[United States Government Manual]
[May 31, 1996]
[Pages 112-117]
[From the U.S. Government Publishing Office, www.gpo.gov]



Rural Development

The rural development mission of USDA is to assist rural Americans in 
using their abilities to improve their quality of life. To accomplish 
this mission requires the fostering of new cooperative relationships 
among Government, industry, and communities. Three agencies carry out 
this mission and report to the Under Secretary for Rural Development: 
the Rural Housing Service, which includes rural housing and rural 
community facility loan and grant programs; the Rural Business-
Cooperative Service, which includes business and cooperative development 
programs; and the Rural Utilities Service, which includes telephone, 
electric, water, and sewer programs. There are approximately 1,580 rural 
development field offices that provide frontline delivery of all rural 
development loan and grant programs at the local level.

Rural Business-Cooperative Service

The mission of the Rural Business-Cooperative Service (RBS) is to 
enhance the quality of life for all rural Americans by providing 
leadership in building competitive businesses and cooperatives that can 
prosper in the global trading marketplace.
    The Service was established by Public Law 103-354 to carry out 
principal programs under the Consolidated Farm and Rural Development Act 
(7 U.S.C. 1921 et seq.) and the Food, Agriculture, Conservation, and 
Trade Act of 1990 (7 U.S.C. 5901 et seq.).
    Business programs are usually leveraged with cooperatives and 
private sector lenders to meet business credit needs in underserved 
areas. The major programs of RBS include commercial lending, revolving 
loan funds, and technical assistance, empowerment program, and 
cooperative services. The business loan and grant programs include:
Business and Industrial Guaranteed Loans  These loans are used to 
improve, develop, or finance business, industry, and employment, and to 
improve the economic and environmental climate in rural communities, 
including pollution abatement and control. This purpose is achieved 
through bolstering the existing private credit structure through 
guarantee of quality loans which will provide lasting community 
benefits. This type of assistance is available to businesses located in 
areas outside any city with a population of 50,000 or more and its 
immediate adjacent urbanized or urbanizing area. Eligible entities 
include corporations, partnerships, cooperatives, recognized Indian 
tribes, individuals, and other legal entities.
Intermediary Relending Program Loans  These loans are used to finance 
business facilities and community development projects in rural areas 
including cities with populations of less than 25,000. This is achieved 
through loans made by RBS to intermediaries which provide loans to 
ultimate recipients for business facilities and community development 
projects. Eligible intermediaries include public bodies, nonprofit 
corporations, Indian tribes, and cooperatives.
Rural Business Enterprise Grants  These grants help public bodies, 
nonprofit corporations, and federally recognized

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Indian tribal groups finance and facilitate development of small and 
emerging private business enterprises located in areas outside the 
boundary of a city of 50,000 or more and its immediate adjacent 
urbanized or urbanizing area. Costs that may be paid from grant funds 
include: acquisition and development of land; construction of buildings; 
plans development; equipment purchases; construction of access streets, 
roads, and parking areas; construction of utility and service 
extensions; refinancing; fees for professional services; technical 
assistance and training associated with technical assistance; startup 
operating costs and working capital; previewing financial assistance to 
a third party; production of television programs to provide information 
to rural residents; and creation, expansion, and operation of rural 
distance learning networks.
Rural Technology and Cooperative Development Grants  These grants help 
finance the establishment and operation of centers for rural technology 
and/or cooperative development, in order to improve the economic 
conditions of rural areas by promoting the development and 
commercialization of new services, products, processes, and enterprises 
in rural areas. For this program, rural areas are defined as areas 
outside the boundary of a city with a population of 50,000 or more and 
its immediate adjacent urbanized or urbanizing area. Eligible applicants 
are public bodies, nonprofit organizations, and federally recognized 
Indian tribal groups.
Local Technical Assistance and Planning Grants  These grants provide 
funding for local technical assistance and planning activities in rural 
areas to improve economic conditions. Grants may be used for: technical 
assistance and training for small businesses; identifying and analyzing 
business opportunities in rural areas; establishing business support 
centers; conducting local or multicounty economic development planning; 
coordination of economic development activities; and leadership 
development training of local government officials. Grants are available 
to public bodies and nonprofit organizations. Grants may be used to 
assist rural areas and any city or town with a population of 10,000 or 
less.
Rural Economic Development Loans and Grants  These loans and grants 
finance rural economic development and rural job creation projects that 
are based on sound economic and financial analyses. Loans and grants are 
made to electric and telephone borrowers who use the funds to provide 
financing for business and community development projects. Loans are 
provided to finance a broad array of projects, including for-profit 
businesses. Grants are targeted for certain purposes such as: community 
development assistance; education and training for economic development; 
medical care; telecommunications for education; job training; business 
incubators; and other technical assistance. Borrowers may receive 
financing for grant purposes through either a grant to establish a 
revolving loan fund or a combination loan and grant.
Empowerment Program  The Empowerment Program initiative is designed to 
develop and maintain programs to identify Empowerment Zones, Enterprise 
Communities, AmeriCorps, and other Presidential initiatives to support 
rural development through the selection of areas of greatest need. The 
Program works with other USDA agencies, other Federal agencies, State 
and local governments, and private organizations and universities in a 
combined effort to develop and promote comprehensive community and 
economic development in rural America.
Cooperative Services  The Cooperative Services program helps farmers and 
rural communities become self-reliant through the use of cooperative 
organizations. Studies are conducted to support cooperatives that market 
farm products, purchase production supplies, and perform related 
business services. These studies concentrate on the financial, 
organizational, legal, social, and economic aspects of cooperative 
activity. Technical assistance and research is provided to improve 
cooperative

