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92–571 PDF 2004

S. HRG. 108–510

EXAMINE THE RURAL DEVELOPMENT PROGRAMS

OF THE UNITED STATES DEPARTMENT OF

AGRICULTURE

HEARING

BEFORE THE

SUBCOMMITTEE ON FORESTRY, CONSERVATION AND 

RURAL REVITALIZATION

OF THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MARCH 16, 2004

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

THAD COCHRAN, Mississippi, Chairman 

RICHARD G. LUGAR, Indiana 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

PETER G. FITZGERALD, Illinois 

SAXBY CHAMBLISS, Georgia 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JAMES M. TALENT, Missouri 

ELIZABETH DOLE, North Carolina 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

THOMAS A. DASCHLE, South Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

ZELL MILLER, Georgia 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota

HUNT SHIPMAN, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

LANCE KOTSCHWAR, Majority General Counsel 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Examine the Rural Development Programs of the United States Department 

of Agriculture ........................................................................................................ 01

Tuesday, March 16, 2004

STATEMENTS PRESENTED BY SENATORS 

Crapo, Hon. Mike, A U.S. Senator from Idaho, Chairman, Subcommittee 

on Forestry, Conservation, and Rural Revitalization, Committee on

Agriculture, Nutrition, and Forestry .................................................................. 01

WITNESSES 

Panel I 

Birdsall, Jim, Birdall and Associates ..................................................................... 05

Harper, Bob, City Council Member, Riggins, Idaho ............................................. 08

Herring, Carleen, Region IV Development Association ........................................ 06

Miller, Jerry, Rural Development Specialist, Idaho Department of Commerce . 03

Panel II 

Cornforth, Fred, Chief Executive Officer, Community Development

Corporation, Inc. .................................................................................................. 19

Pridmore, Mary, Director of Housing Development, Neighborhood Housing 

Services ................................................................................................................. 18

Panel III 

Field, Mike, State Director, USDA Rural Development ....................................... 28

Lane, John, Business Finance Specialist, Clearwater Economic Development 

Association ............................................................................................................ 26

Thorson, Steve, Business Development Director, Forest Concepts, LLC ............ 32

Williams, Ron, Vice President, Mountain View Power, Inc. ................................ 30

Panel IV 

Davis, Phil, Valley County Commissioner ............................................................. 45

Dearstyne, Joyce, Director, Framing Our Community ......................................... 41

Smith, Dick, Forest Supervisor, Boise National Forest ........................................ 43

Stewart, Mike, Field Director, USDA Rural Development .................................. 39

Panel VI 

Johnson, Dwight, Acting Administrator, Rural and Community Development 

Division, Idaho Department of Commerce, on behalf of the Idaho Rural 

Partnership ........................................................................................................... 58

Tueller, Karl, Deputy Director, Idaho Department of Commerce ....................... 57

Page

IV

APPENDIX 

PREPARED STATEMENTS: 

Birdsall, Jim ..................................................................................................... 66

Cornforth, Fred ................................................................................................. 75

Davis, Phil ......................................................................................................... 108

Dearstyne, Joyce ............................................................................................... 103

Field, Michael ................................................................................................... 82

Herring, Carleen ............................................................................................... 70

Johnson, Dwight ............................................................................................... 118

Lane, John ......................................................................................................... 77

Pridmore, Mary ................................................................................................. 73

Stewart, Mike ................................................................................................... 100

Tueller, Karl ...................................................................................................... 114

Williams, Ron .................................................................................................... 94

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

NHS Boise from Mary Pridmore ..................................................................... 122

Partin, Nick ....................................................................................................... 153

(1)

RURAL REVITALIZATION AND DEVELOPMENT 

TUESDAY, MARCH 16, 2004

U.S. SENATE, SUBCOMMITTEE OF FORESTRY, CONSERVATION, AND RURAL

REVITALIZATION, OF THE COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Washington, DC 

The subcommittee met, pursuant to notice, at 10:30 a.m., at the 

Ashley Inn, 500 North Main Street, Cascade, Idaho, Hon. Mike 

Crapo, [Chairman of the Subcommittee], presiding. 

STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM 

IDAHO, CHAIRMAN, SUBCOMMITTEE ON FORESTRY,

CONSERVATION, AND RURAL REVITALIZATION, COMMITTEE 

ON AGRICULTURE, NUTRITION, AND FORESTRY 

Senator CRAPO. I will officially open this hearing. Ladies and 

gentlemen, this is an official hearing of the U.S. Senate Subcommittee on Forestry, Conservation, and Rural Revitalization, and 

I happen to be the Chairman of that subcommittee. This subcommittee works under the Senate Committee on Agriculture, Nutrition, and Forestry, which is Chaired by Senator Thad Cochran 

of Mississippi. Thad, I would just take a moment to note, is an outstanding Chairman of the Committee. He is very concerned about 

the kinds of issues that we are going to be handling here today and 

is the one who authorized us officially for this hearing to be held 

here in Idaho. 

The subcommittee has jurisdiction over rural development legislation, the Farm Credit System, forestry in general, the Farmers 

Home Administration, and several stream channelization and flood 

control programs. As you probably are aware, the primary focus of 

this hearing is on rural revitalization and on rural development 

and economic opportunities in rural communities. 

I am the only member of that subcommittee from the Intermountain West, and as a result of that, I felt that it was important 

to hold this hearing out here in the West so that people from Idaho 

in particular and from the Intermountain West can have an opportunity to give their input on some of these critical issues. We are 

still faced with a tale of two economies between our larger, urbanized centers in the United States and our rural communities, and 

I am very pleased to be able to serve on this committee that has 

a focus on these kinds of rural issues. 

As I said, our focus today is on rural revitalization and development, particularly the USDA programs for rural development. It alVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
2

ways interests me to see how the Federal Government approaches 

these kinds of issues. 

According to the memo that I have in front of me here, there are 

over 88 programs administered by 16 different Federal agencies 

that target rural economic development. It is not unusual in the 

Federal Government to have efforts coming at a particular issue 

from many different perspectives. Often that is very helpful because we find that there are holes or problems in terms of coverage. By the same token, when you have that many programs and 

such a large Federal bureaucracy, we also often get into throwing 

a lot of money at an issue without having necessarily the kind of 

focused successes that we would like to have. 

One of the things that I am looking for today, in particular with 

regard to USDA programs, is what is out there, what is working, 

what is not working, what kind of coverage overlaps do we have, 

where do we not have coverage, what can we do to make it better? 

I should note that the USDA administers the greatest number of 

the rural development programs. I said there were 16 agencies and 

88 programs. If I read my memo correctly, the USDA not only administers the greatest number of these programs, but has the highest average of program funds going directly to rural communities— which is, a tribute to the USDA, and our compliments go to them 

for their efforts in these broad areas. 

Today, we have put together five strong panels on rural issues 

ranging from community development to multi-family housing to 

small business financing and the Healthy Forests Restoration Act. 

I know that people in this community are very focused on the 

Healthy Forests Restoration Act, and we are going to try to focus 

on its implementation as well. Through this hearing, we hope to 

address some important questions. Which programs can best serve 

the needs of our rural communities and our rural businesses? Can 

our programs be improved or focused better? How can we make 

better use of existing programs in Idaho? Where gaps exist in programs, how can we address that concern or problem? 

I am going to have more to say on this and, actually, more to ask 

about this during the question-and-answer period with our witnesses, but now I would like to move to our first panel. Before I 

do that, I want to just lay the groundwork. I should introduce 

Emily McClure, who is my assistant today. You probably recognize 

the name McClure, and she is related to Senator McClure, a granddaughter, and she works on my staff in Washington, DC, right now 

and is one of the outstanding people from Idaho who is representing you in Washington, DC. That is the truth. She is going 

to be the timekeeper today, so I want you all to pay very close attention to her. 

[Laughter.] 

Senator CRAPO. One of the things I have found, and it is true 

about me, is that—we allocate 5 minutes for your oral testimony 

today. I don’t know anybody who can say everything they have to 

say in 5 minutes, and I am sure when your 5 minutes is up, you 

will not be done with what you have come here to say. I would ask 

you to pay close attention, though, and wrap up your thought or 

your sentence or whatever when the time is up, and I have asked 

Emily to show you the signs. It is also hard for people when they 

3

are talking to remember to look at Emily, so I have told her when 

the time is up to ding the glass here so that way you get an audible, an audible sign that your time is up. 

[Laughter.] 

Senator CRAPO. The reason for that is because we like to get engaged in a dialog, not only me and you, but among members of the 

panel. It is during that dialog that you will have an opportunity 

to say a lot more of what you might not have been able to finish 

in your opening statement. To all of the witnesses today, I encourage you to really follow the 5-minute rule because, if not, we don’t 

really get the chance to get into that discussion, which is a really 

valuable part of it all. 

If at the end of the day, after your 5 minutes and your opportunity during the question and answers, you don’t feel like you 

have had a chance to really say it all, we keep the record open, and 

you can supplement the record with further statements you can 

send to us in writing. I hope that that works out with all of you 

very well. Have I forgotten anything in terms of instructions? 

We want to thank those from this incredible facility here for 

making it available to us. I do have to tell you, I have a week to 

spend in Idaho now, and I visit with many of you in Washington, 

DC. I apologize to some of you if you have been there to see me 

and business has interfered with us actually seeing each other, but 

I much prefer meeting with folks out here in Idaho. I can’t imagine 

a more beautiful setting, both this facility that we are in and the 

incredible surroundings in which we find ourselves. This is one of 

the fun parts of the job, to be able to pick where we have these 

hearings. 

[Laughter.] 

Senator CRAPO. With that, we will proceed. Our first panel is 

Jerry Miller, a rural development specialist with the Idaho Department of Commerce; Mr. Jim Birdsall, a private consultant with 

Birdsall and Associates; Carleen Herring with Region IV Development Association; and Bob Harper, a City Council member from 

Riggins, where I hope to go fishing this year. 

[Laughter.] 

Senator CRAPO. With that, we will go in that order. Mr. Miller. 

STATEMENT OF JERRY MILLER, COMMUNITY DEVELOPMENT 

SPECIALIST, IDAHO DEPARTMENT OF COMMERCE 

Mr. MILLER. Good morning, and thank you very much for this opportunity to present before the U.S. Senate, and thank you for providing this voice for rural Idaho and rural America. On behalf of 

the Idaho Department of Commerce, I would like to take this opportunity to once again thank the U.S. Senate and the office of 

Senator Mike Crapo for conducting today’s hearing and providing 

a voice for rural America. My name is Jerry Miller, and I am a 

rural development specialist with the Idaho Department of Commerce. My primary responsibility at the department is to assist the 

communities plan, fund, and implement their community and economic development projects. 

The approach that we take in Idaho toward economic and community development can be summed up with the word partnership. 

It is only through the collaboration of State and Federal partners, 

4

city and county governments, and non-profit organizations do we 

achieve the results that we have been able to achieve in the State 

with the limited resources that are available. I want to highlight 

two examples of partnerships that have formed out there, and 

these are partnerships that have been incubated, nurtured, and 

created around two small but very effective Federal programs. 

The first program I would like to talk about this morning is the 

Rural Community Assistance Program funded through the U.S. 

Forest Service. Each year the Forest Service provides approximately $140,000 for small-scale community and economic development projects in Idaho. The Rural Community Assistance Program 

is unique in that it addresses projects that don’t fit the size, scale, 

and cookie-cutter mentality of some of the larger State and Federal 

funding programs that are out there. This is an especially important offset given that the current trend at both State government 

and the Federal level seems to be toward agencies funding larger 

projects and fewer of them. 

I won’t go into all the details and mechanics of how the programs 

work in Idaho. I would rather tell you the story of a success that 

we have had with the Rural Community Assistance Program and 

that is the Almo-Connor Creek-Elba fire base station or otherwise 

known as the ACE Fire Association, located in lower Cassia County. 

Organized as a volunteer department, the ACE Fire Association 

protects the residences, lands, and public attraction of southern 

Cassia County in Idaho. Included in their jurisdiction is the city of 

Rocks National Reserve and Castle Rocks State Park. Before receiving a Rural Community Assistance Grant, ACE Fire Association lacked the facilities to provide even the most minimal, basic 

level of fire protection. Equipment sat outside exposed to the elements, which meant during the winter months, it effectively could 

not be used. You can’t prefill a fire truck and let it sit outside and 

freeze in the winter months. Probably even scarier than that is the 

fact that the ambulance service had to forego use of medications, 

supplies, and certain weather-sensitive equipment simply because 

there was no way to protect it from the elements. 

Recognizing the need to have an adequate fire station and ambulance base, the community rallied to the cause. Volunteers were recruited and partnerships were formed. Through these efforts, the 

ACE Fire Association accumulated over 1,000 hours of volunteer 

assistance and another $60,000 in donations and matching funds. 

Rural Community Assistance Program funding helped the ACE 

Fire Association finish the project. Were it not for the $30,000 investment that this program made for this project, it would not have 

been able to be accomplished and folks in southern Cassia County 

would go without fire protection. 

In closing, I want to quickly address one other partnership that 

has been very successful, and that is the National Fire Plan Economic Action Program. Operating in a form similar to the Rural 

Community Assistance Program, the program provides small 

grants to small businesses in community economic development efforts to find alternative uses for small-diameter timber and other 

fire fuel materials. 

5

In this area, where the cost of fire suppression and damage due 

to wild fire is reaching in the billions, the Economic Action Program, EAP, is a cost-effective way not only to build rural economies, but also make the prevention of wildfire an affordable tool 

and strategy in addressing fire issues. 

With that I would conclude my testimony. 

Senator CRAPO. Thank you very much, Mr. Miller. 

Mr. Birdsall. 

STATEMENT OF JIM BIRDSALL, BIRDSALL AND ASSOCIATES 

Mr. BIRDSALL. Thank you, Senator Crapo. 

Mr. Chairman, thank you for this opportunity to offer public testimony concerning an extremely important subject, as you have indicated, that discussion being the health and vitality of our rural 

communities. 

Just for context I wanted to let you know that I have been working in the community development arena for the past 28 years. I 

should divulge, however, that I do not have an academic background in this field. My experience has all been on-the-job training 

working in the rural setting. I admit the fact that I have done this 

for such a long time may not speak well for my intelligence, but 

it does provide me with some pretty good perspective on the subject. It also gives a person plenty of time to question whether or 

not they are doing any good, and having had a chance to roll that 

question around a little, I have concluded that people like myself 

and others are, in fact, making a difference. 

This holds true as well for the rural helping programs that many 

communities utilize. I would like to spend the next few minutes offering my insights about some of these programs, especially in 

terms of what is working well. 

I am sure that you are aware—you have already indicated that 

the list of programs is not too awfully long, but there is more than 

one Federal agency offering assistance in rural areas, and the time 

available to me does not allow meaningful discussion about all of 

these opportunities. Therefore, in this testimony I would like to use 

some of the rural programs of the U.S. Department of Agriculture 

to illustrate my thoughts. 

The menu of USDA community programs contains some great examples of well-established initiatives. Some of these, in my opinion, 

help form the backbone of assistance in the areas of housing, infrastructure, business, and community facilities development, and 

their value is well documented. 

However, I would like to spend my time here discussing two perhaps less well known programs. I am referring to the Rural Business Enterprise Grant, or RBEG, and the Rural Business Opportunity Grant, or RBOG, programs. Although they are funded at 

smaller levels than their cousins, these two programs have a certain spark that sets them apart and dramatically increases their 

value to rural communities. 

The quality I refer to is that of flexibility. I have witnessed both 

the RBEG and the RBOG serving in an early role in community 

development endeavors. Examples of this might include strategic 

community planning for business development or feasibility studies 

also involving specific ventures. I have seen RBEG play a critical 

6

role in supporting early operations of small business parks and in 

discovering new ways to bring risk capital into the rural business 

development equation. 

The underlying difference in these programs is their ability to 

have great flexibility in meeting local needs. They can be part of 

the front end of community development work, or they can play a 

role in the actual implementation activities. This niche is one that 

few other public programs can operate within. This quality is invaluable for rural towns. 

I wish that I had some way to capture the difference I see in people’s eyes, the difference when they are empowered to pursue their 

own community strategies; the difference when they are supported 

in putting their heads together to figure out local solutions. The 

difference between that kind of scenario and that of meeting strict 

program guidelines in order to receive a grant award is really stark 

and dramatic. I also wish that this spark of empowerment could be 

infused throughout all rural community assistance efforts. I don’t 

think such an idea is that far-fetched. 

For instance, a little later on today, you may hear about the Inland Northwest Economic Adjustment Strategy, or INEAS. As you 

know, Senator, this is a blueprint to address severe economic distress in targeted counties across the four Northwest States. The 

local capacity-building model that RBEG and RBOG programs represent would find a welcome home within the INEAS concept. 

These qualities are transferable to other locations and programs as 

well. 

The other obvious thought that I should mention is to consider 

increasing funding levels for the RBEG and RBOG programs. 

These initiatives receive fairly low levels of funding, and any increase would, in my opinion, be money well spent. 

In my concluding remarks, I don’t want to leave the impression 

that I am suggesting to just throw more money at programs. My 

emphasis is on being very strategic with adequate funding levels. 

The RBEG and RBOG programs are great delivery models for 

achieving that balance, and I also think this notion fits well in the 

rural setting. Today, more so than ever, rural communities are not 

asking for a handout. They could use a leg up. 

Thank you. 

Senator CRAPO. Thank you very much, Mr. Birdsall. 

[The prepared statement of Mr. Birdsall can be found in the appendix on page 66.] 

Ms. Herring. 

STATEMENT OF CARLEEN HERRING, REGION IV 

DEVELOPMENT ASSOCIATION 

Ms. HERRING. Good morning, Senator Crapo and staff representatives. 

Senator CRAPO. Pull that mic a little closer to you. 

Ms. HERRING. Thank you for the opportunity to be here today to 

share the Idaho experience with Project SEARCH, Special Environmental Assistance for Regulations of Communities and Habitat. My 

name is Carleen Herring, and I am here this morning on behalf of 

Region IV Development Association where I am the Economic Development Division Manager. We are an economic development disVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
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trict serving the people of the eight counties of south-central Idaho 

with offices in Twin Falls. 

In 1997, as a member of the House, Congressman Crapo conceived Project SEARCH to demonstrate how a relatively small 

amount of Federal funds could greatly benefit rural communities. 

Discussion continued on the proposal until 1999, when Senator 

Crapo was finally successful in securing funding for Project 

SEARCH under the authority of the Independent Agencies Appropriations Act. 

The program was intended to show that a simple process could 

be used to get Federal funding down to the smallest governmental 

levels without excessive technical assistance or red tape. Originally 

envisioned as a demonstration project for the State of Idaho—

championed $1.3 million of EPA’s budget—the program was to address small towns in Idaho and provide them access to funds to 

help them address infrastructure issues that were the result of 

Federal legislative actions. It would help resolve problems for 

which other funding sources were not otherwise available. 

The focus was to assist communities with less than 2,500 residents in meeting their wastewater infrastructure needs. The program targeted these communities because they generally have 

small operating budgets, only part-time staff, and lack of financial 

reserves so critical to compete for the normal public sector financing programs. 

On the administrative side, Region IV Development Association 

was selected to implement Project SEARCH. As a 501(c)(3) nonprofit, we ended up being the primary recipient of grant funds. 

We embraced Senator Crapo’s vision to help small towns and designed a process that would be easy to use by communities with 

limited administrative capacity. We created a process where the 

funding decisions would be made by a panel of local elected officials 

facing the same kinds of problems. 

The application consisted of a two-page outline describing the 

proposed environmental project with the reasons why the community believed that their town qualified. The criteria included such 

things as having exhausted traditional methods of funding—bonding; local, State, and Federal resources—or that they have experienced an unexpected problem or expense in implementing or starting their project; or that it was needed to comply with Federal or 

environmental statutes or public health requirements. 

The applications were then screened by a citizens’ advisory committee comprised of representatives from each of the six State-designated planning regions. The members for that panel were identified by the local Councils of Governments representing each region. 

To demonstrate the timeliness of implementation and show how 

effective the program was, EPA awarded the grant in late August 

1999. Notice went out to all the Idaho counties and communities 

with less than 2,500 people the first week of September that year. 

