    1. Job Creation--The average IRP loan is $100,000. According to 
        USDA, on average, each loan for that amount creates or saves 
        76.5 jobs. A recent survey of the CDCs indicates a cost per job 
        of $3,000;

    2. Continuing Source of Capital--A typical intermediary revolves 
        IRP funds three times over the life of the 30 year, USDA loan; 
        and

    3. Leverage--a recent survey of IRP borrowers indicates that 
        projects financed with IRP are able to leverage significant of 
        additional capital. IRP borrowers surveyed leveraged as much as 
        $7.3 per every dollar of IRP funds.

    Other Specific Recommendations for IRP:
    Under Instruction 4274-D:

    Recommendation: Increase the cap on loans to ultimate recipients.

    ( 4274.331(b)-(c)):

    (b) Ultimate recipients. Loans from intermediaries to ultimate 
    recipients using the IRP revolving fund must not exceed the lesser 
    of:

          (1) $250,000; or
          (2) Seventy five percent of the total cost of the ultimate 
        recipient's project for which the loan is being made. 

    (c) Portfolio. No more than 25 percent of an IRP loan approved may 
    be used for loans to ultimate recipients that exceed $150,000. This 
    limit does not apply to revolved funds.

    The current cap on IRP lending has been in place since 1994. To 
keep pace with inflation the cap of $250,000 should be increased to 
$297,000. In addition, there are greater credit demands of IRP lenders 
than ever before. With many private financial institutions pulling 
back, IRP is a key source of fixed rate credit for rural businesses.
    Our recommendation is to allow intermediaries to lend up to 10% of 
their portfolio in any one project.

    Recommendation: Reduce or eliminate points for match, double points 
offered for leverage.

    ( 4274.344(c)(1)):

                          ``(i) The intermediary will obtain non-
                        Federal loan or grant funds to pay part of the 
                        cost of the ultimate recipients' projects . . 
                        .''
                          ``(ii) The intermediary will provide loans to 
                        ultimate recipients from its project 
                        contribution funds to pay part of the costs of 
                        ultimate recipient projects. Project 
                        contribution funds must be separate and 
                        distinct from any loan or grant dollars 
                        provided to the intermediary under the IRP as 
                        well as the intermediary's equity 
                        contribution.''

    ( 4274.344(c)(3)):

    Intermediary contribution. All assets of the IRP revolving fund 
    will serve as security for the IRP loan, and the intermediary will 
    contribute funds not derived from the Agency into the IRP revolving 
    fund along with the proceeds of the IRP loan.

    The current scoring system, as outlined above, gives more weight to 
applicants that have the ability to commit matching funds than an 
applicant that commits to leveraging private financing. Applicants who 
are able to commit matching funds must do so for the full 30 year term 
of the loan. These are the first dollars to be put into the fund and 
the last to come out. The current economic situation makes it very 
difficult for many organizations to commit these funds for that period 
of time.
    Additionally, encouraging private leverage would ensure that 
Federal dollars could go farther and have a greater impact. Such a 
system would also encourage IRP lenders to assist borrowers in 
accessing private credit and developing relationships with conventional 
lenders. As indicated above, many IRP borrowers have shown great 
success in leveraging private sector participation in IRP-financed 
businesses.
    We recommend that USDA double the number of points awarded to an 
IRP applicant committed to leveraging significant private financing, on 
a deal by deal basis, with IRP dollars.
    These difficult economic times have reduced the sources of funds 
for match. Private foundations and state and local governments are 
facing greater limitations and demands for resources. Earned income of 
borrowers is also limited because of the recession. Congress has 
authorized other Federal agencies including Commerce Environmental 
Protection and Treasury to drop or reduce matching requirements for 
community development programs. We recommend that USDA consider a 
similar measure for the IRP.

    Eliminate the fourteen-county limit which is used to award points 
accountability.

    ( 4274.344(c)(5)):

    The instruction limits the target area for an application to not 
more than 14 counties. An application can receive up to 15 points for 
having community representation on its board or oversight committee.
    From state to state, counties vary greatly in size from one 
another. San Bernardino County, California, for example, is larger in 
size and population than the entire state of New Hampshire. Limiting 
the number of counties served puts some applicants at an unfair 
disadvantage. The 14 county ceiling also limits the participation of 
statewide, multi-state or national organizations with service areas 
greater than fourteen counties.
    We suggest that USDA drop 14 county limit. We suggest that other 
measures of accountability be adopted. USDA should ensure that 
applicants have a board of business, civic and community leader make up 
the board or advisory committee of the applicant and that community 
leader be residents of rural communities.

    Recommendation: Allow for the sale and purchase of loan 
participations.

    ( 4274.361(e))

    ``(e) Current regulations do not allow the intermediary to sell 
    their ultimate recipient loans. (Added 08-19-05  SPECIAL PN.)''

    In general, the IRP rules should provide for better coordination 
and cooperation with private financial institutions. In tight budget 
times, leveraging the maximum participation of private loans is 
essential to stretching Federal IRP funds. Because this is not 
expressly authorized in the rule, USDA has recently indicated that 
intermediaries are not authorized to buy or sell participation 
agreements or notes from the IRP revolving fund. This includes any 
revolved funds as well.
    We recommend that USDA eliminate the prohibition on buying and 
selling participations on private loans. Buying participations has 
proved to be useful for encouraging private sector participation in 
rural lending and stretching Federal resources.
    Selling participations allows intermediaries to more quickly 
revolve their funds. This activity would not change the nature or 
character of the IRP funds, and simply serves to increase the volume of 
lending provided by intermediaries. In addition, for statewide or 
regional organizations, IRP borrowers buying participations can rely on 
the local bank to service and monitor loans.
    Small rural bank quickly reach their lending limits. Allowing these 
banks to buy or sell a participation is a way to keep them in small 
business lending.

    Recommendation: Allow borrowers with multiple loans to consolidate 
these for purposes of repayments and reporting requirement.

    Many IRP intermediaries have multiple loans from USDA. In order to 
ensure that deposited funds are protected by Federal deposit insurance, 
intermediaries maintain multiple bank accounts. For example, one 
borrower has nine loans, maintains 27 bank accounts and files nine 
separate reports to USDA. We would like to encourage USDA to consider 
ways that this reporting could be streamlined.

    Recommendation: Ensure that clear and consistent guidance is given 
to IRP Intermediaries.

    While the IRP is administered as a national program, some state 
offices have weighed in with IRP intermediaries to give direction. For 
example, some state offices are requiring documentation that the IRP 
lender has met lender of last resort requirements even though this 
requirement is in neither the rule nor instructions governing the 
program.
    Some intermediaries are interested in lending in more than one 
state. That option does not appear in the rule or instructions. Yet 
intermediaries have in fact received IRP loans to work in more than one 
state with the state on which the IRP is located taking the lead in 
administering the loan. USDA should clarify the instructions on this.

    Recommendation: Establish a ``preferred lender'' program for 
seasoned IRP lenders.

