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**United States Department of Agriculture---2007 Farm Bill Theme
Papers**

**Rural Development**

**July 2006**

**[I]{.smallcaps}. Introduction**

This paper is the third in a series of briefing papers that assess
general themes advanced at the 2007 Farm Bill Forums held during 2005 by
Secretary Mike Johanns as well as related issues that have emerged in
recent months. This paper describes the current state of rural
development, discusses and evaluates current key rural development
programs available to communities and individuals through the Department
of Agriculture (USDA), and concludes with a discussion of general policy
alternatives. The alternatives represent generalized approaches to
addressing some of the key concerns that have been raised with regard to
rural development. The alternatives are not recommendations but are
presented for further discussion for the 2007 Farm Bill.

**[II.]{.smallcaps} Background: Rural Development, What Is It and Where
Are We Today?**

**What is Rural Development?**

Rural development is the improvement in overall rural community
conditions, including economic and other quality of life considerations
such as the environment, health, infrastructure, and housing. For most
small communities, this improvement involves population and employment
growth, however, such growth is neither a necessary nor a sufficient
condition for rural development.

**What is the Current State of Rural Development?**

This report uses the Office of Management and Budget (OMB) 2003 nonmetro
county definition to describe rural people and places. OMB designates as
metropolitan (metro) areas those counties that contain an urbanized area
(an urban nucleus of 50,000 or more) and outlying counties with
significant (at least 25 percent of workers) commuting of workers either
to or from the urban nucleus. All other counties are nonmetropolitan
(nonmetro) counties.

**Rural-Urban Differences.** Rural America is home to about 50 million
people and covers 75 percent of the total land area of the nation. Rural
America is extremely diverse in geography, population density, and
economic and social assets. Rural America has also long lagged behind
urban America on key indicators of economic well-being, having higher
poverty rates, lower incomes, and lower rates of employment growth. In
recent years, the rural-urban gap for some of these indicators has
diminished, however the gaps remain. These differences in economic,
environmental, and social conditions have motivated Federal programs to
specifically help address the needs of rural residents and communities.

Employment has grown in both metro and nonmetro areas in recent years.
However, nonmetro employment has grown at a slightly slower rate (Table
1). Since 1990, the employment growth

Table 1. Rural-Urban Differences

  ---------------------------------- ---------- --------- ----------------
  Indicator                          Nonmetro   Metro     Gap

  **Annual employment growth**       Percent              Percentage
                                                          Points

  1990-2005                          1.0        1.2       0.2

  2000-2005                          0.4        0.7       0.3

  2004-2005                          1.4        1.8       0.4

                                                           

  Unemployment rate, 2005            5.4        5.0       0.4

                                                          

  **Real per capita income**         2004                   Percent
                                     Dollars              

  1990                               21,204     29,671    28.5

  2000                               24,148     34,540    30.1

  2004                               25,104     34,668    27.6

                                                          

  **Poverty rate**                   Percent              Percentage
                                                          Points

  1990                               16.3       12.7      3.6

  2000                               13.4       10.8      2.6

  2004                               14.9       12.3      2.6

                                                          

  **Adults 25 and older with college Percent              Percentage
  degree**                                                Points

  1990                               12.4       22.1      9.7

  2000                               15.1       26.4      11.3
  ---------------------------------- ---------- --------- ----------------

Source: ERS calculations based on data from the Bureau of Labor
Statistics, the Bureau of Economic Analysis, and the Bureau of the
Census.

in nonmetro areas has averaged 1 percent per year compared to 1.2
percent in metro areas. Metro and nonmetro unemployment rates have also
been roughly comparable in recent years, with unemployment rates of 5.4
percent for nonmetro and 5.0 percent for metro in 2005.

Average income levels exhibit more significant rural-urban differences.
In 2004, per capita nonmetro incomes averaged \$25,104, 27.6 percent
below the \$34,668 average for metro areas. This income gap has
fluctuated over time. In 1990 it was 28.5 percent, while in 2000 it was
30.1 percent. However, both metro and nonmetro areas have seen their
average incomes rise over time in real (inflation adjusted) dollars. The
average income levels in metro and nonmetro areas are not adjusted for
cost of living differences. Rural areas are believed to have a cost of
living advantage over urban areas. Although there is no generally
accepted method for making such adjustments, the relatively higher cost
of living in urban areas would cause the rural-urban gap to diminish if
such adjustments were made. Nevertheless, poverty varies across the
United States and rural America has many persistently-poor areas.

During the 1990s, real per capita income rose about 14 percent in
nonmetro areas, and despite slow U.S. economic growth in the early
2000s, nonmetro real income levels rose an additional 4 percent from
2000 to 2004. Along with the rise in incomes, the percentage of nonmetro
persons living in households with incomes below the poverty threshold
declined. In the 1990s, the nonmetro poverty rate declined markedly from
16.3 percent to 13.4 percent. With the slow U.S. economic growth in the
early 2000s, however, nonmetro poverty increased, and by 2004 (the most
recent data) the nonmetro poverty rate was at 14.9 percent. While this
is still 2.6 percentage points higher than in metro areas, the
nonmetro-metro poverty gap has declined since 1990 when the difference
was 3.6 percentage points.

One of the reasons for these continuing rural-urban differences involves
education. Rural workers tend to be less educated than urban workers, a
distinct disadvantage at a time when the U.S. economy has been moving
toward more high-skilled, service-based jobs. While the rural workforce
has improved its educational attainment over time, with the percentage
of adults age 25 and older with college degrees increasing from 12.4
percent in 1990 to 15.1 percent in 2000, the urban-rural gap has also
grown from 9.7 percentage points in 1990 to 11.3 percentage points in
2000.

**Conditions Vary by Type of Place.** Since rural areas are no longer
dominated by agriculture, the rural economy has become highly diverse.
In 1950, about 40 percent of rural people lived on a farm and one-third
of the rural workforce worked in production agriculture. Today, less
than 10 percent of rural people currently live on a farm and only 6.5
percent of the rural workforce is directly employed in farm production.
While the dominance of agriculture in the rural economy has declined
sharply over the past 50 years, one in five rural counties continues to
rely heavily on farming for employment or earnings (Figure 1). Located
mainly in the Great Plains, 78 percent of these 403 farm-dependent
counties experienced a loss in population from 2000 to 2005. Research
conducted by USDA's Economic Research Service (ERS) found these places
are not losing as many farm jobs as in previous years. Their main
problem in generating population growth has been inadequate natural
amenities and the lack of nonfarm employment opportunities, making it
hard to attract or retain young people.

Manufacturing now directly accounts for over a quarter of rural private
sector earnings. More than one in every four nonmetro counties depends
primarily on manufacturing for its economic base. Many of these counties
are in the South, where wages and education levels tend to be relatively
low. Rural manufacturing employment declined during and after the last
economic slowdown. Although it appears to have stabilized in the last
few years, concerns remain over possible future employment losses from
global competition, especially related to textile and apparel plants,
many of which are in the South.

Rural recreation counties, which are generally located near mountains,
lakes, beaches, and other desirable natural amenities, have had rapid
growth in employment, with improvements in local income levels,
earnings, and other measures of socioeconomic well-being. ERS has
identified 334 of these rural recreation counties as of 2002.
Retirement-destination counties and counties adjacent to metropolitan
areas have also experienced relatively high rates of growth. The
location of rural recreation and retirement-destination counties are
presented in Figure 2.

**Rural Population Growth and Migration Patterns.** In recent years,
rural population growth has slowed after strong growth in the 1990s. The
U.S. nonmetro population increased by over 10 percent from 1990 to 2000,
substantially above the 3 percent growth in the previous decade. From
2000 to 2005, the nonmetro population grew an additional 2.2 percent,
reaching 49.9 million in 2005. This growth rate is about a third lower
than that of the previous five years, 1995-2000, and significantly lower
than the 6 percent growth in metro areas. However, different
sub-population groups have grown at different rates. For example:

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-   Since 2000, the growth in the nonmetro population of 1.1 million has
    been evenly divided between natural increase---an excess of births
    over deaths (541,000)---and net immigration (545,000). Three-fifths
    of the in-movement was from abroad. The rest came from metro areas,
    as more people have moved to rural and small town places than away
    from them.

-   Nonmetro population growth was higher among Hispanics than among
    non-Hispanic Whites, both in number (390,000 compared with 361,000)
    and rate (15 percent versus 1 percent). Asians shared a similarly
    rapid rate of growth but on a smaller population base, so the
    numeric change was smaller (47,000) than for either Whites or
    Hispanics.

-   Population fell in about half of the nonmetro counties from 2000
    to 2005. Declining counties tend to be lightly populated and 30
    percent of these counties are in farm-dependent areas, located
    mainly in the Great Plains and western Corn Belt, and also in mining
    areas and some Southern manufacturing areas (Figure 3).

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While the word "rural" is used here to describe only nonmetropolitan
counties, millions of metropolitan residents living in open country and
small settlements within metro areas are also defined as rural according
to the Census definition. The Census Bureau considers open countryside
and settlements with a population of less than 2,500 as rural; urban
areas are larger (more populated) places with densely settled areas
around them.

Slightly more than half of the Census-defined rural residents now live
in metro areas. Metro counties that are primarily rural in population
have been growing more rapidly than other metro counties in recent
years.

A comparison of Figure 3 to Figures 2 and 1 shows the largest growth in
rural population has occurred in areas which rely on non-traditional
income sources. These include areas of the country that have either
capitalized on natural resources and climate for recreation and
retirement or their proximity to urban areas. Alternatively, those
regions of the country that rely on farming, lack urbanization, or are
remote from large cities have seen declines in population.

Rural areas, especially those near urban areas, also continue to
experience changes in land use that changes the character of the rural
areas. The National Resources Inventory data indicates that between 1982
and 2001, about 34 million acres---an area the size of Illinois---were
converted to developed uses. The rate of development between 1997 and
2001 averaged 2.2 million acres per year. This was the same average rate
experienced between 1992 and 1997, but up from 1.4 million acres per
year in the previous decade (1982 - 1992). Between 1992 and 2001, about
6 million acres (28 percent) of the new land developed was prime
farmland.

**Rural Development and Agriculture**. At one time, many viewed rural
development and farm policy as synonymous. Over the past 60 years,
rising productivity of farm labor has released labor to work in the
growing industrial and service sectors of the economy. As we have seen,
agriculture is no longer a dominant segment of the rural economy.
Because farming is not the primary source of jobs and income in many
rural areas, farm payments and other policies that affect farms
generally have little noticeable impact on rural areas as a whole. There
are some counties where reliance on farming is still high, and
government policies can have noticeable impacts in those areas. However,
even in farming-dependent counties, payments to farms are less than
one-fifth of all Federal assistance in those counties.

While agriculture is a small part of the rural economy, farm households
have become increasing dependent on off-farm income. In 2003, 68 percent
of farm households reported that the operator or spouse or both worked
off the farm. In aggregate, almost 89 percent of U.S. farm household
income reported in 2003 came from off-farm sources. Dependence on
off-farm work has led many to observe that agriculture is far more
dependent on the rural economy than the rural economy is on agriculture

**[III.]{.smallcaps} Federal Government Approaches to Rural
Development**

USDA is the lead Federal agency for rural development as designated by
the Rural Development Policy Act of 1980. However, many other Federal
agencies have significant rural development programs. A 2006 report by
the Government Accountability Office found that while the USDA had most
programs providing economic development assistance for rural areas, the
U.S. Department of Transportation provided the largest amount of
assistance. Many Federal agencies have some assistance aimed at rural
development including the Small Business Administration; the
Environmental Protection Agency; and the Departments of Housing and
Urban Development, Labor, Commerce, Health and Human Services, and
Homeland Security. Because the focus of this paper is on providing
information for consideration in the 2007 Farm Bill, we focus only on
those programs within USDA.

**Rural Development Program Overview**

USDA's rural development activities focus on financing housing,
community facilities, and community water and wastewater systems;
providing financial and technical assistance for business development,
including in the area of alternative energy; expanding the availability
of broadband; financing generation, transmission, and distribution of
electricity; providing payments and technical assistance to develop,
maintain, and conserve natural resources; and conducting research to
study how agricultural products can be processed and developed for new
uses, including for the production of alternative energy sources.

**Types of Assistance**

The instruments used by USDA to stimulate rural development are just as
diverse as the goals of USDA's rural development programs. Current USDA
programs involve grants, direct loans, loan guarantees, and direct
assistance. The instruments used by USDA include:

-   **Grants made for specific purposes.** Grants do not require
    repayment and are typically evaluated on criteria established by law
    or regulation, including limits on the grant amount. For example,
    the Rural Development, Business and Cooperative Programs (BCP) makes
    grants under the Rural Business Enterprise Grants (RBEG) program to
    public bodies, private nonprofit corporations, and
    Federally-recognized Indian Tribal groups to finance and facilitate
    development of small and emerging private business enterprises
    located in any area other than a city or town that has a population
    of greater than 50,000 inhabitants and the urbanized area contiguous
    and adjacent to such a city or town. The funds are used for the
    financing or developing small and emerging businesses.

-   **Direct loans for specific purposes.** Direct loan eligibility and
    conditions for repayment and satisfaction are established by USDA
    program. Applications are evaluated on criteria established by law
    or regulation, including limits on the loan amount. An example of
    direct loans made by USDA is the Housing and Community Facilities
    Programs Direct Loan Program (DLP). Most of the loans made under the
    DLP are to families with income below 80 percent of the median
    income level in the communities where they live. Direct loans may be
    made for purchasing an existing home or for constructing a new home.

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-   **Loan guarantees to lenders.** Loan guarantees for repayment of a
    portion of loans provide assistance to the borrower. Loan guarantees
    may depend on whether a borrower can obtain loans without the
    guarantee. Applications are evaluated on criteria established by law
    or regulation, including any limitations on the amount of the loan
    guarantee. For example, the Business and Industry (B&I) Guaranteed
    Loan Program provides guarantees up to 80 percent of a loan made by
    a recognized commercial or other authorized lenders in rural areas.
    Loan guarantees to lenders expands the lending capability of private
    lenders in rural areas.

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-   **Intermediation.** USDA also acts as an intermediary, supplying
    funds and assistance support to segments of the credit industry
    providing services to defined participants. For example, under the
    Rural Economic Development Loan Program, USDA provides zero-interest
    loans to electric and telephone utilities. The utility is then
    required to re-lend, at zero-percent interest, the loan proceeds to
    an eligible third-party recipient for the purpose of financing job
    creation projects and sustainable economic development within rural
    areas.

The allocation of USDA resources among the various delivery systems is
shown in Figure 4. The estimates presented in Figure 4 represent the
share of program level financial assistance (e.g., loan principal on
guaranteed loans). Program level assistance represents the gross value
of financial assistance USDA provides the public. Because many rural
development programs include loans and loan guarantees, program level
assistance is greater than actual budget authority or outlays. For
example, for fiscal year (FY) 2006, the program level assistance for the
USDA Rural Development mission area is estimated to be about \$18
billion, compared with budget authority of \$2.6 billion.

![](media/image5.wmf)Figure 4. Methods of Assistance of USDA Rural
Development Mission Area Programs, FY 2006 ^[1]{.underline}/^

^[1]{.underline}/^ Shares are based on program level of assistance.

Loan guarantees represent over 50 percent of the total USDA rural
development program level assistance. Direct loans represent about 26
percent of USDA program level assistance, and about 9 percent of USDA
program level assistance goes toward supporting its role as an
intermediary and in the form of grants.

USDA also provides direct assistance through research, technical
assistance, and development assistance. Direct assistance services are
provided either directly by USDA or through USDA funding to third party
organizations such as universities that offer the services to the
ultimate recipient. Most program areas have some component of direct
assistance. Assistance may range from services given to individual
recipients to services available to rural areas or the general public in
educational settings. For example, USDA's Cooperative State Research,
Education, and Extension Service (CSREES) Regional Rural Development
Centers (RRDC) link the research and educational outreach capacity of
the nation\'s public universities with communities, local
decision-makers, entrepreneurs, families, and farmers and ranchers to
help address a wide range of development issues. In some cases, direct
assistance may take the form of cost-share arrangements, where USDA
provides funds only if the private sector or State government provides
additional funds.

**Types of Programs**

USDA's rural development programs mainly fall in the Rural Development
(RD) mission area but other USDA mission areas also contribute to rural
development. For example, the RD mission area can be divided into eight
program groups made up of nearly 80 activities organized into about 40
programs. The Research, Education and Economics (REE) mission area which
includes the Agricultural Research Service (ARS), the Cooperative State
Research, Education, and Extension Service (CSREES) and the Economic
Research Service (ERS) also aids rural development through research,
education, and extension.