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performance in organizing new cooperatives, merging existing 
cooperatives, changing business structures, and developing strategies 
for growth. Applied research is conducted to give farmers and rural 
communities expert assistance pertaining to their cooperatives.
    The program also collects and publishes statistics regarding the 
role and scope of cooperative activity in the U.S. agriculture. The 
Service's bimonthly magazine, Rural Cooperatives, reports current 
developments and research for cooperative management leadership.

For further information, contact Rural Development, Office of 
Communication, Public Affairs, Room 5037-S, Department of Agriculture, 
Fourteenth Street and Independence Avenue SW., Washington, DC 20250-
0320. Phone, 202-720-6903.

Rural Housing Service

The Rural Housing Service (RHS) provides loans to rural residents and 
communities unable to obtain credit from commercial sources at 
reasonable rates and terms. These borrowers must have a reasonable 
chance for success. The Service guarantees loans made by commercial 
lenders for modest rural housing. It also makes direct loans to low-
income rural residents. Rural residents and communities may apply for 
these loans at approximately 1,580 local Rural Development offices.
    The Service operates under Title V of the Housing Act of 1949 (42 
U.S.C. 1471) and the Consolidated Farm and Rural Development Act (7 
U.S.C. 1921). It seeks to do business as the lender of first opportunity 
rather than the lender of last resort.
    The Service provides financial and management assistance through the 
following types of loans:
Guaranteed Single-Family Housing (SFH) Loan Programs  The Service 
guarantees loans made by commercial lenders to moderate-income rural 
residents. Eligible applicants must have sufficient income and 
acceptable credit but lack the downpayment to secure a loan without 
assistance. The Service provides up to 100 percent financing for 
eligible borrowers and guarantees participating lenders against most 
losses.
Direct Single-Family Housing Loan Program  Section 502 loans are made to 
very low and low income families for housing in rural areas. Loans can 
be made to build, purchase, repair, and refinance homes. The maximum 
term is 38 years. Loans may be made for 100 percent of the appraised 
value. The basic interest rate is determined periodically, based on the 
cost of money. Borrowers may qualify for annual subsidy on the loan, 
which can reduce the interest rate to as low as 1 percent. Cosigners on 
promissory notes may be permitted for applicants who may lack repayment 
ability.
    Builders may obtain ``conditional commitments'' as assurances to a 
builder or seller that if their houses meet RHS lending requirements, 
RHS may make loans to qualified applicants.
Home Improvement and Repair Loans and Grants  An owner-occupant may 
obtain a section 504 loan of up to $15,000, or in the case of senior 
citizens, a grant of up to $7,500, to remove health and safety hazards 
from a home. These loans, available to very low income families, are 
made at 1 percent interest.
Self-Help Housing Loans  Self-help direct SFH loans assist groups of six 
to eight very low and low income families to build their own home by 
providing materials and the skilled labor which they cannot furnish 
themselves. The families must agree to work together on each other's 
homes until they are complete. Rates and terms are the same as the 
direct SFH program.
Rural Housing Site Loans  Loans are also available to private or public 
nonprofit organizations to purchase sites for the development of housing 
for very low and low income families. Loans are repayable in 2 years.
Direct Multi-Family Housing Loans  Loans are made to private, nonprofit 
corporations, consumer cooperatives, State or local public agencies, and 
individuals or organizations operating on a profit or limited profit 
basis to provide rental or cooperative housing in rural