    USDA has made hundreds of IRP loans totaling hundreds of millions 
of dollars since the program's inception. A select few of the 
organizations receiving these loans are high volume lenders and, 
therefore, many of them apply to USDA on an annual basis for additional 
IRP dollars to replenish their loan funds. We recommend that the USDA 
consider instituting a ``preferred lender'' program that would provide 
additional liquidity to high-performing, high-volume IRP lenders.
    Through a ``preferred lender'' program, USDA could grant a 
moratorium on the principal and interest payments of an intermediary as 
long as the intermediary could demonstrate a successful track record in 
terms of deploying loans to qualified businesses, being current in 
payments to USDA, and meeting additional performance goals such as 
targeting ``high distress'' rural areas and/ or creating and retaining 
jobs.
    The annual demand for IRP funding outweighs the availability of IRP 
funds. Many seasoned IRP lenders are left unable to secure the new IRP 
loans that they need to meet the local demand from new and returning 
borrowers. By relieving these qualified lenders of principal and 
interest payments, additional capital would be freed. Intermediaries 
could put those dollars into loans, thus alleviating the need to apply 
for additional IRP funds on an annual basis.

    The Chairman. Thank you so much. Perfect timing. And I 
apologize for the mispronunciation of your name. Thank you for 
being here today. Ms. Crystle.

            STATEMENT OF AMY PYLE CRYSTLE, COMMUNITY
   SUPPORTED AGRICULTURE (CSA) MANAGER, LANCASTER FARM FRESH 
                     COOPERATIVE, LEOLA, PA

    Ms. Crystle. Yes. Good morning. I am here representing 
Lancaster Farm Fresh Cooperative. It is an organic farmers' 
cooperative from Lancaster County, Pennsylvania. And I am here 
to tell you a success story of an RCD grant. The Keystone 
Development Center, KDC, a nonprofit organization devoted to 
rural cooperative business development in Pennsylvania, 
received a grant from the USDA under the RCDG program. KDC 
contracted with a local facilitator who understood there was a 
strong need and great potential for an organic farmer's 
cooperative to serve the Philadelphia metropolitan area. LFFC, 
Lancaster Farm Fresh, evolved from a series of meetings 
organized by that KDC facilitator with Lancaster County farmers 
and sustainable ag professionals in the fall of 2005.
    The facilitator conducted a market feasibility study in 
early 2006 that found a need and demand for more locally grown 
organic food in the Philadelphia area. The farmers assembled 
and selected a Board of Directors. The first deliveries for 
LFFC were made in May of 2006. The Board of Directors hired two 
full-time managers in July of 2006, and I am one of those 
managers. LFFC has enjoyed growth and success. Our first 
growing season, 12 farmers contributed products to the 
Cooperative, serving 30 wholesale customers and 100 community 
supported or CSA customers. The Cooperative employed two full-
time managers and two of the farmers' sons helped us to pack 
orders. One of the members delivered orders to customers.
    This year, for 2009, 50 farmers contributed to the products 
we offer. Over 100 wholesale customers order products weekly, 
and more than 1,200 families collect CSA shares during the 
growing season. We now have five full-time employees and 15 
part-time employees. In addition, the Board of Directors 
created a transportation company in the spring of last year 
that currently employs three full-time and two part-time 
delivery drivers and a full-time transportation manager. LFFC 
is a farmer-owned cooperative. The employees work for the 
farmers to secure a sale price for products which provide a 
profit to the farmers and allow them to continue to produce.
    Profits are redistributed to farm members at the end of the 
fiscal year. The nature of the business is direct marketing 
from the farmers' cooperative, acting on behalf of the farmers 
to individual consumers and wholesale buyers. Our customers, 
both CSA and wholesale, are more connected with their food 
source and the hardships and glories of agriculture than if 
they were purchasing food from a large grocery store or a food 
distributor.
    I was asked to testify today to support the work of the 
National Cooperative Business Association and 
CooperationWorks!. On behalf of NCBA, CooperationWorks!, and 
all the cooperatives, I want to thank you, Mr. Chairman, and 
Members of the Subcommittee, for making improvements to the 
RCDG program in last year's farm bill, and supporting an 
increase to the RCDG program in the most recent appropriations 
bill passed by Congress. I want to thank you for allowing me to 
share our story with you. I hope it will shed some light on the 
economic impact of RCD grants in rural America. The impacts of 
this particular RCD grants goes beyond economic benefits in 
rural Lancaster County, Pennsylvania.
    It affects the social and cultural fabrics of the 
metropolitan and suburban communities we serve. If you eat at 
some of the restaurants that serve locally produced food in 
Washington, D.C. or join a CSA program here you are supporting 
local farmers and possibly Lancaster Farm Fresh. Thank you.
    [The prepared statement of Ms. Crystle follows:]

