[Congressional Record Volume 145, Number 70 (Friday, May 14, 1999)]
[Senate]
[Page S5370]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   AGRICULTURAL BOND ENHANCEMENT ACT

  Mr. GRASSLEY. Mr. President, yesterday, Senator Conrad, and 
Representatives Nussle and Boswell helped me stand up for American 
agriculture.
  Agriculture is capital intensive. As a family farmer myself, I know 
you can't put your love of the land to work if you don't have the 
resources to get started.
  My colleagues and I introduced a bipartisan bicameral bill that will 
expand opportunities for beginning farmers who are in need of low 
interest loans for capital purchases of farmland and equipment. This 
legislation is called the ``Agricultural Bond Enhancement Act.''
  Back in the early 1980s, I realize the federal government needed to 
do more to provide young farmers an opportunity to start farming. In 
1981, I pushed for pilot projects to establish the Aggie Bond program. 
After temporarily reauthorizing the program many times I succeeded in 
making the Beginning Farmer Loan Program permanent in the 103rd 
Congress.
  Current law permits state authorities to issue tax exempt bonds and 
to loan the proceeds from the sale of the bonds to beginning farmers 
and ranchers to finance the cost of acquiring land, buildings and 
equipment used in a farm or ranch operation. The tax-exempt nature of 
the Aggie Bonds provides a below-market interest rate on the loan made 
to the farmer or rancher.
  The program has been very successful, especially in my home state of 
Iowa. Since the beginning of the program in 1981, more than 2,600 
Iowans have taken advantage of this opportunity. Iowa's program has 
provided over $260 million in qualified beginning loans and the default 
rate has only been 1.5% of the total number of loans. I believe most ag 
lenders would agree those are very good numbers.
  We have an opportunity to make the Beginning Farmer Loan Program even 
better. Currently, Aggie Bonds are subjected to a volume cap. That puts 
them in competition with industrial projects for bond allocation. This 
is the problem we would like to remedy.
  Aggie Bonds share few similarities to Industrial Revenue Bonds and 
should not be subjected to the same volume cap. Insufficient funding 
due to the volume cap limits the effectiveness of this program.
  The solution: amend the Internal Revenue Code of 1986 to exempt small 
issue bonds for agriculture from the State volume cap.
  During the past three years the Iowa Agricultural Development 
Authority has consistently used all of the $24 million bond allocation 
it was allowed. Some beginning farmers had to sit idle until the next 
year to close their loan, or pay a higher interest rate if they closed 
their loan without the bond.
  We cannot afford to stand by and allow the next generation of family 
farmers to lose out on an opportunity to start farming. The average age 
of America's family farmers continues to climb.
  Deserving young farmers should not be forced to compete against 
industry for reduced interest loans.
  The ``Agricultural Bond Enhancement Act'' will open the door to more 
young farmers and help cultivate the next crop of family farmers in the 
21st century.

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