Additional notice was provided to the Association of Idaho Cities, 

Counties, Idaho Rural Partnership, USDA. Forty-seven applications were then received in November; 21 communities were selected by the advisory committee on January 11, 2000. That is getting it to the people. 

8

Of the 21 funded applications, they ranged from a low of $9,000 

for a facility plan so that a housing authority could solve its wastewater problems to a high of $319,000 for part of the funding for a 

wastewater treatment facility in a highly sensitive area. 

However, the implementation was not without its tense moments. The demonstration project grant through the EPA required 

a 45-percent match. As previously mentioned, small communities 

generally cannot come up with the matching requirements for most 

public infrastructure grant programs, effectively eliminating their 

potential for receiving assistance. As originally proposed, Project 

SEARCH was not much different in this regard, and many applicants couldn’t meet the 45-percent match requirements. To overcome this obstacle, RIVDA worked with EPA to structure the program so that each individual community would not be required but 

that match requirements could be pooled. The result of this common-sense approach—we easily met the requirements with 

matches ranging from 14 to 87 percent. 

Project SEARCH was designed to be easy to apply for and as 

simple as possible to administer at the local level. Communities 

didn’t need professional grant writers or administrators to successfully apply for or utilize the program. EPA was very cooperative 

and accommodating to work with. 

We see the same potential now that the program has been moved 

over to USDA. Through this combination of local direction and Federal partnering, Project SEARCH enabled more direct infrastructure-building and environmental problem-solving dollars to reach 

the communities. Project SEARCH is not meant to replace traditional sources such as Community Development Block Grants or 

other programs administered by USDA Rural Development or Idaho’s Department of Environmental Quality, but it was created to 

encourage communities to try collaborative methods to address 

their environmental needs. 

Project SEARCH was very beneficial to 21 of Idaho’s smallest 

communities, helping make the environment safe for the future. 

Small communities across the Nation need a funding source that 

closes the gap as Project SEARCH did for our towns, and there are 

still many towns out there in Idaho that need our help. 

I encourage Congress to authorize funds for Project SEARCH 

through USDA, and we offer our experience and expertise to help 

in its implementation. Thank you for your time this morning. 

Senator CRAPO. Thank you very much. I appreciate that review 

of a project that is very close to my heart. We are going to try to 

accomplish what you talked about. 

[The prepared statement of Ms. Herring can be found in the appendix on page 70.] 

Mr. Harper. 

STATEMENT OF BOB HARPER, CITY COUNCIL MEMBER, 

RIGGINS, IDAHO 

Mr. HARPER. Thank you, Senator Crapo. It has been my opportunity to represent the people of Riggins and citizens in that area. 

It goes on for quite a ways. We are 150 miles due north of Boise 

right where the confluence of the Salmon and Little Salmon come 

together and run for 30 miles north. The main part of employment 

9

up to 1983 was mining, ranching, and lumber. That year the mill 

burnt. This was one of Brown Industries’ mills, and we lost a major 

employer. 

Living wages were gone. We are back into a low income. Demographics in the 1990’s shows us that we had something like 65 percent of the community was over 65. We have median income of less 

than $12,000, which leaves us a very low tax base and very little 

money to work with. We still have all the emergency services—

water, sewer, which is very important to a small community like 

this. Rural development has been a major concern and a major 

source of our funding. If we hadn’t had it, we would not be where 

we are today. 

Starting with many years ago, the old Farm Home Association, 

which we just paid up a 30-year note on our sewer district this 

month, that was a grant. It was a $120,000 loan with a large grant. 

Rural Development also came up with water upgrades in 1999. We 

delayed ours for a year and the State brought theirs up for a year. 

They were going to tear up the roads and put in curbs, gutters, 

sidewalks, lights. We put in a main line, a 10-inch line, 6-inch hydrants, a 450,000-gallon tank, and Viox fluoridation system. This 

improved fire protection, it lowered our rates, the whole works. 

That was a $350,000 loan to the city and a $490,000 grant. 

Public facilities—this was in 2001. The city hall was falling 

apart. We needed a new roof, we needed heating, we needed the 

whole works. The city came up with over $26,000, and we had a 

grant of $28,000 to help complete this. This was part of ADA standards that we had to redo the restrooms. We enlarged our library 

and at this time, the same time, we knew we needed off-street 

parking. Riggins was a tourist—we found a home just a block off 

the city limits that could be a large parking lot. 

The city bought this with a loan of $167,000, and we got a grant 

for $106,000 to remodel the house, pave the parking lot. There are 

about 20 parking spaces there. It is now a museum and a meeting 

place, which is great for the city. We call it the Heritage Center. 

Also in that grant, we have a walking museum which has been in 

the works for many years. We have 21 stations all over town telling 

the heritage of the city of Riggins, and you can walk from one end 

of the city to the other now. 

We also have a wellness center feasibility study which was 

$325,000; the event center, which was completed. Now, Jim 

Birdsall did these for us; he was our grant writer. The feasibility 

study on that was, I guess, deemed unfeasible for economic purposes. 

Anyway, we are still working our way to try to find something 

with a living wage. We also have a Rural Business Opportunity 

Grant and Overall Economic Strategy Study and a $46,000 grant, 

which is still in process at this point. 

The citizens of the Riggins area would like to thank Rural Development for all their help in our community, and in no way could 

we have done it on our own without your continued helping hand. 

Thank you. 

Senator CRAPO. Well, thank you very much, Mr. Harper. I note 

that in the material here submitted by you and Mayor ZimmerVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
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man, there are some additional projects that you need to have some 

assistance on. 

Mr. HARPER. Yes. 

Senator CRAPO. Riggins is certainly just such a wonderful example of the benefit that some of these programs can provide to some 

of these communities. 

Let me just start—and what I may do, I may direct a question 

or two here specifically, but I would really like to just toss out 

questions and get people to jump in. We have about a half hour, 

if we stay on schedule, to talk and get into the issues. We may not 

use all that time, but let’s see what we can do. 

Let me just start out by saying you all are probably very familiar 

with the budget climate we have in Washington, DC. I won’t give 

you my budget speech. I sit on the Budget Committee, and we just 

spent 2 unbelievable weeks fighting a budget through. To give you 

a really quick summary, we project 10 years out. I don’t know how 

anybody can presume to do that, but we do it. Three years ago, we 

were projecting over the next 10 years that we would have somewhere in the neighborhood of a $4 to $5 trillion surplus in the 

budget. 

That was before the stock market fell apart, the 9/11 attacks occurred, and we became engaged in defending our homeland, as well 

as engaged in a war on terror overseas. We have been in two wars 

since then, and spending has gone through the roof on things we 

weren’t contemplating at the time, and revenue, the economy, has 

gone to the toilet. Our projection now over that 10-year cycle is 

nearly $2 trillion worth of deficit. It is about a $7 trillion swing 

from 3 years ago in our projection of what we are looking at in the 

Federal budget. 

In that context, we are doing everything we can to try to control 

spending and get out of the deficits that we are in. The projected 

deficit for this year is somewhere between $470 and $512 billion. 

Just to give a little more perspective on that, it is about a $2.4 trillion budget. If you take the entitlement programs out—because 

they are basically on autopilot, and their spending just goes on regardless of what is happening in the rest of the world until we can 

get the votes to change it, and we don’t have the votes to change 

it—that is about two-thirds. 

That leaves about $800 billion that we actually have some discretionary control over. Now, I just told you we have a $512 billion 

deficit. About half of that $800 billion is defense, and when you add 

homeland security into that, you get up into the 60- or 70-percent 

range. 

My point in putting this all out is in the budget we just put together, defense gets a pretty sizable increase for obvious reasons; 

homeland security gets a pretty sizable increase for obvious reasons; and the rest of everything else is held to less than one-half 

of 1 percent growth. We are dealing with basically a flat line for 

everything but defense and homeland security. 

What I am getting at is—we are not likely to get a lot more 

money in these budgets, but we are looking at ways—if there are 

things that are working, we should shift the money to the things 

that are working, and there are opportunities to shift. That is one 

of the things we are looking at right now to do. 

11

As I have approached economic developments in rural communities, it seems to me that the basic infrastructure—which all of 

you in one way or another have talked about—is one of the key 

things we have to be sure our rural communities have. Maybe I 

need to define what that is, but in concept that it is the infrastructure necessary to be competitive and then, second, access to capital 

for businesses and for other economic opportunities. I am sure 

there is more to it than that, but in my mind that is where I am 

coming from, and I just wanted to toss that out to you to see if you 

think that I am heading down the right road. 

Do I need to expand on that or define it? Where are we—where 

should we be focused in the broad—from the 30,000-foot level, what 

should we be focusing on for our rural communities in our Federal 

programs? Any suggestions? 

Mr. BIRDSALL. That is quite a question, Senator. Maybe I could 

lead off with just a few comments. Again, your comments about the 

budget are well taken and not lost on rural communities. In fact, 

there is probably some fear there. In general, the rural towns I 

work with don’t view themselves as high on anybody’s radar 

screen, although I can say they believe they are on yours. 

You have certainly done a good job of being a champion of rural 

Idaho, and that hasn’t gone unnoticed. The communities I deal 

with, in general, they view Congress with some trepidation, whether rural programs, what the future might be in this current budget 

climate. 

I do think that the issues that you just mentioned in terms of 

infrastructure and access to capital are extremely important, so I 

would support what you are saying as far as appropriate tracks to 

pay attention to. Unfortunately, they are not the only ones, and I 

don’t know that one is a higher priority than another. I guess the 

third leg of that that I would like to mention is the ability—furthering and supporting and empowering the ability for communities to find their own solutions. 

The reason I bring that up—it was in my comments about the 

RBEG and the RBOG programs, and I think there are others that 

support this as well. If you can nurture that spark of enthusiasm 

and empowerment, you will get more mileage for dollars spent out 

of all of the programs, out of the infrastructure programs, out of 

the business development finance programs. It is a third ingredient, that capacity building, flexibility, tapping into the creativity 

at the local level. 

I am always amazed at the amount of creativity that you can 

find at that local level if you will just give it the right—— Senator CRAPO. I agree with you, and I believe in that. 

Ms. HERRING. Let me also add on to what Jim was saying. We 

had a situation just recently where the J.R. Simplot Company gave 

the city of Burley the entire plant site in Heyburn, about $15 million worth of assets. It comes back down to the two components you 

just mentioned: basic infrastructure and access to capital. What we 

have an opportunity to do down there is take that entire plant site, 

270-some-odd acres, and create it into a business park that hopefully will get jobs back into that community. 

As it stands right now, we have talked with USDA about using 

the RBEG and RBOG programs to, for one thing, get a site develVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
12

opment plan, strategy put together where we can figure out what 

those buildings can be used for, what the infrastructure is that we 

do have available for the sewer, power, water, natural gas. 

Then take a look at what is available to finance those small businesses that we could potentially generate from the community, that 

whole entrepreneurial spirit that we know is available in the Cassia area, using Small Business Administration’s 504 fixed-asset financing, or the 7A programs, or using USDA’s business and industry programs, but trying to put together a combination of those two 

resources and capital for that development. Don’t know if you were 

watching the press. 

There is a new enthusiasm in that community after years of 

pretty much being in the doldrums, and here is an opportunity. 

They also recognize that because the economy’s been in the doldrums, they don’t have the resources to do what they need to do 

by themselves. We are looking at all the different partners in it, 

and USDA is definitely at the table. 

Mr. MILLER. One of the programs administered by our agency at 

State government is the U.S. Housing and Urban Development 

Block Grant Program. In terms of programs like the HUD Block 

Grant Program, we could probably get bigger bang for what is already being spent on the program by adding some flexibility to the 

programs, at least as it relates to rural communities. 

The program was initially established for urban areas, so they 

take a one-size-fits-all approach to how they do things and the requirements that are attached to the dollars. A lot of those requirements don’t really work well with rural Idaho and just simply don’t 

fit. 

To give you an example, I will talk about the one everybody always talks about, and this might be the third rail of politics there 

in DC, but the Davis–Bacon Prevailing Wage Act. 

[Laughter.] 

Senator CRAPO. You are right. 

Mr. MILLER. The cap on that is $2,000, and that was established 

during the New Deal and hasn’t moved upwards since then. we 

find that with a lot of the projects we try to put in Idaho; that regulation alone probably adds anywhere from 5 to 7 to, in some cases, 

10 to 15 percent of the administrative cost. On a half-million-dollar 

project, that is quite a bit of money that could buy extra pipe, that 

could put extra infrastructure, could put another bay on a fire station, whatever the project might be on the ground. 

The second thing I would urge Congress to look at is taking some 

of the existing programs and opening the array of projects or types 

of projects that could be funded under them. Let me give you an 

example. 

The Federal Emergency Management Agency has a program 

called the Assistance to Firefighters Program. Excellent program. 

Fire departments can get equipment through this program, they 

can get training, they can get the special hazmat gear. Doesn’t 

really work well in rural Idaho. It doesn’t do you any good to have 

a new fire truck if you don’t have a place to put that fire truck. 

One of my pet peeves with that program or my suggestion for 

that program would be, at least for the rural community, to maybe 

open up to allow—some of those dollars could be used to even rehaVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
13

bilitate existing fire stations or maybe add to or remodel fire stations. Not to the point where you duplicate what is already being 

done with the USDA Community Facility Program or what can be 

done with the HUD program, but to address those small projects 

that are too small for the larger programs, but are vital needs 

nonetheless and need to be addressed. 

Those are the kinds of things Congress should look at. If you 

could just figure out, maybe, how to diminish some of administrative costs that are associated with these programs, that would be 

a way to get more money into rural Idaho and into those rural programs without actually having to add more dollars to the program. 

Senator CRAPO. That is a good point. 

Bob. 

Mr. HARPER. May I speak to—especially on this one. We had an 

emergency services building—one stall, basically, that was falling 

down. We went for grants, looking for some help on building an 

emergency with a double bay. We had two fire engines, and we had 

one ambulance. With the Davis–Bacon wages and all, it was going 

to be a $120,000 grant. We had to do a high match on it, which 

we couldn’t do. We did it ourselves with about $68,000. A complete 

building—better than the one at Winchester for over a hundred 

and some thousand—and with volunteer labor. A gentleman came 

and took high school kids and built the building himself. 

Now, we did get a grant from Rural Development to put a—it is 

a meeting room inside, bathrooms, this type thing. Believe me, we 

couldn’t have done it if we went through the grant type because it 

was just too expensive. 

Senator CRAPO. Well——

Mr. HARPER. One more thing I want to share. 

Senator CRAPO. Sure. 

Mr. HARPER. In a small town, one of our biggest problems that 

we see is that we do not have living wages. We are losing our 

young people. Our school is in need right now. Maybe within 2 or 

3 years we could lose our school. We do not have an enrollment. 

The last 5 or 6 years, steadily, every kid that graduates, I would 

say within 95 to 98 percent leave town and go to Boise to work or 

some other place because all we have—tourism’s fine. Tourism is 

great. Our rafting business lasts about 5 months a year, our fishing 

lasts about 5 months a year. All this money, it goes into the businesses, but it does not go into paying a living wage. We are talking 

about entry-level positions, $6, $7 an hour. It is not living wages 

at $6, $7 an hour. We are going to lose our school. 

We are looking for some employer. How do we get hold of an employer that would come to a small community like ours, give us 30 

jobs, living wage, $12 to $14 an hour, then young families will stay 

because they want to live there, just can’t afford to. 

Senator CRAPO. Oh, you bet. You have all raised very, very interesting and valuable points. Just a quick little aside. Another of the 

committees that I chair in Washington, DC—on a different committee, the Environment and Public Works Committee, I chair the 

subcommittee on Fisheries, Wildlife, and Water. We jokingly call it 

the fishing, hunting, and drinking committee. 

[Laughter.] 

14

Senator CRAPO. Drinking water. We do get into a lot of resources 

you brought up. One of the things we cover, obviously, is water, 

water infrastructure. I have had a bill for the last 4 years that we 

have been working on to try to address the infrastructure needs of 

our communities to support their clean water and safe drinking 

water systems, particularly our rural communities who don’t have 

the economy of scale. Project Circle was a way to try to get some 

of that money up fast. 

It is the Davis–Bacon law and the battle with urban and rural 

communities over the formula that has stopped that bill for 4 

years. We have finally conceded the Davis–Bacon issue. We would 

at least like to pass the bill. Now we are fighting over the formula, 

but if you look at the votes in Congress—our Founding Fathers 

were so wise for small-population States when they established the 

U.S. Senate, because it is two votes per State regardless of population. 

In the U.S. House—and I am not criticizing the House. It was 

very wise to have a population-based part of the legislature as well. 

If you look at where the—I have seen a map that was actually done 

by a phone company that has every county in America, one of four 

different colors, red being heavy population, then orange the next 

heaviest level, and then green for moderate population, and white 

for light population. If you look at the map of the United States 

colored in gradation from red to white, based on population, the 

east coast is red and it is pretty much red and orange, with little 

counties of green and white throughout there until you get to the 

Mississippi River. Then it starts turning green, and pretty much in 

the farm belt there, it turns white and it is white all the way to 

the coast. Then it is red along the coast again. 

There are red spots. Boise is a red spot, and Tucson and Salt 

Lake City and Denver. For the most part, the whole middle part 

of the country is white. The reason I tell that is because that is 

how the House of Representatives votes. You can just look at that 

map, and you can tell the outcome of what the formula for clean 

water funding is going to look like. They are siphoning all the 

money into the red area. They battle the Senate where we try to 

pull it back into the white area. 

For 4 years now, we have lost—well, we have lost the bill because it gets filibustered. The other thing in the Senate is there is 

the filibuster, and the heavy-population States can filibuster a formula change, and that is where we have this battle. 

It is just interesting though. You have brought up among this 

panel the two key issues that have stopped us from putting billions. I sponsored the amendment to add $2.3 billion for water infrastructure systems for our communities across the country, leaving aside the formula battle. Just put it in there. We have the 

money in the budget now; we have won that fight. Now we are 

going to go back and try to battle this out again. 

I am just telling you some of the intricacies, the wars we have, 

to try to accomplish the common-sense things that you are suggesting that we need to do. You have given me a very good idea 

here—I have made a lot of notes—as to where we need to head in 

terms of getting flexibility for local control and flexibility in proVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
15

gram fund usage, and trying to address some of these questions of 

how to get a living wage. 

Anyway, another question that I had is, getting to a little bit 

more of specifics now. A number of programs were mentioned here 

in your various testimony; the RCAT program, the small-diameter 

timber projects, RBEG and RBOG—I am getting good at these 

acronyms. 

[Laughter.] 

Senator CRAPO. It seems to me that what I am going to do is, 

from this panel and other panels that we have talked about, I am 

going to listen very carefully to the ones that work and where. 

With those that work, we can improve their effectiveness so that 

their scope and their flexibility are sufficient. I would encourage 

you to tell me if there are any others—and I don’t know that you 

need to answer that right now—but just now or at another time, 

any other programs such as these that we need to pay attention 

to in terms of our focus in Washington to make sure they get funded. By the way, SEARCH is not funded. We are going to get it 

funded, one way or the other, if we can help it. 

Ms. HERRING. It is one of those that works. 

Senator CRAPO. It is one of those that works beautifully. Were 

you about to say something, Mr. Birdsall? 

Mr. BIRDSALL. No, Senator. Well, I just was having a thought 

of—trying to think of other programs, and I will continue to try to 

do that. I guess I would again like to stress, maybe the concept is 

just to look at these programs that you just mentioned in the 

model, and some of the answer might be in defusing that operational model out into other programs so we are getting more mileage. 

Senator CRAPO. Because these are working——

Mr. BIRDSALL. These are working very well, except for lack of resources. 

Senator CRAPO. That is a good point. Well, let me talk about 

SEARCH for just a moment as an example, and then I want to talk 

about INEAS. Project SEARCH, actually, is just an idea that came 

up in my staff as we were struggling with this about 4 or 5 years 

ago, trying to figure out how to get money to some of these really 

small communities, 2,500 or less, that just are hammered by Federal mandates and have the same environmental or infrastructure 

needs, but just do not have any kind of economic base with which 

to address the issue. 