Prepared Statement of Amy Pyle Crystle, Community Supported Agriculture 
       (CSA) Manager, Lancaster Farm Fresh Cooperative, Leola, PA
    Good morning Chairman McIntyre and Members of the Committee. My 
name is Amy Crystle, and I am here representing Lancaster Farm Fresh 
Cooperative, an organic farmers' cooperative in Lancaster County, 
Pennsylvania. I have worked as a manager for Lancaster Farm Fresh since 
2006. I am here to tell you one story of a successful Rural Development 
grant and encourage you to continue and expand funding for the Rural 
Cooperative Development Grants program.
    The Keystone Development Center (KDC), a nonprofit organization 
devoted to rural cooperative business development in Pennsylvania, has 
received grants from USDA under the Rural Cooperative Development Grant 
(RCDG) program). The RCDG program is an annual competitive grant 
program that awards grants to Cooperative Development Centers to 
provide technical assistance to farmers and others to help create 
cooperatives and other member-owned businesses. The grants are awarded 
to between 20 and 25 centers around the country, depending on the year, 
the applications, and the amount of available funds.
    KDC contracted with a local facilitator in Lancaster County, 
Pennsylvania who understood there was a strong need, and great 
potential, for an organic farmers' cooperative to serve the 
Philadelphia metropolitan area. Lancaster Farm Fresh Cooperative (LFFC) 
evolved from a series of meetings, organized by the KDC facilitator, 
with Lancaster County farmers and sustainable agricultural 
professionals from Philadelphia and the surrounding region in the fall 
of 2005.
    The facilitator conducted a feasibility study in early 2006 that 
found the need and demand for more organically grown food and a member-
owned farmer cooperative that could address that need in the 
Philadelphia area. A group of farmers organized into a Board of 
Directors and farmer members assembled in the spring; the first 
deliveries of organic produce and pastured-animal products were made in 
May. Two full-time managers for the Cooperative were hired in July of 
2006. I am one of those managers.
    We are happy to report that the Cooperative has enjoyed growth and 
success over the past few years. About 12 farmers contributed to the 
products delivered by LFFC in 2006, serving approximately 30 wholesale 
customers and 100 CSA shareholders. In 2007 the number of farmers 
contributing product to the Cooperative rose to 24, with the number of 
wholesale customers and CSA members increasing to 55 and 300 
respectively. The Cooperative employed two full-time managers, three 
part-time employees and two contracted delivery drivers in 2007.
     In 2009 the number of people involved with LFFC increased 
significantly; currently 50 farmers contribute to the products offered 
by the Cooperative, over 100 wholesale customers order produce and more 
than 1,200 families collect CSA shares during the growing season. We 
now have five full-time employees and 15 part-time employees.
    In addition to the above described business growth we created a 
trucking company, Lancaster Farm Fresh Organics, LLC, in the spring of 
2008 to support the growing delivery needs for the Cooperative. 
Lancaster Farm Fresh Organics employs three full-time and two part-time 
delivery drivers and a full-time transportation manager. Because of the 
success of LFFC, the members were able to provide funding support to 
begin the trucking company.
    LFFC is a farmer-owned cooperative. The employees work for the 
farmers to secure a sale price for produce, meat, dairy and value-added 
products, which provide a profit for the farmers' work and allow them 
to continue to produce. Any profits that are made by the Cooperative 
are redistributed to the farm members at the end of the fiscal year. In 
2009 LFFC farmers received their first dividends check for the Fiscal 
Year 2007.
    The nature of the business is direct-marketing from the farmers' 
cooperative, acting on behalf of the farmers, to individual consumers 
and wholesale buyers. For wholesale orders the following procedure 
takes place: the farmers communicate harvest predictions to LFFC staff 
that then send a price list to wholesale customers reflecting the 
farmers' prediction. Wholesale customers order products and we 
communicate their orders to the farmers. The farmers harvest the 
produce ordered and their harvest is retrieved by a truck that delivers 
it to the LFFC warehouse. When all of the produce has been delivered to 
the warehouse, employees assemble each customer's order. We deliver the 
orders, usually the next day, to wholesale customers.
    LFFC also operates a Community Supported Agriculture (CSA) program. 
In CSA the consumer shares the inherent risk and abundance of 
agriculture with the farmer. Individuals and families join the 
Cooperative as CSA shareholders. They purchase a share of the harvest, 
which entitles them to a weekly delivery of vegetables and fruit for 25 
weeks during the growing season, May through November.
    The funds collected from CSA members during the application period, 
November through April, are sent to farmers in the form of CSA advance 
payments. These cash advances are paid back to the Cooperative when the 
farmer begins to receive payments for their products during the harvest 
season. The funds help farmers during a very lean time of the year to 
purchase supplies for the upcoming growing season. The farmer repays 
the CSA members with produce when they begin to harvest their crops.
    The LFFC CSA and wholesale customers are more connected with their 
food source and the trials and tribulations of agriculture than if they 
were purchasing food from a large grocery store or food distributor. 
The effects on food safety are significant, because the consumer 
purchases the food from and speaks directly with the producer. The 
local economy benefits significantly, because 75% of every dollar spent 
is going directly into the hands of farmers, allowing them to continue 
to produce agricultural products on their land. Consumer health is 
positively affected in this system as food is in the hands of consumers 
usually within 24 hours of being harvested, retaining most of its 
nutritional value. Air, soil and water quality is positively affected 
because LFFC farmers build their soil through organic (not synthetic) 
amendments, use erosion-prevention techniques and hand-harvesting 
methods.
    What began as an idea and growing economic need on behalf of one 
farm family, grew into Lancaster Farm Fresh Cooperative, a multi-
million dollar farmer-owned business. The funding and assistance from 
Keystone Development Center through a Rural Cooperative Development 
Grant created jobs with livable wages, economic stability for organic 
farmers and a significant contributor to the local food system. LFFC 
brings local, fresh organically grown vegetables and fruit and grass-
fed animal products to thousands of families, restaurants and grocers 
in Philadelphia, Washington, D.C., New York and the surrounding areas.
    The National Cooperative Business Association (NCBA), which 
represents cooperatives across this country, and CooperationWorks!, a 
network of Cooperative Development Centers, work to make sure the RCDG 
program is effective and that funding is available to help create 
cooperatives like ours. On behalf of NCBA, CooperationWorks! and all 
cooperatives, I want to thank you, Mr. Chairman, and Members of this 
Subcommittee for making improvements to the RCDG program in last year's 
farm bill. It is also my understanding that the RCDG program got an 
increase in the most recent appropriations bill passed by Congress. 
Again, thank you. That support will help create more opportunities for 
rural entrepreneurs.
     I encourage you to continue to support this and other programs 
that help rural businesses develop and grow. The assistance we received 
with creating a business feasibility study, organizing informational 
meetings, developing a business plan and writing by-laws was invaluable 
for the start of LFFC. Without the funding from RCD grants to study and 
discuss the possibility of an organic farmers' cooperative, LFFC may 
never have germinated into the successful business it is today.
    I want to thank you for allowing me to share our story with you. I 
hope it will shed some light on the economic impact of RCD grants in 
rural America. The impact of this particular RCD grant goes beyond 
economic benefits in rural Lancaster County, Pennsylvania: it affects 
the social and cultural fabric of the metropolitan and suburban 
communities it serves. If you eat at some of the restaurants that 
feature locally grown food in this metropolitan area or join a local 
CSA, you are supporting local farmers and maybe LFFC. The more we 
support local farms, the more we improve our health and well-being and 
the more we prosper economically. Thank you.

    The Chairman. Thank you very much. Excellent job, and a 
great testimony, and we look forward to having that full story 
on record. It is very interesting as I was going through it. 
Dr. Collins.

         STATEMENT OF TIMOTHY COLLINS, Ph.D., ASSISTANT
    DIRECTOR, ILLINOIS INSTITUTE FOR RURAL AFFAIRS, WESTERN 
               ILLINOIS UNIVERSITY, BUSHNELL, IL

    Dr. Collins. Yes, thank you. Good morning. Mr. Chairman, 
Members of the Committee, thank you for letting me testify 
today on the Illinois Institute for Rural Affairs experience 
with two USDA rural business programs. More than 20 years ago, 
the Illinois Governor designated IIRA as the clearinghouse for 
information on rural issues. As a rural community and economic 
development agency, IIRA works with rural communities and also 
conducts rural research and policy activities. USDA funding has 
been important in IIRA's small business development efforts. 
For example, the current RCDI grant helps leverage private 
funds to work with small businesses in three rural communities 
so that those businesses could market more effectively over the 
Internet.
    The grant allowed IIRA to meet needs of each community 
including training on digital media, renewable energy, youth 
entrepreneurship and microenterprises. Based on preliminary 
estimates from the first eight businesses providing Letters of 
Intent, we anticipate the project will create about 13 jobs. We 
also hope to see 25 to 30 full and part-time jobs added as IIRA 
continues to support the project, and as other businesses join 
in. IIRA's business partners recognize the importance of 
working as a region or community of interest. One restaurant 
owner, for instance, wants to connect the traffic coming from 
Chicago to visit historic sites in his community. In addition, 
RCDG funding has spurred entrepreneurship and small business 
activities. For example, this grant paid for some legal work to 
set up the only community-owned grocery store in Illinois in 
Washburn, which was a rural food desert when the store opened 
in 2000.
    With RCDG funding, IIRA has been able to assist with 
several membership drive activities. In his ``The Rise of the 
Creative Class,'' author Richard Florida talks about the 
increased role of artists and other creators of intellectual 
property and economic development. RCDG funds also helped an 
arts cooperative flourish in rural northwest Illinois helping 
rural America to participate in the creative economy. The RCDG 
grant also helped spur entrepreneurial activities among farmers 
in the green economy. For example, IIRA used RCDG funds to help 
organize an ethanol producing New Generation Cooperative in 
Crawford County.
    Our experience with USDA grants has been excellent. State-
level staff members are cooperative, support our work, and 
offer helpful suggestions. With this in mind, we offer these 
recommendations to make the programs even better. First, 
programs to promote the creation of eco-industrial parks where 
renewable energy projects based on wind or biofuels can be 
linked with new small business start-ups in rural areas. And, 
second, USDA grants to support the development of small 
business entrepreneurship, what we like to call 
earthtrepreneurship, for the rural green economy. I am glad to 
be here this morning and thank you so much for this opportunity 
to testify.
    [The prepared statement of Dr. Collins follows:]