The USDA conservation and farm price and income support programs also
support rural development through investment in rural economies. In
addition, conservation programs support rural development by protecting
and enhancing environmental amenities which can attract amenity-oriented
businesses to rural areas, encouraging sustainable production practices
that help ensure the long-term economic viability of rural areas, and
providing direct rural development assistance to rural areas. The
Natural Resources and the Environment (NRE) mission area, which includes
the Natural Resources Conservation Service (NRCS) and the Forest Service
(FS), administers over 25 USDA conservation programs. In the Farm and
Foreign Agricultural Services (FFAS) mission area, the Farm Service
Agency (FSA) administers farm price and income support programs, the
Conservation Reserve Program, and farm operating, farm ownership, and
emergency loan programs while the Risk Management Agency (RMA)
administers crop insurance. This paper only discusses those USDA
programs not addressed in the first two USDA Farm Bill Theme Papers. For
details on USDA farm programs, see the *Risk Management* Farm Bill Theme
Paper and for details on USDA conservation programs, see the
*Conservation and the Environment* Farm Bill Theme Paper. Also, we do
not consider FSA direct and guaranteed farm ownership, operating loans,
or emergency loan programs.

To facilitate an overview of the types of rural development programs, we
group the programs under four broad categories:

> **(1)** economic development,
>
> **(2)** infrastructure development,
>
> **(3)** special needs programs, and
>
> **(4)** natural resource enhancement.

These development activities are interrelated. Programs aimed at
economic development bring new business and employment to rural areas
and offer new opportunities for income enhancement. Enhanced
infrastructure development programs are designed to counter deficiencies
caused by rural poverty or to equalize amenities with metro inhabitants.
Special needs programs are designed to provide individuals and
communities without sufficient income access to some level of basic
services such as housing, sanitation, or health care. Natural resource
enhancement programs are focused on improving the services provided by
the natural environment such as improving water quality and recreational
opportunities.

The allocation of USDA resources among the various rural development
activities is shown in Figure 5. Over one-half of USDA rural development
program level assistance is directed toward infrastructure development.
This includes programs devoted to providing electricity, improving water
and waste water facilities, and telecommunications. About 40 percent of
USDA rural development program level assistance is devoted toward
special needs, such as housing and community facilities. Less than 10
percent of USDA rural development program level assistance is aimed at
economic development. An overview of USDA RD programs, their objectives,
uses, and target population can be found in the appendix to this paper.

![](media/image6.wmf)Figure 5. Category of Assistance of USDA Rural
Development Mission Area Programs, FY 2006 ^[1]{.underline}/^

^[1]{.underline}/^ Shares are based on program level of assistance.

**Economic Development.** Economic development is a change in the
economic activities of a community or area that generates sustained
income and employment opportunities. Not only is such development
self-sustaining, it creates multiplier effects on other businesses as
well. It leads to further growth along with accompanying income and
employment that enable individuals to purchase housing and services
otherwise beyond their reach. Economic development generates the
resources, through taxes and other means, needed to build and maintain
the kind of infrastructure that would otherwise require assistance.

***Business.*** The driving force in rural life and rural development,
however defined, is associated with business enterprises. Ten business
programs in the RD mission area focus on strengthening business, helping
entrepreneurs develop new businesses and new ideas, and maintaining the
local character of such businesses. Program assistance provided through
direct or guaranteed loans, grants, and technical assistance assists
businesses directly or encourages business development through community
service improvement. Among the business oriented programs are those that
assist purchases of real estate, buildings, equipment, supplies, and
working capital for qualified endeavors. Feasibility studies, startup
operating costs, and other activities may be funded for educational
institutions, hotels, and recreational facilities to encourage
development. Business programs also include assistance, through
utilities borrowers, to establish revolving loan programs, support
community development, and provide technical assistance. In FY 2006, the
RD mission area is estimated to provide grants, direct loans, and loan
guarantees with a program level over \$1.3 billion for the business and
community development objectives of business programs. The largest of
these programs is the B&I loan guarantee program, which provides
protection against loan losses so that private lenders are willing to
extend credit to establish, expand, or modernize rural businesses.
Program level assistance for the B&I loan guarantee program is estimated
to exceed \$900 million in FY 2006.

***Cooperatives and Producer Enterprises.*** Programs directed to
agricultural producer-owned and controlled cooperative organizations
deliver service through 16 assistance and grant programs. Value-added
agricultural product market development grants are given directly to
agricultural producers, producer groups, cooperatives, and
majority-controlled producer-based business ventures to develop new
markets and add value to agricultural commodities, supporting ventures
in emerging markets. Other programs enable entities to develop venture
capital systems for emerging rural enterprises. Cooperative programs
support producer cooperatives with technical assistance, development
assistance, research, and education, both for existing cooperatives and
for producers organizing cooperatives. These programs do not provide
funding to cooperatives. However, assistance may be provided to
universities to carry on research on market structures and farmer
organizations. Special organizations are established and supported at
universities to provide sources of information on sustainable
agricultural production and value-added agriculture. In FY 2006, the
program level assistance for cooperatives and producer enterprises is
expected to total about \$110 million.

***Energy.*** A new and growing area for USDA is in alternative energy
and energy conservation. For example, Section 9006 of the 2002 Farm Bill
authorizes loans, loan guarantees and grants for farmers, ranchers, and
rural small businesses to produce alternative energy or makes changes to
their operations that conserve energy. Most of the program level for the
9006 Program is for loan guarantees, which has a program level of over
\$150 million in FY 2006. USDA has a range of other loan, research, and
procurement programs that support alternative energy and bio-products.
Energy will be the subject of the next Farm Bill theme paper.

**Infrastructure Development.** Improvements supported by these programs
enhance communities' abilities to generate economic development because
they provide the infrastructure needed to attract capital,
entrepreneurs, and skilled labor, including blue collar and white collar
workers and other professionals. Examples include modernized community
facilities and systems, including broadband, access to expert medical
advice, and educational opportunities.

***Electricity.*** The RD mission area offers direct loans and loan
guarantees to electric utilities serving customers in rural areas
through ten programs. USDA is the majority note-holder for nearly 750
electric systems. Assistance is available through various programs to
finance electric distribution and sub-transmission facilities, build
bulk transmission and generation facilities, acquire equipment,
construct or improve facilities, and associated activities. Ninety-six
percent of the energy companies receiving assistance are non-profit
cooperatives owned and operated by the rural residents they serve.
Technical assistance and training are also funded. Financing assistance
is offered for solar, wind, hydropower, biomass, and geothermal energy
generation under newer programs. The RD mission area also provides
assistance to rural communities with extremely high energy costs. In FY
2006, electricity programs are estimated to provide a program level of
more than \$5.4 billion, including technical assistance.

***Water and Waste Disposal.*** The RD mission area makes direct loans
and grants to develop drinking water and wastewater systems in rural
areas through eight programs. Programs also include solid waste disposal
and storm drainage assistance. Financial assistance is offered to
construct and improve water and waste facilities as well as design and
provide technical assistance to local and regional governments. In FY
2006, these programs are estimated to have a program level of nearly
\$1.6 billion in grants, loans, and loan guarantees to public entities
and Native American Tribes.

***Telecommunications.*** The RD mission area provides loans and loan
guarantees to telecommunications providers throughout rural America.
Assistance is provided to build, acquire, extend, improve, and refinance
telephone infrastructure. Telecommunications have changed dramatically
in the last two decades and USDA has responded through new programs. A
new rural broadband access program provides loans in rural areas without
broadband services. Educational and health care needs of rural America
are also supported by loans and grants under the distance learning and
telemedicine programs. Equipment, land, facilities, and other needs are
met by an array of funding activities. In FY 2006, the program level
assistance for the various telecommunications programs is estimated at
\$1.3 billion in grants, direct loans, and loan guarantees.

**Special Needs.** Special needs programs are intended to raise the
quality of life for rural residents by providing access to basic
individual and community services. One objective of assistance is to
enable individual rural residents with comparatively inadequate income
to maintain, at least at a minimal level, basic needs such as housing,
sanitation, and health care. Programs in this category provide resources
directly to individuals in need or make resources available for
individuals to draw upon.

Another group of programs address what may be viewed as effects of the
prevalence of low income in some rural areas at the community level.
This may be evidenced by inadequate public services, including the lack
of adequate health care facilities. Programs that alleviate housing,
sanitation, health care, and other such needs that are unmet because of
low income levels are included in this category of programs.

***Housing.*** Sixteen programs implement the RD housing mission.
Primarily through grants, loans, and loan guarantees, USDA assistance
addresses several needs in rural housing. The housing programs help
finance new or improved housing for low- to moderate-income families and
individuals. Grants, direct loans, and loan guarantees in several
programs are used by individuals to build, purchase, or repair their
homes and remove health or safety hazards. In others, rental subsidies
are paid directly to renters meeting certain qualifications. Programs
address the special needs of agricultural workers. Funds in other
programs can be used to build multi-family rental housing; buy and
develop building sites with associated roads, streets, and utilities;
and for rehabilitation of multi-family dwellings. Programs address both
single-family housing needs and multi-unit facilities. A program level
of \$7.4 billion for FY 2006 is estimated for grants, direct loans, and
guaranteed loans for rural housing and related purposes. Several
programs also include technical and supervisory assistance for mutual
self-help efforts. Housing programs are authorized by the Housing Act of
1949 which is under the jurisdiction of the Senate Banking Committee and
the House Financial Services Committee. Neither of these Committees
directly participates in the development of Farm Bills, so these
programs may not be the subject of upcoming Farm Bill debate.

***Community Facilities.*** Seven programs in the RD mission provide
necessary community services for those living in rural areas. Direct
loans and guarantees to third party loans are used to develop essential
community facilities in rural areas. Funds may be used to construct,
enlarge, or improve more than 80 types of community facilities for
health care, public safety, public transportation services, among
others. Programs of technical assistance are designed to help recipients
develop or increase their capacity to undertake community-based projects
in rural areas. In FY 2006, the community facilities programs are
estimated to provide a program level of \$541 million for essential
community facilities for public use.

**Natural Resource Enhancement.** Enhancing the natural resources in
rural areas has a positive effect on rural development by attracting
amenity-oriented businesses, providing recreational and tourism
opportunities, encouraging sustainable agricultural and forestry
production practices that help ensure the long-term economic viability
of rural areas, and providing direct rural development assistance to
rural areas. A study by ERS found that population change in rural
counties since 1970 has been strongly related to their attractiveness as
places to live. Natural aspects of attractiveness include: a mild
climate, varied topography, and proximity to water.

***Encouraging Sustainable Agricultural and Forestry Practices*.**
Another aspect of USDA conservation programs is they contribute to
long-term economic viability by conserving natural resources. Programs
that contribute to the sustainability of rural areas include the NRCS
Environmental Quality Incentives Program (EQIP), Conservation Security
Program (CSP), Wildlife Habitat Incentives Program (WHIP), and Wetlands
Reserve Program (WRP); and the FSA Conservation Reserve Program (CRP),
including the Conservation Reserve Enhancement Program (CREP). The NRCS
Resource Conservation & Development (RC&D) Program provides technical
assistance to communities within USDA designated multi-county areas for
land conservation, land management, and water management. Other programs
such as NRCS's Farm and Ranch Lands Protection Program (FRPP), Grassland
Reserve Program (GRP), along with the FS Forest Legacy Program (FLP) all
support the purchase of conservation easements that protect farm, ranch,
and forest lands from conversion to non-agricultural or non-forestry
uses. In addition, programs such as the FS Forest Stewardship Program
(FSP) provide technical assistance to private landowners to improve
forest management using the authorities provided by the Healthy Forests
Restoration Act of 2003 (HFRA) to work with communities to develop
Community Wildfire Protection Plans (CWPP). CWPP reduce wildland fire
hazards in areas surrounding communities.

***Providing Recreational and Tourism Opportunities*.** Tourism is the
third largest industry in the United States. The National Survey on
Recreation and the Environment estimated that 63 million Americans
visited farms in 2000-01 and spent an average of \$45 per person. The
survey indicated that 86 percent of the visitors to rural areas took the
trip to enjoy the scenery. The growth in farmers markets (over 3,300 in
2003) is another indicator of the interest the public has in rural
areas. In response to the public's interest in farm related recreation,
during the past two decades, landowners have shifted to alternative
enterprises and agri-tourism to supplement their income. In addition,
the FS estimates that annual visits to National Forest Service (NFS)
lands exceeds 200 million and annual visits to viewing corridors
approaches 175 million.

**Distribution of Assistance by Location and Need**

Most USDA RD mission area programs have eligibility requirements defined
by recipient location or the location of services provided by
recipients, a natural consequence of the focus on economic opportunities
and improved quality of life in rural America. As a result, most, though
not all, programs in the RD mission area are targeted to geographic
areas. In addition, many programs either restrict eligibility to lower
income individuals or give preference to low income places when awarding
grants or loans. This generally results in low income places receiving
more assistance, on a per capita basis, than other places. Table 2
compares 2001 assistance data of persistently poor nonmetro counties
with nonmetro counties in general. Persistently poor nonmetro counties
tend to benefit more from grants and direct loans and less from
guaranteed

Table 2. Assistance To Persistently Poor Counties, 2001

+-----------------------------------------+------------+--------------+
| Selected USDA Programs                  | > All      | > Nonmetro   |
|                                         | >          | >            |
|                                         | > Nonmetro | > Poverty    |
|                                         | >          | >            |
|                                         | > Counties | > Counties   |
+-----------------------------------------+------------+--------------+
|                                         | Dollars    |              |
|                                         | per        |              |
|                                         | capita,    |              |
|                                         | 2001       |              |
+-----------------------------------------+------------+--------------+
| **Economic Development**                | >          | > **23.08**  |
|                                         |  **27.45** |              |
+-----------------------------------------+------------+--------------+
| *Business*                              |            |              |
+-----------------------------------------+------------+--------------+
| Intermediary Re-lending Program Direct  | > 0.52     | > 0.92       |
| Loans                                   |            |              |
+-----------------------------------------+------------+--------------+
| Business and Industry Direct Loans      | > 0.64     | > 0.98       |
+-----------------------------------------+------------+--------------+
| Business and Industry Guaranteed Loans  | > 25.09    | > 19.63      |
+-----------------------------------------+------------+--------------+
| Rural Business Enterprise Grants        | > 0.60     | > 1.20       |
+-----------------------------------------+------------+--------------+
| Rural Business Opportunity Grants       | > 0.12     | > 0.14       |
+-----------------------------------------+------------+--------------+
| *Cooperatives and Producer Enterprises* |            |              |
+-----------------------------------------+------------+--------------+
| Rural Cooperative Development Grants    | > 0.48     | > 0.21       |
+-----------------------------------------+------------+--------------+
| **Infrastructure Programs**             | >          | > **24.78**  |
|                                         |  **18.01** |              |
+-----------------------------------------+------------+--------------+
| Water and Waste Disposal System Direct  | > 9.66     | > 11.79      |
| Loans                                   |            |              |
+-----------------------------------------+------------+--------------+
| Water and Waste Disposal System Grants  | > 7.38     | > 11.92      |
+-----------------------------------------+------------+--------------+
| Water and Waste Disposal System         | > 0.05     | > 0.02       |
| Guaranteed Loans                        |            |              |
+-----------------------------------------+------------+--------------+
| Section 306C Water and Waste Disposal   | > 0.39     | > 0.55       |
| Grants                                  |            |              |
+-----------------------------------------+------------+--------------+
| Technical Assistance and Training       | > 0.19     | > 0.00       |
| Grants                                  |            |              |
+-----------------------------------------+------------+--------------+
| Solid Waste Management Grants           | > 0.03     | > 0.02       |
+-----------------------------------------+------------+--------------+
| Emergency Community Water Assistance    | > 0.31     | > 0.48       |
| Grants                                  |            |              |
+-----------------------------------------+------------+--------------+
| **Special Needs**                       | >          | > **49.68**  |
|                                         |  **51.23** |              |
+-----------------------------------------+------------+--------------+
| *Housing*                               |            |              |
+-----------------------------------------+------------+--------------+
| Farm Labor Housing Direct Loans         | > 0.19     | > 0.16       |
+-----------------------------------------+------------+--------------+
| Farm Labor Housing Grants               | > 0.01     | > 0.02       |
+-----------------------------------------+------------+--------------+
| Low Income Housing Direct Loans         | > 9.17     | > 11.03      |
+-----------------------------------------+------------+--------------+
| Low Income Housing Guaranteed Loans     | > 23.95    | > 12.63      |
+-----------------------------------------+------------+--------------+
| Rural Rental Housing Loans              | > 0.93     | > 1.13       |
+-----------------------------------------+------------+--------------+
| Rural Rental Assistance Payments        | > 8.57     | > 13.19      |
+-----------------------------------------+------------+--------------+
| Very Low-Income Housing Repair Direct   | > 0.45     | > 0.90       |
| Loans                                   |            |              |
+-----------------------------------------+------------+--------------+
| Very Low-Income Housing Repair Grants   | > 0.45     | > 0.82       |
+-----------------------------------------+------------+--------------+
| Rural Self-Help Housing Technical       | > 0.14     | > 0.15       |
| Assistance Grants                       |            |              |
+-----------------------------------------+------------+--------------+
| Rural Housing Preservation Grants       | > 0.10     | > 0.15       |
+-----------------------------------------+------------+--------------+
| Section 504 Housing Repair Grants --    | > 0.03     | > 0.10       |
| Natural Disaster                        |            |              |
+-----------------------------------------+------------+--------------+
| Section 502 Housing Direct Loans --     | > 0.07     | > 0.10       |
| Natural Disaster                        |            |              |
+-----------------------------------------+------------+--------------+
| *Community Facilities*                  |            |              |
+-----------------------------------------+------------+--------------+
| Community Facility Direct Loans         | > 4.34     | > 3.49       |
+-----------------------------------------+------------+--------------+
| Community Facility Grants               | > 1.09     | > 3.04       |
+-----------------------------------------+------------+--------------+
| Community Facility Guaranteed Loans     | > 1.34     | > 2.54       |
+-----------------------------------------+------------+--------------+
| *Other Special Needs Programs*          |            |              |
+-----------------------------------------+------------+--------------+
| Empowerment Zones Program Grants        | > 0.04     | > 0.14       |
+-----------------------------------------+------------+--------------+
| Rural Economic Development Direct Loans | > 0.09     | > 0.09       |
+-----------------------------------------+------------+--------------+
| High Energy Cost Rural Communities      | > 0.27     | > 0.00       |
| Grants                                  |            |              |
+-----------------------------------------+------------+--------------+

Source: ERS calculations, using Consolidated Federal Funds Reports data,
Bureau of the Census.

loans, since the repayment burden for guaranteed loans for poor
borrowers is greater. For example, per capita assistance on low income
housing guaranteed loans in all nonmetro counties averaged \$23.95 in
2001 compared to only \$12.63 in persistently poor nonmetro counties.