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areas for persons of very low, low, and moderate income. No downpayment 
is required from nonprofit organizations. A 3 or 5 percent downpayment 
is required from other applicants. The maximum term is 50 years, and the 
interest rate may be reduced to 1 percent to make rents affordable to 
very low and low income families. Rental assistance may be available to 
defray rent paid by very low income families.
Farm Labor Housing Loans and Grants  Farm labor housing loans and grants 
enable farmers, public or private nonprofit organizations, or units of 
local government to build, buy, or rehabilitate farm labor housing. The 
interest rate is 1 percent and is repaid over 33 years. Grants may be 
made in connection with a loan to a public/private nonprofit 
organization or unit of government to ensure affordability of the units 
to farm workers.
Housing Preservation Grants  These grants are made to a public body or 
public/private nonprofit organization to provide assistance to 
homeowners and landlords to repair and rehabilitate housing for very low 
and low income families in rural areas. Financial assistance provided by 
grantees may include loans, grants, interest reduction on commercial 
credit, or similar assistance. Up to 20 percent of the grant may be used 
for program administration.
Housing the Homeless  The Service offers SFH inventory property to 
nonprofit organizations or public bodies for transitional housing for 
the homeless. Qualifying organizations may lease nonprogram property if 
they can show a documented need in the community for the type of housing 
use proposed and the financial ability to meet proposed housing costs.
Community Program Loans  Direct and guaranteed loans are authorized to 
public and quasi-public bodies, nonprofit associations, and certain 
Indian tribes for essential community facilities such as health care, 
public safety, and public services. Necessary related equipment may also 
be purchased. The interest rate is set quarterly for direct loans and is 
based on yields of municipal bonds. Guaranteed loans bear an interest 
rate negotiated by the lender and the borrower. The Service guarantees a 
lender against losses up to 90 percent of principal and interest. 
Community facility loans may be made in towns populated up to 20,000. 
Nondiscrimination in employment and occupancy is required.

For further information, contact Rural Development, Office of 
Communication, Public Affairs, Room 5037-S, Department of Agriculture, 
Fourteenth Street and Independence Avenue SW., Washington, DC 20250-
0320. Phone, 202-720-6903.

Rural Utilities Service

The Rural Utilities Service (RUS) is a credit agency that assists rural 
electric and telephone utilities in obtaining financing and administers 
a nationwide water and waste loan and grant program to improve the 
quality of life and promote economic development in rural America. A 
total of 890 rural electric and 900 rural telephone utilities in 47 
States, Puerto Rico, the Virgin Islands, Guam, the Republic of the 
Marshall Islands, the Northern Mariana Islands, and the Federated States 
of Micronesia have received financial assistance. Approximately 7,200 
rural communities are currently served through financial assistance 
received from water and waste loans and grants.
Electric Program  The Rural Electrification Act of 1936, as amended (7 
U.S.C. 901-950b), authorizes RUS to provide loans for improving electric 
service to persons in rural areas, as defined by the Bureau of the 
Census.
    The Act requires that preference be given to nonprofit and 
cooperative associations and to public bodies. With RUS assistance, 
rural electric utilities have obtained financing to construct electric 
generating plants and transmission and distribution lines to provide 
reliable electric service.
Telecommunications Program  In 1949, RUS (then the Rural Electrification 
Administration) was authorized to make loans to provide telephone 
service in rural areas. Congress directed that the rural telephone 
program be conducted to ``assure the availability of adequate