   Prepared Statement of Timothy Collins, Ph.D., Assistant Director, 
  Illinois Institute for Rural Affairs, Western Illinois University, 
                             Bushnell, IL *
    Mr. Chairman, Members of the Committee, thank you for letting me 
testify today on the Illinois Institute for Rural Affairs' experience 
with two USDA rural business programs.
---------------------------------------------------------------------------
    * Testimony also contributed to by Giselle Hamm, Program Manager; 
Karen Poncin, Operations Manager; Erin Orwig, Faculty Assistant; and 
Christopher D. Merrett, Director, Illinois Institute for Rural Affairs, 
Western Illinois University.
---------------------------------------------------------------------------
    More than twenty years ago, the Illinois Governor designated IIRA 
as the clearinghouse for information on rural issues. As a rural 
community and economic development agency, IIRA helps rural communities 
build a better life. It also conducts rural research and works with 
various agencies and organizations on rural policy issues (Appendix).
    USDA funding has been important in IIRA's small-business 
development efforts. For example, the current RCDI grant helped 
leverage private funds to work with businesses in Havana (Mason 
County), Stark County, and Savanna (Carroll County) so they could 
market more effectively over the Internet. The grant allowed IIRA to 
meet needs of each community, including training on digital media, 
renewable energy, youth entrepreneurship, microenterprises, food-based 
businesses, business succession, youth entrepreneurship, and innovative 
business approaches.
    Based on preliminary estimates from the first eight businesses 
providing Letters of Intent, we anticipate the project will create 
about 13 jobs. We also hope to see 25 to 30 full- and part-time jobs 
added as IIRA continues to support the project and as other businesses 
join in. A standard economic development multiplier of 1.5 suggests 40 
or more total (direct and indirect) jobs could be created in the 
region, including businesses not participating in the grant.
    IIRA's business partners recognize the importance of working as a 
region or community of interest. One restaurant owner, for instance, 
wants to connect to traffic coming from Chicago to visit historic 
sites. An antique dealer wants to attract tourists by marketing jointly 
with other nearby dealers. A tourism group wants to put an itinerary 
tool on the community website to show potential tourists how they might 
spend 1 or 2 days in the region and which businesses might be possible 
attractions.
    In addition, RCDG funding has also spurred entrepreneurship and 
small business activities. For example, this grant paid for some legal 
work to set up the only community-owned grocery store in Illinois in 
Washburn (Woodford County), which was a rural food desert when the 
store opened in 2000. According to the Cooperative's website,\1\ 
members went door-to-door within 15 miles of Washburn to sell shares. 
Nearly 500 investors bought the $50 shares, raising more than $100,000. 
The capital, along with grants and low-interest loans, paid for buying, 
remodeling, and restocking the store. Volunteers cleaned, painted, 
replaced light fixtures, repaired equipment, and rearranged the store. 
With RCDG funding, IIRA has been able to assist with several membership 
drive activities.
---------------------------------------------------------------------------
    \1\ http://www.washburnillinois.org/resources.html.
---------------------------------------------------------------------------
    In ``The Rise of the Creative Class,'' author Richard Florida talks 
about the increased role of artists and other creators of intellectual 
property in economic development. RCDG funds also helped an arts 
cooperative flourish in rural northwest Illinois--helping rural America 
to participate in the ``creative economy.''
    The RCDG grant also helped spur entrepreneurial activities among 
farmers in the ``green economy.'' For example IIRA used RCDG funds to 
help organize an ethanol producing New Generation Cooperative in 
Crawford County. This operation helps Illinois farmers add value to 
their crops, generating increased on-farm profits and employment 
opportunities.
    Our experience with USDA grants has been excellent. State-level 
staff members are cooperative, support our work, and offer helpful 
suggestions. With this in mind, we offer these recommendations to make 
the programs even better:

   USDA grants to support the development of small business 
        entrepreneurship (``earthtrepreneurship'') for the rural green 
        economy;

   Programs to promote the creation of eco-industrial parks 
        where renewable energy projects based on wind or biofuels can 
        be linked with new small business start-ups in rural areas.

    Thank you for the opportunity to testify. I look forward to your 
questions.
        Appendix: About the Illinois Institute for Rural Affairs
    The Illinois Institute for Rural Affairs (IIRA) was founded in 1989 
as a companion agency to the Illinois Governor's Rural Affairs Council 
and is focused on research, policy analysis, and technical assistance 
in rural areas of Illinois. IIRA assists rural communities and their 
leaders to expand their capacity to improve their quality of life. IIRA 
also acts as a bridge between local leaders and the state and Federal 
agencies that provide rural programs. Following is a glimpse at some of 
the things IIRA does to build rural communities in our state.
    IIRA receives about 25% of its annual budget through Western 
Illinois University, where it is located. The remaining funding is 
raised through grants. Because of this dependence on grants, IIRA is an 
entrepreneurial organization that constantly seeks new opportunities.
    The staff of about 40 includes five Ph.D.s and 25 master's level 
outreach specialists and about 20 students. IIRA has created grant-
funded outreach and research programs in a number of areas, including 
economic and community development; housing and health; transportation; 
rural schools; and alternative energy using wind and biomass (Figure 
1). IIRA's research is not only theoretical; it is intended to be 
applied in the local communities.
    IIRA partners with public and private agencies on rural local 
development and enhancement efforts with the goal of developing 
sustainable communities. Efforts involve building local support to 
create a community vision and plan for achieving that vision. IIRA's 
holistic model links research, outreach, and policy activities.
Figure 1


Figure 2). These strategies are often mixed to provide a wide spectrum 
        of assistance to rural communities throughout the state. As a 
        result, IIRA has developed a national reputation for innovative 
programs and services.Figure 2


    Thank you, Dr. Collins, well done. Mr. Hoehn.STATEMENT OF LEO J. 
 HOEHN, GENERAL MANAGER, STATELINE BEAN PRODUCERS COOPERATIVE, GERING, 
                                   NE

    Mr. Hoehn. Thank you. Chairman McIntyre, Ranking Member Conaway, 
thank you for the opportunity to tell the story of the Stateline Bean 
Producers Cooperative before the Subcommittee today. My name is Leo 
Hoehn, Manager of Stateline Bean Producers Cooperative. Stateline is a 
closed Cooperative formed in 2002 after a small group of dry edible 
bean growers from western Nebraska and eastern Wyoming were able to 
implement their vision to process and market their dry edible beans. 
Our Cooperative came into existence when acreage in our region was 
diminishing due to low returns to growers. The Stateline Bean Producers 
Cooperative was organized, and we started working with USDA Rural 
Development to see what could be done. Today, acreage has stabilized 
and is returning to historic levels due to the increased profitability 
of our producers, as well as other producers in the area.
    A feasibility study conducted by USDA Rural Development along with 
a Business and Industry Guaranteed loan for $1.9 million enabled the 
Cooperative to purchase two processing plants in western Nebraska. The 
Cooperative raised nearly $1 million from 180 regional growers in a 100 
mile radius of Scottsbluff, Nebraska to purchase the two plants valued 
at $2.4 million. Growers invested $3.00 for the right to deliver each 
100 pounds of dry edible beans. In 7 years the Cooperative has returned 
over $9.00 per hundred weight for the original investment, or a 300 
percent return.
    The total return to growers has been nearly $3 million. In 
addition, the competition provided by Stateline has reduced margins of 
competing processors and shifted revenue to bean growers in the area. 
In addition to the dividend payments the Cooperative continues to 
reduce long term debt on its facilities. In 2002, the Cooperative was 
awarded a $500,000 Value-Added Grant from USDA Rural Development. This 
grant helped to fund an inventory tracking system, the development of 
the Stateline Brand, and a complete technology upgrade. Stateline's 
launch can be greatly attributed to the feasibility study done by the 
USDA Rural Development staff. We are in existence because of our USDA 
80 percent Rural Business Guaranteed loan, and much of our success and 
operations and marketing are the result of the Value-Added Grant.
    The outcome of the investments made by the farmer-owners of the 
Stateline Bean Producers Cooperative and the USDA Rural Development has 
enabled us to secure our own processing facilities and significantly 
increase our sales volume. In addition, the Rural Development funding 
has also helped the Cooperative maintain permanent jobs that would have 
been lost if sales were not increased. The Cooperative employs close to 
20 employees, that adds to the economy of the communities of Gering and 
Bridgeport, Nebraska. Again, thank you for your time and the 
opportunity we have been afforded by the Subcommittee to testify today.
    [The prepared statement of Mr. Hoehn follows:]