Alternatively, per capita rural rental assistance in all nonmetro
counties averaged \$8.57 in 2001 compared to \$13.19 in persistently
poor nonmetro counties. Some guaranteed loan programs are also in more
demand in high growth areas, which are not generally poor.

Assistance also varies by type of program. Per capita assistance from
programs aimed at increasing economic development, such as business
programs, was higher in all nonmetro counties compared to persistently
poor nonmetro counties, while per capita assistance from programs aimed
at improving infrastructure were greater in persistently poor nonmetro
counties compared to nonmetro counties in general. The differences in
assistance by type of program reflect both the types of assistance
mechanisms available and the diversity in needs for various services.

**[IV.]{.smallcaps} Economic and Policy Issues for Rural Development
Programs**

This section provides a general assessment of the support provided by
current programs using several evaluation criteria: furthering rural
development, targeting of funds, program cost, and implications for U.S.
commitments under the World Trade Organization (WTO). However, there is
no unique measure for rural development. We evaluate how current USDA
programs further rural development within two goals: economic
development and improving the quality of life in rural communities. This
section draws on conclusions based primarily on two sources of
information: the USDA's FY 2005 Performance and Accountability Report
and the Office of Management and Budget's (OMB) Program Assessment
Rating Tool (PART) reviews. While we do not evaluate every USDA program,
our evaluation covers a majority of USDA program level assistance for
rural development.

**Economic Development**

Economic development programs fall generally into two categories: (1)
those that focus on enhancing entrepreneurship through direct
assistance, training, information dissemination, and enterprise
development and (2) those that enhance capital formation in rural
communities. USDA is developing a pilot information system, the
Socio-Economic Benefit Assessment System (SEBAS) to enhance its ability
to measure program-investment effectiveness. SEBAS, which uses detailed
information about loan or grant awards, will enable USDA to measure the
direct and indirect impacts of program assistance on local and regional
economic performance, and the quality of life in rural areas.

**Business.** The RD mission area estimates that in FY 2005 its business
programs created over 73,000 jobs and "impacted" over 12,000 businesses.
The largest business program, in terms of program level assistance, is
the B&I loan guarantee program. The B&I program represented about 80
percent (\$675 million) of the program level assistance the RD mission
area allocated to business programs in FY 2005. The program provides
guarantees up to 80 percent of a loan made by a commercial lender. The
primary purpose of the B&I program is to create and maintain employment
and improve the economic climate in rural communities. The capital
formation combined with technical assistance and enterprise development
enables businesses to start and grow, providing income and employment in
rural areas.

One measure of the contribution of the B&I program toward rural
development is the number of jobs created in rural areas. The B&I
program counts jobs when the loan is closed, a practice also used for
several grant programs. In FY 2005, the B&I program guaranteed 335 loans
and is estimated to have created 4,500 jobs and saved an additional
11,000 jobs. This translates into 1 job created or saved for every
\$2,200 in FY 2005 budget authority. During FY 2002-05, the B&I program
has guaranteed over 2,200 loans and created almost 23,000 jobs and saved
almost 68,000 jobs or 1 job created or saved for every \$1,500 in budget
authority. In addition to direct jobs created and saved, the indirect
economic benefits to the rural community through greater economic
activity are estimated to be \$2.50 for every dollar in guaranteed loans
closed, according to U.S. Department of Labor statistics. While these
measures of effect may be useful for comparing one program to another or
a program over time, they are limited in that they do not provide
estimates of net employment---the employment after the investment less
the employment that would have occurred in the absence of the
investment. The SEBAS project is designed to address this deficiency.

The B&I program is targeted to rural residents, and is further
prioritized to meet the greatest need of communities suffering from out
migration, persistent poverty, long-term population decline and job
deterioration, natural disasters, and fundamental structural changes in
its economic base. A geographic distribution of B&I loans for FY 2001-05
is presented in Figure 6, which indicates California, North Carolina,
Ohio, Texas, New York, Florida, and Pennsylvania have received the
largest amount of B&I assistance.

![](media/image7.png){width="5.25in" height="3.6625in"}Figure 6.
Distribution of B&I Loans, FY 2001-05

The FY 2005 OMB PART review for the B&I program raised a concern over
the number of defaulted loans occurring in this program. National and
regional economic trends are the primary influence on default rates,
followed by the local business environment and finally the quality of
the agency's loan underwriting. While USDA cannot control macroeconomic
factors or the conditions of each rural community, it has begun
strengthening loan underwriting through continuous training, as well as
implementing an accreditation program. The results have started to
appear in the form of decreasing delinquency rates.

**Cooperative and Producer Enterprises.** Entrepreneurship enhancement
is found in several programs. The most direct assistance is implemented
by Cooperative Programs. Cooperative Programs staff provides
information, research, technical assistance, education, and development
services to rural cooperatives. Cooperative Programs focuses on
entrepreneurship so the program's impact is not measurable by the
funding provided to recipients.

Cooperative Programs also administers the Value Added Producer Grant
Program (VAPG). In FY 2005, 172 grants were awarded that allowed
individuals and businesses to assess the feasibility and take initial
steps in bringing creative entrepreneurship to rural areas by developing
value adding businesses for agricultural producers and producer groups.
Grants in FY 2005 totaled almost \$15 million to enterprises located in
42 States. Table 3 presents a regional breakdown for VAPG assistance in
2005. Data are not available on the effects of VAPG on rural growth and
employment.

Table 3. Value Added Producer Grants, FY 2005

  ----------- ----------- ------------- ----------- ----------- ------------------
  State       Number      Assistance    State       Number      Assistance

  AZ          1           \$30,050      MS          4           \$495,000

  CA          13          \$1,196,630   MT          1           \$59,998

  CO          3           \$252,000     NC          2           \$179,600

  CT          1           \$150,000     ND          2           \$250,000

  DE          1           \$150,000     NE          16          \$1,113,540

  FL          6           \$613,717     NH          1           \$40,362

  GA          2           \$168,404     NJ          3           \$51,500

  HI          1           \$105,275     NY          3           \$162,783

  IA          13          \$1,177,075   OH          3           \$98,750

  ID          2           \$139,667     OK          1           \$25,000

  IL          4           \$299,125     OR          11          \$536,985

  IN          3           \$300,000     PA          3           \$258,248

  KS          7           \$504,616     RI          1           \$50,000

  KY          1           \$150,000     SD          2           \$198,250

  LA          1           \$30,400      TN          1           \$150,000

  MA          1           \$180,400     TX          11          \$1,074,896

  MD          2           \$175,852     VA          2           \$94,500

  ME          1           \$33,937      VT          1           \$150,000

  MI          4           \$441,452     WA          6           \$461,175

  MN          7           \$823,250     WI          5           \$549,789

  MO          17          \$1,750,446   WY          2           \$200,000

                                        **U.S.      **172**     **\$14,872,672**
                                        Total**                 
  ----------- ----------- ------------- ----------- ----------- ------------------

**Infrastructure Development**

**Electricity.** Under authority of the Rural Electrification Act of
1936, USDA makes loans and loan guarantees to electric utilities to
serve rural customers. These borrowers are responsible for about 40
percent of the national electric distribution grid. The rationale for
government involvement is that providing electricity in rural areas is
more difficult and expensive per customer than in urban areas. Working
through rural cooperatives, not-for-profit associations, public bodies
and for-profit utilities, RD programs provide leadership and capital to
upgrade, expand, maintain, and replace the rural electric
infrastructure. The electric programs help rural utilities expand and
keep their technology current as well as establish new and vital
electrical services.

In FY 2005, USDA's electric programs approved 111 loans to rural
distribution, generation, and transmission providers, worth more than
\$3.3 billion. The loans connected about 195,000 new consumers and
improved electrical service to about 2.4 million customers. Customers
served by new or improved electric facilities totaled almost 22 million
for FY 2002-05. Through program operations in past years, the Federal
Government is now the majority note holder for more than 750 electric
systems.

In the next 5-7 years, the United States is facing a shortage of cost
effective base load electric generation capacity. RD and the rural
electric industry estimated that during that time RD's current
generation and transmission borrowers will need an additional \$30
billion in financing from the Rural Utility Service (RUS) to meeting
this demand for base load generation capacity.

The OMB FY 2005 PART review for the RUS electric loans program raised a
concern that except for the Hardship loans, RUS electric loans are not
provided in such a way that would focus support to areas of greatest
need. In addition, loan funds do not always go to rural areas.

Table 4 presents a geographic breakdown of RUS electric loans in FY
2005. The program statistics show that the State-by-State benefits
distribution varies widely among programs and depend on program
objectives and targets. While identified by State, ultimate recipients,
in this case consumers of electricity, will be found in many regions of
rural America.

Table 4. Rural Electric Loans for Distribution Facilities, FY 2005

  ----------- ----------- --------------- ----------- ----------- ---------------------
  State       Number      Assistance      State       Number      Assistance

  AL          2           \$18,650,000    MT          4           \$22,185,000

  AK          1           \$82,448,000    NM          1           \$13,823,000

  AR          1           \$33,231,000    NY          1           \$4,300,000

  CO          3           \$45,390,000    NC          4           \$129,789,000

  FL          1           \$75,000,000    ND          2           \$14,185,000

  GA          7           \$104,411,600   OH          2           \$10,713,000

  IL          1           \$1,464,000     PA          2           \$22,300,000

  IN          1           \$5,500,000     SC          3           \$128,540,000

  IA          2           \$6,000,000     SD          8           \$59,310,000

  KS          6           \$31,814,000    TN          5           \$78,585,000

  KY          8           \$150,697,000   TX          6           \$58,923,000

  LA          3           \$109,698,000   VA          2           \$25,800,000

  MI          3           \$35,154,000    WI          1           \$5,527,000

  MN          10          \$69,426,000    WY          2           \$11,057,000

  MO          2           \$33,216,000    **U.S.      **94**      **\$1,387,136,600**
                                          Total**                 
  ----------- ----------- --------------- ----------- ----------- ---------------------

**Water and Waste Disposal.** Water and wastewater disposal loans and
grants are provided to rural communities for the development,
replacement, or upgrading of such facilities. The Environmental
Protection Agency (EPA) found that small communities (communities with
fewer than 10,000 people) with an average daily wastewater flow of less
than 1 million gallons, have documented needs of approximately \$16
billion for wastewater treatment over the next 20 years. The EPA also
found the total rural needs for wastewater treatment systems was in
excess of \$50 billion over the next 20 years. In terms of
infrastructure needs to insure safe drinking water quality, the EPA
found that medium-size communities (3,300 to 50,000 people) will need to
spend about \$43 billion, in total, over the next 20 years, while small
communities (3,300 and less people) will need to spend almost \$31
billion, in total, over the next 20 years.

The need to improve water and waste disposal systems has created a
demand for RD mission area water and wastewater disposal loans and
grants with a considerable backlog of applications. Since the program's
inception in 1937, water and wastewater disposal borrowers have received
\$29 billion in direct loans, loan guarantees, and grants. In FY 2005,
1.3 million customers were served by new or improved water and
wastewater disposal systems funded by the programs. During FY 2002-05,
about 3.65 million individuals have directly benefited from the
programs.

The programs have become proactive in creating better output and outcome
measurements. These measurement changes are designed to quantify program
effects and identify solutions to serve rural residents better. In May
2005, the program revised its long-term measures to focus strategically
on reducing rural peoples' exposure to water-related health and safety
hazards by FY 2010. Another long-term goal will focus on maintaining
sustainable water systems in rural communities. Annual analyses will
track program data to improved funds leveraged for project development.
The analysis will also be used to improve the loan-to-grant mix so that
more loan dollars are directed to systems that can afford maximum debt
capacity, and provide grant funds only to the neediest systems.

The OMB FY 2005 PART review for the Rural Utility Service (RUS) water
and wastewater disposal loan program noted that RUS has also established
a priority ranking system in its regulations to target financial and
technical resources to the neediest communities. Water and wastewater
projects designated as priorities for financial assistance are those
that (1) serve low population communities, (2) address health risks, and
(3) serve communities with median household income less than the poverty
level or the State non-metropolitan median. The Rural Development
National Office also has discretion to establish priorities for projects
based on identified target areas, specific set asides, and reserve
accounts. Projects may be given priority consideration for emergency
conditions and cost overruns.

**Telecommunications/Rural Broadband.** A new broadband loan and loan
guarantee program was established by the 2002 Farm Bill. The program is
designed to fund the cost of constructing, improving, and acquiring
facilities and equipment for broadband service in rural communities of
defined size. Direct loans are made for the life of the facilities
financed. Loans may be made at a 4 percent rate of interest to rural
communities where broadband service currently does not exist. The number
of counties receiving new service measures the extent to which the
deployment of broadband is achieved.

The broadband loan program is different from USDA's traditional
telecommunications program portfolio. First, even in today's
technology-driven marketplace, broadband service, while critically
important, still is not a "necessity-of-life" in the same manner as
electricity, telephone service, and water and wastewater disposal.
Second, a majority of the current applicants are "start-up" companies
with little, if any, history of doing business in this industry. Third,
today's marketplace is highly competitive as opposed to the traditional
monopolistic environment. Finally, many applications cover multi-State
service territories, rather than a single cooperative serving a single
rural community. Many of the applications request to serve 50, 75, or in
excess of 100 rural communities in several States. These differences,
while opening the door to a greater number of potential applicants, pose
new challenges for a lending program. Fewer than expected eligible and
complete applications have been received in the broadband program.
Program staff have revised procedures and worked with applicants to
improve the efficiency of applications review and loan processing, and
facilitate participation by borrowers.

Customers served by new or improved broadband facilities totaled 232,000
in FY 2005. Combining this with the two previous years in which the
program operated, 988,000 customers are served with assistance of the
broadband program.

While consumers have benefited from greater broadband service, the
program has come under some criticism. In 2005, the USDA Office of the
Inspector General (OIG) found that "During the 4 years the RUS has
administered Federal loans and grants for extending broadband service to
rural America, the program's focus has shifted away from those rural
communities that would not, without Government assistance, have access
to broadband technologies." The OIG found the change in focus occurred
because (1) RUS has not satisfactorily implemented statutory
requirements for serving rural instead of suburban areas, nor does it
have a system that can guarantee that communities without preexisting
service receive priority and (2) inconsistent administration of the
programs has resulted in irregularities in approving and servicing
grants and loans. OIG questioned over half of the funds reviewed.

**Special Needs**

**Housing.** Of the Nation's 2,000-plus nonmetro counties, 302 are
defined as housing stressed, according to ERS's county typology. In
these counties, at least 30 percent of households failed to meet widely
used standards for minimum basic amenities in 2000. This categorization
of household-level housing stress requires that one or more of the
following conditions be met: (1) housing expense/income
threshold---expenses exceed 30 percent of income, (2) crowding---more
household members than rooms, (3) incomplete plumbing---home lacked
necessary bathroom facilities, and (4) incomplete kitchen---home lacked
essential kitchen facilities

To address these housing needs, USDA implements a wide variety of
housing programs. Through its Single Family Housing Direct and
Guaranteed Loan Programs, USDA helps rural families who would otherwise
not be able to own homes. In FY 2005, USDA invested \$4.24 billion to
assist 44,224 rural families obtain homes, and an additional \$66
million to rehabilitate the homes of more than 11,700 very low-income
families. Minority homeownership increased by 7,605 as a result of these
programs. From FY 2002 to FY 2005, financial assistance was provided to
180,284 rural households with an increase in minority homeownership of
32,875.