Like you said, when you went through that, it reminded me of 

how well it worked. We spent 3 years fighting just to get the pilot 

plan done. We got the pilot project, announced it in August, and 

within 6 weeks or so, there were 47 applications. Within just a hair 

over 5 months, those applications had been reviewed, and the 

money was in the communities being utilized. It made a big difference for 21 communities in Idaho. 

In fact, when we went back and then got the concept authorized 

on a national scale, when we told them how well it worked back 

here in our committee—the Fisheries, Wildlife, and Water Committee—Senators from other States were saying, ‘‘I want to be a 

part of the next pilot project.’’ I said, well, actually the idea is we 

16

are going to make it nationwide now. We have done that, but we 

have these continuous funding battles for the obvious reasons. 

It seems to me that that kind of a system is needed. It was, in 

many cases, almost a complete drain because some communities 

just couldn’t come up with the matching funds. Other communities 

could, and they were able to pool. It seems to me, for the really 

small communities who still have to put in the expensive systems, 

we need to find a way to just get the money to them without 

matching dollars. 

Ms. HERRING. That was the case in several of those towns simply 

because, as the gentleman from Riggins said, having that small of 

a tax base or that small of population, you cannot generate the 

kinds of dollars you need to build a million-dollar treatment plant. 

Whether you are 25 people or 200 people or 35,000 people, that 

million-dollar treatment plant still needs to be built. 

Senator CRAPO. Right. The cost doesn’t change. 

Ms. HERRING. It doesn’t change. Welcome to Castleford. 

Senator CRAPO. That is right. Well, we are going to continue 

fighting for that. If the budget climate were the way it was 3 years 

ago, I would be able to tell you we are going to get some good 

money into that program. The way it is right now, we want to keep 

these good ideas alive, and that is the range of things to look at, 

and I appreciate all of—— Mr. HARPER. Excuse me. Like Riggins, we are in a situation with 

our sewers. We have certain standards there that are higher than 

most places. Our system is 30 years old; we need an upgrade on 

it to bring it up to standards, and we don’t have the money. We 

do have some depreciation money that we could use to match, but 

I know it wouldn’t be big enough, and it would be a pretty sizable 

outlay for us. It has to be done in the next 2 or 3 years to meet 

the standards because we are tested two or three times a week. 

Just for—the water goes back in the river. Other places are not— they just have groundwater to worry about; we have the worry 

about the river. 

Senator CRAPO. Mr. Harper, I agree with you about that even 

more than you might know, because I have stood in that river with 

about 100 other people, casting and turning for one of those salmon 

to come up. No, I understand. Your plight is one that is repeated 

dozens and dozens, hundreds of times over throughout this country 

in rural communities. 

Ms. HERRING. Senator, one thing I would like to add to that. In 

funding such things, it may not be the capital expenditure with 

bonding mechanisms and granting resources of the USDA. It is 

that initial step—which Project SEARCH happened to fill—getting 

that initial feasibility study so the community could understand 

what their options were if they had a problem. Unless they had all 

the options, they didn’t know if it was going to cost $1.98 or $5 million to fix the problem. 

By having that little bit of the seed money to get the engineering 

done or be able to get the analyses completed, put that thing out 

to the community for a bond election or approach some of the other 

resources available, that is the piece that was missing for some of 

these smaller communities. They couldn’t even raise enough dollars 

to get to that level. 

17

Senator CRAPO. That is something that I have had to become 

educated on. I approached it by saying why do we have to put all 

this money into a study; why don’t we just go out and build the 

plant? I have learned that we have to analyze and figure out what 

law requires, and what is the most efficient and effective ways to 

meet the requirements of the law, and then be able to move on. 

Much of the problem that small communities face is exactly, as you 

say, that very first step. 

Let me just use our last little bit of time here on INEAS. As I 

believe everybody knows, I introduced a bill on INEAS last week, 

I believe it was. I have talked to several of the other Senators from 

the Northwest, and there is some significant interest. For those 

that aren’t familiar with it, it is the Inland Northwest Economic 

Adjustment Strategy. 

Basically, it is the rural development people from government 

and private sector, basically—groups working together trying to 

find solutions to all these problems we are talking about here. This 

legislation is to create a Northwest strategy and to give us the ability to have a structure behind focusing on these issues. 

I am being vague about it because, to me, it is something where 

we want to have the flexibility to make it work and have this Federal entity that we are trying to establish by statute, have the ability to bring together the various people from the Northwest here. 

When I say that, it is Washington, Oregon, Idaho, and Montana, 

selected counties. All of Idaho is included. Then bring together the 

people who are on the ground doing this, have them—to have them 

help us identify solutions. 

For example, if they come together, I hope they think Project 

SEARCH is a great idea and that they figure out a way to collectively help us make that become a reality, just what we do. In my 

mind, that is what INEAS is. For those involved with that, could 

you tell me your picture of what you think we are trying to achieve 

there? 

Mr. BIRDSALL. I would be glad to, Senator. I should probably respond first. I am a member of the consulting team that is attached 

to this phase of that project, and, essentially, you have done a pretty good job of describing it in a nutshell, that initiative. At this 

point in time, it is an initiative that is focused on structuring that 

regional approach; taking some lessons, the good things learned out 

of prior activities like the timber initiative when the spotted owl 

issue surfaced, or like regional commissions in other parts of the 

United States. Although this is not either of those, it took some 

good lessons from those to put this approach together. 

The thinking, generally, is can we be smarter as a region and 

work together as a region to use adequate resources to answer our 

problems through creativity and collaboration and, if possible, 

streamlining the delivery of financial resources? It does take—it is 

an initiative that is taking a look at systemic change in the economies of the Northwest and how do we adjust and react to those. 

Senator CRAPO. As we develop a strategy, which will include a 

lot of things we have talked about here today, it would seem to me 

that this—this group—I don’t know what to call it. I guess that is 

as good as any—would have the collective power that individual 

Senators—I am talking politically now, back in the Congress. If we 

18

have the commitment of the Senators from Montana, Idaho, Washington, and Oregon, we will have bipartisan support, a focused 

strategy, and the ability to much more effectively advocate for the 

kinds of reforms and focus that we have been talking about here. 

That is what I, in my mind, imagine. 

Mr. BIRDSALL. That is accurate. 

Senator CRAPO. Well, again, I would like to thank all of you for 

coming. We are about out of time. We have had some really good 

input from you, and I appreciate the effort to get here today. 

Mr. BIRDSALL. Thank you, Senator. We realize the challenges you 

face, and that is why we elect brilliant leaders to go to Washington. 

[Laughter.] 

Senator CRAPO. We will go to panel No. 2, which is Mary 

Pridmore and Fred Cornforth. Mary is with the Neighborhood 

Housing Services, and Fred is with the Community Development 

Corporation. This panel will focus primarily on multi-family housing, I suspect. We welcome you both here. We have about a half 

an hour, so if you two will also pay close attention to the timekeeper here, we will have about 20 minutes for questions and answers, too. 

Let’s see. Mary, you are welcome to start first. 

STATEMENT OF MARY PRIDMORE, DIRECTOR OF HOUSING 

DEVELOPMENT, NEIGHBORHOOD HOUSING SERVICES 

Ms. PRIDMORE. Thank you for the opportunity to be here today. 

The 515 Program is probably more complicated than we want to go 

into today, but it is the multi-family housing program through 

USDA Rural Development. They support seniors and families. Generally, in Idaho, it is 60 percent of median income, and I have provided you some information about median income. In Idaho, for 

rural counties that is generally $22,850 or two people who are 

making about $5.50 an hour. 

Most of the portfolio of 515 properties, real estate, are owned by 

aging owners. They are ready to divest themselves of the properties, and under some regulations that were created by Congress 

in 1988 to protect the low-income population that are housed in 

these properties, there are pre-payment incentives that are provided by USDA Rural Development, and there are restrictions on 

when the owners can sell their properties. This is to protect the 

people that live there. 

The incentive programs provide higher rates of return, rental assistance, and some other features that would benefit the owners 

and encourage them to stay in the property. Unfortunately, the incentive program does not match the appropriation, and I am aware 

of the budget constraints. The appropriations are very critical to 

communities. As you heard earlier, many of these people are leaving communities, the very young people. Affordable housing is very 

difficult to do if you make $5.50 an hour, $7 an hour. 

There are waiting lists that USDA Rural Development has for 

these equity loans. One of the challenges for a developer to even 

be interested in acquiring or applying for new construction loans is 

that you have to be ready. You have to have spent money, you have 

to be sure your project is ready to go and prove that. Also, they 

compete with the red area. It is a national pool. It is a disincentive 

19

for a developer, a new developer to try to move into this area when 

there is a long waiting list and the appropriations are short. 

The challenge with that is, as non-profit organizations, we are 

resident-based, community-based. The population we serve is who 

we choose to serve, and so the funding available to try to stretch 

ourselves, to take that risk, is not there. Even if our mission is 

there, our opportunity for risk is very great. Sorry. 

Senator CRAPO. That is all right. 

Ms. PRIDMORE. Somebody told me I get too passionate about this. 

Average property size in Idaho is 24 units; some of them are even 

smaller. I provided you a map. Here is an even larger map to show 

how much they are dispersed. 

When you were talking about the East Coast and how the red 

and white—some of these, as you can see, are just the palest white 

because of where they are located. When you compete on a national 

scale for funding for those areas, it is very difficult to say that you 

are going to compete to get the funding. 

I want to interject something here because—that is not in my 

written testimony—just so you will understand how strongly I feel 

about this. I have worked with developers on the other side who 

were trying to sell their own homes, and one of things they have 

said to us is that in the Northwest, the Rural Development Office 

here has most fertile minds in trying to make the most out of this 

money. Because they do, we want to make sure that we retain 

those appropriations. We like to get appropriations for our folks because they are resident-based, and as a non-profit, that is what we 

care about, just like the mayors and the city councils. 

The impact of losing these properties is critical. I have provided 

you some statistics, and I just want to run through those real 

quickly with you. The average adjusted annual household income 

for a particular property we picked was $4,676 or $390 a month. 

A lot of these people are on disability; some are seniors on Social 

Security income. For instance, a working, single mom who has one 

child with her has an annual income of $12,000. She pays $269 for 

rent and utilities, and the USDA Rural Development supplements 

that with $302. 

Obviously, she can’t sustain a job as a waitress or a clerk in a 

small community without that assistance. This funding is absolutely critical. 

We thank you so much for taking the time to hear this issue. I 

know you have many critical issues. This is the one we are passionate about. 

Senator CRAPO. Thank you. Your passion is not only very evident, but justifiable, and we appreciate it. 

[The prepared statement of Ms. Pridmore can be found in the appendix on page 73.] 

Mr. Cornforth. 

STATEMENT OF FRED CORNFORTH, CHIEF EXECUTIVE 

OFFICER, COMMUNITY DEVELOPMENT CORPORATION, INC. 

Mr. CORNFORTH. Thank you, Senator. It is good to be here. Our non-profit organization this year will do approximately $800 million of apartment development throughout the West Coast. Somewhere between 10 to 12 percent of that will involve Rural DevelopVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
20

ment funding. The 515 program is a mature program that has generated many housing units throughout the United States. There 

are some inherent problems with it that could make it a better program. 

I just noticed in my reading last night that President Bush’s proposed 2005 budget has no money for new construction in the 515 

program. That money is being fully dedicated into acquisition and 

rehab, which is a critical need as well. I was a little concerned 

about that because striking a balance between new construction 

and rehabilitation is a worthy goal. 

One of the things that we have—our company has been approached, probably in the last 18 months, by six or seven owners 

of 515 developments, probably representing 7,000 to 8,000 units 

just in the Pacific Northwest alone. Many of them were poorly 

built, poorly constructed. They are in a decision, a valid decision, 

deciding whether to convert those somehow to market units, losing 

the current housing stock or depleting part of the housing stock. 

There are really very few mechanisms in place to allow a transfer that makes economical sense to the current owner and to anyone wanting to acquire them, plus do the rehabilitation that is 

needed to the units as well. That has created quite a dilemma for 

many of us trying to figure out how to make this work. 

In 1986, with the IRS Reform Tax Act, the tax credit program 

was created, Section 42, Low Income Tax Credits, and our company 

has specialized in that. We fell into the 515 program by having 

identified a need in the city of Emmett, and we were successful in 

competing on the national level, bringing about 515 rental assistance to Emmett. 

The problem we ran into as you find in many federally funded 

programs, they are written by different people, and they are administered under different philosophies. We found a lot of incompatibilities that made it difficult, in a practical sense, to have them 

come to work together to achieve the goal. 

One of them, in the tax credit program, the value of tax credits—

one of the things that gives value to tax credits, changes every 

month. We have an ability in just a straight tax credit to go out 

and borrow additional funds if the tax credit value goes down, because usually the interest rate drops, allowing us to borrow more 

money. Unfortunately, there are some mechanisms that are part of 

the program that prohibit us from doing that, so that is a problem. 

In Emmett, it was remarkable. Within about 10 minutes of having talked with the mayor at that time about the need that he perceived, we knew we had a community that was in desperate need, 

especially for their senior population. We hung out at the senior 

center over a couple of weeks, interviewed several of the seniors 

over lunch, and learned that many of them were receiving $600 to 

$700 a month in Social Security, but the rents they were having 

to pay were $450 to $550. They were left with $100 a month to live 

on. 

It made it very difficult to buy medications, and many of them 

skipped meals. In fact, one man told me he had been living on Corn 

Flakes for about 8 months since he had had to add a new prescription to his monthly costs. He is now living in one of our units and—

has it already gone that quick? 

21

Senator CRAPO. I told you it would. 

Mr. CORNFORTH. It was just a neat thing to be able to see that 

his rent has dropped down to $180 a month. It has been a real benefit, the 515 program has. 

The last thing, and quickly, your office has been very kind to 

work with us, especially in the city of Caldwell, to get an exemption, but there is a gap, a population gap right now in our programs. Towns under 20,000 are served by Rural Development, and 

towns over 50,000 are typically served by many entitlement programs through HUD. The problem is that the towns that are in between that are in a no man’s land, and there are very little funds, 

without exception, to see about helping the needs that those communities have identified. I still wish there was something we could 

do about that. 

In short, and in long, those are my thoughts for today. Thank 

you. 

Senator CRAPO. Well, thank you both very much. Explain to me 

a little bit—both of you mentioned the fact that these funds are 

competed for nationally. How does that work when you say you 

have to compete nationally for these funds? 

[The prepared statement of Mr. Cornforth can be found in the 

appendix on page 75.] 

Ms. PRIDMORE. Well, there are a lot of housing programs that—

well, the State of Idaho does have some allocations. Our sister 

States—Washington, Oregon, the more populated States—have a 

housing trust fund that is funded. They may have layers of different funding that is set aside for that. 

Here, because of the population base, the money that comes from 

HUD is through an allocation for the State, and then outside of 

Boise, and certain metropolitan areas have to compete statewide 

for the moneys that Fred is talking about. 

In the RD program, there isn’t a specific 515 allocation for the 

State of Idaho. There are staff members who can explain it better 

than me, but my understanding is in any competition where you 

are competing for national funds, there is a certain stage of readiness: you have to have the site, you have to have identified things 

that cost money. You are competing nationally, and there might be 

20 units that might be available. 

Say there is $515,000 for the entire initiative that is available for 

new construction and accompanying rental assistance, as a nonprofit developer in a State where we don’t have other matching 

funds that we can put with it to say if you give us this, we can 

finish the project with this, then we need all of the money. It weakens the project. 

Does that make sense? 

Senator CRAPO. Yes, it does. 

Fred. 

Mr. CORNFORTH. The way the pointing is worded, just about anybody can get a 30, and in the past, until about 4 years ago, that 

was enough to get funding at the national level. The weighting of 

the applications at the national level are favored now toward the 

100 most underserved counties in the United States, which by virtue of their designation indicates that there is a terrific need. 

22

If I wanted to do a project in the Yukon Delta in Alaska, which we had actually looked at doing, which is $200,000 just to do one 

unit, we could compete on the national level and successfully get 

515 money. 

I don’t believe any RD staff are here. I don’t believe we have one 

of those 100 underserved counties in Idaho. 

Ms. HERRING. No. 

Mr. CORNFORTH. We don’t have any, so we are immediately crippled there on being able to compete against anyone else in the 

United States, and that is 20 points. That is really—when you consider only 60—well, 65 total and you get a 30 in the past, 20 makes 

a big difference and gets you into that, what we call a ‘‘kill zone’’ where you can receive funding. 

Senator CRAPO. This is not a case of the urban areas getting an 

undue benefit in the formula? It is a case of the most economically 

disadvantaged area getting an advantage that makes it difficult for 

those that fall just above that? 

Mr. CORNFORTH. That is correct. 

Senator CRAPO. I guess what I am hearing you say is that, clearly, if we had enough budget money to put enough in to expand the 

pool, we could then expand the number of counties or change the 

formula. This is a case where we have—I was going to say a loophole. It is not a loophole, but we have a hole between those 100 

disadvantaged counties and the other counties that can’t compete 

but badly need the support? 

Mr. CORNFORTH. That is correct. 

Senator CRAPO. How do we solve that? Give me some suggestions. 

Mr. CORNFORTH. Change the pointing. 

[Laughter.] 

Ms. PRIDMORE. Well, my suggestion would be to try to get an allocation for Idaho. The reason I say that is I believe that if you had 

an allocation for Idaho, then the most needy areas in Idaho would 

be reached. Another thing is, we do not have the funding allocations that some other States have. For instance, Alaska does have 

allocations for the natives where they get something like $60,000 

a year, when it is a good year, for residents. 

Now, I don’t want to minimize the issues in other States—I am 

a tropical person, and I do not want to live like that—or the homeless issues in Alaska, but the important thing is they do have other 

funding sources that take care of some things that we do not have 

in this State. An exploration of funding they get, by State, of the 

rural areas, that it might change the way that some of the allocations are done. That is just personal. 

Senator CRAPO. That is a very good suggestion. You are saying 

we should—I know that my staff is out there making good notes 

on this. 

Ms. PRIDMORE. I can give them anything they need. 

[Laughter.] 

Senator CRAPO. We should evaluate the funding matrix of the 

515 dollars by State to see how they go out. 

Ms. PRIDMORE. Well, the combination available, like Fred was 

talking about, for tax credits, home dollars—those are populationbased, not necessarily need-based. Then each State allocates that. 

23

The CDBG funding that Jerry was talking about, how those programs work together in each State and availability. Essentially, as 

non-profits, we don’t like to aggressively compete against each 

other because you deplete resources. 

Our organization tries to partner as much as we can with every 

community and every organization because, essentially, you are depleting resources if you are competing against another non-profit 

for funding coming into your State. 

In States like Washington, Oregon, and some of the other States, 

special ones like Alaska, they have different funding mechanisms 

that provide housing subsidies that we don’t have here. Without 

comparing that, you are not really comparing apples to apples. 

Senator CRAPO. When you say different funding sources, different 

Federal funding sources? 

Ms. PRIDMORE. Or State. 

Senator CRAPO. Were you about to add something, Fred? 

Mr. CORNFORTH. I like this idea of having a State allocation. 

Washington and California compete very well at the national level 

in part because the States have oriented themselves. The State 

housing agencies or something, Governor-appointed trust funds, 

those types of things have helped to attract those funds. That still 

doesn’t get us over the hump. 

Matching leverage, again reflected in funds at the national level, 

counts some. When you don’t have any of those underserved counties, you can have $2 or $3 million extra in a $5 million deal, and 

it still wouldn’t get you to the point where you get funding. It really has to do with this 100 underserved county designation. In my 

opinion, that is where things are being steered away from us. 

Senator CRAPO. Well, it seems to me that if you go to a State allocation—and I assume there would have to be some formula where 

every State had an allocation to make it politically work. If you did 

that, then you would probably have to have the underserved counties be a subset of the State allocation system. 

Ms. PRIDMORE. Each State can designate its own underserved 

counties. 

Senator CRAPO. Each State can do that. OK. I am learning some 

stuff here. I appreciate you walking me through this. I had a question in my mind. Fred, in your testimony, you talked about this 

funding gap between the 20,000 and 50,000 population mark, and 

you are right. For several years, we have just had an exception for 

Caldwell to try to get them past this problem. 