  Prepared Statement of Leo J. Hoehn, General Manager, Stateline Bean 
                   Producers Cooperative, Gering, NE
    Chairman McIntyre, Ranking Member Conaway, and Members of the 
Subcommittee, thank you for the opportunity to tell the story of the 
Stateline Bean Producers Cooperative before the Subcommittee today.
    My name is Leo Hoehn, Manager of Stateline Bean Producers 
Cooperative. Stateline is a closed Cooperative formed in 2002 after a 
small group of dry edible bean growers from western Nebraska and 
eastern Wyoming were able to implement their vision to process and 
market their dry edible beans.
    Our Cooperative came into existence when acreage in our region was 
diminishing due to low returns to growers. The Stateline Bean Producers 
Cooperative was organized and we started working with USDA Rural 
Development to see what could be done. Today, acreage has stabilized 
and returning to historic levels due to increased profitability to our 
producers, as well as other producers in our area.
    A feasibility study conducted by USDA Rural Development along with 
a Business and Industry Guaranteed (B&I) loan for $1.9 million enabled 
the Cooperative to purchase two processing plants in western Nebraska.
    The Cooperative raised nearly $1,000,000 from 180 regional growers 
in a 100 mile radius of Scottsbluff, Nebraska to purchase the two 
plants valued at $2,400,000. Growers invested $3.00 for the right to 
deliver 100 pounds of dry edible beans. In 7 years the Cooperative has 
returned over $9.00/CWT for the original investment, or a 300% return.
    The total return to growers has been nearly $3,000,000. In 
addition, the competition provided by Stateline has reduced margins of 
competing processors and shifted revenue to bean growers in the area. 
In addition to the dividend payments the Cooperative continues to 
reduce long term debt on its facilities.
    In 2004 the Cooperative was awarded a $500,000 Value-Added Grant 
from USDA Rural Development. This grant helped to fund an inventory 
tracking system, the development of the Stateline Brand, and a complete 
technology upgrade.
    Stateline's launch can be greatly attributed to the feasibility 
study done by USDA Rural Development staff. We are in existence because 
of our USDA 80% Rural Business Guaranteed loan and much of our success 
in operations and marketing are the result of the Value-Added Grant.
    The outcome of the investments made by the farmer-owners of the 
Stateline Bean Cooperative and USDA Rural Development has enabled us to 
secure our own processing facilities and significantly increase our 
sales volume. In addition, the Rural Development funding has also 
helped the Cooperative maintain permanent jobs that would have been 
lost if sales were not increased. The Cooperative employs close to 20 
employees that add to the economy of the communities of Gering and 
Bridgeport Nebraska.
    Again, thank you for your time and the opportunity that we have 
been afforded by the Subcommittee to testify today.

