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**RURAL DEVELOPMENT TITLE**

***Background***

USDA has the unique responsibility of coordinating Federal assistance to
rural areas of the Nation, as authorized by the Rural Development Policy
Act of 1980.  Each year, Rural Development programs attempt to create or
preserve rural jobs, build and update rural infrastructure, and create
or improve the quality of rural housing.  To multiply the impact of its
programs, Rural Development is working with State, local, and tribal
governments, as well as private and nonprofit organizations and
user-owned cooperatives.

[Housing]{.underline}

USDA housing programs work to improve the quality of life for rural
Americans by ensuring that they have access to safe, well-built,
affordable homes. Homeownership builds economic stability and, over the
long term, creates equity to finance education, business startups, and
retirement. USDA is responsible for delivering housing programs
authorized by the Housing Act of 1949, and community facilities programs
authorized by the Consolidated Farm and Rural Development Act of 1972.

USDA's housing programs finance new or improved housing for low- to
moderate-income families and individuals who wish to live in rural areas
or rural cities and towns. These loans are for the purchase,
construction, rehabilitation, or relocation of a dwelling. In fiscal
year (FY) 2005, a total of \$5.2 billion in loans and grants were made
to low- to moderate-income rural residents and nonprofit housing
organizations.

[Community Facilities]{.underline}

USDA's community facilities program strives to ensure that health care
clinics, police and fire stations, schools, and child care centers are
readily available to all rural Americans. Rural Development can make and
guarantee loans to develop essential community facilities in rural areas
and towns of up to 20,000 in population. In FY 2005, the program awarded
\$52.9 million in grants and loaned \$621.2 million for essential
community facilities for public use.

[Native Americans]{.underline}

Native American reservations have some of the lowest homeownership rates
in the country. The 1990 farm bill Section 2501(g) required USDA to
establish consolidated sub-offices at tribal headquarters wishing to
participate.

[Electric]{.underline}

The USDA electric program helps upgrade, expand, maintain, and replace
America's vast rural electric infrastructure. Under the authority of the
Rural Electrification Act of 1936, this program offers direct loans and
loan guarantees to electric utilities to serve customers in rural areas.
The Federal Government, through USDA's Rural Development, is the
majority note-holder for nearly 750 electric systems. The electric
program also offers financing assistance for renewable energy projects
(solar, wind, hydropower, biomass, or geothermal) and assistance to
rural communities with extremely high energy costs. The primary
differences between the programs are the qualifying criteria and the
interest rate for each type of financing.

USDA has approved approximately \$57 billion in debt financing to
support electric infrastructure in rural areas since the start of the
program. Of these rural systems, about 96 percent are nonprofit
cooperatives, owned and operated by the consumers they serve. The
remaining 4 percent include municipal systems, Native American tribal
utilities, and other entities.

[Water]{.underline}

Water and environmental programs are authorized under the Consolidated
Farm and Rural Development Act to make direct loans and grants to
develop drinking water and wastewater systems, including solid waste
disposal and storm drainage, in rural areas and in cities and towns with
a population of 10,000 or less. Funds are available to public entities,
such as municipalities, counties, special-purpose districts, and Indian
tribes. In addition, funds may be made available to nonprofit
corporations and cooperatives. In FY 2005, this program awarded a total
of \$485.8 million in grants and \$924.3 million in loans and loan
guarantees for essential water and wastewater facilities for rural
residents and towns.

The 2002 farm bill contains a number of water-related authorizations.
Section 6002 authorizes the Water or Waste Disposal Grants program,
Section 6005 authorizes the Rural Water and Wastewater Circuit Rider
program, Section 6009 authorizes the Emergency and Imminent Community
Water Assistance Grant program, Section 6010 authorizes the Water and
Waste Facility Grants for Native American Tribes program, Section 6011
authorizes Grants for Water Systems for Rural and Native Villages in
Alaska, and Section 6012 authorizes grants to nonprofit organizations to
finance the construction of household water well systems.

