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**WRITTEN STATEMENT FOR THE RECORD**

**ROBERT J.THOMPSON, EXECUTIVE DIRECTOR OF THE**

**ANDROSCOGGIN VALLEY COUNCIL OF GOVERNMENTS**

**AND**

**VICE-CHAIR, RURAL DEVELOPMENT TASK FORCE OF THE**

**NATIONAL ASSOCIATION OF DEVELOPMENT ORGANIZATIONS (NADO)**

**BEFORE THE**

**U.S. HOUSE OF REPRESENTATIVES**

**COMMITTEE ON AGRICULTURE**

**SUBCOMMITTEE ON RURAL DEVELOPMENT, BIOTECHNOLOGY,**

**SPECIALTY CROPS, AND FOREIGN AGRICULTURE**

**WASHINGTON, DC**

**MARCH 31, 2009**

**Thank you, Chairman McIntyre, Ranking Member Conaway and members of
the Subcommittee, for the opportunity to testify today on USDA Rural
Development programs and the important role they play in helping
regional and local organizations provide financial and technical
assistance to rural entrepreneurs and businesses.**

My name is Bob Thompson. I serve as the Executive Director of the
Androscoggin Valley Council of Governments (AVCOG), a multi-disciplinary
regional planning and development organization serving

56 organized communities, and numerous townships and plantations in
Western Maine. We are the Economic Development District (EDD) designated
by the U.S. Economic Development Administration for our region. In
addition, we provide the primary management and staffing support for the
Maine Lakes and Mountains Tourism Council, the Androscoggin
Transportation Resource Center, a federally-designated Metropolitan
Planning Organization (MPO) serving the urbanized area in and around our
central cities of Lewiston and Auburn, and a Rural Transportation
Planning Organization.

I also serve as a Board Member of the National Association of
Development Organizations (NADO) and Vice-Chair of the NADO Rural
Development Task Force.

Before I begin, let me first thank the subcommittee for your leadership
and support of rural development programs as part of the 2008 Farm Bill.
The broad portfolio of USDA Rural Development programs for business
development, infrastructure, value-added agriculture production and
marketing, regional strategic planning and broadband deployment are
essential to the long-term economic competitiveness of our nation's
small urban and rural communities.

Chairman McIntyre, the members of NADO are also very appreciative of
your persistence and vision on the issue of federal-state regional
commissions, such as the Northern Border Regional Commission, the
Southeast Crescent Regional Commission and the Southwest Border Regional
Commission authorized in the 2008 Farm Bill. These federal-state
entities, which are targeted at multi-state, rural regions suffering
from persistent poverty, are structured to be complementary partners
with existing programs such as USDA Rural Development and the U.S.
Economic Development Administration. We strongly believe that the
successful implementation of the Northern Border Regional Commission
will help address the community and economic development needs of the
most severely distressed portions of the Northeastern United States.

**This afternoon, Mr. Chairman, I will focus my remarks on three key
areas**:

1.  **USDA Rural Development is an essential partner and funding source
    for rural regions as they work to develop the fundamental building
    blocks for community and economic competitiveness.** These include
    resources for basic infrastructure, as well as business development
    finance tools for entrepreneurs and businesses to create new
    employment and wealth opportunities in rural areas.

2.  **USDA's Rural Business Enterprise Grant (RBEG) program and
    Intermediary Relending Program (IRP) are highly effective
    resources** that allow intermediaries, such as AVCOG, to assist
    rural entrepreneurs, business leaders and local officials as they
    pursue innovative development strategies and business opportunities.

3.  **USDA Rural Development should provide new and more aggressive
    incentives, rewards and flexibility for rural communities to work
    together on a regional basis to pursue innovative regional
    development strategies, as envisioned in the 2008 Farm Bill's
    Regional Collaborative Investment Program (RCIP).** This is
    essential for rural communities to compete in today's global
    marketplace where we need the economies of scale, knowledge
    clusters, and physical and human infrastructure necessary to remain
    competitive. In Maine, the statewide network of Economic Development
    Districts have begun working with state and local officials, private
    sector leaders and nonprofit partners on an exciting and innovative
    asset-based rural development strategy that offers a great case
    study on the potential of USDA Rural Development's RCIP program.

**First, Mr. Chairman, USDA Rural Development is an essential partner
and funding source for rural regions and communities as they work to
develop the fundamental building blocks for community and economic
competitiveness.** With USDA's assistance, rural communities across the
nation are now in a better position to pursue innovative development
strategies that are resulting in new job and wealth- generating
opportunities, whether in traditional sectors such as agriculture and
natural-resource based industries or emerging science and technology
fields.