    The Chairman. Thank you. Thank you for testifying in a very 
timely, and succinct manner, and thank you and each of the 
panelists for your testimony today. Some brief questions: Mr. 
Jones, we, of course, both know the primary role of Lumbee 
River EMC is to provide electric power to your member-owners, 
which you do an excellent job of. How does the Cooperative 
decide what economic development projects to undertake, and do 
you work with the USDA Rural Development staff in deciding on 
those projects?
    Mr. Jones. Yes, sir. We work not only with the USDA staff 
but we also have a committee, loan committee, who works with us 
out of the four counties, which we serve, that are appointed to 
serve on our loan committee to help us. And by having those 
individuals out of those four counties, they also know some of 
the economic conditions of their county, and they also make 
recommendations or referrals to us for lending loans.
    The Chairman. Are those folks from the four counties, does 
that have a certain name? Is it a committee appointed through 
the LREMC or appointed through some other entity?
    Mr. Jones. It is appointed through LREMC.
    The Chairman. And how many people serve on that?
    Mr. Jones. There are eight committee members, four out of 
each of the four counties we serve, and then four of our own 
board members serve on that loan committee.
    The Chairman. And how are the committee members appointed 
that are not members of your board?
    Mr. Jones. Basically by the board itself or our EMC board 
looks at those community people who are involved with economic 
development, or even in the banking area, we have a retired 
banker on that committee. We have a couple other businessmen 
that are a part of that committee and also a local developer.
    The Chairman. Thank you. I commend you on the great number 
of projects that I have personally seen that have been quite 
successful in Robeson County and in your service area. Dr. 
Collins, you mentioned a couple of opportunities related to 
rural communities recognizing online marketing opportunities. 
Broadband is something that we have fought for for rural areas. 
How do you see greater access to broadband services having an 
effect on these opportunities for small communities?
    Dr. Collins. Well, I think there are a number of 
opportunities. Certainly in terms of promoting tourism, but 
also we are seeing, in some cases, actually local use of 
broadband so that people can shop more selectively. Then, of 
course, there are the broader national and global connections, 
all of which are very important. Original connections with 
Chicago, St. Louis, depending on what part of the state that 
you are in, are very important in terms of the tourism because 
it allows people from those areas to drive fairly close from 
home, take a day trip or whatever, take in the sights, and 
perhaps do some tourism or buy some local products.
    The Chairman. In terms of merchandising those products or 
marketing them, have you seen an advantage in that way as well?
    Dr. Collins. Yes, I think so. Now we are relatively early 
into this project, probably about 2 years, but I think in the 
time to come, we will see, because of the increased bargaining 
efforts, that increase as the participants for the grant 
increase.
    The Chairman. Thank you. Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman. I want to just thank 
you all for coming to D.C. and putting up with the schedule. 
Mr. Jones, you have experience with several different Rural 
Development lending programs. You visited with us a couple of 
minutes about conflicts between them, could they cooperate 
better, are there ways that the system could be streamlined to 
meet a broader need?
    Mr. Jones. We really haven't run into many problems with 
it. It has been very beneficial pertaining to our local area in 
southeastern North Carolina. There are so many needs there for 
small businesses to receive funds, but through USDA we have had 
a good working relationship with the regional office, state 
office, and also the national office in assisting us and being 
able to get those lending funds that we lend back out to the 
businesses, so it has been very helpful.
    Mr. Conaway. Dr. Kangas, you mentioned a loan for about $7 
million to a local company that helped retain 900 jobs. You 
said the loan is well secured. What risks were the banks 
unwilling to take that the loan guarantee was necessary for it? 
Do you know off the top of your head?
    Dr. Kangas. Well, I don't believe that it was that the bank 
was unwilling to take risks because I don't think there was 
underwriting risk really with the transaction, but rather for 
the company due to the downturn in sales because they are a 
tier one manufacturer too and OEM, original equipment 
manufacturer, they had lost money. They lost $7 million in the 
last fiscal year. The bank with whom they were working has a 
policy that it a company loses money of any significant amount, 
they want them out of their portfolio. So it wasn't a question 
of whether or not the bank felt it was going to get repaid or 
not, but merely that it lost money and their policy is to 
jettison that company.
    Mr. Conaway. Okay, because they don't think they are going 
to get repaid. What is the current status of the loan now? Is 
it performing?
    Dr. Kangas. Well, we haven't closed the loan. The loan is 
scheduled to close in the next month or 2 depending on working 
out all of the details, but we do plan to close it shortly.
    Mr. Conaway. Sure. Dr. Collins, you mentioned that there 
was a grant that created 13 jobs to help businesses, I guess, 
better market over the Internet. How much was that per job, the 
grant versus 13 jobs?
    Dr. Collins. I am afraid off the top of my head, I don't 
have that information for you but----
    Mr. Conaway. Typically in Texas we have a sales tax that is 
dedicated toward economic development within the sales tax 
entity. The rule of thumb there is $10,000 per job. Is that 
anywhere near the----
    Dr. Collins. I am going to guess and say it is probably 
about $10,000 and $15,000 and probably closer to $15,000.
    Mr. Conaway. Okay. All right. Mr. Hoehn, you mentioned the 
loan originally was about $1.9 million. Is it performing? You 
said it was reduced but is it performing according to its terms 
so there is no real sense that the guarantee is going to have 
to be called?
    Mr. Hoehn. Not at all. We make monthly payments on our 
original loan of $1.9 million, and the board of our company has 
taken the attitude that we needed to get money back to the 
farmers' hands as quickly as possible. As you can tell from our 
earnings, we could have paid this off very rapidly. We have 
chosen to make our monthly payments as scheduled. So, we have 
put about $3 million in additional money back into the 
community, but we are down to about $1.5 million on our loan.
    Mr. Conaway. What was the original term of the loan?
    Mr. Hoehn. Thirty years.
    Mr. Conaway. Thirty years.
    Mr. Hoehn. Yes.
    Mr. Conaway. Okay. Thank you, Mr. Chairman.
    The Chairman. Yes, sir. Ms. Crystle, how large are the 
farms which participate in your Cooperative?
    Ms. Crystle. How many farms?
    The Chairman. How large are the farms?
    Ms. Crystle. Oh, well, they range from about 3 acres to 
maybe 80 acres, and on those larger farms they have--they are 
very diversified, they have a small dairy herd. So, a lot of 
those 80 acre farms are pasture land and land to grow hay.
    The Chairman. Do any of your farmer-members have side 
ventures to sell portions of their produce outside of the 
Cooperative?
    Ms. Crystle. No, that is against our membership guidelines, 
so they can't compete with the Cooperative.
    The Chairman. Okay. Thank you. Did you have any final 
questions, Mr. Conaway?
    Mr. Conaway. Just one. Mr. Jones, the tension between 
private lending and government guaranteed lending, the local 
banks you say are unwilling or incapable of making loans 
competitively so that guarantees aren't needed. What is going 
on there because most of us would prefer that lending be done 
privately as done with everything else. The loan guarantees by 
the taxpayers would be kind of a last resort.
    Mr. Jones. I think, presently, with the economy as it is 
that we are seeing from the banking side some lesser lending on 
smaller businesses. It is more difficult for small businesses 
to be able to obtain lending through the banks, and this is 
where the Intermediary Relending Program, for us, has been very 
beneficial for those smaller businesses. We have been very 
fortunate. All of our loans are on bank draft and we don't have 
any losses with any of those loans at this time, so it has been 
beneficial. The banking industry, I think, because the economy 
has just tightened down on the lending side of where we were 
lending 15 year term limits at six percent interest, banks are 
keeping a cap of 5 years, and I understand that from the 
banking industry as well too, it is to protect their risk. But 
the small business lending program is ideal today because of 
some of the financial crisis that we see.
    Mr. Conaway. All right. Thank you. Dr. Kangas, one of your 
recommendations, and I appreciate the specificity of your 
recommendations because it is helpful as sometimes we talk at 
10,000 feet when we really need to be a little lower. You 
mentioned that B&I should go to a low-doc or no-doc process. 
Given the wreck we have seen in mortgage lending with lack of 
documentation and the problems there, is there something that 
offsets similar risk here that you wouldn't know your borrower?
    Dr. Kangas. Well, the reference to low-doc isn't to lower 
the credit standards, which in the mortgage lending industry 
the problem really was no documentation, liar loans, et cetera, 
driven by brokers who were merely trying to make a quick buck, 
and, obviously, got a lot of banks and others into trouble. 
Low-doc is really for--is similar to the SBA program where 
there is minimal work that is done on the application. The 
underwriting process remains the same. The credit quality 
remains the same, but it would be for smaller loans, and the 
principal impediment for banks to get involved with the 
Business and Industry Guarantee Program is the voluminous 
application that goes along with it. So, there are ways to 
streamline that process, and I have talked to the Administrator 
about that specifically. Whether or not they are proposing to 
do anything or not, I am not sure.
    Mr. Conaway. Okay. A more euphemistic phrase might be a 
streamlined process rather than low-doc given the low-doc is 
a----
    Dr. Kangas. I think that would be a better description 
although in the industry low-doc is the term of choice.
    Mr. Conaway. Okay. Thank you, Mr. Chairman.
    The Chairman. Thank you, Mr. Conaway. Thank you to each of 
our panelists and everyone in attendance today at this 
important hearing. Under the rules of the Committee, the record 
of today's hearing will remain open for 10 calendar days to 
receive additional material and supplementary written responses 
from the witnesses to any question posed by a Member. This 
hearing of the Subcommittee on Rural Development, 
Biotechnology, Specialty Crops, and Foreign Agriculture is now 
adjourned. Thank you.
    [Whereupon, at 11:56 a.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
      
    Supplementary Material by Judith Canales, Administrator, Rural 
     Business-Cooperative Services, U.S. Department of Agriculture
Locally Produced Agriculture Products
    Through fiscal year 2012, the agency is required to reserve not 
less than five percent of the funds made available to the B&I program 
until April 1 of each year for entities that establish and facilitate 
the processing, distributing, aggregating, storing, and marketing of 
locally or regionally produced agricultural food products. Prior to 
allocating funds to the State Offices, we will remove the five percent 
setaside and retain it in the National Office. State Offices will 
request funds from the setaside the same way funds are requested from 
the National Office reserve. Requests will clearly indicate that the 
project is for locally or regionally produced agricultural food 
products. Additionally, priority will be given to projects that have 
components benefiting (providing product to) underserved communities, 
including applicants who propose to work with retail establishments in 
underserved communities to supply items to promote and ensure the 
salability of the locally-produced agricultural food products. For the 
purposes of this setaside, underserved community is defined as a 
community (including an urban or rural community and an Indian tribal 
community) that has limited access to affordable, healthy foods, 
including fresh fruits and vegetables, in grocery retail stores or 
farmer to consumer direct markets AND has a high rate of hunger or food 
insecurity or a high poverty rate. For fiscal year 2010, $76,164,913 
will be set aside under B&I ARRA reservej. We are not sure the exact 
amounts that will be available under regular B&I in the National Office 
reserve and B&I Disaster reserve, but it will be 5 percent of the 
available funds.