Congress has designated a Native American earmark of approximately \$17
million in FY 2005 for Water and Waste Facility Grants.

[Telecommunications]{.underline}

Modern high-speed telecommunications can improve the quality of life and
economic opportunity in rural America, opening markets, improving
education and health care, and providing jobs for rural youth who want
to stay in rural America. The Rural Electrification Act of 1936
authorizes loans and loan guarantees to telecommunications providers to
extend and improve telecommunications service in rural areas. USDA
telecommunications borrowers provide single-party service to nearly all
customers over digitally switched, state-of-the-art networks. In FY
2005, Rural Development funded 64 telecommunications projects totaling
\$518 million.

## 

## Section 6103 of the 2002 farm bill established the Rural Broadband Access program---authorizing loans to provide access to broadband service to areas with a population of 20,000 or less. The goal of this program is to ensure that rural consumers benefit from the same quality and range of telecommunications services that are available in urban and suburban communities. USDA has loaned approximately \$850 million to provide access to broadband services in rural communities since the start of this program in 2002. This program is authorized through 2007.

## 

## Section 6203 of the 2002 farm bill extends the Distance Learning and Telemedicine Program. This program is designed specifically to meet the educational and health care needs of rural America. Through loans, grants, and loan and grant combinations, advanced telecommunications technologies provide enhanced learning and health care opportunities for rural residents. In FY 2005, USDA obligated \$2.7 million in loans and \$2.1 million in grants for distance learning and telemedicine projects.

[Business]{.underline}

USDA creates jobs and stimulates economic development by funding the
growth and creation of rural businesses---often in partnership with
private-sector lenders and community-based organizations. In a typical
year, Rural Development business programs create or preserve between
70,000 and 80,000 rural jobs. Program assistance is provided through
direct or guaranteed loans, grants, and technical assistance authorized
by the 2002 farm bill, the Consolidated Farm and Rural Development Act
of 1973, the Food Security Act of 1985, and the Rural Electrification
Act of 1936. Recipients of these programs may include individuals,
corporations, partnerships, cooperatives, public entities, nonprofit
corporations, Indian tribes, and private companies. In FY 2005, USDA
made 444 loans totaling \$736 million, and awarded 497 grants for nearly
\$114.1 million.

The Rural Business Investment Program was established under Title VI,
Section 6029, of the 2002 farm bill to promote rural economic
development through venture capital investment by for-profit Rural
Business Investment Companies (RBICs). As required in the authorizing
statute, USDA has delegated to the Small Business Administration many of
the day-to-day responsibilities for this program, including receipt of
applications and most of the selection process for licensing as an RBIC.
A total of \$10 million was available in FY 2005 and remains available
in FY 2006. This budget authority will support \$3 million in grants,
\$65 million in loans, and \$2 million in administrative costs.

Section 6013 of the 2002 farm bill authorized the business and industry
program to make loans and loan guarantees for renewable energy systems,
including wind energy systems and anaerobic digesters. Since 2002, USDA
has funded eight projects for a total of \$61.4 million.

[Cooperatives]{.underline}

USDA helps rural residents form new cooperative businesses and improve
the operation of existing cooperatives.

Section 6401 of the 2002 farm bill authorizes USDA grants that enable
producers of agricultural commodities to participate in the economic
returns found in the value-added market. Value-Added Agricultural
Product Market Development (VAPG) grants may be used to develop business
plans and strategies for creating marketing opportunities and to provide
capital to establish alliances or business ventures allowing producers
to better compete in domestic and international markets. Grant proposals
must be limited to emerging markets, with the exception of independent
producer applicants, and only 10 percent of program funds can go to
applicants that are majority-controlled producer-based ventures. In FY
2005, the program funded projects totaling \$14.5 million.

[National Rural Development Partnership (NRDP)]{.underline}

Section 6021 of the 2002 farm bill authorizes the continuation of NRDP
and appropriations specific to the NRDP.  It also authorized the
establishment of a National Rural Development Coordinating Committee.
The NRDP brings together partners from local, State, tribal, and Federal
governments as well as from the for-profit and nonprofit private sector
to address the needs of rural America.  