Is the solution there—well, let me ask you. What is the solution? 

Change the formula? The qualification categories? 

Mr. CORNFORTH. That would seem to make sense. However, the 

number of communities that suddenly would qualify then would 

grow tremendously and dilute the funds, so it is—and as I was sitting there listening to you describe your process in the Budget 

Committee, I began to feel just a little bit of the weight on my own 

shoulders of the decisions you must have to make. 

This—in fact, I was a little discouraged. 

[Laughter.] 

Mr. CORNFORTH. I was looking for a Prozac in my pocket and 

didn’t have one. I really think communities should be able to somehow speak of their need and present their case, regardless of their 

24

population size. Then the objective process—hopefully it is an objective process—that is in place can then prioritize what communities are in the greatest need. Right now there is no forum, there 

is no voice for that group that falls between the 20,000 and 50,000 

to allow that. 

Somehow, communities like Twin Falls, for example, at 34,000, 

they are in that funding gap area. These areas should have a 

chance to present their case and should compete with everyone else 

as well. Just right now there is no forum for that. 

Senator CRAPO. Tell me if I am understanding this right. For the 

communities between 0 and 20,000, we basically have the USDA 

Rural Development program; for the communities over 50,000, we 

have the HUD housing programs? 

Mr. CORNFORTH. CDBG. In some States, a home entitlement. 

Senator CRAPO. For those between 20 and 50, there is just a hole 

there? There are no Federal programs that apply? 

Mr. CORNFORTH. Some of the staff may be able to—I believe 

some of them have moving population targets; they change from 

year to year. I don’t think the staff——

Senator CRAPO. Anybody got an answer to that question? Have 

I got a good picture of it, or am I simplifying too much? 

Mr. CORNFORTH. In regards to housing, it is 20,000. 

Audience Member. Every program has a different level. Some of 

our programs are 10, some are 20, some are 50. 

Senator CRAPO. OK. 

Audience Member. Depending on the program. 

Senator CRAPO. It is a program-by-program issue, but at least as 

to housing—— Mr. CORNFORTH. The 20,000 seems to be the problem. 

Senator CRAPO. Between 20 and 50 would face a problem? 

Mr. CORNFORTH. That is correct. 

Senator CRAPO. Well, that completes the questions that I have. 

Anything you folks didn’t get to say that you wanted to say? Other 

than this is really important. 

[Laughter.] 

Ms. PRIDMORE. Because interest rates have been so low for so 

long, a lot of people are moving into homeownership. Housing is 

not on a lot of people’s agenda. If you look at income of those 

served by this program—unfortunately, housing does fall off the 

agenda of people with homeownership. The people who live in these 

communities and the people that we are talking about serving at 

these income levels could not buy a home with that income. I just 

would like to make sure that that is clear. I just can’t tell you how 

much we appreciate the time. 

Senator CRAPO. I am glad. 

Mr. CORNFORTH. A lot of rural communities want to stay rural. 

You have to be there a while to really get a sense, because you will 

have some visionaries that are speaking almost as prophets that 

could be stoned at any time, talking about wanting economic 

growth or additional infrastructure that will lead to growth. Some 

communities don’t want to grow. They have the desire to stay the 

way they are. 

This is strange because it is usually—I am finding this trait in 

rural communities that are near larger towns. For example, in 

25

Caldwell, we had a lot of Rural Development-sponsored homeownership take place probably in the last three—I am just going 

to pull a number out of my mind—around 600 to 700 homes that 

were made possible for first-time home buyers mostly to get a 

home. 

For example, take Caldwell out of that. What happens is there 

is a lot of pent-up demand that homeownership can only happen 

through the Rural Development program. That pent-up demand 

ends up getting pushed into some rural communities that don’t 

want to grow or they don’t have the infrastructure in place to be 

able to support it. 

Now, if you get a town like Caldwell—and I am not here to beat 

Caldwell’s drum. It is just I am most familiar with it. They spent 

a lot of time and now have the money, now have the capacity to 

serve quite an increase in their population base. We are seeing a 

little bit of a slowing in homeownership there simply because now 

we are going to notice Wilder, Middleton, Parker, Homedale. 

You are seeing this ripple effect that is going to cause these rural 

communities to lose some of their rural nature, and some of them 

don’t want that. Then you have this pent-up demand, too, of homeownership and a desire to own their own home. It does create a bit 

of a confluence there in intersecting trends, but that—thanks for 

listening. 

Senator CRAPO. You have very clearly identified some of the dynamics of this issue as we move from urban to rural as far as 

achieving the goal of homeownership in this country. In fact, as you 

were talking, I was thinking about my own feelings as a kid growing up in Idaho and not wanting anybody else to move in here and 

get all of the population problems but, on the other hand, wanting 

to have a really strong, vibrant, dynamic economy. It is a conflict 

that we continue to deal with. 

Let me just conclude by saying, to come back to your point, 

Mary, I believe—everybody, almost everybody, believes, too—that 

affordable housing and homeownership is one of the core parts of 

the American dream. It is one of the things that gives people the 

ability to get their hand on that ring and start economically improving themselves in ways that dramatically increase the quality 

of their lives. It is something that our Government is committed to, 

at both the Federal level and State level, and that we as a people 

are committed to. 

Even for those who aren’t ready to yet move into the homeownership category, to make the ability to have housing, even if it is 

rental housing, affordable and high quality is just one of most important parts of the quality of life in America. Like I say, it is part 

of the American dream. I believe it is part of what is—when I 

talked earlier about what is needed in our rural communities for 

economic development, I believe that homeownership is part of infrastructure. 

We didn’t get into it in as much detail as I should have with the 

previous panel, but at some point today or in the near future, I 

would like to put together a really good definition of what we mean 

when we say infrastructure. It is roads and bridges and schools 

and health care and access to the Internet and all sorts of techVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
26

nology needs that we have there, but it is also homeownership, and 

it is affordable housing. 

I have been in parts of Idaho where I have actually had the 

privilege of meeting people who were in some of the housing units 

that we were able to help them gain access to. They let us come 

into their homes and see what they have. It was a really remarkable thing. I don’t know how many of you would just let some Senator come into your house and look at it and see what a Government program was providing or what it was facilitating. 

To look in the eye of somebody—well, I can tell you. The look in 

the eyes of the lady whose home we were in just tells you what you 

are talking about, what you are dealing with here. I can understand your passion and the passion of everyone who is involved in 

it. I can assure you that in our focus on trying to figure out what 

to do for our rural communities, Rural Development is going to 

have a homeownership component in it, very solidly in place. 

Well, it is 5 minutes to 12. We are supposed to be breaking at 

noon for lunch. We will excuse this panel, and we will recess until 

1 o’clock. 

We will recess for lunch, and we will resume here at 1 o’clock. 

Thank you very much. 

[Whereupon, at 11:55 a.m., the subcommittee recessed, to reconvene at 1 p.m., this same day.] 

AFTERNOON SESSION 

[1 p.m.] 

Senator CRAPO. We will resume the hearing. I can see our panelists already know we are ready for panel No. 3. We welcome you 

all here. Panel No. 3 is John Lane of the Clearwater Economic Development Association; Mike Field, the USDA Rural Development 

State Director, Ron Williams from Mountain View Power, Inc; and 

we also have with us Mr. Steve Thorson of Forest Concepts. I don’t 

know if you were all here this morning when I gave my iron-fisted 

speech about sticking to 5 minutes, but we have a timer here, and 

we are going to hold you to your 5 minutes for your presentations, 

and then we will engage in some discussion. 

Mr. Lane. 

STATEMENT OF JOHN LANE, BUSINESS FINANCE SPECIALIST, 

CLEARWATER ECONOMIC DEVELOPMENT ASSOCIATION 

Mr. LANE. Thank you. Thank you for inviting me to attend today. 

Clearwater Economic Development Association, CEDA, serves the 

five counties of north central Idaho. My role at CEDA is to operate 

and administer small business finance programs. Our total capital 

base at this point is approximately $2 million. Funding for that is 

a combination of USDA Economic Development Administration 

funding, USDA Rural Business Services through both the IRP and 

the RBEG programs providing funds. 

The DPA and the IRP programs primarily focus on gap financing. That fills a small niche in the market where we provide a 

small amount of financing relative to the total project, typically a 

third; two-thirds from either the bank or owner in combination 

thereof and one-third CEDA dollars. These borrowers are typically 

relatively strong in most areas but have some deficit in relation to 

normal banking guidelines to prevent the bank from doing the loan 

27

without the gap financing. These programs, as I said, do fill a niche 

in the market. They work quite well in that niche, and I would encourage continued funding for those. 

We also offer microloan programs. We have two tiers of lending, 

one 10,000 and under, and one 20,000 and under. Our RBEG program dollars fund the 10,000 and under projects. 

There are several unmet needs and challenges in our market 

area. It is common for banks to refer projects to us that are in the 

area of the $35,000, which is over our microloan amount, yet small 

enough to make it less than profitable for them to pursue the loan 

either through in-house loans or, particularly, when they need an 

SBA guarantee and they get flagged for the borrower. The gap is 

actually between $50,000 and $20,000. The amount they typically 

go after is $50,000; our microloans end at $20,000. 

We also have another unmet need in our market where, because 

of constraints on the USDA IRP program that we operate in cities 

outside of 25,000 population and up, we have some problems serving our largest community, Lewiston. Regardless of the economic 

development of the individual project or the economic need of the 

economic need applicant, we find it very hard to serve that niche. 

One of the major areas I would like to emphasize is we have a 

wealth of entrepreneurial people in our region who have products 

or services that typically would capitalize on the emerging markets 

and technologies that are targeted by the RBEG program. Due to 

the need for flexible repayment structures, the existing programs 

don’t necessarily meet the needs. What I would propose would be 

a program with a more flexible repayment structure similar to an 

investment capital type program. 

However, one must recognize that the typical investor type program doesn’t meet the needs of these small businesses, primarily 

because they are looking—these small business owners want to remain the owner of the business. They are not looking for a partner. 

These small business owners are focused more on keeping their 

business in their community and hopefully improving the economic 

condition of those around them, as compared to your normal investor is going to be looking for rapid and high return on investment. 

The two fall into conflict. A program that simulated investment 

capital, operated through EDC, funded with USDA dollars to focus 

on rural business development would be the best combination. 

Another need we have in our area is for technical assistance for 

these same individuals. An example would be, we recently assisted 

several businesses through an RBOG, a Rural Business Opportunities Grant. We found primarily that the program ran short in time. 

We ran out of dollars before all the needs were met. We had some 

success with a particular participant and had we followed up with 

them better, or had the resources, I should say, to follow-up with 

them better, we may have been able to better help them in the long 

term. Whereas, what happened was several of their needs were 

unmet because they, the business owner, didn’t necessarily recognize it as a need, didn’t ask for help from the Small Business Development Center. 

Had we had a better ongoing program developed to help these 

types of businesses, we may have been able to maintain what gains 

we did make with that business. We need consistent funding on esVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
28

tablished time lines for business development, and the best programs are the RBEG and RBOG programs for funding these because of flexibility. 

Senator CRAPO. Thank you very much. That 5 minutes goes by 

way too fast. 

Mr. LANE. Yes, it does. 

Senator CRAPO. I would say, Mr. Lane, in reviewing your testimony, you have a lot of good organizations and very good suggestions. 

Mr. LANE. Thank you. 

[The prepared statement of Mr. Lane can be found in the appendix on page 77.] 

Senator CRAPO. Mr. Field, you ought to be feeling pretty happy 

with the programs you are administrating then. 

Mr. FIELD. I am pretty happy. 

Senator CRAPO. Thank you for making the effort to be here with 

us. 

STATEMENT OF MIKE FIELD, STATE DIRECTOR, USDA RURAL 

DEVELOPMENT 

Mr. FIELD. Mr. Chairman, I am pleased to be here today to talk 

about our programs in Idaho. I have a formal written statement 

and a copy of our annual report that I would like to submit for the 

record along with my oral testimony. I know that you have responsibilities across the Nation, and we are certainly glad to have an 

Idahoan as the Chair of this important subcommittee which addresses forestry, conservation, and rural revitalization. 

USDA Rural Development is committed to the future of Idaho. 

We have three main programs—jobs, housing, and infrastructure—

all of which help to build the fabric of rural communities. 

We provide a variety of both single and multi-family housing options for rural residents. Our housing programs provide housing for 

low-income families and seniors. Our self-help program allows families to build their own homes and create sweat equity in the process. I know that you had the chance to visit one of these properties 

in Kimberly. In fact, you laid some subfloor that day; is that correct? 

Senator CRAPO. That is correct. 

Mr. FIELD. Most areas in Kimberly are not just building equity 

in their homes, but also equity in their community. As USDA Rural 

Development, we are interested in creating economic opportunities 

as well as improving the quality of life in rural America. 

We have concerns about our aging multi-family housing portfolio. 

We are at the point where we need to rehabilitate existing properties or build new ones. In Idaho a large percentage of our properties are 20 years old or older. Outside consultants are currently 

conducting a study of our properties across the Nation, and we look 

forward to discussing the findings with the Congress upon completion. Safe and sanitary housing for rural families is the core of our 

housing program. 

Our community facility and rural utility programs help to build 

infrastructure. There are few rural residents in the State who don’t 

benefit from these programs. Whether it is delivering safe drinking 

29

water to a school or building a fire station or almost everything in 

between, we can make it possible. 

We are also very proud of our business and cooperative loan program. As you are aware, the building we are meeting in today was 

built with the help of Federal, State, and private funds. Ashley and 

Katrin Thompson have created new hope in their community by investing in its future. We are glad to be a part of that by working 

with Farmers and Merchants State Bank to guarantee the Thompsons’ loan. 

There are several other programs I would like to mention. They 

are also important tools for economic development in our State. I 

am speaking of our distance learning, telemedicine, broadband, and 

electric program. Through these programs we have linked rural 

clinics and hospitals to larger regional health care facilities, thus 

providing more medical care in rural areas. 

Southern Idaho has one of the best broadband networks in the 

Nation. The Syringa network was partially funded from loans from 

USDA Rural Development to rural communication providers and 

cooperative. The Syringa network will provide rural communities 

the same economic advantage that the railroads provided to rural 

communities in the 1800’s. 

This past year, the Coeur d’Alene Tribe received the largest connect broadband grant in the Nation. This grant allows the tribe to 

provide high-speed Internet service to all reservation residents and 

will link critical public services such as police, fire protection, and 

health care on the reservation. 

Senator Crapo, I have the opportunity to work for one of the best 

outfits in the Federal Government. We would not be able to provide 

our programs without the help of our partners. Today you are hearing from some of them. We want to take this opportunity to publicly thank those we work with to bring economic opportunity and 

improved quality of life to rural Idaho communities. 

We also want to thank the Idaho Congressional Delegation for 

their continued interest and support for USDA Rural Development 

programs. 

Last year I traveled with one of your staff members to a meeting 

in Twin Falls on a renewable energy farm bill. When we discussed 

rural communities in our State, we observed that the towns that 

were a long distance from one of our major cities seemed to need 

more economic help than those communities within a reasonable 

commute distance. 

As we talked about what USDA Rural Development could do to 

help these isolated communities, as he put it, that anything we can 

do to assist homegrown entrepreneurs would be beneficial. Our 

Business and Enterprise Grant Program and Intermediary Lending 

Program, both of which are delivered through our partners through 

cities and non-profit corporations, are designed to facilitate private 

business development through entrepreneurs. To be successful, 

these first-time or expanding businesses need technical assistance 

to help them put together a feasibility plan to assist them in evaluating their business. We will continue to work with our partners 

to look for additional sources to fund needed technical assistance 

for these entrepreneurs. 

30

The Small Business Development Centers in the State could provide technical assistance if they had the manpower. Any suggestions you may have as to how we might find additional technical 

assistance for these start-ups would be appreciated. 

USDA Rural Development is working with a broad coalition of 

partners for solution to the dairy problem in the Magic Valley. We 

are happy to report that through the renewable energy title in the 

Farm bill, a renewable energy grant was made for all three. We 

hope this will be one of three projects that will come online this 

coming year. 

In addition, we are working to provide partial funding for a feasibility study in the Magic Valley to look at the prospects of forming 

a generating co-op to collect methane, generate power, and sell the 

electricity to produce additional revenues for the dairy and main 

street businesses in the Magic Valley. 

I know that I have given a quick overview, but rest assured that 

we are here to serve rural Idaho. Our team of qualified professionals want to thank you and your colleagues for your continued 

support of our programs. On behalf of myself, USDA Rural Development, and the Secretary, I thank you for the opportunity to testify at this field hearing and will be glad to answer any questions 

you may have. 

Senator CRAPO. Thank you, Mike. Thank you for being here, and 

for all the work you do to make this a success. 

[The prepared statement of Mr. Field can be found in the appendix on page 82.] 

Ron. 

STATEMENT OF RON WILLIAMS, VICE PRESIDENT, MOUNTAIN 

VIEW POWER, INC. 

Mr. WILLIAMS. Senator Crapo, it is good to be here today. You 

probably remember me in other roles with other clients—— Senator CRAPO. I know. I did a double take there for a moment. 

Mr. WILLIAMS. I am one of the owners of a company called Mountain View Power. We recently won the bid to build a 165-millionwatt power plant that replaces a facility that Idaho Power wanted 

to build. That has taken us into energy development and renewable 

energy development as well. 

There are just two points I want to make. I have a written statement that goes much further in some of my ideas and concepts, but 

one of them has to do with conventional power developments in 

rural communities, and the other with the rural development, the 

biogas possibilities that Mike Field just talked about, because we 

are involved in that as well. 

On the conventional power side, we won a bid at Mountain Home 

because Mountain Home was an economically distressed community. They wanted the investment in their community that Middleton and Canyon County didn’t. We worked with the city to locate our power plant in the industrial park. We had to beat Idaho 

Power’s own construction group to win the bid. We told the city, we 

can’t win the bid unless you give us a good reason why we can be 

here, because our pencils aren’t that much sharper than theirs. 

The city said, We will take a real serious look at forming an 

urban renewal district to capture the property taxes that are linked 

31

to the power plant; take some of the bond money to offset some of 

the infrastructure costs of the industrial park. The industrial park 

now wins because it has high-quality gas lines, transmission lines, 

sewer and water service, and a steam production facility here so 

they will be able to sell their industrial park to other industrial 

uses. Meanwhile, the urban renewal district also reaches into 

downtown Mountain Home, again, if it gets formed, and revitalize 

that, again, for more business and development. 

It really was a partnership that was struck between us and a 

community, a rural community, that wanted a power plant as opposed to one that didn’t. One of the wrinkles—we had to actually 

change an Idaho law. It is a bill that changes how utility property 

taxes—they were centrally assessed and apportioned out. Now they 

are local property tax revenues that just stay there. There are a 

lot of other communities that might have the correct variables to 

be smaller-scale power generating communities. Heyburn comes to 

mind as one, the Simplot plant that just closed. 

While peaking plants are not great job producers, they do provide 

very significant property tax revenues. Mountain Home is going to 

receive $400,000 to $500,000 annually, just property tax revenues 

related to the power plant. It is really a win for them and what 

they wanted to do. 

The second part that Mountain View Power is getting involved 

in is renewable energy. We are looking at some wind investment 

opportunities with Mr. Field and Commissioner Kjellander from 

the PUC. We have been asked to actually do a feasibility study on 

producing power from biogas from animal waste. We are still waiting to hear if all those pieces come together, but that project is 

going to be driven on, what we think, will be by some additional 

incentives or investment incentives that are going to be needed. 

There are bills tonight in the legislature to provide investment 

tax credits that will help it in the renewable energy area. I know 

that the Federal energy legislation that you are considering also 

has a matching tax credit for renewables and provisions that ratchets down the Federal credits and State credits, so in essence the 

State credits would go into the U.S. Treasury. That should be 

looked at. 

