[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
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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]