The average annual income for families receiving direct loans is
approximately \$22,200, while the average for guaranteed loans is
approximately \$40,627. Families obtaining repair loans had average
incomes of \$11,330, while elderly households receiving repair grants
earned only \$10,240.

While the results are somewhat dated, a 1998 study conducted by ERS
regarding the RD mission area single family direct loans (known as
Section 502 loans) found that borrowers from the program were under 40,
had children, had low or modest incomes, had a home that is better than
their previous residence, and were satisfied with their current home,
neighborhood, and the Section 502 program. Most believed that, without
assistance from the program, they would have been unable to afford a
comparable home for at least 2 years and possibly never.

Another aspect of USDA's housing program is the rental assistance
provided as part of its multi-family housing program. Rental assistance
make up the difference between 30 percent of income that low-income
tenants contribute toward their rent and a "basic" rent that reflects
the operating costs of the project, including the project's debt
servicing requirements. The assistance is linked to units in a project
as long as that project remains in the program and the units are
occupied by tenants who qualify for the assistance. Unlike vouchers,
rental assistance cannot be retained by tenants who move. About 60
percent of the units in USDA's multi-family housing portfolio receive
rental assistance payments.

Concerns have been raised regarding USDA's multi-family housing program.
Most of the properties in the program were constructed between 1977 and
1990, and they are reaching the end of their normal useful life as
constructed. Based on an internal study of these properties, USDA
determined it was more cost effective to rehabilitate these properties
than to rebuild them. For FY 2006, RD received funds to support a
program level of over \$150 million to start the process of
rehabilitating these properties.

In FY 2004, the USDA OIG had found that USDA's Rural Housing Service
(RHS) needed to do a better job of inspecting and repairing its aging
portfolio of rural rental housing projects, implement wage matching to
identify excessive rental assistance, and identify and prevent theft
(equity skimming) of project funds. However, due to regulation changes
initiated by RHS, the OIG removed this issue from its list of management
challenges facing the Department.

**Community Facilities.** USDA provides a series of grants, loans, and
loan guarantees to finance the development of facilities essential to a
modern standard of living in rural communities. A wide range of public
facilities and equipment can be financed by these programs including
hospitals, fire trucks, police cars, child-care centers, food banks,
schools, medical clinics, nursing homes, community centers, town halls,
jails, and street improvements. The programs leverage Federal funds with
private capital to invest in rural infrastructure, technology, and
human-resource development.

In FY 2005, 12.9 million individuals were served by new or improved
community facilities. USDA provided funds to construct, renovate or
improve 812 essential community facilities, including 112 health-care
facilities, 312 public-safety facilities, 92 educational facilities, 15
energy-related facilities, 157 public buildings, 7 recreation
facilities, and a number of other essential community facilities.
Community facilities assisted during FY 2002-05 served 39.3 million
individuals.

The OMB FY 2005 PART review for the RHS community facilities program
noted that the program had clearly stated population and income
requirements targeting low-income rural communities which, by
definition, have severely limited resources to meet the needs of their
residents. Priority is given to communities with populations of 5,000 or
less and priority points are also given to communities where the median
household income of the service area is less than the poverty line for a
family of four, or less than 80 percent of the State-wide
nonmetropolitan median household income.

**Natural Resource Enhancement**

**Resource Conservation & Development (RC&D).** One USDA program that
was not discussed in the first two Farm Bill Theme Papers is the RC&D
program. NRCS administers the RC&D program, which includes specific
activities directed at fostering both natural resource conservation and
rural development. The purpose of RC&D program is to accelerate the
conservation, development and utilization of natural resources, improve
the general level of economic activity, and to enhance the environment
and standard of living in designated RC&D areas. In addition, the
program works to improve the capability of local citizens to plan and
implement programs and projects that address natural resource and
community development issues within and across communities within a
geographic region. Program objectives address improving the quality of
life, including social, economic and environmental concerns; continuing
prudent use of natural resources; and strengthening local citizens'
ability to utilize available sources of assistance through USDA and
other Federal agency partnerships. Objectives of the program are
delineated by the statutory program elements of land conservation, water
management, community development, and land management. The
NRCS-administered RC&D program uses the local non-profit RC&D
leadership, the RC&D Council, to ascertain community needs that are not
being addressed by other programs or through other avenues, to form the
basis for each individual strategic RC&D Area and annual plan. The
average RC&D Area covers seven counties. Nearly half of the Councils
members are locally elected officials such as mayors, judges, or
commissioners. RC&D councils are able to create unique program
applications that address unmet needs not previously recognized by other
programs. The RC&D program also improves the capability of State, tribal
and local units of government and local nonprofit organizations in rural
areas to plan, develop, and carry out programs for resource conservation
and development. The RC&D councils objectives include:

-   provide small business loans to natural resource-based business;

-   create job opportunities through business planning and financial
    opportunities for small businesses;

-   coordinate activities between communities and planning agencies for
    ecotourism, heritage tourism and historic preservation in rural
    communities;

-   assist with land acquisitions for green space and recreational
    opportunities;

-   facilitate the use of multiple USDA RD programs within their
    communities such as establishing revolving loan programs,
    establishing or improving community infrastructure;

-   provide the resources for rural areas to understand opportunities
    available from the RD mission area;

-   provide services as managers for land trusts, conservation
    easements, and mitigation programs for improved natural resource
    amenities;

-   assist small natural resource-based businesses to expand into value
    added approaches through enhanced marketing programs;

-   facilitate programs that enhance rural housing needs for the
    under-privileged;

-   facilitate process between landowners and Federal agencies for
    conservation, wildlife and recreational opportunities; and

-   provide creative solutions and be on the cutting edge of emerging
    issues such as implementation of bio-energy projects and
    environmental credit trading opportunities.

The RC&D program is an appropriated account and the Administration's
2007 Budget proposes to modify the Federal RC&D council coordinator
position to provide more technical oversight duties instead of
day-to-day administration support. The local RC&D councils would be
responsible for operation of their non-profit corporations. This
proposal would consolidate the number of Federal coordinator positions,
eliminate duplication of rural development coordination efforts, but
NRCS would still maintain its strategic planning and oversight
assistance for all 375 authorized RC&D Areas nationwide.

**Forest Conservation Programs*.*** Two FS programs that were not
discussed in the first two USDA Farm Bill Theme Papers were the Forest
Legacy Program (FLP) and the Community Wildfire Protection Plans (CWPP).

***FLP*.** FLP aids in protecting private forest land from being
converted to non-forest uses. The FLP is a partnership with States and
supports State efforts to protect environmentally sensitive forest
lands. FLP helps States develop and carry out their forest conservation
plans and encourages and supports acquisition of conservation easements
without removing the property from private ownership. FLP participation
is limited to private forest landowners. To qualify, landowners are
required to prepare a multiple resource management plan as part of the
conservation easement acquisition. The Federal government may fund up to
75 percent of project costs, with at least 25 percent coming from
private, State or local sources. In addition to gains associated with
the sale or donation of property rights, many landowners also benefit
from reduced taxes associated with limits placed on land use. The FLP
has grown in recent years to an FY 2006 budget authority level of \$57
million and has protected over 1 million acres.

In a 2005 PART review of the FLP, the OMB noted: the program performs
very well when compared to other land conservation programs, is
efficient in getting maximum funds to the field to produce acquisitions,
and has enjoyed excellent leveraging of Federal resources to produce
acquisitions. The 2005 PART review also noted that in independent
evaluations from OIG, the Government Accountability Office (GAO), FLP
compared favorably with other government and private programs.

***CWPP*.** One of the most significant conservation issues facing
America today is the need to protect lives and property in communities
near large areas of forested land, the so-called wildland-urban
interface. CWPP's enable communities to establish a localized definition
of the wildland-urban interface in their area, and high-risk areas
identified in a CWPP receive funding preference from the Forest Service.
As of December 2005, at least 450 CWPP's had been completed nationwide,
covering at least 2,250 communities at risk from wildfire.

Catastrophic fires threaten communities dependent on wildlands and
natural resources for tourism and recreation and wood products,
ranching, and the service industries that support them. Destroyed
forests and damaged watersheds also impose a variety of economic costs
to communities. In 2005 FS also treated 2.7 million acres of land to
reduce hazardous fuels, with over 60 percent of those acres in the
wildland-urban interface.

**Consistency with World Trade Organization Obligations**

Another evaluation factor for rural development programs is their WTO
consistency. Some rural development programs provide support to
agricultural producers. The Uruguay Round Agreement on Agriculture
(URAA) of the World Trade Organization (WTO) established criteria for
classifying domestic farm programs by how much they distort production
and trade. This classification is important because programs that are
deemed to be minimally or non-trade distorting (so-called green box) are
not subject to annual limits on domestic agricultural support, as are
programs that are classified as trade-distorting (referred to as amber
box). To be classified as minimally or non-trade distorting, a program
must meet specific criteria spelled out in the URAA.

WTO member countries are obligated to notify, or report, programs to the
WTO under the various domestic support categories. The United States has
reported only two rural development programs under these paragraphs.
(The last U.S. notification was made in 2004 for the crop years 2000 and
2001. No programs under the 2002 Farm Bill have been reported as the
Doha negotiations have continued.)

Small expenditures have been reported for some salaries and expenses for
the (former) Agricultural Cooperative Service and the (former)
Alternative Agricultural Research program. The United States has also
reported preferential loans and loan guarantees for structurally
disadvantaged farmers (\$103 million in 2001). These loans are often
provided to beginning farmers who cannot qualify for conventional loans
because they have insufficient financial resources, or to established
farmers who have suffered financial setbacks from natural disasters, or
whose resources are too limited to maintain profitable farming
operations. The United States has not notified to the WTO loans, loan
guarantees, and grants under the RD mission area because these programs
are aimed at providing services to nonagricultural entities and
beneficiaries, including housing, medical facilities, utilities, rural
businesses, water and wastewater, and telecommunications.

Some grant programs are directed at agricultural cooperatives and
businesses. Issues of consistency between such rural development
programs and WTO criteria can be illustrated by examining the
Agricultural Value-Added Agricultural Producer Grant Program, which has
not been reported to the WTO. The VAPG program provides grants primarily
for project planning and feasibility studies for developing value-added
ventures. The program does not allow the grants to be used for on-farm
or business purposes, such as acquiring or repairing equipment. As such,
these grants appear to be consistent with the WTO criteria.

**[V.]{.smallcaps} Alternative Approaches to Rural Development**

USDA's rural development programs are designed to accomplish two major
purposes: provide socially-based assistance to local rural communities
and residents in need and facilitate market-based rural development.
Pressures on Federal budget authority coupled with the requirements of
the Federal Credit Reform Act of 1990 (Credit Reform Act) are pushing
USDA's rural development programs toward market-based development and
away from socially-based assistance. Because most socially-based rural
development programs involve grants and subsidized direct loans which
tend to have higher Federal budget authority costs than unsubsidized
loan guarantees. This situation encourages market-based over
socially-based rural development. Under the Credit Reform Act, loan
guarantees tend to "cost less" than direct loans because loan guarantees
require a private lender to risk some capital which suggests that the
underlying loan is more likely to be repaid. USDA can leverage Federal
budget authority by a factor of 20 to 1 or more by moving away from
grants and toward guaranteed loans. For example, grants require \$1 of
budget authority for every \$1 of assistance while direct loans usually
require \$0.25 of budget authority for every \$1 of assistance, and loan
guarantees can require from \$0 to \$0.10 of budget authority for every
\$1 of assistance.

One challenge during the Farm Bill consideration of USDA's rural
development programs is finding ways to use the available Federal budget
authority most effectively to meet both of these two critical
objectives. This section presents alternatives that could help the
Administration and the Congress develop legislation that would address
the balance between these two objectives given the realities of the
current Federal budget situation and the requirements of the Credit
Reform Act.

The alternatives presented are not meant to be exhaustive or mutually
exclusive, nor are they meant to represent specific legislative
proposals for the upcoming Farm Bill. No specific alternative is being
advocated. Rather, the alternatives represent generalized approaches to
addressing concerns that have been raised with regard to current
programs. They are presented as candidates for further public discussion
to help inform the 2007 Farm Bill debate.

This discussion addresses the implication of these alternatives for
furthering rural development, defined as improving both economic
opportunities and quality of life. Possible effects on the distribution
of assistance and program costs are also discussed. Although WTO
consistency is an issue that spans each of the alternatives, we do not
discuss it since the alternatives are viewed as extensions of the
existing programs, which are considered green box programs, based on the
discussion in the preceding section.

During the Secretary's Farm Bill Forums, considerable support was
expressed for rural development programs. Public commenters consistently
said the programs were effective. Thus, the three alternatives raised
here have a common theme---they each offer alternative criteria and
objectives for employing the existing basic tools of USDA rural
development programs: loans, grants and direct assistance. The first
alternative suggests a series of targeting approaches for the existing
set of rural development programs. The second alternative suggests a
renewed focus on new business formation by inspiring and supporting
rural entrepreneurship, with an emphasis on the use of rural financial
capital grounded in the market-based rural development objective. The
third alternative suggests consideration of broader regional areas as
the focus of support thereby increasing the access of more local areas
to supporting infrastructure, business services, leadership expertise
and other resources.

These alternatives need to be considered in context with the existing
diversity in rural America. Those areas of the country that have either
capitalized on natural resources and climate for recreation and
retirement or their proximity to urban areas have generally been growing
in terms of population. Alternatively, those regions of the country that
rely on farming, lack urbanization, or are remote from large cities have
seen declines in population.

**Alternative 1. Maintain the Structure and Tools of Existing Programs
but Refine Program Targeting.**

Most USDA rural development programs are "targeted" in several ways,
many with multiple eligibility requirements. Examples of such targeting
were identified in the basic program descriptions, although more
specific targeting may be found in detailed program descriptions, in the
application process, and in criteria applied to assess the applications
for awarding program benefits. Program targeting encompasses both the
broad policies of Federal government assistance for rural areas and the
narrower policies of each program's definition and application. The two
are, of course, necessarily connected. Legislation defines essential
targeting characteristics and legislative changes can significantly
modify current programs. Consequently, changed targeting of programs is
the subject of Farm Bill consideration even where programs are
maintained.

A prerequisite for targeting is objective information about program
performance as measured against policy objectives. Many rural
development programs have been operating for a considerable time, some
for nearly three quarters of a century, while others are relatively new.
Each program has an overall objective related to improving economic
development and quality of life in rural America. While limited program
results can usually be measured, the larger impacts on the rural economy
and rural residents are generally not available. Without such measures,
there is only the thinnest analytical base for better program targeting.

Legislation may be considered to establish systems for objective and
continuous monitoring of program impacts on rural America. The results
of such measures would (1) provide information on whether programs are
achieving the ultimate goals of economic and quality of life
improvements and (2) enable USDA to use authorized discretion to
redesign the administration of programs to more equitably distribute
funds and more efficiently meet program objectives. New measurement
methods could build on methods of assessment currently applied to
address the wide variety of programs, needs to which the programs are
targeted, and methods used to provide benefits including grants, direct
loans, loan guarantees, and direct technical assistance. Systematic
impact assessment would likely include a single, in-depth study to
establish baselines and ongoing assessment associated with and
appropriate to each program.

Following are targeting issues that may be appropriately addressed in
Farm Bill consideration while generally maintaining the overall
structure and balance of current programs:

-   **Targeting Based on Critical Needs.** Most current programs are
    based on a perceived need. While these programs contribute to rural
    development, it is not clear that they are addressing the most
    important needs in rural America. With changing demographics,
    economic opportunities, increased communication, and the multitude
    of other social and economic factors defining rural America, the
    needs facing rural America are also changing and some of those needs
    may not be as important as they once were. A more targeted approach
    would direct programs to those issues that address the most critical
    needs. Legislation establishing existing programs may be revisited
    to determine if greater targeting would place the benefits of the
    programs where the need is demonstrably the greatest.

> Emphasis on critical needs may in fact be a reversion to the original
> purposes of many USDA rural development programs. Such needs may have
> changed substantially since the programs were initiated because of the
> profound changes that have taken place in agriculture and rural
> America in the past few decades. Targeting programs based on defined
> and felt needs may redistribute benefits in a more efficient manner
> with greater impacts than currently is the case.
>
> Targeting may differ depending on the goal of the program. For
> example, socially-based rural development programs may be targeted on
> income by establishing an income test for socially-based rural
> development programs that may not at present have such a condition for
> benefits. The overall change would be to refocus from rural location
> as a key criterion to one based more on income, while retaining the
> rural location criteria as a necessary but not sufficient condition.
> Definitions of rural area may also be revisited, but redefining rural
> is not essential to re-target to income rather than rural as a
> sufficient condition for benefit eligibility. Targeting programs based
> on income may redistribute benefits in a more equitable manner with
> greater impacts than currently.

