[Federal Register Volume 72, Number 60 (Thursday, March 29, 2007)]
[Proposed Rules]
[Pages 14712-14713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-1530]


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DEPARTMENT OF AGRICULTURE

Rural Business-Cooperative Service

Rural Utilities Service

7 CFR Part 4290

RIN 0570-AA35


Rural Business Investment Program

AGENCY: Rural Business-Cooperative Service and the Rural Utilities 
Service, U.S. Department of Agriculture.

ACTION: Advanced notice of proposed rulemaking; comments requested.

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SUMMARY: The Rural Business-Cooperative Service and the Rural Utilities 
Service seek public input regarding the possibility of operating the 
Rural Business Investment Program, in light of the loss of funding 
starting in the 2007 Fiscal Year, to provide for non-leveraged Rural 
Business Investment Companies.

DATES: Written or e-mail comments on this advance notice of proposed 
rulemaking must be received on or before 30 days from the date of 
publication in the Federal Register.

ADDRESSES: You may submit comments to this rule by any of the following 
methods:
     Agency Web Site: http://www.rurdev.usda.gov/regs. Follow 
instructions for submitting comments on the Web Site.
     E-Mail: [email protected]. Include the RIN No. 0570--
in the subject line of the message.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Submit written comments via the U.S. Postal Service 
to the Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., 
Washington, DC 20250-0742.
     Hand Delivery/Courier: Submit written comments via Federal 
Express Mail or other courier service requiring a street address to the 
Branch Chief, Regulations and Paperwork Management Branch, U.S. 
Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, 
DC 20024.

FOR FURTHER INFORMATION CONTACT: Michael Foore, Program Advisor, Rural 
Development, Business and Cooperative Programs, 1400 Independence Ave., 
SW., Stop 3201, Washington, DC 20250-3201, Telephone: (202) 690-4730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This advance notice has been reviewed under Executive Order 12866 
by the Office of Management and Budget and has been determined to be 
significant for the purposes of Executive Order 12866.

Background

    The Rural Development Mission Area of the Department of Agriculture 
(Rural Development) is responsible for assisting rural communities in 
improving the quality of life for their residents and in increasing 
their economic opportunities. Most of the programs and activities of 
Rural Development provide assistance in the form of loans, loan 
guarantees, and grants. However, Rural Development estimates that at 
least $1.45 trillion of equity in rural America is idle and could be 
used to assist the development of rural America.
    In an attempt to tap this equity in rural America and provide for 
investment capital opportunities which are not widely available, 
Congress created the Rural Business Investment Program in section 6029 
of the Farm Security and Rural Investment Act of 2002 (Pub. L. 107-171; 
116 Stat. 134). The Rural Business Investment Program authorized the 
Secretary of Agriculture to encourage, with financial and technical 
assistance, the creation of investment companies, called Rural Business 
Investment Companies, which would provide equity investments to rural 
small businesses. These investment companies would leverage capital 
raised from private investors, including rural residents into 
investments in rural small businesses. The legislation strongly 
encouraged that the Secretary of Agriculture operate this Program with 
the assistance of the Small Business Administration (SBA) because it 
was modeled after the SBA Small Business Investment Program. The 
legislation even provided funding to cover SBA's costs of providing 
such assistance. On June 8, 2004, Rural Development promulgated an 
interim rule to implement the Rural Business Investment Program [7 CFR 
part 4290; 69 FR 32200].

[[Page 14713]]

    The legislation that created the Rural Business Investment Program 
gave the Secretary of Agriculture two choices concerning the creation 
of Rural Business Investment Companies: leveraged and non-leveraged. A 
leveraged Rural Business Investment Company is a company that is 
created with an infusion of Federal capital. A non-leveraged Rural 
Business Investment Company is a company that is created without the 
infusion of Federal capital. Since the legislation authorizing this 
Program provided funds for leveraged Rural Business Investment 
Companies and SBA's own programs operate with leveraged entities, the 
focus of the current Rural Business Investment Program has been on the 
creation of leveraged Rural Business Investment Companies. Since the 
promulgation of the interim rule, Rural Development, with SBA's 
support, has conditionally selected three leveraged Rural Business 
Investment Companies. These companies have initiated the process of 
making equity investments in rural small businesses.