    Item 4: Please provide a narrative statement that explains how the 
final rule and the NOFA will be published simultaneously, i.e., the 
concern that we will be putting out a NOFA without knowing what the 
final rule says.
    Response: The Administrator has indicated that the agency will 
publish the Final Rule for the Rural Microenterprise Assistance Program 
(RMAP) simultaneously with publication of the Notice of Funding 
Availability (NOFA). Once comments on the proposed rule are received, 
reviewed, and incorporated as appropriate, the NOFA will be finalized 
accordingly. The NOFA, along with the Final Rule will be processed 
through the Agency internal clearance process. The NOFA will not be 
published prior to publication of the Final Rule.

    Item 5: Describe the matching requirements in the proposed rule and 
explain that we will be responsive to comments.
    Response: As proposed, the RMAP program has three distinct 
activities that will require participants to provide matching funds. 
The establishment of a Loan Loss Reserve Fund will require a five 
percent (5%) match. The provision of a Technical Assistance Grant will 
require a twenty-five percent (25%) match. And the provision of an 
Enhancement grant will also require a 25% match for any project funded.
Loan Loss Reserve Fund Match
    The first set of matching funds will be used to establish a Loan 
Loss Reserve Fund. The Loan Loss Reserve Fund will be held in a 
federally insured depository account and will be maintained an amount 
equal to not less than five percent (5%) of the amount owed to the 
agency by the RMAP intermediary. The 5% will be made up of non-Federal 
cash. To ease the burden of raising up front cash, intermediaries may 
build the fund over time so that they will only be required to put 
dollars into the fund as the Agency disburses dollars to the 
intermediary. Over time, the Loan Loss Reserve Fund must be maintained 
at a level of 5% of the debt owed to the Agency by the intermediary 
lender. In the event that a microloan fails and reserve funds are used 
causing the Loan Loss Reserve Fund to dip below 5% of the outstanding 
debt to the Agency, the intermediary will be required to access its own 
funding to bring the Reserve Fund up to the 5% requirement.
Grant Match
    The second set of matching funds in accordance with the statute 
will equal a total of twenty-five percent of the amount of a grant. The 
grant match will be made up of two tranches of funding. The first 
tranche is a cash requirement in the amount of ten percent (10%) of the 
grant amount. The second tranche is a fifteen percent (15%) requirement 
that can be made up of further cash or of in-kind contributions, such 
as the dollar equivalent of volunteer time or use of equipment, of 
donation of space. For Technical Assistance grants, up to ten percent 
of the grant may be used for administrative expenses.
    Since the rule has been published proposed and is open to public 
comment. All comments will be considered in developing the final rule.
USDA Rural Development--Business Programs--Energy Branch--Rural 
        Coordinator List
10/22/09
Alabama
Quinton Harris, USDA Rural Development,
Sterling Centre, Suite 601,
4121 Carmichael Road,
Montgomery, AL 36106-3683,
(334) 279-3623,
[email protected].
Alaska
Dean Stewart, USDA Rural Development,
800 West Evergreen, Suite 201,
Palmer, AK 99645-6539,
(907) 761-7722,
[email protected].
Arizona
Alan Watt, USDA Rural Development,
230 North First Avenue, Suite 206,
Phoenix, AZ 85003-1706,
(602) 280-8769,
[email protected].
Arkansas
Tim Smith, USDA Rural Development,
700 West Capitol Avenue, Room 3416,
Little Rock, AR 72201-3225,
(501) 301-3280,
[email protected].
California
Philip Brown, USDA Rural Development,
430 G Street, #4169,
Davis, CA 95616,
(530) 792-5811,
[email protected].
Colorado
April Dahlager, USDA Rural Development,
655 Parfet Street, Room E-100,
Lakewood, CO 80215,
(720) 544-2909,
[email protected].
Delaware-Maryland
Bruce Weaver, USDA Rural Development,
1221 College Park Drive,
Suite 200,
Dover, DE 19904,
(302) 857-3629,
[email protected].
Florida/Virgin Islands
Joe Mueller, USDA Rural Development,
4440 NW. 25th Place,
Gainesville, FL 32606,
(352) 338-3482,
[email protected].
Georgia
J. Craig Scroggs, USDA Rural Development,
111 E. Spring St., Suite B,
Monroe, GA 30655,
(770) 267-1413 ext. 113,
[email protected].
Hawaii
Tim O'Connell, USDA Rural Development,
Federal Building, Room 311,
154 Waianuenue Avenue,
Hilo, HI 96720,
(808) 933-8313,
[email protected].
Idaho
Brian Buch, USDA Rural Development,
9173 W. Barnes Drive, Suite A1,
Boise, ID 83709,
(208) 378-5623,
[email protected].
Illinois
Molly Hammond, USDA Rural Development,
2118 West Park Court, Suite A,
Champaign, IL 61821,
(217) 403-6210,
[email protected].
Indiana
Jerry Hay, USDA Rural Development
5975 Lakeside Boulevard
Indianapolis, IN 46278
(812) 873-1100
[email protected].
Iowa
Teresa Bomhoff, USDA Rural Development,
873 Federal Building,
210 Walnut Street,
Des Moines, IA 50309,
(515) 284-4447,
[email protected].
Kansas
David Kramer, USDA Rural Development,
1303 SW First American Place, Suite 100,
Topeka, KS 66604-4040,
(785) 271-2744,
[email protected].
Kentucky
Scott Maas, USDA Rural Development,
771 Corporate Drive, Suite 200,
Lexington, KY 40503,
(859) 224-7435,
[email protected].
Louisiana
Kevin Boone, USDA Rural Development,
905 Jefferson Street, Suite 320,
Lafayette, LA 70501,
(337) 262-6601, Ext. 133,
[email protected].
Maine
John F. Sheehan, USDA Rural Development,
967 Illinois Avenue, Suite 4,
P.O. Box 405,
Bangor, ME 04402-0405,
(207) 990-9168,
[email protected].
Massachusetts/Rhode Island/Connecticut
Charles W. Dubuc, USDA Rural Development,
451 West Street, Suite 2,
Amherst, MA 01002,
(401) 826-0842 X 306,
[email protected].
Michigan
Traci J. Smith, USDA Rural Development,
3001 Coolidge Road, Suite 200,
East Lansing, MI 48823,
(517) 324-5157,
[email protected].
Minnesota
Lisa L. Noty, USDA Rural Development,
1400 West Main Street,
Albert Lea, MN 56007,
(507) 373-7960 Ext. 120,
[email protected].
Mississippi
G. Gary Jones, USDA Rural Development,
Federal Building, Suite 831,
100 West Capitol Street,
Jackson, MS 39269,
(601) 965-5457,
[email protected].
Missouri
Matt Moore, USDA Rural Development,
601 Business Loop 70 West,
Parkade Center, Suite 235,
Columbia, MO 65203,
(573) 876-9321,
[email protected].
Montana
John Guthmiller, USDA Rural Development,
900 Technology Blvd., Unit 1, Suite B,
P.O. Box 850,
Bozeman, MT 59771,
(406) 585-2540,
[email protected].
Nebraska
Debra Yocum, USDA Rural Development,
100 Centennial Mall North,
Room 152, Federal Building,
Lincoln, NE 68508,
(402) 437-5554,
[email protected].
Nevada
Herb Shedd, USDA Rural Development,
1390 South Curry Street,
Carson City, NV 89703,
(775) 887-1222,
[email protected].
New Hampshire (See Vermont)
New Jersey
Victoria Fekete, USDA Rural Development,
8000 Midlantic Drive,
5th Floor North, Suite 500,
Mt. Laurel, NJ 08054,
(856) 787-7752,
[email protected].
New Mexico
Jesse Bopp, USDA Rural Development,
6200 Jefferson Street, NE,
Room 255,
Albuquerque, NM 87109,
(505) 761-4952,
[email protected].
New York
Thomas Hauryski, USDA Rural Development,
415 West Morris Street,
Bath, NY 14810,
(607) 776-7398 Ext. 132,
[email protected].
North Carolina
David Thigpen, USDA Rural Development,
4405 Bland Rd. Suite 260,
Raleigh, N.C. 27609,
(919) 873-2065,
[email protected].
North Dakota
Dennis Rodin, USDA Rural Development,
Federal Building, Room 208,
220 East Rosser Avenue,
P.O. Box 1737,
Bismarck, ND 58502-1737,
(701) 530-2068,
[email protected].
Ohio
Randy Monhemius, USDA Rural Development,
Federal Building, Room 507,
200 North High Street,
Columbus, OH 43215-2418,
(614) 255-2424,
[email protected].
Oklahoma
Jody Harris, USDA Rural Development,
100 USDA, Suite 108,
Stillwater, OK 74074-2654,
(405) 742-1036,
[email protected].
Oregon
Don Hollis, USDA Rural Development.
200 SE Hailey Ave, Suite 105,
Pendleton, OR 97801,
(541) 278-8049, Ext. 129,
[email protected]
Pennsylvania
Bernard Linn, USDA Rural Development,
One Credit Union Place, Suite 330,
Harrisburg, PA 17110-2996,
(717) 237-2182,
[email protected].
Puerto Rico
Luis Garcia, USDA Rural Development,
IBM Building,
654 Munoz Rivera Avenue, Suite 601,
Hato Rey, PR 00918-6106,
(787) 766-5091, Ext. 251,
[email protected].
South Carolina
Shannon Legree, USDA Rural Development,
Strom Thurmond Federal Building,
1835 Assembly Street, Room 1007,
Columbia, SC 29201,
(803) 253-3150,
[email protected].
South Dakota
Douglas Roehl, USDA Rural Development,
Federal Building, Room 210,
200 4th Street, SW.,
Huron, SD 57350,
(605) 352-1145,
[email protected].
Tennessee
Will Dodson, USDA Rural Development,
3322 West End Avenue, Suite 300,
Nashville, TN 37203-1084,
(615) 783-1350,
[email protected].
Texas
Daniel Torres, USDA Rural Development,
Federal Building, Suite 102,
101 South Main Street,
Temple, TX 76501,
(254) 742-9756,
[email protected].
Utah
Roger Koon, USDA Rural Development,
Wallace F. Bennett Federal Building,
125 South State Street, Room 4311,
Salt Lake City, UT 84138,
(801) 524-4301,
[email protected].
Vermont/New Hampshire
Cheryl Ducharme, USDA Rural Development,
89 Main Street, 3rd Floor,
Montpelier, VT 05602,
(802) 828-6083,
[email protected].
Virginia
Laurette Tucker, USDA Rural Development,
Culpeper Building, Suite 238,
1606 Santa Rosa Road,
Richmond, VA 23229,
(804) 287-1594,
[email protected].
Washington
Mary Traxler, USDA Rural Development,
1835 Black Lake Blvd. SW,
Suite B,
Olympia, WA 98512,
(360) 704-7762,
[email protected].
West Virginia
Richard E. Satterfield, USDA Rural Development,
75 High Street, Room 320,
Morgantown, WV 26505-7500,
(304) 284-4874,
[email protected].
Wisconsin
Brenda Heinen, USDA Rural Development,
4949 Kirschling Court,
Stevens Point, WI 54481,
(715) 345-7615, Ext. 139,
[email protected].
Wyoming
Jon Crabtree, USDA Rural Development,
Dick Cheney Federal Building,
100 East B Street, Room 1005,
P.O. Box 11005,
Casper, WY 82602,
(307) 233-6719,
[email protected]