 

***General Opinions Expressed***

[General Policy]{.underline}

-   Some commenters asked that a higher level and more visible Federal
    position be dedicated to rural communities; for example, a new
    Secretary-level Cabinet member for rural community development.

-   It was suggested that USDA maintain a balanced portfolio between
    competitive funding and base funding and that the Federal Government
    can affect things more directly through competitive targeted
    funding. Others recommended that funding be in the form of either
    block grants or formula funding that allocates funds to the
    appropriate USDA offices---under the premise that the people in the
    State will then craft the specifics of a program under the overall
    charge of the next farm bill with oversight from the USDA Secretary.

-   Commenters said that Rural Development programs are important to
    rural communities and noted the importance of USDA staff at the
    local level. Continued support is essential to improve the income
    level of citizens in rural communities.  Rural Development should
    rely on local staff and allow those folks to set priorities, and
    some suggested that the base amount of reserve funds and pools in
    every State should be increased.

-   USDA was encouraged to be open to recommendations emerging from the
    nationwide Farm Credit System Horizon Planning Project. The
    recommendations identify ways in which farm credit must evolve to
    meet the future needs of farmer/customer members.

-   Some commenters suggested that the new farm bill encourage
    collaboration and coalition building for rural regions that advance
    rural development, including funding intermediary organizations. 
    Regional market development should also be encouraged.

-   Others suggested that USDA should fund new technologies and
    innovative strategies to bring traditionally city-based jobs to
    rural communities and at the same time stop jobs from leaving our
    country.

-   A few commenters said that access to USDA programs should be given
    on the basis of out-migration levels.

-   A few others suggested that rural communities' transportation
    infrastructure---such as roads and bridges for transportation of
    agricultural products---be improved.

-   USDA should target rural development funds toward innovations that
    serve niche markets and match program monies to rural businesses
    that are working to meet the needs of the consumers.

-   A few commented that policy should fully recognize the unique needs
    of rural Alaska, noting that the current farm bill is structured for
    agriculture in the lower 48 States and needs adaptation to rural
    Alaska. Others suggested that all of Alaska be defined as "rural."

[Housing]{.underline}

-   Many expressed support for all housing and community facilities
    programs and encouraged USDA to increase program funding for these
    programs.

-   Some commenters asked that rental-assisted units continue to be
    available; while others expressed the need for preserving existing
    housing stock and continuing support for programs targeted to
    special areas and populations such as the Mississippi Delta and farm
    labor housing.

-   A few commenters stated that housing is insufficient on some Native
    American reservations, and others requested more USDA office
    presence on reservations.

[Electric]{.underline}

-   Commenters supported the use of renewable forms of energy such as
    wind and solar power.

[Water]{.underline}

-   Many expressed support for USDA water and wastewater programs
    (including the circuit rider program and emergency community water
    assistance grant program) and requested that funding be
    significantly increased so that efforts to extend potable and
    drinking water to rural areas, especially small, economically
    disadvantaged communities, can be continued.

-   Several commenters expressed the importance of protecting and
    securing our water resources from terrorism.

-   To assist in the affordability of basic water projects, some
    commenters requested that grant allocations be increased to small
    States (for example, Vermont) and rural villages (populations
    under 500) and that the loan interest rate be reduced.

-   Some commented that increased support for water system
    infrastructure investment is critically needed in Hawaii. Others
    commented that the high cost of water, electricity, land, and access
    to capital has had an effect on the competitiveness of aquaculture
    farmers.

-   Some tribal comments expressed a need for housing but noted a lack
    of funds for the necessary infrastructure of power and water. Others
    stated that USDA funding of infrastructure development on Native
    American reservations has led to other grants and loans from the
    Federal Government. These grants have enabled more Native Americans
    to remain on the reservations and have contributed to economic
    development.