-   **Targeting Based on Net Rural Development Impact.** Some rural
    development programs offer benefits to rural areas based on the
    assumed disadvantages of rural communities and amenities without
    necessarily determining if needs would be met in the absence of
    assistance. In some cases, this assumption may not be correct. This
    type of review should be conducted with respect to all programs.
    Examples may be where low-interest or guaranteed loans are made but
    other financing could be obtained, albeit at a somewhat higher rate.
    While these programs contribute to rural development, the marginal
    or net contribution of the program is relatively small in those
    situations. Programs could be re-targeted to circumstances where
    goods and services are not available and would not be provided by
    the private market without government involvement. Better targeting
    may be achieved if programs were limited to situations where
    alternative financing is significantly restricted and that goods or
    services needed for either economic development or an adequate
    quality of life are not forthcoming without the program's benefits.

> Legislation may be considered to inject considerations of net rural
> development impacts into program targeting. B&I and broadband loan
> programs are candidates for such consideration. Adjustments could take
> several forms including specific competitive considerations in
> selection criteria, requirements for competitive impact statements in
> applications, and more detailed analysis of program targeting where
> the net impacts on rural development are added to the assessments.

-   **Targeting Market-Based Programs on Self-Sustainability.**
    Assistance provided under market-based programs is generally offered
    to businesses or communities with the hope that recipients will use
    the assistance to become self-supporting and self-sustaining. Other
    programs are not so restricted. Some are non-business assistance
    programs whose purposes are not economic development but poverty
    alleviation. Others support entities that may be able to function
    without the assistance once the initial assistance has been
    incorporated into on-going economic activity. Yet others provide
    benefits to businesses or organizations that could in one way or
    another function quite as well without government assistance. One
    targeting alternative would be to direct more assistance into the
    support of self-sustaining economic development projects and away
    from those that are either maintenance-oriented or would be
    self-sustaining without the benefits of the program.

> Self-sustaining economic activity may well continue to require
> programs oriented toward rural America. In some cases, economic
> activity in rural areas may naturally lag behind those of urban and
> industrialized areas, even where such activity may eventually become
> indistinguishable from similar activities in non-rural areas. The
> needs for special attention to the supporting infrastructure and
> amenities enabling rural development is inherent in many programs and
> can continue under this alternative. Finally, rural development
> programs should continue to recognize certain comparative advantages
> in economic development over other areas of the nation, advantages
> that can be supported by carefully targeted programs.

-   **Targeting Assistance to Increase Funds Available for
    Socially-Based Programs**. Under the Credit Reform Act, most
    socially-based rural development programs cost more Federal budget
    authority to implement than market-based rural development programs.
    To the extent that rural development issues can be addressed with
    market-based solutions which take fewer Federal budget dollars,
    these Federal dollars can be applied to situations that can only be
    addressed with more expensive socially-based rural development
    solutions. During the consideration of the Farm Bill, legislative
    changes could be made to encourage RD and the people it serves to
    use market-based rural development solutions where possible.
    Reserving the socially based solutions to those situations where
    rural communities were in most need.

> Further, RD needs flexibility to manage the costs of its programs to
> stretch the Federal budget authority further to help more people.
> During the Farm Bill, legislative changes could also be made to give
> RD more flexibility to operate its programs more efficiently with
> respect to its use of Federal budget authority.

A more thorough assessment of the economic, environmental, and
infrastructure conditions in rural America coupled with targeted
programs would lead to more efficient and equitable uses of Government
assistance. For example, a conclusion may be reached that more immediate
and needed benefits should be directed to acute community facility or
health needs rather than maintaining existing and prospering utility
companies. Similarly, financial support to emerging business enterprises
may be found to add more to a community than funding that only supports
on-going activities.

**Effects on furthering rural development (economic and quality of
life).** A systematic program to monitor conditions in rural America and
study the net impacts of the various programs on rural development would
provide information on (1) the direct and indirect impacts of current
programs and (2) the direct and indirect impacts of current programs
under new targeting. Any consequent re-targeting would be directed
specifically at the most efficient and equitable way to further rural
development. Rural development would be enhanced because available
funding and services would be directed toward the areas, individuals,
and enterprises with greatest need and make the most efficient use of
assistance to further subsequent economic development. By encouraging a
greater reliance on market-based rural development solutions where
possible, rural communities would have a greater stake in the success of
the project.

**Effects on distribution of assistance.** Program targeting changes may
result in three types of redistribution. First, the geographic areas in
which benefits flow may change, either relative to rural or more
urbanized areas or as a redistribution among communities, counties, and
States. Second, the types of recipients may also change. For example,
with more emphasis on individuals or on small businesses, these
recipients may see greater benefits at the expense of benefits for large
business entities currently providing services to rural populations.
Third, the types of projects funded may change. Distribution of benefits
resulting from alternative targeting may be more oriented toward
demonstrated need, although some programs may define need in terms of
personal or community assistance while others may define need in terms
of the economic activity that a recipient business may generate with
assistance. Targeting of funding to socially-based programs may also
mean that some program participants would be encouraged to seek loan
guarantees instead of grants and direct loans for certain types of
projects.

The sheer number of programs focused on rural development and the fact
that each program has one or more targets that may be changed in this
alternative, precludes specific estimates of payment distribution
effects.

**Effects on program costs.** Few of the alternatives suggested
necessarily affect program costs. Total program costs may stay the same
even with significant targeting changes. If the same program re-targets
benefits to another eligible set of recipients, program costs will not
change. Of course, if some programs are diminished as a result of
targeting, costs associated with such programs will be reduced. However,
if re-targeting shifts benefits to another program or part of a program,
overall costs would change little. In the longer run, programs that
enhance self-sufficiency and internal self-sustaining economic growth
should eventually reduce or eliminate the need for development
programming, thus reducing future program costs.

**Alternative 2: Focus on New Business Formation Supported with Rural
Private Investment**

New business formation and expansion of existing business is necessary
for growth in rural economic activity and jobs. The increase in activity
and employment is not going to come from more farms employing more
people; it is going to come from nonfarm business growth. Under this
alternative, USDA would recognize new business formation as the core
activity to increase rural economic growth and focus on market-based
solutions.

USDA would work with State and local governments, regional
organizations, as well as other stakeholders to focus on meeting the
needs of rural entrepreneurs. These needs range from education to
dealing with regulations to establishing relationships with supporting
businesses to obtaining financial capital. Some commercial banks will
not lend to business start-ups unless equity investors are liable beyond
their invested capital. Many rural investors are reluctant to accept
such liability. A focus would be on implementing strategies that
facilitate investment by rural residents in rural businesses.

This alternative would require, among other things, identifying,
aggregating and assisting many small individual investors to finance
critical investments. While small business and micro lending would
continue to have a role, under this option, USDA (or some new
development funding entity) would focus on facilitating the aggregation
of financing for new rural businesses by helping to bring together
entrepreneurs with rural communities, banks, potential individual rural
investors, and nonrural investors and creating mechanisms to utilize
rural wealth to create more wealth.

Restraints on equity-based rural development are not due to a lack in
rural equity. For example, the equity of farm businesses exceeds \$1.4
trillion and the farm sector debt to asset ratio is at a 50-year low,
suggesting that some farm businesses have the capacity to invest in
rural business formation if inclined to do so. Further, a number of
equity investment opportunities in rural America are emerging which are
stemming from the development of alternative energy resources and the
fact that the Internet allows an individual to live in rural America,
but work globally. Investors are helping provide development
opportunities for some rural communities, although some rural residents
may not be in a position to take advantage of these opportunities.

One example were rural investors retained a portion of the wealth of
their investments is the programs that financed the electrification of
rural America. Under these programs, USDA not only brought electricity
to local rural communities, they also encouraged the development of
locally controlled rural electric cooperatives to give the local
communities a financial and operational stake in these electric systems.
Under these programs, these cooperatives have grown to become very
valuable assets for rural communities. Rural electric cooperatives
reinvest their revenues in the local community and provide a foundation
for economic and cultural growth.

This alternative suggests a next logical step for rural development
programs is to move from programs based on subsidized debt financing to
development that is at least partially financed by rural people using
their own equity.

**Effects on furthering rural development (economic and quality of
life).** USDA's RD mission area has embarked on an effort to simplify
the structure and delivery of its programs to release the staff and
customers in its 800 local offices from unnecessary and overlapping
regulations and administrative burden. This alternative would require
that effort to continue to enable local staff to assume a larger
leadership role in RD mission area activities of their rural communities
by helping these communities become more financially and operationally
involved in these new investment opportunities. USDA staff would need to
overcome the transactions costs inherent in aggregating equity
investments of rural residents, team the equity investments and Federal
credit with successful entrepreneurs and projects for their area, and
help deal with Federal, State and local regulatory and other
impediments. Non-rural investment may have to be sought to absorb
sufficient risk to obtain bank financing. Activities to generate
successful entrepreneurship must extend beyond accessing rural wealth.
Capacity building for entrepreneurship may also require education and
training, infrastructure development, strategic planning, and
establishment of linkages with other businesses across broader areas to
access necessary business services. If increased coordination,
organization, and targeting of USDA resources are successful, rural
citizens would earn a return on their investments and would help
generate economic growth and jobs.

**Effects on distribution of assistance.** Primary tools for generating
more investment in rural businesses by rural residents are development
of entrepreneurs, coordination and communication, information and
analysis, and leveraging Federal resources through increased use of loan
guarantees and private sector funding. Because this alternative is
market-based, it would direct more assistance toward economically
feasible and sustainable new businesses in areas where rural investors
are willing to invest their available capital. Thus, this approach may
reduce the amount of Federal funds going to areas where investable
funds, including equity levels, are low and the rates of equity
appreciation are low. These regions may have high concentrations of the
most vulnerable rural residents.

**Effects on program costs.** Pursuing this alternative would not
necessarily require increased budget authority or result in reduced
budget authority. In recent years, USDA has increased its program levels
for rural development without a significant increase in Federal budget
authority by shifting toward loan guarantees and away from grants and
direct loans. Under this alternative, USDA rural development programs
would continue this trend. This alternative addresses the way in which
existing resources would be used. For example, legislative restraints
may need to be amended to provide the greatest flexibility possible to
manage budget resources under the Credit Reform Act to supply the
leveraged credit needed to generate rural economic activity. Some
assistance would be needed to provide for education and training for
rural entrepreneurial capacity building.

**Alternative 3: Move Toward Greater Regionalized Assistance.**

The Farm Bill debate has from time to time focused on the structure of
USDA's rural development programs. For example, block grants have been
considered as a way to redistribute Federal tax receipts as well as to
pass some funding decisions from the Federal to the State level. Another
restructuring approach which has garnered interest in recent years
involves making more use of regional development strategies when
awarding Federal grants and loans. Such a regional approach, it is
argued, has more potential for succeeding in today's global economy.

In past years, rural communities competed mainly with their urban
counterparts, specializing in products made with relatively low-cost
rural labor. Today, facing increased global competition from places with
much lower labor costs, many rural communities must rethink their
development strategies. Some rural development experts argue that rural
communities must band together to make the most of the local region's
assets in pursuing a regional development strategy that can potentially
provide them with a comparative advantage in today's global economy. To
respond to budgetary pressure, USDA must look for ways to help
communities provide for themselves in more cost effective ways. For
example, it generally costs less to provide water services on an area or
regional basis than to provide separate systems for every community.

Federal policy has already moved in this direction with the creation of
new regional and sub-State regional development organizations. For
example, the Delta Regional Authority (DRA), created in 2001, funds
projects in the lower Mississippi Delta region. Similar to the
Appalachian Regional Commission, DRA priorities arise from
recommendations of State governors, and assistance goes to local
multi-county development organizations (where they exist) which plan and
implement the projects.

The DRA was reauthorized in the 2002 Farm Bill. That same legislation
authorized three new regional initiatives:

-   Northern Great Plains Regional Authority---similar to the DRA.

-   Rural Strategic Investment Program---awards assistance competitively
    to regional investment boards which plan and implement comprehensive
    regional development strategies.

-   Multi-jurisdictional Regional Planning Organization
    Program---provides assistance to regional organizations that assist
    local governments and organizations involved in local development.

While these last three regional initiatives were never funded, the
regional approach remains an issue for consideration in the 2007 Farm
Bill.

This alternative may be used without new Commissions or creating
bureaucratic structures by changing regulations of some existing
programs to encourage more assistance for projects that are included in
the strategic plans of regional development organizations. For example,
projects that are instrumental to regional development strategies might
be given preference points in the selection process when awarding
assistance or approval by regional development organizations might be
required of all USDA rural development funded projects.

**Effects on furthering rural development (economic and quality of
life).** Regional approaches may offer several advantages for rural
development.

-   Local regional development organizations benefit from economies of
    scale that give them a cost advantage over a single small rural town
    or county in doing economic development planning and in grant
    writing. This should enable them to do more strategic planning that
    may be needed to find a new niche for the local economy, and should
    increase their likelihood of identifying and obtaining financial
    assistance to support their strategy.

-   Regional development organizations, which would have access to more
    assistance sources than typical local governments, may be better
    able to package different assistance streams together to leverage
    and finance larger, more comprehensive projects.

-   Because of their broader geographical focus, regional strategies can
    make use of a wider variety of development assets (such as
    infrastructure, educational and financial institutions, etc.) than
    can individual towns or counties.

-   Their broader geographical area is more conducive to some kinds of
    strategies that are popular today, including the growth of clusters
    of businesses that locate not just in one town but over an entire
    region.

-   Encouraging collaboration at the regional level might help to reduce
    costly inter-local competition in bidding up tax incentives to
    businesses that locate in the region.

-   At the regional level, impacts of policies that extend beyond the
    borders of individual towns or counties (externalities) are likely
    to receive more attention, leading to development that increases
    positive externalities (such as from education) and reduces the
    negative externalities (such as from pollution).

From these arguments, the effects on rural development would appear to
be generally positive. Research evaluations have been generally positive
of Federal agencies that have significant regional development
dimensions such as the Economic Development Administration (EDA) and the
Appalachian Regional Commission. However, the rural development effects
from any new initiative would vary depending on the specific initiative.
For example, initiatives that provide planning and operational funds to
regional development organizations might be expected to have a bigger
impact than initiatives that merely gave such organizations special
preference in competing for program assistance. Rural development
effects would also depend on how much assistance is targeted to regional
development strategies, and whether this is new assistance or assistance
that is recycled from existing programs, with the latter approach
leading to less overall economic impact. One drawback of the regional
approach is the potential difficulty of getting more political
jurisdictions and geographically dispersed people to work effectively
together.

**Effects on distribution of assistance.** Distributional effects depend
on the type of regional initiative. For example, if the focus is on
particular regions of the country, like the DRA or the proposed Northern
Great Plains Regional Authority, the impacts will focus on those regions
rather than being spread over the country. The rules governing the
regional authorities will affect other distributional aspects, such as
how assistance is targeted within the region: rural versus urban,
high-income versus low-income, and population growth versus population
decline.

One of the arguments behind empowering local regional development
organizations is that smaller rural communities that have little
grant-writing capacity to attract Federal funds might do better when
represented by regional organizations backed by RD mission area program
assistance. However, not all small communities will fare equally, since
their receipt of assistance under such programs will depend on whether
they play an important role in the regional development strategy. Even
if they do not receive much of this assistance, however, they may
benefit if the strategy produces jobs and income that they can obtain by
commuting to regional growth centers.

**Effects on program costs**. The impact on program costs will depend on
the specific initiative(s). For example, the Delta Regional Authority
received \$6 million in Federal funds in 2006. The more established
Appalachian Regional Commission received about \$65 million. These cost
differences suggest that when creating a new regional program, costs
might initially be quite small but they may rise over time, eventually
leveling off at a higher level of assistance. The 2002 Farm Bill
authorized \$30 million for its proposed Northern Great Plains Regional
Authority. The authorized amounts for the other two Farm Bill
initiatives were \$100 million for the Rural Strategic Investment
Program and \$30 million for the Multi-jurisdictional Regional Planning
Organizations program. Although these 2002 initiatives were not funded,
these amounts indicate the potential scale of program costs for similar
regional initiatives in the future. In contrast to these initiatives, if
existing program money is merely retargeted by regulation, no new
assistance would be required.

**VII. Suggestions for Further Reading**

The following is a list of selected USDA publications related to the
issues raised in this paper.

Bagi, Faqir. \"Economic Impact of Water/Sewer Facilities on Rural and
Urban Communities,\" *Rural America,* Vol. 17, No. 4, Economic Research
Service, USDA, Winter 2002, 6pp.

<http://www.ers.usda.gov/publications/ruralamerica/ra174/ra174f.pdf>

Barkley, David and Deboreh Markley. [\"Nontraditional Sources of Venture
Capital for Rural America.\" *Rural America*, Economic Research Service,
USDA, May
2001.](http://www.ers.usda.gov/publications/ruralamerica/ra161/ra161d.pdf)

http://www.ers.usda.gov/publications/ruralamerica/ra161/ra161d.pdf.

Cromartie, John B. "Population Loss Counties Lack Natural Amenities."
*Amber Waves,* Economic Research Service, USDA, April 2005.
http://www.ers.usda.gov/Amberwaves/April05/Findings/PopulationLoss.htm

Gadsby, Dwight. \"Resource Conservation and Development Program Reaches
a Milestone,\" *Rural America*, Economic Research Service, USDA, Vol.
17, No. 4, Winter 2002.