Fifty years ago, one out of every two jobs in Maine was concentrated in
the manufacturing sector. By comparison, approximately one in ten jobs
is tied to manufacturing today. During the 1990's, Western Maine was
still very highly concentrated in the traditional, manufacturing
industries such as leather, textiles, apparel and wood products, with
25 - 35 percent of our job base in these very industries being hardest
hit by global competition. In the past year, our unemployment rate has
doubled, increasing from approximately 5 to 10 percent.

Western Maine exhibits many of the same characteristics as other areas
along the Canadian border from New York to Maine. We are faced with
poverty rates above the national average, median household incomes
nearly \$7,500 below the national average, and stagnant or declining
populations. We also have many communities and areas of our region with
persistent unemployment problems.

The mass exodus of the state's manufacturing sector has left behind
large and small industrial complexes that often dominate our rural and
small urban centers. It has also left behind aging and decaying
infrastructure systems---primarily water and sewer systems---that now
need costly upgrades, yet we have a dwindling tax and employment base to
finance these essential investments. The flexible nature of USDA Rural
Development infrastructure and community facility programs, combined
with the agency's continued support of small towns and rural areas, has
been vital to our ability to respond to the evolving nature of our
region's economy.

**Second, Mr. Chairman, USDA Rural Development's Rural Business
Enterprise Grant (RBEG) program and Intermediary Relending Program (IRP)
are highly effective resources** that allow intermediaries, such as
AVCOG, to assist rural entrepreneurs, business leaders and local
officials as they pursue innovative development strategies and business
opportunities. We encourage the committee to look at ways to increase
funding resources for these small yet invaluable programs.

Androscoggin Valley COG's region covers over 4,200 square miles of
forested mountains and fields carved by pristine lakes and rivers. The
majority of our region's population of 188,000 is scattered over 75
small towns, townships, plantations and unorganized territories. Our two
largest cities, Lewiston and Auburn, are located in the southern portion
of the region, sharing a combined population of only 58,893 residents.
Early in the 1990s, AVCOG's policy board of local elected officials and
community leaders recognized that our dependence upon major employers
was a risk factor that could not be sustained.

As a result, an aggressive effort was initiated to establish lending and
technical assistance resources to help in the retention and development
of small- to medium-sized businesses. Our strategy was not simply to
retain our existing entrepreneurs and firms, but to help them grow and
prosper. This required us to develop the lending capacity and technical
assistance resources needed to assist start-up companies and existing
firms with seed capital, gap financing and business planning.

In 1995, we secured a USDA Rural Business Enterprise Grant of \$500,000.
Of this total, \$425,000 was for microlending and \$75,000 was dedicated
for technical assistance. As one of the smaller USDA initiatives, the
RBEG program is often overlooked. However, we have found that the broad,
flexible nature of RBEG assistance, combined with its focus on small
business development, makes the program an indispensable tool in our
region.

To date, we have lent over \$900,000 that has leveraged an additional
\$14.8 million in owner equity and private funds. The average RBEG loan
amount is approximately \$27,000, and the program has helped AVCOG and
its partners create or retain 350 jobs in our rural region.

In addition, we used approximately \$75,000 in earnings from our RBEG
investments to access an additional \$1.15 million in Small Business
Administration (SBA) funds. Utilizing the SBA assistance, we have
generated over \$1.3 million in loans that have leveraged nearly
\$700,000 in additional capital investment and created or retained 275
jobs.

Ultimately, the initial \$500,000 RBEG investment has enabled us to
create a lending pool of approximately \$1.58 million that has generated
over \$2.2 million in loans and leveraged an additional \$15.5 million
in business capital. More importantly, these investments have helped
create or retain 631 jobs with a highly efficient cost ratio between
\$2,500 - \$4,500 per job.

USDA Rural Development's Intermediary Relending Program (IRP) is another
invaluable and often overlooked resource for rural regions. This program
was created with the primary intent of providing gap financing to enable
our regional and local banks to write debt in conformance with national
standards.

Our organization has been awarded three IRP loans for a total of \$3.5
million. To date, the AVCOG IRP program has lent nearly \$8.4 million
that has leveraged over \$43.7 million in other capital investment. Of
the \$43.7 million total, \$3.6 million is in owner equity, \$33.3
million is in bank debt and \$6.8 million is in other public funds. Our
loan loss rate is currently 3.2 percent.

As we gained success and impact with our lending it became evident that
additional community impact could be created if we utilized a portion of
the IRP funding to invest in private, qualified, community- sponsored
redevelopment projects. We decided to make funds available with reduced
interests rates and flexible terms to encourage reinvestment by the
private sector into our downtowns and village centers. To date, we have
made three such incentive deals, including the Bass Wilson Mill project.