Bonneville was also looking at funding a portion of the feasibility 

study along with their nonwires group. Idaho Power and Bonneville 

are both very transmission constrained. You are familiar with the 

concept of avoided costs. That is a generation concept that we really need to take a serious look at, formulating the concept for avoiding transmission cost. If we can locate generation next to a large 

pumping station, using biogas energy, then maybe there should be 

some transmission investment in this and other locations because 

we don’t have to build facilities. This may be the best way to get 

the money out to that kind of generation without it being taxpayer 

dollars. 

Senator CRAPO. Thank very much, Ron. 

Steve. 

[The prepared statement of Mr. Williams can be found in the appendix on page 94.] 

32

STATEMENT OF STEVE THORSON, BUSINESS DEVELOPMENT 

DIRECTOR, FOREST CONCEPTS, LLC 

Mr. THORSON. Good afternoon, Senator. My name is Steve 

Thorson; I am the Business Development Director for Forest Concepts, LLC. We manufacture patented environmental erosion control devices, bank stabilization, and endangered species products 

from small-diameter timber. I appreciate the opportunity to appear 

before this hearing today. 

Because of your strong leadership, we now have the Healthy Forests Restoration Act of 2003. You are to be commended for your negotiating skills, tenacity, and floor managing skills in moving that 

mess forward. I watched it on C–SPAN, and it was quite an artful 

process. 

Senator CRAPO. Thank you. 

Mr. THORSON. Let me start by providing some background. When 

the Boise Cascade Mill closed in May 2001, we determined that an 

opportunity might exist where we could fill the gap by harvesting 

small-diameter timber, creating local jobs, and returning the products to the landscape as a biodegradable product. We embarked on 

a healthy public/private partnership with the U.S. Forest Service, 

the city of Cascade, and Valley County. 

A Fire Plan Grant was received by the city which enabled them 

to purchase a building in the industrial park on the south end of 

town. Forest Concepts received a Fire Plan Demonstration Grant 

to build and install various structures in the local area. We moved 

into the city’s building, started paying rent, and commenced operations. After extensive lobbying, the agencies approved our products for utilization. 

We procured our log supply through the U.S. Forest Service on 

timber sale contracts. I thought our efforts culminated best in our 

joint media event that you hosted last summer in Cascade, where 

Federal agencies, State and local government, industry, the environmental community, and yourself all came together to recognize 

the Federal unlimited quantities contracts and support the pending 

challenges ahead. 

We assumed this was going to be the beginning of a very healthy 

public/private partnership that would go on indefinitely and create 

numerous jobs in Cascade, and I just want to take a little side 

issue here to thank the people here from the Boise Forest—Ron Julian and Dick Smith, Julie Thomas in the Sawtooth, and a number 

of others, Mike Stewart, the mayor—because this was truly a community effort to try to pull this together. 

Since that time, Forest Concepts has spent nearly $500,000 creating small diameter products and creating jobs in rural communities, including in Cascade. In addition to our own personal, private investments, we have received approximately $250,000 in Federal research grants and contracts for product development that is 

getting us off to some other new products that we are going to be 

working on. So far, however, the returns to investors have been 

negative, and the number of expected jobs created has been far less 

than expected. While the agencies have endorsed these products, 

they have not fulfilled the expected public/private partnership by 

also becoming a viable customer. Without their participation as a 

33

customer and support, the small businesses will not likely survive 

and prosper. 

So far, really, other than in the Boise Forest, nothing is really 

happening on the ground. The beginning of the next fire season is 

only about 60 days away. If a significant thinning process is actually embarked upon under the new legislation, what happens to the 

resulting logs? 

The agencies indicate our products are too expensive. That is because we are buying their logs and trying to pay a living wage to 

our employees. They also indicate we cannot compete with straw 

wattles, which is not surprising given that straw wattles are subsidized by $25 a ton by the California Rice Straw Commission just 

not to burn the straw. Further, the Local Government Advisory 

Council to EPA has taken a position that it will oppose burning the 

small-diameter timber thinning on the forest lands because of the 

Clean Air Act. 

The USDA is proposing new programs to use logs as a method 

of creating methanol, but that technology may well take 5 to 10 

years to develop and require huge Federal subsidies to cover research and development. Finally, the Forest Products Laboratory 

spends millions on research, but few products make it out to the 

marketplace. 

Perhaps a better interim environment would be a program for 

the agencies to earmark or mandate to commit a percentage of 

those funds to be used by small-diameter manufacturers to fill that 

intermediate gap and to create hundreds of new jobs. However, this 

would also necessitate the agencies stepping up to the plate in a 

partnership and cooperative manner and buying and using the 

products. 

We also need the local citizen representatives, Conservation Districts, Resource Advisory Council, and other local agencies to speak 

out that we need to use local round wood materials and local labor 

in our local market. One more sentence. Forest Concepts and the 

city of Cascade are not alone in this bind. Small wood companies 

through the West are facing the same reluctance, that Federal 

agencies will walk the walk, but they are not actually talking the 

talk. They are talking the talk, but not walking the walk. 

We need your help and continued leadership in Congress if we 

are going to solve this issue and make this into a viable and profitable industry. I have another letter that I have already submitted 

to you that I would like to make part of the record, if that is OK. 

Senator CRAPO. That is very fine. Without objection, that will be 

admitted. 

Well, I thank all of you for this testimony. Mr. Lane, let me start 

with you with a couple questions. First of all, again, I note that 

your testimony is very well organized, and you have identified a 

number of concerns and promoted some solutions which we will 

pay very close attention to. You are knowledgeable of both the 

USDA and the SBA business plans and programs; right? 

Mr. WILLIAMS. Yes. Fairly well. 

Senator CRAPO. Can you just give me a snapshot? Are they duplicative? Are they overlapping? Are there holes in them? Do we need 

both? How do they work? 

34

Mr. LANE. Well, they are definitely not duplicative. They complement each other often on the same project. In some instances, 

particularly in the most rural areas, we are banging our heads because of uncertain collateral values, which is again driven by the 

market and their ability to resell the property. We found that in 

order to get the bank to make the loan, it takes both CEDA participation to get the financing and they go after an SBA guarantee on 

their portion, on the bank portion. 

The structure of our gap financing product is similar to the SBA 

504 program in that part of the money comes from the bank, part 

of it comes from CEDA, and part from the owner, in similar 

amounts, even. However, we typically take the smaller end of scale 

as far as loans go. SBA is doing the larger projects; we are doing 

the smaller ones. 

Our microloan programs, because they are funded with grant dollars, allows some flexibility on the smaller loans. The SBA loan 

program, I investigated, exploring that for CEDA, and decided not 

to pursue it because basically the SBA microloan program requires 

that the CBC guarantee the loan for the most risky borrower, 

which is pretty tough to do given the amount of work that goes into 

those microloans and the return on investment. 

I am told by those that operate them, it just doesn’t—the SBA 

microloans loaned through the CBC just don’t amortize, and they 

end up using principal to pay it back. Whereas, our microloan is 

funded by grants; we are more apt to take a riskier stance. The 

money is revolved. It is a win-win for everybody. 

Senator CRAPO. How much business development opportunity do 

you believe is simply being lost because we don’t have adequate access to capital? 

Mr. LANE. In our particular area during the last 6 months, I 

have had 130 inquiries for funding. Not that those would have 

turned into projects. I would say the top 5, 10 percent of inquiries 

end in projects, so getting an actual dollar amount would be difficult. I can tell you that of those 130 inquiries, 19 of them were 

for requests between $20,000 and $50,000; nine of them were a better fit for investment capital than a loan; and 11 were located in 

areas that we are not able to serve either because of population restrictions or economic condition restrictions put on by the Federal 

funders. The result is that 30 percent of those inquires didn’t make 

it past step one because they didn’t fit a program that we had to 

offer. 

Senator CRAPO. Either because of the size of the loan or population or geographic location of the business? 

Mr. LANE. Yes. There is another 12 percent that were just totally 

dismissed for borrower issues. 

Senator CRAPO. OK. 

Mr. Field, first of all, let me again thank you for the great work 

that is being done under your leadership. Also in your testimony, 

you did a very thorough job reviewing your written testimony, as 

well as going through the programs and some of the individual successes that we have had in those programs. 

Can you tell me—at the outset, I talked about the tight budget 

times that we are facing right now. If we are going to have to make 

priorities—and I am not suggesting that we are going to not fund 

35

anything. If there are some areas where we need to put our emphasis in terms of the programs you administer for the purposes of 

rural revitalization, can you highlight what do you think are the 

cornerstones that we should focus on? 

Mr. FIELD. Certainly. First of all, I would like to thank you for 

recognizing Rural Development and our contribution to economic 

development in our rural communities. I can’t accept any of that 

praise because it is really on the part of our employees in the agency and also our partners’ participation and support. It is just fun 

for me to be there and try to be that enthusiastic spark plug on 

some occasions. They are the real pros here. 

It is a very hard decision because all of our programs work. 

Senator CRAPO. That is right. 

Mr. FIELD. All of our programs work and every one is important 

to different segments of the rural community. For me to say what 

is most important——

Senator CRAPO. I know that wasn’t a very fair question. There 

are all these people behind you waiting to see what you are going 

to say. 

[Laughter.] 

Mr. FIELD. Sometimes I ask my employees, I say, OK, do the jobs 

we create, do those fuel the houses that then fuel the need for infrastructure? Or do the houses we build increase the jobs that 

fuel—where does this egg take us? 

I guess they are all very important for us and for our communities. I do think there is a big need in the start-up entrepreneur 

side of things. If there is something we could focus on, could we get 

some more funding through RBEG or IRP programs through the 

lending program to help start-up folks? Because it is not the communities close to Boise and Twin Falls and Coeur d’Alene. 

There are people there that live in rural communities, they are 

working, there is income coming. It is those isolated communities 

that are too far away to do the work in the larger areas. If we can 

grow some entrepreneurs in those communities, three or four a 

year, whatever, with small loans that are administered through the 

economic development agencies, with some technical assistance to 

help those folks be successful, that is one we should probably do. 

Senator CRAPO. Thank you. 

Mr. Williams, you brought up a number of important things. You 

discussed specifically the efforts in animal waste and bio-energy, 

alternative fuels, and renewable fuels. As I am sure you are aware, 

that is an area I have been very interested in. In fact, I was instrumental in getting the animal waste amendment added to the Farm 

bill so we could qualify with them for some of our alternative energy sources. 

Do you think those are working at this point? Let’s assume that 

we are able in the energy bill to extend the tax credits and have 

the tax credits apply. Is that sufficient? Is that going to do what 

is necessary to boost these types of fuels? 

Mr. WILLIAMS. Senator Crapo, my gut reaction is to say no, that 

probably won’t be enough when I look at the animal waste. The tax 

credits probably won’t be enough to bring wind into a competitive 

position. That is one that is on the cusp of being price competitive 

with new generation, and utilities are starting to change the way 

36

they look at wind. In California, wind is actually more predictable, 

in a capacity standpoint, than hydroelectricity. There is a lot of 

hydroelectricity in California. 

Senator CRAPO. I would believe that. 

Mr. FIELD. We are trying to get anemometers up across southern 

Idaho in inexpensive sites to do that. The FCC has towers, utilities 

have towers. So far, everybody is telling us no, we can’t use their 

towers. That would be nice if we could, but that is probably not 

something you want to mandate. 

On the biogas, my gut reaction—and we are going to do the feasibility study to answer that question with collections of money from 

different pots. We were asked to do that. Initially, we don’t do feasibility studies, we do projects. They asked us to do this one, to 

take greenfield concepts to final completion. There are some real 

institutional barriers right now in the markets. 

The last one just occurred to me reading Sunday’s paper because 

what if we—you need a long-term power sale agreement to finance 

this, to give the security that is needed. All of a sudden in Sunday’s 

paper, I am reading about a dairy cow farmer that says, if I lose 

my water, my animals are gone in a few days. 

Well, I have a 10- or 20-year contract with a fuel source that is 

tied to some other resource that could be gone in a week’s time. We 

didn’t do that in our feasibility study—and it is tied to the resource—that is going in to also look at water availability. There are 

so many variables out there, we are probably going to have to do 

more to quantify and assign an economic value to the environmental costs that aren’t being picked up right now in the Magic 

Valley for this thing. People don’t recognize the environmental 

costs that people right now are paying, but we are going to do our 

best to inform them about that. 

Senator CRAPO. In terms of these various alternative and renewable fuels which are in various stages of being able to economically 

compete, with the exception of wind which may be on the cusp and 

might be put over the cusp with the tax credits, what is it that we 

need to do for the others? Do we need some type of additional subsidy? Do we need to have feasibility studies? Do we need to have 

a financing program that——

Mr. FIELD. The financing for feasibility studies is in place. We 

are probably going to need some subsidies initially to get the systems working and the pilot projects up and running so we can better understand what is going on. These subsidies can be as direct 

as through Mike’s department. I also think it can be indirectly, if 

the utilities can buy into the concept of paying and avoiding transmission costs. 

Looking at these 1- and 2-megawatt generating plants located for 

peak demand of local transmission that they are not having to buy, 

it is like buying conservation. I don’t think the utilities are going 

to buy into that. 

Senator CRAPO. Thank you. 

Mr. Thorson, again, thank you for your testimony and for all 

your work trying to make this work out of small diameter timber. 

We are not done fighting yet. You raised some interesting points. 

As I talked to both of the earlier panels, and we will get into it, 

building up the infrastructure in the rural communities is one of 

37

the key things, and we need to define what that is. We talked 

about a few extra things here like power and—well, actually the 

tax policy came up on a few of these things. 

You raised another aspect, Mr. Thorson, and that is the Federal 

Government through its policies can also help to generate markets 

for products through, for example, a requirement or some incentive 

in the Federal purchasing programs to purchase small-diameter 

timber products to accomplish the environmental and economic 

purposes of our Healthy Forests Restoration Act. Or I can think of 

some other ideas that might come. There are Buy America proposals. Maybe we should have Buy Rural America proposals or 

something like that. Could you expand on that concept a little bit? 

Mr. THORSON. Yes, Senator. Thank you. When we first came 

here, part of this was about creating infrastructure—and I don’t 

want to steal Mike Stewart’s speech because he is going to speak 

in a little bit. We came here with the idea of being their anchor 

tenant. If being an anchor tenant could then generate other kinds 

of wood products jobs that would come to this industrial park, they 

could then get the infrastructure they needed to form an industrial 

park and do those kinds of things. We came to be a tenant and not 

to essentially own that. 

The problem we have had, as you well know, is we have gone 

through an extensive lobbying process to get the products approved, going through all the regulations and so on, which was accomplished. We got to this public/private partnership that we all 

felt so strongly about, and so far it just hasn’t materialized. Now, 

if they had some incentives to make that materialize through procurement—we are not asking for subsidies. We just want them to 

procure this and put it back on the watershed and complete the 

watershed cycle. 

If that can happen, that gives us a base market from which we 

can go forward with all these other river restoration products that 

we are doing. We did a big project up at Coeur d’Alene; we did a 

big project out here at Tamarack where we put in 18 river restoration logs with school kids. It then follows, but you have to have 

that base thing to come to a small community and hire good people 

and keep them sustainable. 

Senator CRAPO. Well, that is a very important aspect of all this 

because the Federal Government through its procurement process 

does have a significant ability to impact markets and to establish 

or facilitate markets. On the one hand, there is the need to get the 

best price for the objective that is being sought to be accomplished; 

on the other hand, there are social and environmental objectives 

that we are demanding that we achieve at the Federal level, not 

the least of which are environmental objectives and policy objectives in the management of our forests that require that we utilize 

the small-diameter timber. 

Reaching those kinds of balances on the policy side, it is important to point out, as you did, that that has an impact on our rural 

communities. 

Mr. THORSON. As I said last summer when we had our media 

event up here, we spent the year before $140 million on restoration 

products. We had 1 percent of that market off those 20 jobs in CasVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
38

cade. It is that kind of incentive. We are not talking about wanting 

the whole marketplace; we just want a niche for where we do well. 

Senator CRAPO. That is right. Given the intense battle over policy in our forests, it would seem to me that that is a reasonable 

approach to market these ideas that are going to help these rural 

communities. 

Mr. THORSON. Well, you are going to have to find something to 

do with the logs if you are going to thin. 

Senator CRAPO. Well, they don’t want you to burn them. 

Mr. THORSON. No. 

Senator CRAPO. Let me just conclude with this panel by going to 

something that all the panels have talked about a little bit. I discussed earlier the notion that it seems to me—and I really want 

you to help me either flesh this out or redirect it if I am not focused, or refocus it for me. It seems to me that in the broad sense, 

as we look at what needs to be done for economic development in 

our rural communities, that again building up the infrastructure so 

the infrastructure is in place and then making sure that access to 

capital is in place are the key two big pieces of it. 

We have talked about a lot of other pieces. We have talked about 

making sure that local solutions and flexibility and empowerment 

are a part of the programs that are implemented; we have talked 

about housing; we have talked about power; we have talked about 

tax policy as it facilitates some of the economic decision-making 

that will be necessary as we move forward here with regard to 

building up infrastructure or creating markets, and about doing 

what we can at the Federal level in the procurement process and 

generating markets. 

Am I approaching it right? Are there things that I am not picking up? When I say infrastructure, in my mind, I am talking in a 

broad sense—education, health care, transportation, water quality, 

air quality, power, housing. I am sure I am leaving out some glaringly obvious things. Those things that are necessary—oh. There is 

broadband. Those things that are necessary for an entrepreneur to 

be able to access a market with a product or a service. Am I heading in the right direction? Any suggestions? 

Mr. FIELD. Well, let me take a stab. We have a very active partnership with RD—Rural Development partnership in Idaho. They 

have taken on to try to—and I am not going to steal Dwight’s thunder either. They have taken on the tasks that were pointed out by 

the Governor’s task force on rural Idaho. We have the majority of 

the tools that we need, and I am a rural kid myself. I look at it 

from that perspective. 

If anyone wants to be a success, there has to be a spark plug. 

There has to be a bang, somebody in that community that really 

wants to see something happen there. The Thompsons were a 

spark plug here in Cascade. Somebody has to take that risk. 

We have to—well, it is two parts for me. To help folks that facilitate—help those folks that do have vision, and then help those 

communities that don’t have vision to gain it. Because you can’t 

help the community that doesn’t want to grow. If it doesn’t want 

to grow, there is no amount of government programs you can give 

to it that would make it any different, so education is a very important part of the rural revitalization effort across rural America. 

39

Senator CRAPO. Very helpful. 

Ron. 

Mr. WILLIAMS. Senator, I would just like to echo Mr. Field’s comments. Our success in Mountain Home was related to a couple of 

key people. One of them was Ron Swearinger, the Economic Development Director, who just wouldn’t let this thing die, as it died 

four or five times, and really was instrumental in saying we want 

you to win that bid, and we are going to invest in that—your bid. 

There was definitely leadership on their council and their investment in an Economic Development Director who was willing to 

work on something for 3 or 4 years without knowing if it was going 

to work or not. 

Senator CRAPO. Good point. Anything else? 

[No response.] 

Senator CRAPO. Well, again, let me thank you all, not only for 

your attendance here today and your presentations, but also for 

your very excellent testimony, which is going to be very helpful to 

us. We will excuse this panel, and we will call up our next panel. 

Senator CRAPO. This next panel is going to focus a little more 

specifically on—well, I hope they are going to focus on—I am not 

sure what they are going to talk about, but I hope it is on the 

Healthy Forests Restoration Act. 

[Laughter.] 

Senator CRAPO. If you came here to talk about something other 

than the Healthy Forests Restoration Act or the small timber business development issues, feel free to go into whatever it is you 

wanted to talk about. 

[Laughter.] 

Senator CRAPO. While the panel is taking their seats, I want to 

correct an oversight that I made. We have with us our—what is 

your formal title? 

Court Reporter. Court reporter. 

Senator CRAPO. Our court reporter, Sue Wolf, from Boise who is 

here to record these proceedings. Sue is a new resident of Idaho. 

Relatively. 

Court Reporter. Two and a half months. 

Senator CRAPO. Well, we welcome you to Idaho. We welcome you 

to Cascade, and we thank you for all of your good work here for 

us today. 

Court Reporter. Thank you. 