<http://www.ers.usda.gov/publications/ruralamerica/ra174/ra174g.pdf>

Heimlich, Ralph William Anderson. *Development at the Urban Fringe and
Beyond: Impacts on Agriculture and Rural Land*, Economic Research
Service, USDA, Agricultural Economic Report No. (AER803) 88 pp, June
2001.

<http://www.ers.usda.gov/Publications/aer803/>

Ingram, Kevin and Jan Lewandrowski. [\"Wildlife Conservation and
Economic Development in the West, *Rural America*, Economic Research
Service, USDA. 8 pp. August
1999.](http://www.ers.usda.gov/publications/RDP/rdpsept99/rdpsept99g.pdf)

http://www.ers.usda.gov/publications/rdp/rdpsept99/rdpsept99g.pdf

Leistritz, F. and Randall Sell. [\"Socioeconomic Impacts of Agricultural
Processing Plants.\" *Rural America*, Economic Research Service, USDA,
May
2001](http://www.ers.usda.gov/publications/ruralamerica/ra161/ra161e.pdf).

<http://www.ers.usda.gov/publications/ruralamerica/ra161/ra161e.pdf>

McGranahan, David and Patrick Sullivan. "[Farm Programs, Natural
Amenities, and Rural
Development](http://www.ers.usda.gov/Amberwaves/February05/Features/FarmPrograms.htm)."
*Amber Waves*, Economic Research Service, USDA, February 2005.

<http://www.ers.usda.gov/AmberWaves/February05/Features/FarmPrograms.htm>

Mikesell, James. "One in Four Nonmetro Households are Housing
Stressed.\" *Amber Waves*,

Economic Research Service, USDA, November 2004.

<http://www.ers.usda.gov/AmberWaves/November04/Findings/housingstressed.htm>

Reeder, Richard. [*How Would Rural Areas Fare Under Block Grants?*,
Economic Research Service, USDA, Agricultural Information Bulletin No.
(AIB-724-03) 4 pp. April
1996.](http://www.ers.usda.gov/publications/AIB724/Aib72403.pdf)

http://www.ers.usda.gov/publications/AIB724/Aib72403.pdf

Reeder, Richard. "Transition Year Brings Changes for Rural Development."
*Rural America*, Economic Research Service, USDA, September 2002.
<http://www.ers.usda.gov/publications/ruralamerica/ra172/ra172g.pdf>.

Reeder, Richard and Dennis M. Brown. *[Recreation, Tourism, and Rural
Well-Being](http://www.ers.usda.gov/publications/err7/).* Economic
Research Service, USDA, Economic Research Report No. (ERR7) 33 pp.
August 2005.

http://www.ers.usda.gov/publications/ERR7/

Whitener, Leslie. "Policy Options for a Changing Rural America," *Amber
Waves*, Economic Research Service, USDA, April 2005.
http://www.ers.usda.gov/Amberwaves/April05/Features/PolicyOptions.htm

U.S. Department of Agriculture. Economic Research Service. "Nonmetro
County Population Change, 2000-05." *Amber Waves*, June 2006.
http://www.ers.usda.gov/AmberWaves/June06/Indicators/onthemap.htm

U.S. Department of Agriculture. Economic Research Service. "Population,
Income, Education and Employment, State Fact Sheets: United States."
June 2006.

http://www.ers.usda.gov/statefacts/US.htm

**Rural Development --- Housing and Community Facilities Programs**

+---------+---------+-------+---------+-------+-----+----------------+---+
| Program | Ob      | Appl  | Uses    | Popul | L   | Te             |   |
|         | jective | icant |         | ation | oan | rms/Conditions |   |
|         |         |       |         |       | /Gr |                |   |
|         |         |       |         |       | ant |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| *       | Safe,   | Fam   | Buy,    | Rural | Dir | Up to 100      |   |
| *Single | well    | ilies | build,  | areas | ect | percent of     |   |
| Family  | -built, | and   | i       | with  | lo  | market value   |   |
| Home    | aff     | in    | mprove, | p     | an. | or cost,       |   |
| Ow      | ordable | divid | repair  | opula |     | whichever is   |   |
| nership | homes   | uals. | or      | tions |     | less. Loan     |   |
| Direct  | for     |       | rehab   | of    |     | amortized for  |   |
| Loans** | rural   | Apply | ilitate | 2     |     | 33/38 years.   |   |
|         | Ame     | to    | rural   | 0,000 |     | Applicant may  |   |
| **(     | ricans. | Rural | home as | or    |     | be eligible    |   |
| Section |         | De    | the     | less. |     | for payment    |   |
| 502)**  |         | velop | appl    |       |     | assistance     |   |
|         |         | ment. | icant's |       |     | (subsidy) on   |   |
|         |         |       | pe      |       |     | the loan.      |   |
|         |         |       | rmanent |       |     |                |   |
|         |         |       | res     |       |     |                |   |
|         |         |       | idence. |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| *       | Assist  | Fam   | P       | Rural | L   | 30 year, fixed |   |
| *Single | e       | ilies | urchase | areas | oan | rate. Interest |   |
| Family  | ligible | and   | new or  | with  | g   | rate           |   |
| Home**  | app     | in    | e       | p     | uar | negotiated     |   |
|         | licants | divid | xisting | opula | ant | between lender |   |
| **Ow    | in      | uals. | home.   | tions | ee. | and borrower.  |   |
| nership | buying  |       |         | of    |     | Loans to 100   |   |
| Gua     | their   | Apply |         | 2     |     | percent of     |   |
| ranteed | homes   | to    |         | 0,000 |     | market value.  |   |
| Loans** | by      | le    |         | or    |     |                |   |
|         | guara   | nder. |         | less. |     |                |   |
| **(     | nteeing |       |         |       |     |                |   |
| Section | loans   |       |         |       |     |                |   |
| 502)**  | made by |       |         |       |     |                |   |
|         | private |       |         |       |     |                |   |
|         | l       |       |         |       |     |                |   |
|         | enders. |       |         |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| *       | To help | Fam   | Repair  | Rural | Dir | Loan terms to  |   |
| *Single | v       | ilies | or      | areas | ect | 20 years at 1  |   |
| Family  | ery-low | and   | replace | with  | l   | percent.       |   |
| Home    | -income | i     | roof,   | p     | oan | Assistance to  |   |
| Ow      | hom     | ndivi | winte   | opula | and | individual may |   |
| nership | eowners | duals | rizing, | tions | gra | not exceed     |   |
| Direct  | remove  |       | p       | of    | nt. | \$20,000.      |   |
| Repair  | health  | who   | urchase | 2     |     | Grants only    |   |
| Loans   | and     | curr  | or      | 0,000 |     | available to   |   |
| and     | safety  | ently | repair  | or    |     | v              |   |
| G       | hazards | own   | of      | less. |     | ery-low-income |   |
| rants** | or to   | their | heating |       |     | applicants 62  |   |
|         | repair  | home. | system, |       |     | years or older |   |
| **(     | their   | Apply | str     |       |     | who cannot     |   |
| Section | homes.  | to    | uctural |       |     | afford to pay  |   |
| 504)**  |         | Rural | repair, |       |     | 1 percent      |   |
|         |         | De    | and     |       |     | loan.          |   |
|         |         | velop | water   |       |     |                |   |
|         |         | ment. | and     |       |     |                |   |
|         |         |       | sewage  |       |     |                |   |
|         |         |       | connect |       |     |                |   |
|         |         |       | fees,   |       |     |                |   |
|         |         |       | and     |       |     |                |   |
|         |         |       | similar |       |     |                |   |
|         |         |       | uses.   |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| *       | Assist  | N     | Te      | Rural | Gra | Grant          |   |
| *Mutual | lower   | on-pr | chnical | areas | nt. | agreement.     |   |
| Se      | income  | ofits | ass     | with  |     |                |   |
| lf-Help | f       | and   | istance | p     |     |                |   |
| Housing | amilies | p     | to      | opula |     |                |   |
| G       | in      | ublic | qualify | tions |     |                |   |
| rants** | b       | bo    | and     | of    |     |                |   |
|         | uilding | dies. | su      | 2     |     |                |   |
| **(     | their   |       | pervise | 0,000 |     |                |   |
| Section | own     |       | small   | or    |     |                |   |
| 523)**  | homes.  |       | groups  | less. |     |                |   |
|         |         |       | of      |       |     |                |   |
|         |         |       | f       |       |     |                |   |
|         |         |       | amilies |       |     |                |   |
|         |         |       | to      |       |     |                |   |
|         |         |       | build   |       |     |                |   |
|         |         |       | each    |       |     |                |   |
|         |         |       | other's |       |     |                |   |
|         |         |       | homes.  |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| **Rural | Safe,   | In    | New     | Rural | Dir | Up to 100      |   |
| Rental  | well    | divid | const   | areas | ect | percent of     |   |
| Ho      | -built, | uals, | ruction | with  | lo  | total          |   |
| using** | aff     | li    | or      | p     | an. | development    |   |
|         | ordable | mited | rehabil | opula |     | cost           |   |
| *       | rental  | p     | itation | tions |     | (non-profits); |   |
| *Direct | housing | rofit | of      | of    |     | 97 percent     |   |
| Loans** | for     | and   | rental  | 2     |     | (for-profits). |   |
|         | ve      | non-p | h       | 0,000 |     | 30-year term   |   |
| **(S    | ry-low, | rofit | ousing. | or    |     | with up to 50  |   |
| ections | and low | orga  |         | less. |     | year           |   |
| 515)**  | income  | nizat |         |       |     | amortization.  |   |
|         | indi    | ions. |         |       |     | For for-profit |   |
|         | viduals | Apply |         |       |     | organizations  |   |
|         | and     | to    |         |       |     | with           |   |
|         | fa      | Rural |         |       |     | Low-Income     |   |
|         | milies. | De    |         |       |     | Housing Tax    |   |
|         |         | velop |         |       |     | Credits, 95    |   |
|         |         | ment. |         |       |     | percent of     |   |
|         |         |       |         |       |     | total          |   |
|         |         |       |         |       |     | development    |   |
|         |         |       |         |       |     | costs.         |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| **Rural | Safe,   | In    | New     | Rural | L   | Up to 90       |   |
| Rental  | well    | divid | const   | areas | oan | percent loan   |   |
| Housing | -built, | uals, | ruction | with  | g   | to value for   |   |
| Gua     | aff     | par   | or      | p     | uar | loans made to  |   |
| ranteed | ordable | tners | subs    | opula | ant | for-profit     |   |
| Loans** | rental  | hips, | tantial | tions | ee. | entities, and  |   |
|         | housing | li    | rehabil | of    |     | up to 97       |   |
| **(     | for low | mited | itation | 2     |     | percent loan   |   |
| Section | to      | liab  | of      | 0,000 |     | to value for   |   |
| 538)**  | m       | ility | rural   | or    |     | loans made to  |   |
|         | oderate | compa | rental  | less. |     | non-profit     |   |
|         | income  | nies, | h       |       |     | entities.      |   |
|         | indi    | tr    | ousing. |       |     | Repayment      |   |
|         | viduals | usts, |         |       |     | terms are 25   |   |
|         | and     | state |         |       |     | to 40 year     |   |
|         | fa      | and   |         |       |     | amortization.  |   |
|         | milies. | local |         |       |     |                |   |
|         |         | age   |         |       |     |                |   |
|         |         | ncies |         |       |     |                |   |
|         |         | and   |         |       |     |                |   |
|         |         | I     |         |       |     |                |   |
|         |         | ndian |         |       |     |                |   |
|         |         | Tr    |         |       |     |                |   |
|         |         | ibes. |         |       |     |                |   |
|         |         | Apply |         |       |     |                |   |
|         |         | to    |         |       |     |                |   |
|         |         | le    |         |       |     |                |   |
|         |         | nder. |         |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| **      | Repair  | P     | Op      | Rural | Gra | Grant          |   |
| Housing | and     | ublic | eration | areas | nt. | agreement.     |   |
| Prese   | rehab   | b     | of a    | with  |     |                |   |
| rvation | ilitate | odies | program | p     |     |                |   |
| G       | housing | and   | which   | opula |     |                |   |
| rants** | owned   | non-p | f       | tions |     |                |   |
|         | or      | rofit | inances | of    |     |                |   |
| **(     | o       | orga  | repair  | 2     |     |                |   |
| Section | ccupied | nizat | and     | 0,000 |     |                |   |
| 533)**  | by      | ions. | rehabil | or    |     |                |   |
|         | ve      | Apply | itation | less. |     |                |   |
|         | ry-low- | to    | act     |       |     |                |   |
|         | and     | Rural | ivities |       |     |                |   |
|         | low     | De    | for     |       |     |                |   |
|         | -income | velop | single  |       |     |                |   |
|         | rural   | ment. | family  |       |     |                |   |
|         | fa      |       | and     |       |     |                |   |
|         | milies. |       | small   |       |     |                |   |
|         |         |       | rental  |       |     |                |   |
|         |         |       | prop    |       |     |                |   |
|         |         |       | erties. |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| **Farm  | Safe,   | In    | New     | No    | Dir | Up to 102      |   |
| Labor   | wel     | divid | const   | popul | ect | percent of     |   |
| Ho      | l-built | uals, | ruction | ation | l   | total          |   |
| using** | aff     | p     | or      | re    | oan | development    |   |
|         | ordable | ublic | subs    | stric | and | cost.          |   |
| **(S    | rental  | and   | tantial | tion. | gra |                |   |
| ections | housing | pr    | rehabil |       | nt. | Up to 33 years |   |
| 514 &   | for     | ivate | itation |       |     | to repay at 1  |   |
| 516)**  | farm    | non-p | of      |       |     | percent        |   |
|         | w       | rofit | rental  |       |     | interest.      |   |
|         | orkers. | orga  | h       |       |     |                |   |
|         |         | nizat | ousing. |       |     |                |   |
|         |         | ions. |         |       |     |                |   |
|         |         | Apply |         |       |     |                |   |
|         |         | to    |         |       |     |                |   |
|         |         | Rural |         |       |     |                |   |
|         |         | De    |         |       |     |                |   |
|         |         | velop |         |       |     |                |   |
|         |         | ment. |         |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| **Co    | Provide | P     | Build   | Rural | Dir | Up to 100      |   |
| mmunity | es      | ublic | fac     | areas | ect | percent of     |   |
| Facil   | sential | bo    | ilities | with  | l   | market value.  |   |
| ities** | co      | dies, | and     | p     | oan | Up to 40 years |   |
|         | mmunity | non-p | p       | opula | or  | or life of     |   |
| **(Fait | fac     | rofit | urchase | tions |     | security.      |   |
| h-Based | ilities | orga  | eq      | of    | l   | Maximum grant  |   |
| and     | for     | nizat | uipment | 2     | oan | 75 percent of  |   |
| First   | rural   | ions, | for     | 0,000 | g   | project cost.  |   |
| Respo   | commu   | and   | fire    | or    | uar |                |   |
| nder)** | nities. | I     | and     | less. | ant |                |   |
|         |         | ndian | rescue, |       | ee, |                |   |
|         |         | tr    | early   |       | gra |                |   |
|         |         | ibes. | warning |       | nt. |                |   |
|         |         | Apply | s       |       |     |                |   |
|         |         | to    | ystems, |       |     |                |   |
|         |         | Rural | police  |       |     |                |   |
|         |         | De    | st      |       |     |                |   |
|         |         | velop | ations, |       |     |                |   |
|         |         | ment. | health  |       |     |                |   |
|         |         |       | c       |       |     |                |   |
|         |         |       | linics, |       |     |                |   |
|         |         |       | s       |       |     |                |   |
|         |         |       | chools, |       |     |                |   |
|         |         |       | lib     |       |     |                |   |
|         |         |       | raries, |       |     |                |   |
|         |         |       | hos     |       |     |                |   |
|         |         |       | pitals, |       |     |                |   |
|         |         |       | etc.    |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+
| **      |         |       |         |       |     |                |   |
| *Direct |         |       |         |       |     |                |   |
| Loans   |         |       |         |       |     |                |   |
| and     |         |       |         |       |     |                |   |
| G       |         |       |         |       |     |                |   |
| rants - |         |       |         |       |     |                |   |
| Apply   |         |       |         |       |     |                |   |
| to      |         |       |         |       |     |                |   |
| Rural   |         |       |         |       |     |                |   |
| Devel   |         |       |         |       |     |                |   |
| opment. |         |       |         |       |     |                |   |
| Loan    |         |       |         |       |     |                |   |
| Guara   |         |       |         |       |     |                |   |
| ntees - |         |       |         |       |     |                |   |
| Apply   |         |       |         |       |     |                |   |
| to      |         |       |         |       |     |                |   |
| inter   |         |       |         |       |     |                |   |
| mediary |         |       |         |       |     |                |   |
| (a      |         |       |         |       |     |                |   |
| pproved |         |       |         |       |     |                |   |
| banks,  |         |       |         |       |     |                |   |
| m       |         |       |         |       |     |                |   |
| ortgage |         |       |         |       |     |                |   |
| comp    |         |       |         |       |     |                |   |
| anies)* |         |       |         |       |     |                |   |
| *R      |         |       |         |       |     |                |   |
| evised* |         |       |         |       |     |                |   |
| *June   |         |       |         |       |     |                |   |
| 01,     |         |       |         |       |     |                |   |
| 2006*** |         |       |         |       |     |                |   |
+---------+---------+-------+---------+-------+-----+----------------+---+