[Broadband]{.underline}

-   Many supported increased efforts to develop affordable broadband
    access for rural towns, rural businesses, and farmers as an economic
    development tool.

-   Others suggested that USDA introduce a policy for achieving
    universal access to high-speed communications in rural areas.

-   A few suggested that USDA increase the grant amounts for broadband
    distribution to rural America.

[Business]{.underline}

-   Many commenters supported the continuation and increased funding of
    the business loan and grant programs---these programs provide the
    needed capital infusion for businesses in rural communities,
    especially start-up businesses.

-   Many commenters said that additional resources should be invested in
    USDA rural development programs to recognize entrepreneurship as a
    rural development strategy. Commenters also indicated that
    agriculturally based entrepreneurship and innovation must continue
    to play a prominent role in rural development policy, with emphasis
    on entrepreneurship rather than entitlements to revitalize rural
    America. Additional programs created for education and technical
    assistance for small business development, community capacity
    building, leadership programs, and entrepreneurial programs could
    help stop out-migration trends.

-   Commenters suggested that businesses, factories, and textile mills
    be offered incentives to expand or relocate to rural areas.

-   Comments indicated that the Bureau of Indian Affairs (BIA) should be
    more responsive to commercial business lenders regarding the
    recordation of financing statements at BIA Land Title and Records
    Offices. Lengthy delays in the confirmation of document recordation
    can jeopardize commercial loan closings.

-   A few commenters asked that USDA reauthorize and fund the
    Agricultural Innovation Center Demonstration Program to help
    establish businesses that produce value-added agricultural products.

[Cooperatives]{.underline}

-   New economic opportunities to diversify and stabilize total revenue
    for farm families through higher value new crops and products should
    be created to enhance additional agriculture-related, but off-farm,
    employment in rural areas.

-   Many expressed support for reauthorizing and significantly
    increasing the funding of the Value-Added Agricultural Product
    Market Development program and for continuing the Rural Cooperative
    Development Grant program. Both programs help cooperatives and
    producers to create new economic opportunities to diversify and
    stabilize total revenue for farm families through higher value new
    crops and products to enhance additional agriculture-related, but
    off-farm, employment in rural areas.

-   Some commented that more cooperative extension workers are needed to
    provide technical support and that they should spend more time in
    the field and less time in their offices.

-   Support was expressed for the reauthorization and funding of the
    National Sheep Industry Improvement Center. The Center provides
    financial assistance to business ventures for which traditional
    commercial credit may not be available.

-   As cooperatives grow in size, a few commenters stated their concern
    about losing the protection of the exemption from anti-trust law
    (Capper-Volstead Act of 1922) and urged USDA to continue to support
    the cooperative way of business.

[NRDP]{.underline}

-   Many commenters encouraged USDA to support the NRDP and State Rural
    Development Councils by reauthorizing the program in the next farm
    bill, extending the program to all 50 States, and supporting
    adequate funding.

***Detailed Suggestions Expressed***

[General Policy]{.underline}

-   One commenter suggested that large servicing centers, such as the
    USDA National Finance Center, should be located in rural areas to
    move those incomes closer to the people served.

-   Support actions that supply a stable, year-round labor force.

[Housing]{.underline}

-   To complement existing housing programs, USDA was encouraged to
    establish a Housing Intermediary Relending Program (IRP) similar to
    the IRP commercial lending program established for economic
    development projects.

-   The Housing Preservation Grant program regulations should allow an
    owner to make needed house repairs incrementally, as opposed to all
    at once, if the owner is unable financially to bring the entire
    house up to code.

-   Program regulations should be updated periodically to reflect
    current economic trends. Specifically, the requirements governing
    population limits for housing programs need to be adjusted from time
    to time to more accurately identify target populations. USDA should
    decentralize the decisionmaking process and empower those familiar
    with the local area to make program management decisions.

-   The rising cost of real estate in high-demand areas should be
    considered in farm labor housing program policy, particularly in the
    Northeast States where the cost of land and building is higher than
    in other areas of the country.