Senator CRAPO. This panel is made up of Joyce Dearstyne of 

Framing Our Community. How are you, Joyce? Dick Smith of the 

Boise National Forest; Phil Davis, Valley County Commissioner. I 

had my page turned over here. Our first one on the panel here is 

Mike Stewart from Cascade Forest Resource Center. Mike, even 

though I said your name last, we are going to have you be the first, 

so why don’t you go ahead. 

STATEMENT OF MIKE STEWART, FIELD DIRECTOR, USDA 

RURAL DEVELOPMENT 

Mr. STEWART. Well, welcome again, Senator, to Cascade, my 

hometown. On behalf of the city and myself personally, I want to 

thank you for all the work you have done in the past to help us 

address unemployment, catastrophic wildfires, and restoring forest 

40

health in rural Idaho. Under your leadership, getting the Healthy 

Forests Restoration Act passed last fall was critical. The work done 

by you and your colleagues in Congress has been most appreciated 

here. 

I realize we are preaching to the choir here, but it seems our 

message still hasn’t gotten through to some. 

Cascade is the perfect place for this hearing. It is a typical rural 

community that has seen the economic ups and downs that go with 

being tied to this Nation’s resource industries. It has been almost 

3 years now since the closure of the Boise Cascade mill—a closure 

that company officials blamed largely on the uncertainties of timber supplies on Federal lands. 

Though we weren’t necessarily prepared for what happened, we 

have survived the loss of the mill and its $4 million payroll. Since 

then, though, we have seen a dramatic shift from a resource-based 

economy to one that embraces recreation and tourism. Short term 

that is good, as just about every construction worker with a tool 

belt around here is working right now. Long term, those good-paying jobs are going to be replaced by low-paying service jobs. What 

we need here are family wage jobs that are part of a diversified 

economy. We have had all of our eggs in one basket before—that 

is, the Boise Cascade basket—and we don’t intend to repeat that 

error by putting them all in the recreation and tourism basket. 

More help is needed to develop sustainable rural economies 

based on biomass and small-diameter timber as tens of millions of 

acres of forest land across the West are treated. In Cascade, as in 

many areas, we have almost entirely lost the infrastructure—there 

is that word again—to deal with the biomass. 

Senator the HFRA was a very positive step in the right direction, 

but more help is needed for the innovative small businesses to take 

the lead with new ideas for using that material. I disagree with the 

oft-heard refrain that with passage of the HFRA, ‘‘the job is done.’’

That has quotes around it. 

First off, the $760 million authorized has not yet been appropriated. Second, the bill mentions only $5 million that is specifically directed at rural areas in a category called Rural Revitalization Technologies. There is another $5 million that is authorized in 

a category called the Biomass Commercial Utilization Grant Program, but combined, that is just more than 1 percent of the total 

authorization. Granted, everyone will have a right to tap into that 

$760 million, but right now rural areas are at a disadvantage when 

it comes to the economic capital needed to rebuild that infrastructure. 

In addition, of that total authorization, only $80 to $100 million 

can be considered ‘‘new money.’’ Again with quotes around it. Most 

of it will be shifted from existing programs, some of which have 

proven valuable in the effort of restoring forest health. 

For example, Economic Action Program funding has been zeroed 

out in the National Fire Plan’s 2005 budget. The EAP money is 

very flexible and a very valuable source of help for small business. 

Last week—I don’t know if you saw it—Alaska Senator Murkowski 

issued a statement bemoaning the loss to her State of EAP funding. 

41

Another piece of legislation that a coalition of community-based 

forestry advocates will push for this year is revival of a bill co-sponsored a couple of years back by Senator Larry Craig and others— the Community-Based Forest and Public Lands Restoration Act. 

While some aspects of that legislation were ultimately incorporated 

into HFRA, some were not. 

One thing that was left out was creation of Restoration and 

Value-Added Centers proposed for small communities around the 

rural West. That proposed bill focused on small businesses and 

gave them contracting preference on an annual escalating scale. 

Senator you are aware of the size of the problem—it is huge— and the scale of the work needed to solve it. That is also huge. 

From my perspective, we can approach it a couple of ways: using 

large corporations, using small business, or a mix of both. Referring back to my eggs-in-one-basket comment, there is stability and 

flexibility in small business, and I much prefer that approach for 

Cascade. 

Federal agencies also need to walk the talk. You are well aware 

of the Forest Concepts story, but here is another example. We have 

seen a number of new Federal buildings around here in recent 

years. While the cost effectiveness of heating those buildings with 

wood chips, for example, may be iffy, new technology is making it 

more feasible all the time. Alternate sources of heat and construction methods using small-diameter timber in areas that are rich in 

those resources should be considered. 

Last, Senator, we need an energy bill, one that includes transportation subsidies for biomass. Several good projects in this region 

presently aren’t viable because of the high costs associated with the 

haul. Projects that would use the material that has to be removed 

anyway from the forest is going to be removed by burning—which 

we are not hearing good things about—or another disposal method. 

We might as well put that material to good use, create some jobs 

and economic activity, and also recover some of the costs of forest 

health restoration. 

Senator thank you again for holding this hearing. Again, I thank 

you for all you have done for this area in the past, and I hope you 

can carry this message back to Washington, DC. 

Senator CRAPO. Thank you very much, and some good points 

there. 

[The prepared statement of Mr. Stewart can be found in the appendix on page 100.] 

Joyce. 

STATEMENT OF JOYCE DEARSTYNE, DIRECTOR, FRAMING 

OUR COMMUNITY 

Ms. DEARSTYNE. I would like to start by thanking you for the opportunity to testify today about how rural Idaho communities are 

addressing economic development needs and how the Healthy Forest Restoration Act does and does not help in our efforts. My name 

is Joyce Dearstyne, and I am the Director of Framing Our Community, a community-based forestry non-profit organization located in 

the Clearwater Mountains of north central Idaho. 

Our focus today is on how Framing Our Community programs facilitate the utilization of low-value timber in the production of valuVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
42

ated wood products and how HFRA will assist us in accessing these 

materials to use for business development while reducing the extreme fire hazard in the national forest that surrounds our community. 

This will be accomplished through the development of valueadded wood products manufactured from small-diameter, standingdead, and diseased timber that result from fuels reduction and defensible workspace projects. Urban, niche, and emerging consumer 

markets were researched. Then businesses were identified that 

would utilize the available low-value timber to manufacture desired 

wholesale and retail products. They include timber frame buildings; 

rustic and high style home and office furnishings; round pole structures and bridges; custom doors, windows, and moldings; and quality gift items. 

The most important product that the incubator will sell is Framing Our Community’s story about how our rural community is 

using forest restoration and fuels reduction projects to improve the 

health of the forest and the health of the community. HFRA, 

multiyear agreements with the BLM and the Forest Service, used 

in conjunction with categorical exclusions and stewardship contracts, will facilitate FOC’s ‘‘Jobs in the Woods’’ program which 

trains unemployed workers in methods of forest restoration and 

fuels reduction. The University of Idaho and FOC will spearhead 

a pre-planning and monitoring process that brings diverse and 

often opposing groups to the table to help plan and monitor 

projects. 

At the local level, we expected HFRA to be a silver bullet that 

would reduce fire hazards, interrupt insect infestation, and create 

opportunities for employment. What we have found is that, as requested, we will play a bigger role in the management of our surrounding national forest, and that with work, and in time, there 

will be opportunities for local employment. We learned that categorical exclusions do not apply to areas that are well into the 

NEPA process and are not the quick fix expected to eliminate the 

danger of catastrophic fire. 

Under the Communities at Risk definition, larger population centers are targeted to receive the majority of the funding, and small 

rural communities will have limited funds to work with. Our Nez 

Perce Forest has a Class 1 fire condition because we have yet to 

miss a hundred-year fire cycle when, in fact, we have the highest 

fuel load in Region 1, and the million-acre fire of 1910 started outside of our town and burned to the Canadian border. 

We applaud Congress for enacting HFRA because it promises to 

be an important tool that FOC will use to treatments necessary to 

reduce the potential of a catastrophic fire and create economic stability for our rural community. With the extreme fire hazard and 

poor economic conditions that we face, we urge you not to stop 

there. We need you to pass further legislation like the Communitybased Forestry and Public Lands Restoration Act that will allow 

rural communities that are on the front line to build the infrastructure necessary to reduce fire hazard on public as well as private 

lands. 

To this end, we urge Congress to appropriate funds for HFRA so 

legislative actions can get on the ground; develop a method of fundVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00046 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
43

ing, interaction, and coordination of efforts among the Rural Development, Forest Service, and BLM; set in place mechanisms for nonprofits to build capacity, purchase equipment, and train workers 

for available jobs; fund the EAP program. 

This year FOC applied for a National Fire Plan EA grant to help 

purchase equipment that would create from three to four jobs in 

fuels reduction and forest restoration work. This work would have 

been completed for $1,000 less per acre than it costs the Forest 

Service to effect. We needed $66,000 to complete this purchase, but 

because the funds for the entire State were zeroed out, we were not 

funded. Now those jobs may not happen, and our fire hazard will 

not be diminished. 

Create restoration and value-added centers that are located in 

communities that are within or adjacent to national forests. Pass 

legislation that provides funds to communities with populations 

under 5,000. Infrastructure, like equipment and building construction; capacity building, training and tools for towns and organizations to become self-sufficient; product development, technical and 

financial assistance directly to small and microenterprises in the 

form of grants, revolving loans, or lines of credit to provide access 

for the growth or start-up capital. 

Our hope is that you will help us in this effort and take the next 

steps necessary for creating rural economic development and getting work done on the ground. 

[The prepared statement of Ms. Dearstyne can be found in the 

appendix on page 103.] 

Thank you. 

Senator CRAPO. Thank you very much. 

Dick, we welcome you here. Go ahead, please. 

STATEMENT OF DICK SMITH, FOREST SUPERVISOR, BOISE 

NATIONAL FOREST 

Mr. SMITH. Thank you, Senator Crapo, for the opportunity to 

present this testimony on behalf of the USDA Forest Service. The 

President’s Healthy Forests Initiative and the Healthy Forests Restoration Act of 2003 will help us improve the health and vitality 

of the national forests and may also provide economic benefits to 

many rural communities, just as the previous two testimonies have 

indicated. 

I would personally like to thank you for your efforts in helping 

us, as Mike Stewart mentioned, in getting this legislation passed. 

It is a definite asset and tool for us in the Forest Service. The 

Healthy Forests Restoration Act provides the tools for the Forest 

Service to address the problems where our forests have become 

overgrown and unhealthy and to address the threat of fire and fuel 

buildup in order to reduce the risk of private property lost to wildfire. It will take active management and lots of hard work to treat 

lands that currently need help. Mechanical treatment and prescribed burning are the two primary we have at our disposal. 

Prescribed burning is a valuable tool but cannot be used in all 

situations. Factors such as high fuel loading, air quality restrictions, weather, and risk of fire near communities can limit its use. 

That leaves us the mechanical treatments, such as thinning crowded stands, as another very value and necessary tool. In order to 

44

fully implement this tool, we need to overcome the higher costs associated with its use, and also the dilemma of how to dispose of the 

significant quantities of standing-dead trees that we need to remove to improve both the health and fire security of our community. 

In addition to the existing authorities already available to the 

Forest Service, HFRA also addresses the economic and community 

developments implications and challenges of handling the small-diameter materials. Mr. Chairman, as you know, the focus of the administration’s efforts in implementing HFRA to this point has been 

largely focused on Title I, which focuses on treatment of fuels on 

public lands. 

Plans are underway, however, to develop the other authorities, 

like the authorities that Mr. Stewart spoke to earlier. These other 

authorities addressed by this legislation may provide a foundation 

for rural community development opportunities. If we can make 

progress, add value, find markets for this small-diameter materials, we can offset the high cost of mechanical treatments, dispose 

of small-diameter material, and hopefully assist communities that 

are dependent on these natural resources. 

Section 201 of HFRA amends the Biomass Research and Development Act. Forest Service research and development has a comprehensive research program currently underway to look at forest 

biomass assessment, management, harvesting, utilization, processing, and marketing. These efforts are in their early stages and 

are being led largely by our Forest Products Laboratory in Madison, Wisconsin. 

The Forest Products Lab is a world leader in developing new 

technology and uses for wood products, and it is actively exploring 

new opportunities for using small-diameter materials. These research programs are exploring new opportunities for utilizing 

small-diameter material and technologies to help business operators to become more efficient and environmentally friendly in their 

operations. 

Section 202 of HFRA, Rural Revitalization through Forestry, will 

help communities and businesses create economic opportunity 

through the sustainable use of the Nation’s forest resources. While 

the key to this will be largely centered in the private sector, the 

likelihood of success is greatly expanded with our active participation, both of the U.S. Forest Service and our partners in our State 

forest programs. 

The Forest Products Lab, as I have already mentioned, works 

closely with many of the non-profit and for-profit organizations that 

are working on community development throughout the Intermountain West. 

One promising development for the use of biomass is the Fuels 

for Schools Program, and I will just use that as one of many examples that we hope can help us in dealing with this small-diameter 

material. The Fuels for Schools Program is a cooperative effort involving the Forest Products Lab, Forest Service State and Private 

Forestry, State foresters and local communities. The aim of the 

Fuels for Schools Program is to promote and encourage the use of 

wood biomass as renewable natural resource to provide a clean, 

45

readily available energy source suitable for use in heating systems 

in public and private buildings. 

Removing hazardous fuels from our forests by developing a viable 

commercial use for some of the small-diameter material is necessary to effectively implement HFRA. Using wood biomass as a renewable energy source, such as for heating schools and public 

building, makes good sense. The first Fuels for Schools project is 

currently in operation in Darby, Montana, and additional projects 

are being considered for Idaho. 

In conclusion, I would like to say that we are working hard to 

address the threats to the health of our forest. The President’s 

Healthy Forests Initiative and congressional passages of HFRA 

have provided us with new and valuable tools for accomplishing 

this work. In Idaho we are making good progress on developing 

community-based County Hazard Mitigation Plans across the entire State that will identify activities and treatment needed for reducing wild land fire threats to homes and communities. 

While there is much that still needs to be done, we are working 

with Governor Kempthorne’s Idaho Rural Partnership to find additional solutions that will benefit rural Idaho. We feel that the 

treatment and use of this thinned material presents both a management challenge to us, but also a potential economic opportunity 

for rural America. 

Thank you. 

Senator CRAPO. Thank you very much, Mr. Smith. 

Commissioner Davis. 

STATEMENT OF PHIL DAVIS, VALLEY COUNTY COMMISSIONER 

Mr. DAVIS. Well, I would certainly like to welcome you to Valley 

County. It is my pleasure to do so today. 

Senator CRAPO. Thank you. 

Mr. DAVIS. You have picked a nice day to show up. 

Senator CRAPO. Too bad we are inside, right? 

Mr. DAVIS. It is. Yes, sir. I also am going to talk about the 

Healthy Forests Restoration Act, and I was going to start my comments with all the catastrophic circumstances of wildfire, and then 

I got to thinking, why would I want to do that? You made the same 

argument much more eloquently in the Senate when you were arguing on behalf of this, only you that had the visions of Southern 

California burning in the background, and how could I match that? 

There is not much point of bringing up the downside of catastrophic fires, but what I do want to visit about is the opportunity, 

hopefully, with this Act to mitigate those fires or prevent them as 

much as possible. The hope is this bill will give us the tools that 

we need to stop those catastrophic fires which threaten our homes 

and watersheds. 

Obviously, one thing that will depend on this is funding, and 

that has been addressed already and we do hope that the appropriated funds will be allocated to implement this. 

Also the Healthy Forests Act, I will hope, will bring back local 

decision-making. Over the last number of years, we saw quite a lot 

of decisions on public lands being made in Washington, DC, which 

is not the most efficient decisions. You will get a lot more comprehensive benefit by local decision-making. 

46

Under this Act, also, I would like to talk a little bit about the 

gridlock we saw prior to this Act and hope that this Act will somehow alleviate that to some extent. Part of that will be—with direction from Congress—into directing the field line officers regarding 

biological assessments, and the Forest Service biologists will need 

to be directed to reexamine the threshold which may affect how determinations will be evaluated. 

One other addition to this bill that is so valuable, I feel, is the 

evaluation and no-action alternative. I have sat in many commission meetings with Forest Service people looking at the alternatives, without the opportunity of saying what is the opportunity 

of doing nothing and what will the result of that be? Maybe the 

best part of this Act and maybe the lack of active management will 

now finally be addressed, and I appreciate the fact that you were 

able to get that into this bill, where we can at least evaluate that, 

because the true State of the environment at this point is very important, I feel. 

I would like to talk a little bit about the history of the Forest 

Service and the 1908 Act. I don’t feel that anything with the responsibilities and goals of the Forest Service has changed because 

of this. The responsibility and the goals of the Forest Service, in 

my mind, has always been for the local community and the watershed that is dependant upon that. 

Gee, that is quick. 

Senator CRAPO. Everybody thinks we run a fast clock on them. 

Mr. DAVIS. I can’t get past the fact that Forest Service is supposed to work for the benefit for local communities, and we do have 

the Gregg-Wyden Bill, H.R. 2389. The goal there is to get back actual receipt, and somehow we have to do that. Besides a healthy 

forest, we also have to have some economy off the National Forest. 

What we have seen since the mill shut down, which we talked 

about, was devastating to families due to the socioeconomics of 

this. Somehow we are going to have to get some infrastructure. I 

know we were talking about infrastructure before. Somehow that 

will include some way of utilizing the biomass, the bottom of the 

forest to burn it for heat, but also for boards. You certainly can do 

that. I am hurrying as fast as I can. 

We need cooperation between the Forest Service, with County 

oversight from—excuse me. We need cooperation between the counties and the Forest Service with oversight from the congressional 

delegation. I know we have been assured of that. We always have 

in the past. We have risk assessments. We are just about to finish 

fire risk assessments. 

I know your staff has offered to come in when we get that, and 

we will coordinate with the Forest Service, and we will talk about 

how we implement that in conjunction with the Healthy Forests 

Act. I know we don’t have a complete understanding of it, and I 

know your staff wants to come in and help us out with what your 

vision of that bill was, and so we are looking forward to that, although we don’t have the tools in place yet. 

[The prepared statement of Mr. Davis can be found in the appendix on page 108.] 

I could probably quit any time. Did you ding that? 

47

Senator CRAPO. Time is up. You are finished. We will get into 

some discussion here anyway. Let me, first of all, thank this panel. 

We felt this Healthy Forests Initiative issue was significantly important enough to have a specific panel on it. 

Let me just start out this discussion, just give you a little perspective. Many of you followed the debate that we had in Washington over this, and I believe several of you in testimony today 

said that Healthy Forests Restoration Act was a very good Act but 

should not be perceived to be the end of the fight or the ultimate 

solution. Believe me, we understood that very well. 

This bill focuses primarily on giving us a paradigm in which to 

move forward in some of the easier aspects of forest management, 

some of those dealing with protecting against wildfire and insect 

infestation. It doesn’t, in my opinion, even reach into the—it starts 

to get into, but it doesn’t even reach, as it should, as our policy 

should, into the question of logging, commercial logging on the forest. 

Now, we are going to be talking today about how we can get commercial utility out of the activities that this bill opened in the forest. The bill focused on protecting against wildfire and protecting 

against insect infestation, and did not even get into the whole 

arena of—what I am getting at is the whole arena, because it is 

important, of how we need to start reforming our approach to forest 

management with regard to commercial activities. 

I will state once again for the record that I believe that we can 

very effectively manage our forests and have very vibrant forests 

in perpetuity and still have meaningful economic activity on the 

forests. There is a lot that this bill didn’t get into. What this bill 

did was set up a new approach to decision-making about forest 

management. Even with regard to the issues which it did get 

into—insect infestation and fire management and those kinds of 

things—it was limited in acreage and in time and in dollars. 

Frankly, one of the most important parts of this bill, in my opinion, is going to be that as it is implemented, it is going to show 

that those who were—the naysayers who were saying these are the 

environmental catastrophes of the decade, we are going to destroy 

all the forests, we have eliminated all the environmental protection, we are conceding to those who want to go in and destroy our 

forests, it is going to show just the reverse. It is going to show that 

the improved policies and procedures that we put into place to 

allow us to start making and implementing management decisions 

actually can be done, done effectively well, and in a way to protect 

and preserve our forests. 