**Rural Development --- Business and Cooperative Programs**

+---------+---------+---------+---------+--------+-----+-------------+
| Program | Ob      | Ap      | Uses    | Popu   | L   | Terms       |
|         | jective | plicant |         | lation | oan | /Conditions |
|         |         |         |         |        | /Gr |             |
|         |         |         |         |        | ant |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **B     | Create  | Busi    | Most    | Any    | L   | Lender and  |
| usiness | jobs    | nesses. | legal   | area   | oan | borrower    |
| and     | and     | Apply   | b       | other  | g   | negotiate   |
| I       | st      | through | usiness | than a | uar | terms.      |
| ndustry | imulate | Federal | p       | city   | ant | Interest    |
| Gu      | rural   | or      | urposes | or     | ee. | rate tied   |
| arantee | ec      | State   | except  | town   |     | to          |
| Loans** | onomies | ch      | pro     | that   |     | published   |
|         | by      | artered | duction | has a  |     | rate that   |
|         | pr      | banks,  | agric   | popu   |     | may change  |
|         | oviding | credit  | ulture. | lation |     | no more     |
|         | fi      | unions, | Include | of     |     | often than  |
|         | nancial | or      | acqui   | g      |     | quarterly.  |
|         | backing | savings | sition, | reater |     |             |
|         | for     | & loan  | s       | than   |     |             |
|         | rural   | associ  | tart-up | 50,000 |     |             |
|         | busi    | ations. | and     | inhab  |     |             |
|         | nesses. |         | ex      | itants |     |             |
|         |         |         | pansion | and    |     |             |
|         |         |         | of      | the    |     |             |
|         |         |         | bus     | urb    |     |             |
|         |         |         | inesses | anized |     |             |
|         |         |         | that    | area   |     |             |
|         |         |         | create  | cont   |     |             |
|         |         |         | rural   | iguous |     |             |
|         |         |         | empl    | and    |     |             |
|         |         |         | oyment. | ad     |     |             |
|         |         |         |         | jacent |     |             |
|         |         |         |         | to     |     |             |
|         |         |         |         | such a |     |             |
|         |         |         |         | city   |     |             |
|         |         |         |         | or     |     |             |
|         |         |         |         | town.  |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Inter | Finance | Public  | Co      | Rural  | Dir | The         |
| mediary | b       | bodies, | mmunity | areas  | ect | i           |
| Re      | usiness | non     | deve    | and    | lo  | ntermediary |
| lending | fac     | -profit | lopment | incorp | an. | makes loans |
| Program | ilities | corpor  | pr      | orated |     | to          |
| Loans** | and     | ations, | ojects, | places |     | businesses  |
|         | co      | Native  | establ  | with   |     | from its    |
|         | mmunity | A       | ishment | popul  |     | revolving   |
|         | deve    | merican | or      | ations |     | loan fund   |
|         | lopment | tribes, | ex      | of     |     | on terms    |
|         | p       | and     | pansion | less   |     | consistent  |
|         | rojects | cooper  | of      | than   |     | with        |
|         | in      | atives. | busi    | 2      |     | security    |
|         | rural   | Apply   | nesses, | 5,000. |     | offered.    |
|         | areas.  | to      | c       |        |     | I           |
|         |         | Rural   | reation |        |     | ntermediary |
|         |         | Devel   | or      |        |     | pays 1      |
|         |         | opment. | saving  |        |     | percent for |
|         |         |         | of      |        |     | 30 years.   |
|         |         |         | rural   |        |     |             |
|         |         |         | jobs.   |        |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Rural | Finance | Public  | Buy and | Any    | Gra | When grant  |
| B       | and     | bodies, | develop | area   | nt. | funds are   |
| usiness | fac     | private | land,   | other  |     | used for    |
| Ent     | ilitate | non     | es      | than a |     | revolving   |
| erprise | the     | -profit | tablish | city   |     | loan fund   |
| G       | deve    | corpor  | a       | or     |     | (RLF), the  |
| rants** | lopment | ations, | re      | town   |     | i           |
|         | of      | and     | volving | that   |     | ntermediary |
|         | small   | fe      | loan    | has a  |     | makes loans |
|         | and     | derally | fund,   | popu   |     | to          |
|         | e       | rec     | co      | lation |     | businesses  |
|         | merging | ognized | nstruct | of     |     | from its    |
|         | private | Native  | bui     | g      |     | RLF on      |
|         | b       | A       | ldings, | reater |     | terms       |
|         | usiness | merican | plants, | than   |     | consistent  |
|         | enter   | tribal  | equ     | 50,000 |     | with        |
|         | prises. | groups. | ipment, | inhab  |     | security    |
|         |         | Apply   | access  | itants |     | offered.    |
|         |         | to      | streets | and    |     |             |
|         |         | Rural   | and     | the    |     |             |
|         |         | Devel   | roads,  | urb    |     |             |
|         |         | opment. | parking | anized |     |             |
|         |         |         | areas,  | area   |     |             |
|         |         |         | utility | cont   |     |             |
|         |         |         | and     | iguous |     |             |
|         |         |         | service | and    |     |             |
|         |         |         | exte    | ad     |     |             |
|         |         |         | nsions, | jacent |     |             |
|         |         |         | and     | to     |     |             |
|         |         |         | rural   | such a |     |             |
|         |         |         | d       | city   |     |             |
|         |         |         | istance | or     |     |             |
|         |         |         | l       | town.  |     |             |
|         |         |         | earning |        |     |             |
|         |         |         | ne      |        |     |             |
|         |         |         | tworks. |        |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Rural | Finance | Public  | Te      | Any    | Gra | Must be     |
| B       | te      | bodies, | chnical | area   | nt. | completed   |
| usiness | chnical | non     | assi    | other  |     | within 2    |
| Oppo    |         | -profit | stance, | than a |     | years after |
| rtunity | ass     |         | lea     | city   |     | project has |
| G       | istance | corpor  | dership | or     |     | begun.      |
| rants** | for     | ations, | tr      | town   |     |             |
|         | b       | Indian  | aining, | that   |     |             |
|         | usiness | tribes  | establ  | has a  |     |             |
|         | deve    | on      | ishment | popu   |     |             |
|         | lopment | Federal | of      | lation |     |             |
|         | and     | or      | b       | of     |     |             |
|         | conduct | State   | usiness | g      |     |             |
|         | e       | reserv  | support | reater |     |             |
|         | conomic | ations, | c       | than   |     |             |
|         | deve    | and     | enters, | 50,000 |     |             |
|         | lopment | coope   | e       | inhab  |     |             |
|         | p       | ratives | conomic | itants |     |             |
|         | lanning | with    | deve    | and    |     |             |
|         | in      | members | lopment | the    |     |             |
|         | rural   | that    | plans.  | urb    |     |             |
|         | areas.  | are     |         | anized |     |             |
|         |         | pr      |         | area   |     |             |
|         |         | imarily |         | cont   |     |             |
|         |         | rural   |         | iguous |     |             |
|         |         | res     |         | and    |     |             |
|         |         | idents. |         | ad     |     |             |
|         |         |         |         | jacent |     |             |
|         |         |         |         | to     |     |             |
|         |         |         |         | such a |     |             |
|         |         |         |         | city   |     |             |
|         |         |         |         | or     |     |             |
|         |         |         |         | town.  |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Rural | Finance | E       | Promote | Rural  | Dir | The         |
| E       | e       | lectric | rural   | areas  | ect | i           |
| conomic | conomic | and     | e       | and    | l   | ntermediary |
| Deve    | deve    | te      | conomic | places | oan | (electric   |
| lopment | lopment | lephone | deve    | with   | and | or          |
| Loans   | and job | ut      | lopment | popul  | rev | telephone   |
| and**   | c       | ilities | and/or  | ations | olv | utility)    |
|         | reation | e       | job     | of     | ing | makes loans |
| **G     | in      | ligible | c       | 2,500  | l   | to profit   |
| rants** | rural   | for     | reation | or     | oan | or          |
|         | areas.  | fi      | p       | less.  | f   | non-profit  |
|         |         | nancing | rojects |        | und | business    |
|         |         | from    | in      |        | gra | and public  |
|         |         | the     | cluding |        | nt. | bodies for  |
|         |         | Rural   | feas    |        |     | rural       |
|         |         | Ut      | ibility |        |     | economic    |
|         |         | ilities | s       |        |     | development |
|         |         | S       | tudies, |        |     | and/or job  |
|         |         | ervice. | startup |        |     | creation    |
|         |         | Apply   | costs,  |        |     | projects.   |
|         |         | to      | and     |        |     | Loans are 0 |
|         |         | Rural   | b       |        |     | percent for |
|         |         | Devel   | usiness |        |     | 10 years.   |
|         |         | opment. | incu    |        |     |             |
|         |         |         | bators. |        |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Rural | Es      | Non     | To      | Any    | Gra | Applicants  |
| Coop    | tablish | -profit | conduct | area   | nt. | must meet   |
| erative | and     | corpo   | feas    | other  |     | specific    |
| Deve    | operate | rations | ibility | than a |     | selection   |
| lopment | centers | and     | s       | city   |     | criteria    |
| G       | for     | insti   | tudies, | or     |     | including a |
| rants** | coop    | tutions | b       | town   |     | minimum 25  |
|         | erative | of      | usiness | that   |     | percent     |
|         | deve    | higher  | plans,  | has a  |     | fund match. |
|         | lopment | edu     | and     | popu   |     | Grants are  |
|         | to      | cation. | applied | lation |     | awarded on  |
|         | improve | Apply   | r       | of     |     | a           |
|         | the     | d       | esearch | g      |     | competitive |
|         | e       | irectly | as well | reater |     | basis.      |
|         | conomic | to      | as      | than   |     |             |
|         | co      | Rural   | provide | 50,000 |     |             |
|         | ndition | Deve    | t       | inhab  |     |             |
|         | of      | lopment | raining | itants |     |             |
|         | rural   | N       | and     | and    |     |             |
|         | areas   | ational | other   | the    |     |             |
|         | through | Office. | te      | urb    |     |             |
|         | the     |         | chnical | anized |     |             |
|         | deve    |         | ass     | area   |     |             |
|         | lopment |         | istance | cont   |     |             |
|         | of new  |         | to new  | iguous |     |             |
|         | coope   |         | and     | and    |     |             |
|         | ratives |         | e       | ad     |     |             |
|         | and     |         | xisting | jacent |     |             |
|         | im      |         | coope   | to     |     |             |
|         | proving |         | ratives | such a |     |             |
|         | ope     |         | and     | city   |     |             |
|         | rations |         | busi    | or     |     |             |
|         | of      |         | nesses. | town.  |     |             |
|         | e       |         |         |        |     |             |
|         | xisting |         |         |        |     |             |
|         | cooper  |         |         |        |     |             |
|         | atives. |         |         |        |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Valu  | Assist  | Inde    | P       | No     | Gra | Applicants  |
| e-Added | inde    | pendent | lanning | popu   | nt. | must meet   |
| Agric   | pendent | pro     | p       | lation |     | specific    |
| ultural |         | ducers, | urposes | restri |     | selection   |
| Product | agric   | farmer  | such as | ction. |     | criteria.   |
| Market  | ultural | and     | con     |        |     | Grants are  |
| Deve    | pr      | rancher | ducting |        |     | awarded on  |
| lopment | oducers | cooper  | feas    |        |     | a           |
| G       | to      | atives, | ibility |        |     | competitive |
| rants** |         | agric   | studies |        |     | basis.      |
|         | enter   | ultural | or      |        |     | Funds       |
|         | into    | p       | b       |        |     | cannot be   |
|         | act     | roducer | usiness |        |     | used to     |
|         | ivities | groups, | plans;  |        |     | build       |
|         | that    | and     | or as   |        |     | facilities  |
|         | add     | major   | working |        |     | or purchase |
|         | value   | ity-con | capital |        |     | equipment.  |
|         | to      | trolled | to help |        |     | Funds must  |
|         | their   | produce | start   |        |     | be matched  |
|         | commo   | r-based | the     |        |     | on a        |
|         | dities. | b       | ope     |        |     | dollar      |
|         |         | usiness | rations |        |     | -for-dollar |
|         |         | ve      | of a    |        |     | basis.      |
|         |         | ntures. | v       |        |     |             |
|         |         | Apply   | enture. |        |     |             |
|         |         | d       |         |        |     |             |
|         |         | irectly |         |        |     |             |
|         |         | to      |         |        |     |             |
|         |         | Rural   |         |        |     |             |
|         |         | Deve    |         |        |     |             |
|         |         | lopment |         |        |     |             |
|         |         | N       |         |        |     |             |
|         |         | ational |         |        |     |             |
|         |         | Office. |         |        |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Small | Te      | Coope   | To      | All    | Gra | Applicants  |
| M       | chnical | ratives | conduct | areas  | nt. | must meet   |
| inority | Ass     | or      | te      | except |     | specific    |
| P       | istance | assoc   | chnical | cities |     | selection   |
| roducer |         | iations | ass     | of     |     | criteria    |
| G       |         | of      | istance | more   |     | and grants  |
| rants** |         | coop    | such as | than   |     | are awarded |
|         |         | erative | market  | 50,000 |     | on a        |
|         |         | whose   | re      | and    |     | competitive |
|         |         | primary | search, | their  |     | basis.      |
|         |         | focus   | product | cont   |     | Funds are   |
|         |         | is to   | and/or  | iguous |     | to be use   |
|         |         | provide | service | and    |     | only for    |
|         |         | ass     | impro   | ad     |     | Technical   |
|         |         | istance | vement; | jacent |     | Assistance. |
|         |         | to      | legal   | urb    |     | There are   |
|         |         | small,  | advice  | anized |     | no matching |
|         |         | m       | and     | areas. |     | r           |
|         |         | inority | assi    |        |     | equirements |
|         |         | pr      | stance; |        |     | for this    |
|         |         | oducers | feas    |        |     | program.    |
|         |         | and     | ibility |        |     |             |
|         |         | whose   | study,  |        |     |             |
|         |         | go      | b       |        |     |             |
|         |         | verning | usiness |        |     |             |
|         |         | board   | plan    |        |     |             |
|         |         | and/or  | and     |        |     |             |
|         |         | mem     | ma      |        |     |             |
|         |         | bership | rketing |        |     |             |
|         |         | is      | plan    |        |     |             |
|         |         | co      | devel   |        |     |             |
|         |         | mprised | opment; |        |     |             |
|         |         | of at   | and     |        |     |             |
|         |         | least   | tr      |        |     |             |
|         |         | 75      | aining. |        |     |             |
|         |         | percent |         |        |     |             |
|         |         | mi      |         |        |     |             |
|         |         | nority. |         |        |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **Re    | Finance | Agric   | Const   | Any    | L   | Applicants  |
| newable | the     | ultural | ruction | area   | oan | must meet   |
| Energy  | p       | pr      | or      | other  | gua | specific    |
| Systems | urchase | oducers | improv  | than a | ran | selection   |
| and     | of      | and     | ements, | city   | tee | criteria.   |
| Energy  | re      | rural   | p       | or     | and | Loans       |
| Eff     | newable | small   | urchase | town   | gra | cannot      |
| iciency | energy  | busi    | and     | that   | nt. | exceed 50   |
| Impro   | s       | nesses. | insta   | has a  |     | percent of  |
| vements | ystems, |         | llation | popu   |     | eligible    |
| Loans   | and     |         | of      | lation |     | project     |
| and     | make    |         | equ     | of     |     | costs.      |
| G       | energy  |         | ipment, | g      |     | Grants are  |
| rants** | improv  |         | energy  | reater |     | awarded on  |
|         | ements. |         | audits, | than   |     | a           |
|         |         |         | permit  | 50,000 |     | competitive |
|         |         |         | fees,   | inhab  |     | basis.      |
|         |         |         | profe   | itants |     | Grant       |
|         |         |         | ssional | and    |     | cannot      |
|         |         |         | service | the    |     | exceed 25   |
|         |         |         | fees,   | urb    |     | percent of  |
|         |         |         | b       | anized |     | eligible    |
|         |         |         | usiness | area   |     | project     |
|         |         |         | plans,  | cont   |     | costs.      |
|         |         |         | feas    | iguous |     |             |
|         |         |         | ibility | and    |     |             |
|         |         |         | s       | ad     |     |             |
|         |         |         | tudies. | jacent |     |             |
|         |         |         |         | to     |     |             |
|         |         |         |         | such a |     |             |
|         |         |         |         | city   |     |             |
|         |         |         |         | or     |     |             |
|         |         |         |         | town.  |     |             |
+---------+---------+---------+---------+--------+-----+-------------+
| **      | Finance | Insti   | R       | No     | Gra | Applicants  |
| Biomass | the     | tutions | esearch | popu   | nt. | must meet   |
| R       | r       | of      | and     | lation |     | specific    |
| esearch | esearch | higher  | deve    | restri |     | selection   |
| and     | and     | edu     | lopment | ction. |     | criteria.   |
| Deve    | deve    | cation, | of      |        |     | Grants are  |
| lopment | lopment | N       | biomass |        |     | awarded on  |
| Initi   | of      | ational | based   |        |     | a           |
| ative** | biomass | labora  | pr      |        |     | competitive |
|         | based   | tories, | oducts, |        |     | basis. A    |
|         | pr      | Federal | bio     |        |     | minimum of  |
|         | oducts, | or      | energy, |        |     | 20 percent  |
|         | bio     | State   | bi      |        |     | cost        |
|         | energy, | r       | ofuels, |        |     | sharing     |
|         | bi      | esearch | and     |        |     | r           |
|         | ofuels, | ag      | related |        |     | equirements |
|         | and     | encies, | pro     |        |     | apply, and  |
|         | related | private | cesses. |        |     | may be up   |
|         | pro     | sector  |         |        |     | to 50       |
|         | cesses. | en      |         |        |     | percent     |
|         |         | tities, |         |        |     | depending   |
|         |         | and     |         |        |     | on nature   |
|         |         | non     |         |        |     | of project. |
|         |         | -profit |         |        |     | Cost share  |
|         |         | organiz |         |        |     | must come   |
|         |         | ations. |         |        |     | from        |
|         |         |         |         |        |     | non-Federal |
|         |         |         |         |        |     | sources.    |
+---------+---------+---------+---------+--------+-----+-------------+
| **      |         |         |         |        |     |             |
| *Direct |         |         |         |        |     |             |
| Loans   |         |         |         |        |     |             |
| and     |         |         |         |        |     |             |
| G       |         |         |         |        |     |             |
| rants - |         |         |         |        |     |             |
| Apply   |         |         |         |        |     |             |
| to      |         |         |         |        |     |             |
| Rural   |         |         |         |        |     |             |
| Devel   |         |         |         |        |     |             |
| opment. |         |         |         |        |     |             |
| Loan    |         |         |         |        |     |             |
| Guara   |         |         |         |        |     |             |
| ntees - |         |         |         |        |     |             |
| Apply   |         |         |         |        |     |             |
| to      |         |         |         |        |     |             |
| inter   |         |         |         |        |     |             |
| mediary |         |         |         |        |     |             |
| (e      |         |         |         |        |     |             |
| ligible |         |         |         |        |     |             |
| banks,  |         |         |         |        |     |             |
| etc).*  |         |         |         |        |     |             |
| *R      |         |         |         |        |     |             |
| evised* |         |         |         |        |     |             |
| *June   |         |         |         |        |     |             |
| 01,     |         |         |         |        |     |             |
| 2006*** |         |         |         |        |     |             |
+---------+---------+---------+---------+--------+-----+-------------+

