[Congressional Record Volume 145, Number 64 (Wednesday, May 5, 1999)]
[Senate]
[Page S4798]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BURNS (for himself, Mr. Craig, Mr. Baucus, Mr. Daschle, 
        Mr. Kerrey, and Mr. Johnson):
  S. 961. A bill to amend the Consolidated Farm and Rural Development 
Act to improve shared appreciation arrangements; to the Committee on 
Agriculture, Nutrition, and Forestry.


         consolidated farm and rural development act amendments

  Mr. BURNS. Mr. President, shared appreciation agreements have the 
potential to cause hundreds of farm foreclosures across the nation, and 
especially in my home state of Montana. Ten years ago, a large number 
of farmers signed these agreements. At that time they were under the 
impression that they would be required to pay these back at the end of 
ten years, at a reasonable rate of redemption.
  However, that has not proved to be the case. The appraisals being 
conducted by the Farm Service Agency are showing increased values of 
ridiculous proportions. By all standards, one would expect the value to 
have decreased. Farm prices are the lowest they have been in years, and 
there does not seem to be a quick recovery forthcoming. Farmers cannot 
possibly be expected to pay back a value twice the amount they 
originally wrote down. Especially in light of the current market 
situation, I believe something must be done about the way these 
appraisals are conducted.
  I am aware of one case in which the amount of the shared appreciation 
agreement was estimated at $167,500. The increased value was estimated 
at $335,000! When agricultural prices are at nearly an all-time low, 
farmers can barely keep up with their current payment schedules. They 
certainly cannot pay twice what they already owe.
  USDA is attempting to fix the problem with proposed rules and 
regulations but farmers need help with these agreements now. I cannot 
stand idly by and wait for bureaucratic regulations to go through the 
``process'' while farmers and ranchers are forced out of business.
  The USDA has issued an emergency rule which will allow people who are 
unable to pay their shared appreciation agreement on time, to extend 
their current loan for up to three years. The interest rate on this 
extension will be at the government's cost of borrowing. Also, the USDA 
is allowing farmers to take out an additional loan at an interest rate 
of 9.25% to pay off the amount owed on the shared appreciation 
agreement.
  There is also consideration being given to decreasing the number of 
years on shared appreciation agreements from ten to five. I appreciate 
the efforts by the USDA to alleviate the financial burden these shared 
appreciation agreements impose upon farmers, and hope that farmers are 
able to take advantage of them.
  However, as I have stated, time is of the essence. Another proposed 
regulation, which will require a public comment period of 60 days, will 
exclude capital investments from the increase in appreciation. However, 
this proposal has not yet been published and is not expected to be for 
at least another month. After that, the comment period will further 
drag out the process and in the meantime more farmers will be forced 
into foreclosure.
  To ensure this regulation on excluding capital investments from the 
increase in value is carried out, I intend to make it mandatory by 
legislation. Farmers should not be penalized for attempting to better 
their operations. Nor can they be expected to delay capital 
improvements so that they will not be penalized.
  Additionally, my legislation will require the appraisal to be 
conducted by a certified appraiser from the state where the land is 
located. This will prevent out-of-state appraisal businesses from 
conducting appraisals in land areas they know nothing about. How can an 
appraisal company in Arizona be expected to do an accurate appraisal on 
land in Montana? It is not fair to the producers on that land to have 
their appraisal conducted by outside interests.
  I look forward to working with members in other states to alleviate 
the financial burdens imposed by shared appreciation agreements. I hope 
that we may move this through the legislative process quickly to 
provide help as soon as possible to our farmers.
  I ask unanimous consent that the bill be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 961

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHARED APPRECIATION ARRANGEMENTS.

       (a) In General.--Section 353(e) of the Consolidated Farm 
     and Rural Development Act (7 U.S.C. 2001(e)) is amended by 
     striking paragraph (2) and inserting the following:
       ``(2) Terms.--A shared appreciation agreement entered into 
     by a borrower under this subsection shall--
       ``(A) have a term not to exceed 10 years;
       ``(B) provide for recapture based on the difference 
     between--
       ``(i) the appraised value of the real security property at 
     the time of restructuring; and
       ``(ii) that value at the time of recapture, except that 
     that value shall not include the value of any capital 
     improvements made to the real security property by the 
     borrower; and
       ``(C) be based on appraisals that are conducted by persons 
     with a principal place of business that is located in the 
     State containing the real property.''.
       (b) Application.--The amendment made by subsection (a) 
     shall apply to a shared appreciation arrangement entered into 
     under section 353(e) of the Consolidated Farm and Rural 
     Development Act (7 U.S.C. 2001(e)) that is in effect on or 
     after the date of enactment of this Act.
                                 ______