Now, at the same time, as many of you have pointed out, those 

of us who managed this bill—I was fortunate. It just happened to 

land in my subcommittee. This subcommittee, the one I am serving 

on, had jurisdiction over this bill, so we got to write the Senate 

Bill. As we did so, we wrote it in a way that also focused on rural 

revitalization and the economic potential that could be obtained, 

even from this first step into returning to good forest management 

decisions. That is why we talked about small-diameter timber and 

some of the other things that are going on here. 

With that having been said, I want to just say at the outset that 

I absolutely concur with what has been said by many on the panel 

48

today that this is not the end but the beginning of our efforts to 

move back into rational forest management policy; and that we 

need to be sure we have the adequate funding, whether it be from 

the overall funding authorized, the EAP funding, or the other aspects of this issue that need to be addressed. In difficult budget 

times, I consider this to be one of the priorities that I will fight to 

make sure we get adequately and fully funded to the full extent of 

the bill. 

Where I would like to focus is a discussion on where we are right 

now, and maybe I would start with you, Mr. Smith, because as you 

indicated in your testimony, at this point the Forest Service has 

been focused mostly on centralization and Title I. I understand 

that as a new bill is passed, it takes time for the Forest Service 

to gear up and implement the new policies that we have put into 

place. However, there is a serious amount of frustration out there. 

The concern for the communities that are impacted like this one 

or Elk City or others, is, A, will we get from the implementation 

to actual projects occurring in the forest and occurring rather 

quickly? We need to see some of this—we need to see action on the 

ground. Second, what about all this effort to focus on the economic 

potential that can be obtained here if we do it properly, such as the 

effective utilization of small-diameter timber? Would you like to 

take a stab at that? 

Mr. SMITH. Sure, I will take a stab. From the standpoint of activities and things getting started, let me share a couple of numbers. These are national numbers. From the fuel treatment standpoint, we are going from 1.4 million acres of treatment last year 

to 1.6 million acres of treatment this year. 

We are proposing and planning, hoping to get to 1.8 by 2005 and 

2 million acres by 2006. I can assure you from the standpoint of 

the Forest Service, this has probably been the No. 1 topic of discussion we have had since HFRA passed as to how we can do exactly 

the question you are asking and somehow see some measurable results on ground. That is where we are heading on that side of 

things. That is moving forward. 

The other component is we realize that the dollars we receive 

strictly for fuels treatment isn’t the only answer. There are a number of other tools. Commercial timber sales are one. Stewardship 

contracting is another. Partnerships with rural communities are 

another vehicle that we hope to be able to expand those acreages 

of treatment even beyond those figures I just shared with you. 

As far as it relates to the economic development side of things, 

what I do know has happened is this particular year, we had the 

good fortune of having our appropriations bill passed prior to 

HFRA being passed. For example, there are some new provisions 

in HFRA that you will see nothing in the 2004 appropriation for 

because, again, it was passed before. In our funding mechanism, 

unfortunately, we already submitted our 2005 budget, so that has 

some room to be modified by Congress, obviously, as this year 

unfolds——

Senator CRAPO. We intend to do that. 

Mr. SMITH. I expect that. 

[Laughter.] 

49

Mr. SMITH. The point—from the internal agency standpoint, we 

are working hard right now to get—we are in the process right now 

of formulating our 2006 budget, and we are looking at getting both 

policies in place and getting funding mechanisms in place for the 

rest of the provisions. 

Senator CRAPO. Could you tell me—and I know this is potentially 

putting you on the spot, and you may not be able to answer this. 

How does what you just said translate into, particularly, the 

projects that you were talking about? The acreage expansion and 

a couple of other things quickly, how does that translate into action 

in Idaho as soon as possible? 

Mr. SMITH. I can share some numbers off the Boise because I 

know it quite intimately, so let me share a number there. From the 

standpoint of the same acreages, we are going from 4,000 acres to 

9,200 acres of treatment between this year, 2003, and 2004 this 

year. We have almost doubled on the Boise National Forest. 

The numbers you are asking for, Senator, we are actually in the 

process of compiling those. We have an interagency group that is 

working very effectively between Idaho Department of State Lands, 

Bureau of Land Management, and the Forest Service. If you like, 

I would be happy to share those numbers when we get them, probably within the month. 

Senator CRAPO. All right. I would like to see that. I know I 

haven’t let anybody else get in here yet, but we will open it up and 

start going back and forth here in a moment. 

There was also testimony about the question of how effective our 

ability to move in quickly with the help of the Forests Restoration 

Act authorities is being implemented by the agency. In other 

words, are we going to see litigation, do you believe, that is going 

to stall it? Our effort was to forestall any kind of litigation and let 

us move forward. Are you seeing any potential litigation still being 

a threat that diminishes the effort? 

Mr. SMITH. In fairness, it is an unanswered question at this time. 

We don’t have anything that we are aware of occurring, but we are 

also just in the infancy of projects both under HFRA and the categorical exclusions that we mentioned earlier under the Healthy 

Forests Initiative. At this point in time, we haven’t seen a big increase in litigation, but it is probably a little too early to say. It 

takes a little time to work through the legal system. 

Senator CRAPO. I understand. Anybody else want to make a comment or jump in here at this point? 

Mr. STEWART. I would just like to publicly thank Dick, I guess. 

The Boise Forest has been really good for us to work with. They 

have been very supportive, very supportive of Forest Concepts, and 

what we are trying to do. I don’t know how much that spirit is 

lacking across the country, but I wish it would spread a little bit. 

Senator CRAPO. Well, I can join with you in that. I don’t know 

how many of you know that Dick worked for me in my office for—

how long was it? 

Mr. SMITH. About 7 months. 

Senator CRAPO [continuing]. About 7 months as a special fellow, 

or whatever the title was, and did an awful lot of good work. 

Helped us on that side of the issue as we were trying to move 

things forward. We were real pleased to see him move into this role 

50

here in the Forest Service. We know he has his heart in the right 

place. 

I just answered your question by saying when we passed this legislation, we had a big bill signing over in the Department of Agriculture’s headquarters. Everybody showed up and the President 

came and signed it. I can’t tell you how many USDA forest officials 

came up to me and thanked me personally for this. I believe the 

attitude there at headquarters in Washington, DC., was positive 

and receptive toward this. They want to implement it. 

That is why some of us are a little frustrated that it is not being 

implemented as fast as we thought it was going to. Tell them the 

Chairman of the committee is asking you why it isn’t happening 

faster. 

Mr. STEWART. Senator, there is one other thing I wanted to point 

out, and you are probably more aware of this than I am. I guess 

I am a rookie at this testifying thing, so I had my stuff all written 

up. 

On Friday I heard that there was an amendment to the budget 

resolution of half a billion dollars for the next 2 years to help the 

Forest Service and BLM with their overexpenditures in fire fighting, fire suppression, if that happens. Also I understand that Senator Wyden was successful in getting an amendment through the 

Senate for $340 million of new money that will help with implementation of the HFRA. Does that——

Senator CRAPO. That is correct. Let me tell you how all that is 

going to shake out. I will give you just a real quick Budget 101 for 

how all this works. The budget which we adopt—first of all, the 

Senate just adopted one. The House either has or will adopt a 

budget. Then we go into conference and come out with a conference-able budget that we all then vote on again. 

Last year we never got that conference budget passed because it 

got filibustered in the Senate, so the House worked on its budget, 

the Senate worked on its budget to try to cobble something together at the end. This year, we expect that that is a potential outcome as well, but we are going to go ahead. In the conference, some 

of these amendments don’t survive. The fact that they have made 

it in the Senate is good, but they were not necessarily a sure thing. 

If you were here this morning when I gave my little pitch on what 

the budget looks like right now, it is miserably difficult. 

I will be very honest, there is about a half a percent growth for 

the entirety of all the funds, with the exception of Defense Department and Homeland Security. What the ultimate number will be 

I don’t know, but you have to assume that something like the 

Healthy Forests Restoration Act doesn’t have a baseline because 

we are just starting it. We have an authorization of $760 million, 

and we are trying to get to that. Many of us will try to get to that, 

but I just don’t know how close we can get. Those things are in the 

budget now. They are being fought for, and we will try to fight for 

them as aggressively as we can. 

That having been said, once a budget is passed, whether each 

House is working on its own or we get one out of conference, it is, 

in essence, a set of numbers in categories. Then the budget is broken into 13 pieces by the Appropriations Committee, and each of 

the 13 Appropriations Committees gets an allocation of the budget. 

51

The Appropriations Committee doesn’t have to break it out the 

same way the Budget Committee did. If they do, at the end they 

have to come back with the same bottom-line number, but they can 

shift it around inside. There is another point at which you could 

either lose something or gain something as the appropriators do 

their work. 

I am on the Budget Committee; Senator Craig is on the Appropriations Committee. I do my part on the budget side, and he tries 

to save what I have done and improve on it on the appropriations 

side. We have several bites at this; it is not just going to move 

along in a very unhealthy budget climate for a while, but you have 

some very strong advocates for it. Those dollars are there, but I am 

telling you not to spend them. 

[Laughter.] 

Mr. STEWART. Right. I would never presume to do that. 

Senator CRAPO. Yes? 

Ms. DEARSTYNE. If I might, Dick mentioned the fact that now basically there is the authorization to remove those fuels from the forest, but what do you do with them? To take from Mike, also, when 

you have all your eggs in one basket, as most of our communities 

have, we have been timber-based, we are talking about mills, sawmills, and we know that that is not going to work any longer. What 

we have to do is realize that any beginning has to have a driven 

end, and the driven end is the market. If we don’t create markets 

for this material to be utilized in the production of different products, we are going to end up with this huge pile——

Senator CRAPO. Slash pile. 

Ms. DEARSTYNE [continuing]. Slash pile sitting in the forest with 

nothing to do. Framing Our Community, as we were putting our 

program together, we watched it grow, and it ended up truly being 

holistic. We realized that we need to help facilitate the removal of 

the small, the standing-dead, and dying materials from the forest, 

and that we needed to take that material and find the markets 

where we could deliver it to and create jobs along the way. We still 

ended up with this pile at the end, and that is where the biomass 

comes in. 

We need the support at the local level to be able to get that off 

the ground. Our community has been so decimated. Elk City is at 

64-percent poverty level. At that kind of level, it is wonderful that 

there might be loan programs out there, but the fellow who has the 

idea is worried about keeping the roof over his head and food on 

the table. That is the last thing he still owns. There is no way he 

can look at taking out a loan that might lose that final piece. 

We need to look at other mechanisms to help drive this so we can 

get these small, promising, solid—I am not saying support somebody who has had a bad history, but take these solid projects and 

move them forward. 

Senator CRAPO. You raise a very valid point. 

Dick, you are going to be the one we look to to give us a good 

answer on this. I will tell you right now, we have already got some 

directives from the President, directives to the agencies to try to 

purchase this material and so forth. They are not doing it, and they 

don’t know how to do it. Part of what we did in this bill was to 

direct the Forest Service to figure out how. What I heard you say 

52

in your testimony, Dick, was that you are starting that, but we are 

really at the early stages of that part of this bill. We have the indication. 

We have a situation—Steve Thorson, on the last panel—we have 

been working in the community here with him for some time where 

the agencies could have created a market there. We did everything 

but go out and print the contracts for them, and they didn’t happen. Can you tell me why that is not happening? 

Mr. SMITH. The best answer I can give, which Steve actually alluded to pretty well, is just as Congress is driven by trying to work 

within a budget, we are also. Part of what happens there is we are 

using scarce dollars to try to accomplish as much as we can on the 

land, and we are also looking to find the most efficient way and the 

most economical way of getting that done. Sometimes that does 

conflict with utilizing a new product, as we discussed here. Sometimes it is just getting to be aware of it, but sometimes it is also 

the cost factor. 

It is balancing those two and trying to spread our dollars to treat 

as much ground as effectively as we can with the dollars we have. 

That is one part of the answer as to why that is happened. 

I guess the question I would raise, and Steve raised earlier on 

the other panel, is whether or not, from a Federal procurement 

standpoint, we want to build in some actual incentives that are 

currently not there, that I am aware of, for utilizing this type of 

material. 

Senator CRAPO. How would such an incentive be constituted? 

Would it be some kind of financial incentive to the agency? If they 

purchase these products, they get some extra budget allocation or 

how would that work? 

Mr. SMITH. I don’t have an exact answer for you, Senator. I 

would think it would be more in the context of—we have some very 

rigid procurement regulation to ensure that we in the Federal Government are utilizing the public’s money as efficiently as possible. 

It may be as simple as recognizing in those procurement regulations that in addition to getting the best buy for the government 

nickel, there are some other objectives. 

Senator CRAPO. There are some policy objectives that justify that 

expense? 

Mr. SMITH. It might be in there that—I am sure there are some 

folks in the Washington office that could look at that and help 

identify what the best method might be. 

Senator CRAPO. Is there more, Joyce, to—we talked about some 

of the—one piece of the answer. Your focus is broader? 

Ms. DEARSTYNE. Much broader. We found—and it is possibly because our size; we are only 400 now. We were 1,200 in the 1990 

census, but we are down to 400 because our greatest export has 

been our youth and those that have skills. What we ended up doing 

was looking at the broad picture, because we needed to work with 

the Forest Service and build upon the initiative to get this started, 

to get access to those materials. Our forest has been pretty much 

a no-cut forest. We have an unbelievable insect infestation that last 

year was estimated at 130,000 acres. What it is going to be this 

year, I won’t even venture. 

53

We realized that we needed to help. Working with the Forest 

Service, find ways to make it sensible and reasonable to get this 

material out and have something to do with it. We had actually 

started with our small business incubator that focused on standingdead, the dying, and the small-diameter. It was a natural fit for us 

to go out and say, what, there is no infrastructure there to get this 

out in a low-impact method that leaves the least amount of soil and 

vegetative disturbance. 

We need to train those crews and get the equipment to do that. 

When we open the forest up, it becomes healthier, the trees will 

grow to a much better diameter, which helps the sawmill in the 

long run. Just producing the product is not you can end. Those 

products must have somewhere to go. 

Senator CRAPO. You mean the market? 

Ms. DEARSTYNE. What we have been doing is working with a Pacific and Inland Northwest coalition of organizations, and we have 

been developing urban markets in the Seattle and Portland areas; 

we will be moving into Northern California. Even more importantly 

for us, because of our distance, we are going to be utilizing the 

Internet, and we will be utilizing e-commerce. My little description 

is we are the rural Amazon.com. 

You can come to the incubator web site and take your shopping 

cart and go to Mike’s store and purchase a lamp, and go to Dick’s 

store and purchase a table, and then go to check-out, pay for everything, be told how much your shipping is, and you will know that 

it will be shipped out and delivered to you just like Amazon. We 

had to do that because being a commodity-based town and having 

such a slim margin, shipping was the end-all, be-all to whether you 

made it or failed. 

We needed to find businesses that the buyer paid the shipping, 

that eliminated that problem. By going to a secondary and tertiary 

market, we had a much better margin to work with. The other 

problem is, if you go back just to being a sawmill town, even if you 

can get the logs out, there is no commodities market. It is in the 

tank. It doesn’t matter if you cut those trees; they are not going 

to have far to go. 

We need to diversify. We have to make our community stronger 

by doing that. Our town is Forest Service and right now the sawmill, and the sawmill is on skeleton crew. That is how we ended 

up doing the whole spectrum. It was because of our partnership 

with the BLM that I ended up at the Biomass Energy Conference 

in Denver and talked to the gentleman in a booth for what is 

known as the FENCE Program. We will have a feasibility study 

done this May about putting a biomass cold generation plant at the 

district office, which is right next to the school. My hope is it will 

heat the Forest Service compound and the school and provide electricity to our community. 

We are at the end of the grid; we are the most expensive grid 

for a utility. Over a 20-day period during the Christmas/New Year’s 

holidays, we had 16 days with one or more power outages. What 

production we have is totally disrupted because after the power’s 

off for more than an hour, the mill sends the workers home, and 

the school sends the students home, as do other small businesses. 

Our goal is that this cold generation plant will hold up the grid or 

54

support the grid when our power goes off. The way the system is 

set up, not only will it provide heat, when it provides energy the 

electric gets metered back to the utility in good times; in bad times, 

it actually provides the electric for the community. 

Senator CRAPO. Well, those are all very good—and many private 

sector side—pieces of the solution. Before I turn to the commissioner—because you got cut a little short on your testimony. If you 

want to say anything else, you are going to get your shot. 

Dick, could you tell me, in the legislation as we authorized it, is 

the department exploring ways such as this, such as Joyce has 

been talking about—is the department taking—has it received a 

legislative charge in the legislation, as you understand it, to investigate the development of markets for utilization of these products? 

Mr. SMITH. Let me address that from the standpoint of going 

back to the Forest Products Lab again. I don’t want to say that 

that is the whole answer, but that is an entity within our organization, within the Forest Service, who is very aggressively looking in 

that area. Now, from our perspective, hopefully that generates 

seeds. 

There is probably not a silver bullet out there that is the one solution, but we are hoping that through the Forest Products Lab, 

our State or private forestry branch that works specifically with 

communities and the private sector, that we can identify probably 

a number of different options, and options for utilizing that biomass-type material. I can assure you that that is ongoing as we 

speak. 

What I can’t address at this point to my satisfaction, just because, unfortunately, Senator, I don’t know the answer, is where 

the department sits in this discussion. From the standpoint of the 

agency, the Forest Service, we are very much focusing on that, and 

we are just in the process of putting some additional funds in 

place. It is getting our attention. 

Senator CRAPO. All right. Thank you. 

Commissioner, do you want to jump into this in any way or get 

in some of the licks you didn’t get in before? 

Mr. DAVIS. If I was to bring up anything in particular, I guess 

it would be the cooperating agency status that a good many people 

have talked about, including the President. It seems that we got so 

far from local decision-making in the past, I guess it made us hungry to get back because we were out of the loop, as you well know. 

Senator CRAPO. That is right. 

Mr. DAVIS. Fortunately, the Council on Environmental Quality 

has been elevated to cooperative agency status for local government. I guess the other reason that comes to my mind is, over the 

last number of years, whenever we were talking about a solution 

to the gridlock that we all saw was so evident, it was typically 

brought up that it was the consultation process that was so difficult to get through. 

Now, of course, we haven’t worked with the Act, the Healthy Forests Act, enough to recognize when CEs are going to work and 

when they are not. I know there’s a number of exemptions when 

they won’t work. I guess we are going to try and keep your ear 

quite a bit and let you know how we are working through this process. 

55

I know we are going to meet with your staff on what the envision 

of Congress was for this. What kind—can you give us a heads-up 

on that you envisioned the cooperating agency status, sections on 

consultation, and so we can break that gridlock? 

Senator CRAPO. Yes. My vision, which I won’t promise you is the 

one that is achieved yet, but I believe is the direction the administration is trying to take. Jim Condon, the Deputy CEQ, and I have 

talked about this a number of times, and I have actually held hearings in another context, as the chairman of the Fisheries, Wildlife, 

and Water Committee on the Endangered Species Act to address 

this specific issue. 

My vision is that there is a significant amount of room under the 

Endangered Species Act, as we now have it without other agencies, 

to move forward in significantly expanding opportunities for State 

and local government to work together with them in the cooperating agency role. I know that that is the direction that CEQ would 

like to see the agency go. The reason I said that that opportunity 

is there without amending the Act is right now we just don’t have 

the votes to amend the Act in any way. 

One of my initiatives over the last 3 or 4 years has focused specifically on trying to get through the consultation process. We have 

concluded that that is achievable, but it is, at least in the short 

run, mostly achievable through administrative action. We see that 

moving along. It is not moving as fast as we would like to see it, 

but I am very concerned and very focused on it. If you don’t see 

the kind of headway being made there that you would expect, I 

would encourage you to let us know because we will hold some 

more oversight hearings and find out why it is not happening. 

Mr. DAVIS. I appreciate that. 