-   USDA should offer more informational meetings or workshops on
    farmworker housing programs.

-   To reduce the information collection and paperwork burden on the
    public, USDA should partner with other government agencies for the
    purpose of sharing information on individuals. The public should be
    able to sign up for affordable housing and for food stamp benefits
    using one application form.

-   Multi-family type farm worker housing is unavailable on certain
    agricultural land in Hawaii. USDA should address the prohibition of
    clustered-type housing on agricultural land in the next farm bill.

[Electric]{.underline}

-   Installation of high-voltage power lines in rural areas would foster
    wind-based power generation that could supply inexpensive
    electricity to power homes and farms and ranches. This would provide
    an economic boost to rural communities.

[Water]{.underline}

-   USDA should change the loan/grant criteria so municipalities with
    median household income below the poverty level have more
    opportunity to access the water programs at an affordable rate. A
    tiered interest rate less than 4.5 percent, a rate that has been in
    place for decades, would make the program more usable---50 percent
    of the market rate for poverty-level municipalities and 75 percent
    of market for low/moderate-income municipalities was suggested.

-   Early-warning technology can give prompt warning of security
    breaches of water systems in isolated areas. The security needs of
    water utilities should be an eligible project for funding. USDA
    should also make available funds for generators so that a potable
    supply of water could be maintained during times of disasters.

-   USDA should guarantee tax-exempt financing instruments as an
    alternate source to financing improvements for water systems. It was
    also stated that small utilities serving rural residents need
    protection from unfair takeovers. 7 U.S.C. 1926(b) in the
    Consolidated Farm and Rural Development Act currently protects
    systems from being forcibly annexed or cherry-picked by another
    system or municipality.

-   USDA should address the increasing environmental regulatory burdens
    being placed on rural water systems through coordinated legislation
    with the Environmental Protection Agency and/or increased USDA
    grants.

-   The United Nations defines water as a "human need" versus a "human
    right." The next farm bill should define water as a "human right" to
    ensure that all relevant policy-making recognizes water as such.

[Broadband]{.underline}

-   Continued emphasis needs to be placed on bridging the technological
    and infrastructure gap between urban and rural America. The
    Government should provide low-cost satellite connections to the
    Internet for rural communities.

-   Reduce the costs and improve the quality of rural schooling by
    putting the technology into rural schools that allows for education
    from a distance. For example, a rural student in Western Nebraska
    should be able to get a high school diploma from a private school in
    New York or Boston.

[Business]{.underline}

-   USDA Rural Development programs are averse to funding agriculturally
    oriented grant applications. USDA should encourage rural areas to
    incorporate such emphasis when applying for Federal assistance.

-   Scoring criteria for the Rural Business Enterprise Grant program
    should be changed to better accommodate sparsely populated states
    such as South Dakota.

-   USDA should support organic production as an attractive value-added
    option for farmers. The Rural Business Enterprise Grant program
    should give weight to organic businesses as the fastest growing
    sector in agriculture.

-   USDA Rural Development should reassess some of the scoring
    indicators applied to grant programs, which sometimes place regional
    efforts that bring several communities together on a single
    application at a disadvantage; for example, as population rises, it
    detracts from the point scoring. USDA should also consider
    implementing the Northern Great Plains Regional Authority,
    authorized in the 2002 farm bill--a good example of regional
    cooperation.

[Cooperatives]{.underline}

-   Cost savings realized by the reduction of current commodity payments
    should be applied to support the Value-Added Agricultural Product
    Market Development (VAPG) program.

-   The farm bill should enhance the relationship between farmers and
    cooperatives in the implementation of commodity, conservation, and
    environmental programs.

-   To help in the revitalization of rural communities, emphasis should
    be placed on creating cooperative business enterprises that are
    owned by local citizens. A Fannie Mae-type of approach could be used
    to stimulate this kind of business enterprise.

-   It was suggested that VAPGs be made on a State basis rather than on
    a national competition basis.

-   Use movable abattoirs to allow the producer to participate in
    value-added processing.