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telephone service to the widest practicable number of rural users of 
such service.'' About 75 percent of the telephone systems financed by 
the agency are commercial companies, and about 25 percent are 
subscriber-owned cooperatives.
Loans  Loans are made in accordance with the Act and are subject to the 
provisions of the Federal Credit Reform Act of 1991. By law, RUS direct 
loans are made or insured at a municipal rate, but not greater than 7 
percent. In cases of hardship, the Administrator may approve loans at an 
interest rate of 5 percent.
    The Service also obtains funds from the Federal Financing Bank 
(FFB), which it lends to borrowers, primarily for large-scale electric 
and telecommunication facilities, at an interest rate equal to the cost 
of money paid by FFB, plus one-eighth of 1 percent. The Bank is located 
within the Department of the Treasury.
Supplemental Financing  A 1973 statement of congressional policy--not 
part of the law--said, in part, ``. . . that rural electric and 
telephone systems should be encouraged and assisted in developing their 
resources and ability to achieve the financial strength needed to enable 
them to satisfy their credit needs from their own financial 
organizations and other sources at reasonable rates and terms consistent 
with the loan applicant's ability to pay and achievement of the act's 
objectives.''
    When RUS approves electric loans, it requires most borrowers to 
obtain 30 percent of their loan needs from nonagency sources without an 
agency guarantee. These nonagency sources include the National Rural 
Utilities Cooperative Finance Corporation, which is owned by electric 
cooperatives, and the National Bank for Cooperatives.
    Telecommunications borrowers obtain supplemental financing from the 
Rural Telephone Bank (RTB), a U.S. agency established in 1971. Loans are 
made to telecommunications systems able to meet RTB requirements. Bank 
loans are made for the same purposes as loans made to RUS but bear 
interest at a rate consistent with the Bank's cost of money.
    The Rural Telephone Bank is managed by a 13-member board of 
directors. The Administrator of RUS serves as Governor of the Bank until 
conversion to private ownership, control, and operation. This will take 
place when 51 percent of the class A stock issued to the U.S. and 
outstanding at any time after September 30, 1995, has been fully 
redeemed and retired. The Bank board holds at least four regularly 
scheduled meetings a year. Activities of RTB are carried out by RUS 
employees and the Department's Office of the General Counsel.
Water and Waste Direct and Guaranteed Loan Program  Direct loans may be 
made to develop water and wastewater systems, including solid waste 
disposal and storm drainage, in rural areas, cities, and towns with a 
population of 10,000 or less.
    Funds are available to public entities, such as municipalities, 
counties, special-purpose districts, and Indian tribes. In addition, 
funds may be made available to nonprofit corporations. Priority is given 
to public entities in areas with less than 5,500 people to restore a 
deteriorating water supply or to improve, enlarge, or modify a water 
facility or an inadequate waste facility. Preference is given to 
requests which involve the merging of small facilities and those serving 
low-income communities. Applicants must be unable to obtain funds from 
other sources at reasonable rates and terms. The maximum term for all 
loans is 40 years. However, no repayment period will exceed State 
statutes or the useful life of the facility. Interest rates may be 
obtained from USDA Rural Development field offices.
    Guaranteed loans may be made for the same purpose as direct loans. 
They are made and serviced by lenders such as banks and savings and loan 
associations. Normally, guarantees will not exceed 80 percent on any 
loss of interest or principal on the loan.
Water and Waste Disposal Grants  Grants may be made to reduce water and 
waste disposal costs to a reasonable level for users of the system. 
Grants may be made, in some instances, up to 75 percent of eligible 
project costs.

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Requirements for applicants are the same as for loans.
Emergency Community Water Assistance Grants  Grants may be made up to 
100 percent of project costs to assist rural communities experiencing a 
significant decline in quantity or quality of drinking water. Grants can 
be made to rural cities or towns with populations not exceeding the 
State's nonmetropolitan median household income requirement.
Technical Assistance and Training Grants  Grants are available for 
nonprofit organizations to provide rural water and waste system 
officials with technical assistance and training on a wide range of 
issues relating to the delivery of water and waste service to rural 
residents. Legislation requires that at least 1 percent but no more than 
3 percent of the funds appropriated for water and waste disposal grants 
be set aside for these grants.
Solid Waste Management Grants  Grants are available for nonprofit 
organizations and public bodies to provide technical assistance and 
training to rural areas and towns with populations under 10,000 to 
reduce or eliminate pollution of water resources and improve planning 
and management of solid waste facilities.
Rural Water Circuit Rider Technical Assistance Program  Since 1980, the 
National Rural Water Association has provided, by contract, technical 
assistance to rural water systems. Circuit riders assist rural water 
districts with solving operational, financial, and management problems. 
Currently there are 52 circuit riders covering the 48 continental United 
States. The assistance may be requested by rural water systems or by 
RUS. When circuit riders are not working on specific requests, they call 
on rural water systems to offer assistance. The Association reports 
monthly to the national office. The program complements loan supervision 
responsibilities.
Distance Learning and Medical Link Grant Program  This program was 
established by the Rural Economic Development Act of 1990, which gave 
borrowers authority to defer RUS loan payments to make investments in 
rural development.

For further information, contact the Rural Utilities Service, Department 
of Agriculture, Room 4051-S, Fourteenth Street and Independence Avenue 
SW., Washington, DC 20250-0320. Phone, 202-720-1255.