Issue

    With the enactment of section 1403 of the Deficit Reduction Act of 
2005 (Pub. L. 109-171; 120 Stat. 4), all unobligated funds for the 
Rural Business Investment Program for administrative costs for SBA and 
for the assistance grants and leveraging for the Rural Business 
Investment Companies will be rescinded at the end of Fiscal Year 2006. 
The enactment of this legislation effectively prevents the funding and 
support of new Rural Business Investment Companies after the end of 
this Fiscal Year.
    Rural Development believes that a greater focus on tapping the 
equity in rural America for the purposes of furthering rural 
development should be maintained. By encouraging investments in rural 
businesses with rural equity, not only is there the development of an 
underutilized rural resource, but also there is the potential to use 
such investments to increase wealth in rural communities.
    The development of renewable energy resources such as biofuels and 
wind represents an example of the economic development power of tapping 
rural equity. The development of these new energy resources has reached 
a stage where it is possible to find capital in the United States and 
elsewhere to develop many of these rural resources. While the rural 
areas where these outside funded projects are located will reap some 
economic benefits, the profits and equity they create will be owned by 
those outside these rural communities. Rural Development believes that 
if at least a portion of the funding of these projects can be supported 
by the equity in the surrounding rural communities, the projects are 
likely to be more successful because they will have greater local 
support and generate profits and equity that will be retained in the 
these rural communities which could be applied to support further 
development.

Potential Strategies for Continuation of the Rural Business Investment 
Program

    Rural Development seeks to encourage not only the placement of 
economic development projects in rural areas, like an ethanol plant, 
but also the development of business and investment models that will 
lead to the greater use of, and growth in, wealth, equity, and economic 
opportunities in rural communities. For these reasons, Rural 
Development would like to investigate whether there may be a way to 
continue the Rural Business Investment Program, despite the enactment 
of the Deficit Reduction Act of 2005, as part of a strategy to help 
unlock the potential power that rural equity has to finance rural 
development in a manner that will help rural residents share in the 
benefits of the economic growth potential of rural America.
    After reviewing the legislation creating the Rural Business 
Investment Program, it may be possible for the Secretary of Agriculture 
to operate this Program with another partner. The legislation 
authorizing the Rural Business Investment Program authorized certain 
financial institutions to create and invest in Rural Business 
Investment Companies (7 U.S.C. 2009cc-9). Eligible financial 
institutions include banks and savings associations whose deposits are 
insured by the Federal Deposit Insurance Corporation and Farm Credit 
System institutions. The Farm Credit Administration (FCA), the 
independent Federal agency that regulates the Farm Credit System, is 
responsible for the chartering, oversight and examination of the 
financial institutions of the Farm Credit System (FCS). Additionally, 
FCA has experience in examining other non-System institutions, such as 
Small Business Investment Companies. Therefore, FCA has the expertise 
to operate the non-leveraged program for the Secretary of Agriculture. 
If the focus of this Program shifted to the creation of non-leveraged 
Rural Business Investment Companies, the only funds that would be 
needed would be administrative costs to administer the program and 
provide technical assistance. It is Rural Development's understanding 
that these funds could be raised through the fees the FCA can currently 
charge regulated entities. If the FCA would become a partner of this 
Program, provisions would be made to ensure that non-Farm Credit System 
members would be allowed to participate in the creation and financing 
of non-leveraged Rural Business Investment Companies in accordance with 
the statute. This proposal is based on a comment Rural Development 
received from the FCA during the interim rule commenting period for the 
Rural Business Investment Program [69 FR 32200; June 8, 2004].

Requests for Comments

    Rural Development is seeking help from the public regarding the 
following questions related to this matter:
    (1) In what ways can Rural Development leverage the Rural Business 
Investment Program, a developmental venture capital program, to help 
encourage an expanded use of rural equity in the development of rural 
America?
    (2) Does the Rural Business Investment Program provide an 
appropriate basis to encourage the expanded use of rural equity in 
rural development? If not, are there changes in the regulation that 
could be made to make the Program more effective?
    (3) If USDA chooses to use one or more partners in order to provide 
for the licensing of non-leveraged Rural Business Investment Companies, 
what type of considerations should be made? How could such a 
partnership, between USDA and FCA, be made most effective for USDA, 
FCA, and the rural business community? If other Federal agencies in 
addition to FCA wish to become a partner, how should this be addressed 
within the regulation?

    Dated: March 21, 2007.
Thomas C. Dorr,
Under Secretary, Rural Development.
[FR Doc. 07-1530 Filed 3-28-07; 8:45 am]
BILLING CODE 3410-XY-P