**Rural Development --- Utilities Programs**

+---------+---------+-------+---------+-------+-----+----------------+
| Program | Ob      | Appl  | Uses    | Popul | L   | Te             |
|         | jective | icant |         | ation | oan | rms/Conditions |
|         |         |       |         |       | /Gr |                |
|         |         |       |         |       | ant |                |
+---------+---------+-------+---------+-------+-----+----------------+
| **Water | Provide | P     | Build,  | Rural | Dir | Interest rates |
| and     | water   | ublic | repair, | a     | ect | are set        |
| Waste   | and     | enti  | and     | reas, | l   | quarterly      |
| D       | waste   | ties, | improve | ci    | oan | based on an    |
| isposal | fi      | I     | public  | ties, | and | index of       |
| Loans   | nancing | ndian | water   | and   | gra | current market |
| and     | in      | tr    | s       | towns | nt. | yields for     |
| G       | rural   | ibes, | ystems, | with  |     | municipal      |
| rants** | areas   | and   | and     | up to |     | obligations.   |
|         | to the  | non-p | waste   | 1     |     | Repayment      |
|         | most    | rofit | col     | 0,000 |     | period is a    |
|         | fina    | cor   | lection | p     |     | maximum of 40  |
|         | ncially | porat | and     | opula |     | years. Grant   |
|         | needy   | ions. | tr      | tion. |     | funds may be   |
|         | app     | Apply | eatment |       |     | available.     |
|         | licants | to    | s       |       |     |                |
|         | re      | Rural | ystems. |       |     |                |
|         | sulting | De    | Also    |       |     |                |
|         | in      | velop | other   |       |     |                |
|         | rea     | ment. | related |       |     |                |
|         | sonable |       | costs.  |       |     |                |
|         | user    |       |         |       |     |                |
|         | fees.   |       |         |       |     |                |
+---------+---------+-------+---------+-------+-----+----------------+
| **Water | Provide | P     | Con     | Rural | L   | Eligible       |
| and     | loan    | ublic | struct, | a     | oan | lenders obtain |
| Waste   | gua     | enti  | repair, | reas, | g   | up to a 90     |
| D       | rantees | ties, | modify, | ci    | uar | percent        |
| isposal | to      | I     | expand, | ties, | ant | guarantee on   |
| Loan    | lenders | ndian | improve | and   | ee. | loans they     |
| Guara   | serving | tr    | water   | towns |     | make and       |
| ntees** | fina    | ibes, | supply  | with  |     | service.       |
|         | ncially | and   | and     | up to |     | Lenders should |
|         | needy   | non-p | distr   | 1     |     | contact Rural  |
|         | appl    | rofit | ibution | 0,000 |     | Development    |
|         | icants. | cor   | s       | p     |     | Area or State  |
|         |         | porat | ystems, | opula |     | Office.        |
|         |         | ions. | and     | tion. |     |                |
|         |         | Apply | waste   |       |     |                |
|         |         | to    | col     |       |     |                |
|         |         | Rural | lection |       |     |                |
|         |         | De    | and     |       |     |                |
|         |         | velop | tr      |       |     |                |
|         |         | ment. | eatment |       |     |                |
|         |         |       | s       |       |     |                |
|         |         |       | ystems. |       |     |                |
|         |         |       | Also    |       |     |                |
|         |         |       | other   |       |     |                |
|         |         |       | related |       |     |                |
|         |         |       | costs.  |       |     |                |
+---------+---------+-------+---------+-------+-----+----------------+
| **Solid | Provide | Non-p | Provide | Rural | Gra | Projects are   |
| Waste   | te      | rofit | te      | a     | nt. | funded based   |
| Man     | chnical | org   | chnical | reas, |     | on selection   |
| agement | ass     | aniza | ass     | c     |     | at the         |
| G       | istance | tions | istance | ities |     | National       |
| rants** | and/or  | and   | and     | and   |     | level.         |
|         | t       | p     | t       | towns |     | Applications   |
|         | raining | ublic | raining | with  |     | are accepted   |
|         | to help | bo    | to      | up to |     | from October 1 |
|         | comm    | dies. | reduce  | 1     |     | to December 31 |
|         | unities | Apply | po      | 0,000 |     | of each year.  |
|         | reduce  | to    | llution | p     |     |                |
|         | or      | Rural | of      | opula |     |                |
|         | el      | De    | water   | tion. |     |                |
|         | iminate | velop | re      |       |     |                |
|         | po      | ment. | sources |       |     |                |
|         | llution |       | and     |       |     |                |
|         | of      |       | improve |       |     |                |
|         | water   |       | man     |       |     |                |
|         | re      |       | agement |       |     |                |
|         | sources |       | of      |       |     |                |
|         | and     |       | solid   |       |     |                |
|         | improve |       | waste   |       |     |                |
|         | p       |       | faci    |       |     |                |
|         | lanning |       | lities. |       |     |                |
|         | and     |       |         |       |     |                |
|         | man     |       |         |       |     |                |
|         | agement |       |         |       |     |                |
|         | of      |       |         |       |     |                |
|         | solid   |       |         |       |     |                |
|         | waste   |       |         |       |     |                |
|         | sites.  |       |         |       |     |                |
+---------+---------+-------+---------+-------+-----+----------------+
| **Rural | The     | Le    | The     | Eli   | Dir | Loans are made |
| Br      | dep     | gally | constr  | gible | ect | at the         |
| oadband | loyment | orga  | uction, | rural | l   | Treasury rate  |
| Loans   | of      | nized | acqui   | c     | oan | of interest at |
| and     | br      | ent   | sition, | ommun | and | the time of    |
| Loan    | oadband | ities | and     | ities | l   | the advance    |
| Guara   | service | prov  | impr    | with  | oan | for a period   |
| ntees** | to      | iding | ovement | a     | g   | equal to       |
|         | e       | or    | of      | popul | uar | expected       |
|         | ligible | prop  | br      | ation | ant | composite      |
|         | rural   | osing | oadband | of    | ee. | economic life  |
|         | commu   | to    | trans   | 2     |     | of the assets  |
|         | nities. | pr    | mission | 0,000 |     | financed.      |
|         |         | ovide | fac     | i     |     | Loans are      |
|         |         | broa  | ilities | nhabi |     | guaranteed at  |
|         |         | dband | and     | tants |     | the interest   |
|         |         | se    | equ     | or    |     | rate set by    |
|         |         | rvice | ipment; | less. |     | the private    |
|         |         | in    | land    |       |     | lender for no  |
|         |         | eli   | and     |       |     | more than 80   |
|         |         | gible | bu      |       |     | percent of the |
|         |         | rural | ildings |       |     | principal      |
|         |         | co    | used in |       |     | amount.        |
|         |         | mmuni | pr      |       |     |                |
|         |         | ties. | oviding |       |     |                |
|         |         | C     | br      |       |     |                |
|         |         | annot | oadband |       |     |                |
|         |         | serve | s       |       |     |                |
|         |         | more  | ervice; |       |     |                |
|         |         | than  | and the |       |     |                |
|         |         | 2     | refi    |       |     |                |
|         |         | pe    | nancing |       |     |                |
|         |         | rcent | of      |       |     |                |
|         |         | of    | Tele    |       |     |                |
|         |         | the   | communi |       |     |                |
|         |         | tele  | cations |       |     |                |
|         |         | phone | Program |       |     |                |
|         |         | subsc | debt.   |       |     |                |
|         |         | riber |         |       |     |                |
|         |         | lines |         |       |     |                |
|         |         | inst  |         |       |     |                |
|         |         | alled |         |       |     |                |
|         |         | in    |         |       |     |                |
|         |         | the   |         |       |     |                |
|         |         | U.S.  |         |       |     |                |
+---------+---------+-------+---------+-------+-----+----------------+
| **E     | Provide | For   | Gene    | Elec  | Dir | Interest rates |
| lectric | fi      | p     | ration, | tric: | ect | are            |
| and     | nancial | rofit | bulk    | Rural | l   | established in |
| Teleco  | aid     | enti  | trans   | areas | oan | accordance     |
| mmunica | through | ties, | mission | as    | and | with           |
| tions** | direct  | non-p | faci    | de    | l   |                |
|         | and     | rofit | lities, | fined | oan | 7 CFR 1745.    |
| **Loans | gua     | and   | and     | by    | g   |                |
| and     | ranteed | c     | distr   | the   | uar |                |
| Guara   | loans   | ooper | ibution | U.S.  | ant |                |
| ntees** | for     | ative | of      | Ce    | ee. |                |
|         | e       | ass   | e       | nsus. |     |                |
|         | lectric | ociat | lectric |       |     |                |
|         | and     | ions, | power.  | Tel   |     |                |
|         | tele    | p     | Enhance | ecomm |     |                |
|         | communi | ublic | 911     | unica |     |                |
|         | cations | bo    | em      | tion: |     |                |
|         | se      | dies, | ergency | Rural |     |                |
|         | rvices. | and   | s       | areas |     |                |
|         |         | other | ervice, | with  |     |                |
|         |         | utili | digital | p     |     |                |
|         |         | ties. | sw      | opula |     |                |
|         |         | Apply | itching | tions |     |                |
|         |         | dir   | equ     | of    |     |                |
|         |         | ectly | ipment, | 5,000 |     |                |
|         |         | to    | fiber   | or    |     |                |
|         |         | Rural | optic   | less. |     |                |
|         |         | D     | cable,  |       |     |                |
|         |         | evelo | along   |       |     |                |
|         |         | pment | with    |       |     |                |
|         |         | Nat   | trad    |       |     |                |
|         |         | ional | itional |       |     |                |
|         |         | Of    | main    |       |     |                |
|         |         | fice. | system  |       |     |                |
|         |         |       | tele    |       |     |                |
|         |         |       | communi |       |     |                |
|         |         |       | cations |       |     |                |
|         |         |       | service |       |     |                |
|         |         |       | and     |       |     |                |
|         |         |       | br      |       |     |                |
|         |         |       | oadband |       |     |                |
|         |         |       | se      |       |     |                |
|         |         |       | rvices. |       |     |                |
+---------+---------+-------+---------+-------+-----+----------------+
| **D     | Deve    | In    | Eq      | Rural | Dir | Matching funds |
| istance | lopment | corpo | uipment | areas | ect | are required.  |
| L       | and     | rated | for     | with  | l   |                |
| earning | dep     | enti  | clas    | p     | oan |                |
| and     | loyment | ties, | srooms: | opula | and |                |
| Telem   | of      | incl  | c       | tions | /or |                |
| edicine | a       | uding | ameras, | of    | gra |                |
| Loans   | dvanced | muni  | video   | 2     | nt. |                |
| and     | tel     | cipal | mo      | 0,000 |     |                |
| G       | ecommun | cor   | nitors, | or    |     |                |
| rants** | ication | porat | com     | less. |     |                |
|         | s       | ions, | puters, |       |     |                |
|         | ervices | on a  | and     |       |     |                |
|         | thr     | for   | LAN.    |       |     |                |
|         | oughout | p     | Also    |       |     |                |
|         | rural   | rofit | for     |       |     |                |
|         | America | or    | ph      |       |     |                |
|         | to      | not-  | ysician |       |     |                |
|         | improve | for-p | consul  |       |     |                |
|         | ed      | rofit | tation, |       |     |                |
|         | ucation | b     | rad     |       |     |                |
|         | and     | asis, | iology, |       |     |                |
|         | health  | that  | ex-ray  |       |     |                |
|         | care.   | op    | sc      |       |     |                |
|         |         | erate | anners, |       |     |                |
|         |         | rural | and     |       |     |                |
|         |         | sch   | digital |       |     |                |
|         |         | ools, | micro   |       |     |                |
|         |         | libra | scopes. |       |     |                |
|         |         | ries, |         |       |     |                |
|         |         | h     |         |       |     |                |
|         |         | ealth |         |       |     |                |
|         |         | care  |         |       |     |                |
|         |         | cl    |         |       |     |                |
|         |         | inics |         |       |     |                |
|         |         | and   |         |       |     |                |
|         |         | other |         |       |     |                |
|         |         | org   |         |       |     |                |
|         |         | aniza |         |       |     |                |
|         |         | tions |         |       |     |                |
|         |         | that  |         |       |     |                |
|         |         | op    |         |       |     |                |
|         |         | erate |         |       |     |                |
|         |         | e     |         |       |     |                |
|         |         | ducat |         |       |     |                |
|         |         | ional |         |       |     |                |
|         |         | or    |         |       |     |                |
|         |         | h     |         |       |     |                |
|         |         | ealth |         |       |     |                |
|         |         | care  |         |       |     |                |
|         |         | f     |         |       |     |                |
|         |         | acili |         |       |     |                |
|         |         | ties. |         |       |     |                |
+---------+---------+-------+---------+-------+-----+----------------+
| **      |         |       |         |       |     |                |
| *Direct |         |       |         |       |     |                |
| Loans   |         |       |         |       |     |                |
| and     |         |       |         |       |     |                |
| G       |         |       |         |       |     |                |
| rants - |         |       |         |       |     |                |
| Apply   |         |       |         |       |     |                |
| to      |         |       |         |       |     |                |
| Rural   |         |       |         |       |     |                |
| Devel   |         |       |         |       |     |                |
| opment. |         |       |         |       |     |                |
| Loan    |         |       |         |       |     |                |
| Guara   |         |       |         |       |     |                |
| ntees - |         |       |         |       |     |                |
| Apply   |         |       |         |       |     |                |
| to      |         |       |         |       |     |                |
| inter   |         |       |         |       |     |                |
| mediary |         |       |         |       |     |                |
| (e      |         |       |         |       |     |                |
| ligible |         |       |         |       |     |                |
| banks,  |         |       |         |       |     |                |
| etc).*  |         |       |         |       |     |                |
| *R      |         |       |         |       |     |                |
| evised* |         |       |         |       |     |                |
| *June   |         |       |         |       |     |                |
| 01,     |         |       |         |       |     |                |
| 2006*** |         |       |         |       |     |                |
+---------+---------+-------+---------+-------+-----+----------------+