The Bass Wilson Mill, located in the heart of Wilton, a town of 4,100
people in Southwest Maine, is the original G. H. Bass Shoe production
facility. It is an imposing four-story, wood-frame structure that
dominates a small picturesque community of one-and two- story shops and
homes.

In 1998, as G. H. Bass announced its intention to halt shoe production
in Maine in favor of off-shore operations, the Wilson Mill was vacated.
Bass offered the building to the Town of Wilton for a minimal amount,
along with a commitment to mitigate any environmental issues.

When faced with the prospect of a vacant, deteriorating wood frame
structure in the center of the community, the Town of Wilton was
initially at a loss on how to proceed. Local leaders turned to AVCOG and
our business lending programs for assistance. AVCOG staff worked with
the community, and it was determined the best course of action was to
re-establish the local development corporation to take on the project.
AVCOG staff assisted in soliciting a proposal for a master development
agreement to rehabilitate the property. Ultimately, the property was
transferred to a private developer for one dollar, and we lent \$250,000
from our IRP community reinvestment pool to the developer.

Initial private investment was also \$250,000 and the pool funds were
lent at 5 percent, interest-only accrued, for the rehabilitation period.
The term was 60 months with the conversion of any remaining balance to 8
percent for a new five-year term. The intent was to ease costs during
the rent-up period and to create incentives for repayment at the end of
the initial term to replenish our lending pool. In fact, this was the
result.

This is just one example of the innovative nature of USDA Rural
Development business programs and their potential impact in rural and
small urban communities. Before tapping into the technical capacity of
AVCOG, along with our successful USDA loan portfolio, the town of Wilton
lacked the staff and financial resources to accomplish this deal. Today,
the Bass Wilson Mill property is fully renovated, houses five businesses
with 100 employees and pays \$14,200 in taxes each year. In addition,
community leaders have secured financing for façade rehabilitation and
off-street parking to complement the mill renovation.

The success of the project also gave community leaders the confidence to
repeat this deal structure when G. H. Bass proposed turning over its
primary production facility, a 300,000-square-foot property composed of
several connected buildings on the edge of the village. This project,
another AVCOG/IRP investment, is progressing quickly with the hopes of
becoming a commercially viable deal in the near future.

**Finally, Mr. Chairman, I would like to briefly discuss an exciting and
innovative asset-based rural development strategy that the Economic
Development Districts (EDDs) in Maine are working on with state and
local officials, private sector leaders and nonprofit partners** that
could be a model for USDA Rural Development's Regional Collaborative
Investment Program (RCIP).

In 2006, following a thorough assessment of Maine's economy, the
Brookings Institution published *An Action Plan for Promoting
Sustainable Prosperity and Quality Places.* Our Governor embraced many
of the report findings and, with additional recommendations from
Governor-appointed task forces, has called for a new public-private
partnership that will help refocus our economic development activities
through regionally led, asset-based development.

The new statewide effort, *Mobilize Maine*, will be launched next month
and is funded jointly by the private, public and nonprofit sectors
throughout Maine. It is organized at the grassroots level through the
leadership of Maine's six EDDs, providing the first systematic and
consistent approach to planning statewide economic development.

Most prominently, the initiative changes the model for rural economic
development in Maine by addressing our disconnected, fragmented and,
often times, ineffective system. It focuses our work on producing
results that improve the personal income of Maine workers.

It acknowledges that the quality, size and availability of our workforce
must be improved even in the context of our state's challenging
demographics. It acknowledges that Maine's quality of place is our most
significant competitive asset in the global competition for skill-based
employment and workers. It also attempts to change the way we think
about producing positive changes to our economy by leveraging the
elements that make our regions unique---our assets.

In the first year, this initiative aims to accomplish two broad goals.
First, our partners will engage collaborative private, public and
nonprofit sector investors and leaders who are committed to continuous
development and implementation of community and economic development
strategies and action plans that rise above political administrations.
Second, we will create a sense of urgency at the regional and state
level for the need to transform Maine's economic performance as a
foundation for sustainable economic growth.

**In closing, I urge your continued support of USDA Rural Development
programs, especially vital business lending and regional innovation
programs such as IRP, RBEG and RCIP. USDA Rural Development is an
essential partner and funding source for rural regions.** It is also a
vital tool for regional development organizations, such as AVCOG, as we
strive to provide assistance and build capacity for the rural
communities that rely on us for expertise and assistance.

Thank you again, Mr. Chairman and members of the subcommittee, for the
opportunity to testify today. I would welcome any questions.