REAP Results for FY 2009 Applications On-Hand NO


----------------------------------------------------------------------------------------------------------------
                                                                        Jobs               Preapps/
                    Program                       No.      Dollars    Created/   Business    Apps      Dollars
                                                          Obligated     Saved    Assisted   Pending    Pending
----------------------------------------------------------------------------------------------------------------

REAP--EA-REDA                                       22    $2,173,631       117      1,348
REAP--Feasibility Study                             50    $1,244,600        46         43
REAP--RES-EEI Grants 20K or Less                   904   $12,040,048     1,272        976        93   $1,265,993
REAP--RES-EEI Grants more than 20K                 199   $11,167,222       847        167       363  $68,176,176
REAP--RES-EEI Loan Only                              2    $8,451,638       650          3
REAP--RES-EEI Combo Loan and Grant                 380   $76,782,100     2,568        385        47  $23,900,819
Section 9003                                         2  $105,000,000        92          2         1  $60,000,000
Section 9004                                       N/A           N/A       N/A        N/A       N/A          N/A
Section 9005                                       N/A           N/A       N/A        N/A       N/A          N/A





----------------------------------------------------------------------------------------------------------------
    $2,173,631
    $1,244,600
    $12,040,048                                         $8,451,638                                        G-Loan
    $11,167,222                                         $49,007,390.50                                Combo Loan
----------------------------------------------------------------------------------------------------
    $5,567,780                                          $57,459,029                                        Total
----------------------------------------------------------------------------------------------------
    $27,774,710                                         5,567,780                                            B/A
====================================================================================================
    $ 59,967,991                                        $32,009                                          Balance
----------------------------------------------------------------------------------------------------------------

Business Programs--Fiscal Year 2008--Projected Annual Performance Plan 
        Measures Reflecting FY 2008 Appropriated Funding
        
        
October 27, 2009

To: Hon. Mike McIntyre, Chairman; Hon. K. Michael Conaway, Ranking 
Minority Member; U.S. House of Representatives, Committee on 
Agriculture, Subcommittee on Rural Development, Biotechnology, 
Specialty Crops, and Foreign Agriculture

From: Timothy Collins, Ph.D., Assistant Director

Re: Response to Mr. Conaway's question regarding cost of job creation

    At the Subcommittee meeting on October 21, Mr. Conaway asked me a 
question regarding the cost per job from IIRA's RCDI grant that we are 
using to help small businesses build their IT capacity. I answered that 
I believed the cost was between $10,000 and $15,000 per job, probably 
on the higher end. In fact, that estimate was low; the actual figure is 
closer to $20,000.
    After discussing this matter with staff, it appears that one 
significant reason for the higher cost relates to working with three 
different communities that are spread across the state. While we do 
tailor the grant programming to each community, there is considerable 
travel involved in working with each community and in bringing 
communities for common trainings, which, as I mentioned in the 
testimony, cover a wide variety of topics.
    I hope that this is a satisfactory answer. Please do not hesitate 
to contact me if you need any additional information.
    Thank you for the opportunity to testify before the Subcommittee.
    [GRAPHIC] [TIFF OMITTED]
    