Ms. DEARSTYNE. If I could also just mention the Forest Products 

Lab, FPL had received the authority to assist organizations like 

ours by taking some of the products and putting them on the 

ground. They have no funding. If they had funding, they could actually make the investment that has been put in the research, 

worthwhile, and put it on the ground by giving start-up funds for 

some material and some labor. 

Senator CRAPO. This would be funding through the Forest Products Lab? 

Ms. DEARSTYNE. It is through the Forest Products Lab, and they 

do have the authority to help with that, but they have no funds to 

do it. 

Senator CRAPO. OK. That is another point. We will—as I said, 

I am working on my side, and Larry is working on his side, and 

we both help each other. That is something we will pay attention 

to. 

Mr. STEWART. Senator, I would just like to echo that. The Forest 

Products Lab has been doing some great things. They are coming 

up with some great ideas for utilizing all this stuff. They are a very 

valuable resource. It seems that they move slow, sometimes, but 

that is just the nature of the beast, I guess. 

Senator CRAPO. We will try to light a fire under them. 

Mr. STEWART. Some of the things we have talked about—like 

Joyce and I have talked about these a lot. These ideas for shelters, 

picnic shelters made out of round wood; bridges, recreational type 

56

bridges that are made out of round wood; and they are all potentially very great ideas. We want to see those kinds of ideas continue. 

Senator CRAPO. Well, good. Well, I appreciate this panel coming 

forward. I will just now include a couple comments of my own, then 

I will excuse you to get to our last panel. 

You probably all followed this as closely as anybody in America, 

but the legislation to get the Healthy Forests Restoration Act was 

interesting. We are basically in a gridlock in the Senate. It takes 

60 votes to get passed any significant issue you have—that is, to 

beat a filibuster. It takes 60 votes to beat a filibuster. In this political climate, almost everything is filibustered, so there was little 

hope that we would get the bill this year or this last year. We knew 

if we did, we would have to get it on a bipartisan basis, and we 

just didn’t really think that that was likely. 

In other words, we didn’t think that what we would get, if we 

gave up enough to get 60 votes, would be worth getting. We started 

working on it, and we had some really good negotiations with a 

group of Democrats who very sincerely worked with us, and we 

came up with a bill. We gave up a lot, and they gave up a lot, but 

we had something that was still pretty darn good. We only had 56 

votes that we could count for sure. We did a little more tweaking 

and we actually improved it a little bit, and we got up to where 

we thought we had 58 votes for sure. We were thinking we might 

have 60 votes, but there were two votes we weren’t sure of. 

We figured we were as close as we were ever going to get. We 

convinced our leadership to let us put it on the floor. We said we 

will never get those last two votes if we don’t make them vote, so 

let’s put it on the floor and see if we can’t get the 60 votes. The 

leadership actually scheduled it to the floor. Then the California 

forest fires started and we got 80 votes. 

[Laughter.] 

Senator CRAPO. I can tell you, from a very close count, that the 

California forest fire gave us 20 votes, maybe 22. Anyway, it is a 

tough issue. We are looking to use this legislation as proof that you 

can manage the forests well without gridlock, which is what we 

have been having on the forests in the past. 

From there, we are going to expand it. While we are doing it, we 

are going to try to accomplish the objectives we have talked about 

today. I thank this panel for coming today. 

Senator CRAPO. We will now call up our fifth and final panel: 

Karl Tueller from the Idaho Department of Commerce; and Dwight 

Johnson of the Idaho Rural Partnership. 

While Karl and Dwight are taking their seats, I am going to announce to everybody that my schedule is so tight that when this 

panel is finished, I am going to have to get up and leave. I don’t 

want you to be offended if I rush out of the room. I will try to 

shake your hand as quickly as I can when I leave, but they say 

they have a fast car waiting out there to rush me back to Boise, 

and we will try to get me back on schedule and back so that I am 

not at least too late for the next round of meetings tonight. 

I just wanted to apologize to everybody up front. I don’t want you 

to think I am being rude if I hop up when we are done and rush 

out of the room. 

57

OK. Karl, I introduced you first, so you get to go first. 

STATEMENT OF KARL TUELLER, DEPUTY DIRECTOR, IDAHO 

DEPARTMENT OF COMMERCE 

Mr. TUELLER. Well, thank you, Senator Crapo. One week ago 

today, I was in your office, actually, and you were under the weather. I am glad to see you are feeling better. 

Senator CRAPO. In fact, you can probably still hear a little of it 

in my voice. 

Mr. TUELLER. I had a chance to meet with Peter and the rest of 

your staff there. I am even more pleased to be here today representing not only the State of Idaho, but the Inland Northwest 

Economic Adjustment Strategy. This has been an effort started 

back in 1998, and it includes the four States of Washington, Oregon, Montana, and Idaho, as well as the affiliated tribes. 

It has been evolved into what is a very unique, sustainable relationship and partnership. The group, we have done our homework. 

We have gone to considerable length to document the distress and 

its impact to the rural counties in this area experiencing the socioeconomic consequences of these natural resource policy issues that 

affect us all. We have looked a lot at developing national plans, regional plans, and I am going to leave with you, along with my comments here, just this little handout of our executive summary 

about the Inland Northwest Economic Adjustment Strategy. 

I don’t want to spend a lot of time on that. I want to thank you 

on behalf of the Inland Northwest Economic Adjustment Group for 

Senate bill 2162. We really appreciate your leadership on this. It 

is a great effort. The four States, the 23 tribes, and 137 counties, 

and numerous community leaders that have collaborated on this 

project is great testimony in itself. As you know, more than half of 

the Inland Northwest Territory is the Federal Government’s, and 

many of the players made their living in agriculture, forestry, grazing, mining, or recreation. For decades that has been our major 

economic stream. Things have changed; we have lost much of that 

competitive advantage, as you know, and we are struggling to regain. 

You also know that rural development in the policy arena is very 

fragmented, not only at the Federal level but the State level. We 

have more programs. They are all great programs; they just overlap and it is hard the get a handle around them all. What is unusual about the Inland Northwest Economic Adjustment Strategy 

is it really was a grassroots effort among the States and the departments and players here to really make this happen. 

I want to identify briefly three regional collaborative perspectives 

the Inland Northwest Economic Adjustment Strategy provides. One 

of those is efforts by the member States to foster cluster businesses. This is really an opportunity to help businesses that can 

work better together—collaboration—take advantage of supplies 

and training work forces and incorporating new technologies. 

For example, as we have talked about today, making use of 

small-diameter trees, value-added food products, and renewable energy come to mind. Other clusters are emerging on national trends, 

including information technology, health services for rural seniors, 

and biotechnology. 

58

The second collaborative network is the networking of practitioners from public agencies. Everywhere from entrepreneurs and 

business incubators—we really have worked hard to work with all 

the various organizations and entities out there, and many of them 

are represented or have been represented here today. 

The third example of this collaborative effort really falls parallel 

to your Inland Northwest Revitalization Act and would create a 40-

member Inland Northwest Regional Partnership comprised of ten 

representatives from each of the States. These partners will be active players in regional development. They have already committed 

time, energy, and resources. We believe that this partnership and 

your particular bill will provide the glue to make this synergy happen. It also ties very directly, companions with this Healthy Forests Restoration Act. You see, that is the synergy. That was giving 

the local forests ecosystems, and this Inland Northwest Act provides for local socioeconomic developments. 

We look forward to being ready to define and expand business 

opportunities. It is an economic development effort, and we are 

going to be accountable in the sense that we can measure—in your 

bill you outlined—we are going to identify these 137 counties as 

distressed, competitive, or attainment. If we can move them all to 

attainment, then we will think we have been successful. 

How much will all this cost? As you know, other initiatives in the 

past have cost billions. We don’t think it will take nearly that 

much money at all. We know the tight budget issues. We think a 

range of 10 to $12 million per year during the next 8 years will be 

sufficient. There will be, however, need for special consideration as 

other needs are quantified. 

I want to thank you, again. We are very excited about the potential and the opportunity. We have collaborated and worked with 

many players in the Inland Northwest Economic Adjustment Strategy in supporting your bill. 

Senator CRAPO. Thank you very much, Karl. 

[The prepared statement of Mr. Tueller can be found in the appendix on page 114.] 

Dwight. 

STATEMENT OF DWIGHT JOHNSON, ACTING ADMINISTRATOR, 

RURAL AND COMMUNITY DEVELOPMENT DIVISION, IDAHO 

DEPARTMENT OF COMMERCE, ON BEHALF OF THE IDAHO 

RURAL PARTNERSHIP 

Mr. JOHNSON. Senator, it is a pleasure to be with you today to 

highlight some of the recent activities of the Idaho Rural Partnership. I am the past IRP executive director, currently the Acting Administrator of the Rural and Community Development Division at 

the Department of Commerce. I bring the regrets of current executive director, Sara Braasch, and our two co-chairs, Trent Clark and 

Roger Madsen, who happen to be in Washington, DC, today. Too 

bad for them. 

Senator CRAPO. I will second that. 

Mr. JOHNSON. It is much nicer to be in Cascade. As you know, 

IRP is one of over 40 State Rural Development Councils as authorized by the Rural Development Title of the 2002 Farm Bill. Based 

on that direction from Congress and a January 2003 Executive 

59

Order from Governor Dirk Kempthorne, IRP has three specific duties. 

First of all, we facilitate collaboration among Federal, State, 

local, and tribal governments and the private and non-profit sectors 

in the planning and implementation of programs and policies that 

have impact on rural areas of Idaho. 

Second, we monitor, report, and comment on policies and programs that address or fail to address the needs of rural areas of 

the State. 

Last, as part of the partnership, we facilitate the development of 

strategies to reduce or eliminate conflicting or duplicative administrative or regulatory requirements in Federal, State, local, and tribal governments. 

To fulfill these duties, IRP has a 30-member board of directors. 

They are comprised of individual members representing the private 

sector, people that live in rural Idaho, such as Ashley and Katrin 

Thompson that served on the IRP board, and representatives of 

Federal, State, local, and tribal agencies and organizations. 

As an example of some of the things we do to try to garner broad 

input on the current needs and priorities for rural areas of the 

State, we organized the 2002 Idaho Rural Summit in Coeur d’Alene 

last year in the summer. The audience was a very diverse mix of 

private and public sector people of almost 200 individuals. 

They basically brought together a whole list of action items they 

wanted to see and then prioritized those items. Based on those priorities, the IRP board identified a number of strategic issues for 

the coming year, including serving as a champion for rural Idaho; 

expanding competitive access to domestic and international markets; seeking resolution of conflict, especially on environmental 

issues; providing leadership training and leadership in rural communities; and then serving as a one-stop shop, specifically having 

an electronic-access inventory web site for information of programs 

and services of rural communities that we are moving forward aggressively on. 

In addition, in order to tap the expertise of a large group of individuals outside the board of directors, we have established a number of standing committees and have asked volunteers and other 

people from rural Idaho to serve on those committees, including 

Economic Development, Education and Workforce Development, 

Environment, Leadership Training, Policy Development, and Planning and Funding. 

IRP works to achieve its goals. As we do so, we are working with 

the National Rural Development Coordinating Committee that was 

authorized in the 2002 Farm Bill, and per that congressional direction, we look at that group to cross agency lines to solve problems 

and create opportunities for rural America. 

In closing, I would like to publicly thank you, Senator, and the 

other members of the congressional delegation for the tremendous 

efforts you have made in funding this program, specifically in 

Idaho, and across the country. Within the 2002 Farm Bill, we have 

that funding that comes traditionally through the U.S. Department 

of Agriculture Rural Development. In addition, this past year we 

have gone beyond that, got some private sector funding, specifically 

two funding sources: Betchtel BWXT Idaho and Monsanto. We have 

60

achieved some State funding as well through the Idaho Workforce 

Development Training Fund. 

We look forward this coming year to expanding both State and 

private resources to match the Federal resources. We have truly a 

collaborative effort in that. 

[The prepared statement of Mr. Johnson can be found in the appendix on page 118.] 

Senator CRAPO. Thank you very much, Mr. Johnson. I want to 

thank both of you, Mr. Tueller and Mr. Johnson, for the efforts of 

the Idaho Department of Commerce and Idaho Rural Partnership, 

respectively, for their focus to try to address the issues that this 

Committee’s focused on today. 

Karl, you mentioned and discussed a lot of the approach that you 

are engaged in in working with the INEAS group, and I would just 

like you to expand on that a little bit. As I look at this, it seems 

to me that we have a lot of programs, at many different levels of 

government, and a lot of private sector involvement. As others have 

said today, we probably have the programs in place. We have the 

necessary system in place, but we have a tremendous complexity 

out there, and that complexity is made even more complex by the 

fact that we have how many counties in INEAS? One hundred 

forty-seven, I believe? 

Mr. TUELLER. One hundred thirty-seven. 

Senator CRAPO. In the hundreds, between 100 and 150 counties 

that each have their own unique nature. They are in four different 

States. There are tribes, there are State governments, county governments, city governments, tribes, Federal Government, and then 

all kinds of different private sector impacts as we try to figure out 

how to best accomplish this objective of boosting economic development in rural communities. Somebody said earlier that flexibility 

was needed. Clearly it is. 

Is the focus of INEAS the right focus? I know I am asking somebody who is an advocate for it. Tell me how you see INEAS solving 

some of this. 

Mr. TUELLER. Well, Senator Crapo, having been in this business 

for over 30 years, I have worked with a lot of these Federal and 

State programs. Particularly in Idaho, the Rural Partnership has 

really tried to address and cut across a lot of those programs, cut 

down some of the barriers to collaborate, and that is working fairly 

well. Your particular bill is based a lot on that by the fact that you 

have identified ten from each of the various States. We think they 

parallel very well. 

The thing of it is, it is not creating a new, different level of bureaucracy, of new players. It really engages those who are already 

doing this economic and community development from the States. 

It allows us, then, just to pick up and start the implementation 

process without some new, higher level type—like a regional commission. 

Senator CRAPO. Let me interrupt and ask you a question. Earlier, it was Mr. Birdsall, but others said that we really need to be 

sure that we don’t get caught up in a bureaucratic system where 

cookie-cutter solutions get invoked. INEAS will not cause that, I 

hope. How will INEAS facilitate this flexibility for local decisionmaking that we have talked about today? 

61

Mr. TUELLER. Well, I believe it is by bringing all the partners to 

the table, which we have demonstrated can happen, from county 

commissioners to local officials to private industry, plus all the 

service providers, whether it is local or State or non-profit group. 

It is always dangerous, obviously, but we are committed. We have 

the infrastructure. 

I have confidence, almost as much, in the other States. They are 

all different and unique, as you know, in terms of getting all the 

right players to the table. I know that all of them that I have 

worked with are committed. They have been an effective method to 

really work with local community leaders. 

Senator CRAPO. We have all of these players anyway, and they 

are engaged anyway. By bringing them together in a collaborative 

fashion, we should expedite bureaucracy problems and facilitate 

flexibility? 

Mr. TUELLER. Absolutely. 

Senator CRAPO. Dwight, again, the Idaho Rural Partnership is to 

be commended for all of the tremendous work that it is doing. We 

rely on you guys tremendously in our efforts. Let me ask you, if 

you will, I know you are familiar with the INEAS project. How do 

you see IRP working in this context? Let’s assume that the legislation passes and we establish the framework that the bill proposes 

and that Karl has talked about. How do you see IRP working with 

that? 

Mr. JOHNSON. Well, they are, Senator, really a mirror image of 

each other, to a large degree, on a State level, doing the same type 

of thing that IRP is trying to do, and continuing to work to do in 

collaborative efforts to bring the partners together to make real 

things happen. 

Just to give you a very simple example, at our last August meeting, board meeting last year, someone brought up the fact that— a local county service provider brought up the fact that as they do 

various different projects, economic development projects and community development projects, they get various different funding 

sources to make those things work. For each funding process, they 

had to set up a different sign to acknowledge the different funding 

source, whether it be State, local, or Federal, et cetera, and sometimes multiple local and multiple State signs. 

They brought that issue to the table, and we said that doesn’t 

make a lot of sense. We developed an easy sign that we can have 

one sign with everybody acknowledged. Save expense, save programs, frustration on a local partnership level. On the local level 

to actually implement that, a simple solution was arrived at because everybody was sitting around the table and someone didn’t 

have to approach every single different agency and get the runaround. That is just a very simple example of what can happen 

when you have people at a table making a decision. 

Senator CRAPO. That is a good point. 

In the context of the access to capital and some of the USDA programs we talked about today—RBEG and RBOG and the others I 

have forgotten already. RCA or whatever it is. I can’t remember. 

[Laughter.] 

Senator CRAPO. In the context of those capital programs and 

other programs to provide resources for communities or business 

62

start-ups, do you believe that both the IRP and the broader INEAS 

concept work well in helping to facilitate those programs, make 

them more effective? 

Mr. JOHNSON. Senator, absolutely. As I mentioned, to make those 

things happen, in large regard, you have to have partnership. It is 

not just one funding source that is going to get the job done. You 

have to go to numerous different funding sources to accomplish 

what you are trying to do. The coordination and collaboration between all of those players is absolutely critical to accomplishing it. 

That is why the collaborative effort of IRP and, by extension, 

INEAS is the exact process that you need to go through to make 

things happen. 

Senator CRAPO. Karl? 

Mr. TUELLER. I would just like to add that we for some time in 

Idaho have assembled all those infrastructure providers to these 

communities. We sit down around the table on a regular basis to 

find out whether transportation is planning a road consistent with 

the sewer project, or whether the Office on Aging’s got processes 

going into it. We have had a very successful collaborative process 

that we are saying, this community is ready now from all aspects. 

We can bring the resources of EDA or USDA in partnership with 

State money to make the project happen with limited resources. 

Senator CRAPO. There is another benefit that I see, maybe selfishly, from my role in all of this at the policy level with the Federal 

Government, and that is—you can all, everybody that has stuck it 

out all day—as you can tell, I am trying to soak this all into my 

mind, figure out all these programs. There are some for communities under 20,000, and there are some for over 50,000, and all 

that. 

It seems to me that if you have a situation where you have all 

the players working together collaboratively, and you have a circumstance where there is somebody fallen in a hole and can’t get 

serviced because of various regulatory requirements of various programs, that that could be, A, identified, and hopefully, in many 

cases, a creative solution found to solve it. 

If there is just no work-around, then it would seem to me that 

the group could come to me and say, the program needs to be 

changed. This program or this set of programs need to be adjusted 

so they work this way, not that way. In fact, there have been five 

or ten suggestions here today of just that nature by people who 

work in the system. 

It seems to me that the INEAS group or the IRP could come to 

me as a Member of Congress and say, look, here’s a reform bill, or 

whatever you want to call it, for economic development in rural 

areas. If you would make the following X number of changes, you 

would significantly enhance and expedite the access to capital or 

the solution to this problem. Do you envision INEAS working that 

way? 

Mr. TUELLER. I do, and also the rural partnerships do that, do 

a better job. Make our job of trying to coordinate all these programs would be much easier if it were simplified in a way that 

makes sense both from your perspective and Congress’s perspective 

and rural communities. Many of these have grown up through sizVerDate 0ct 09 2002 12:11 Jul 07, 2004 Jkt 092571 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 C:\DOCS\92571.TXT SAG1 PsN: TOSH
63

able ground over the years, and they don’t get adjusted and kept 

up with the current circumstances of the need. 

We welcome that opportunity, and we have probably underutilized your office and other offices to really channel those suggestions and recommendations. 

Senator CRAPO. Well, ideally—I said at the outset, there are 88 

programs and well over 16 agencies working on them. Ideally, I 

would think we should refine the number of programs and expand 

the reach of the programs and reduce the bureaucracy and expand 

flexibility. I guess I am guilty myself. I created one of those, Project 

SEARCH, and, of course, I want to see that stay in. I am sure that 

that could be woven into some other program or project in such a 

way that we streamline. In my opinion, streamlining is probably a 

good objective to achieve here as a long-term objective. 

Well, anything else that either of you would like to put in? 

Mr. JOHNSON. I just want to acknowledge Bob Ford, thank him 

for the good work he does on behalf of the State and your office, 

and acknowledge Dick Gardener and Jim Birdsall, who also are on 

contract with the Inland Northwest Economic Adjustment Strategy, 

as we move that project along. I know Governor Kempthorne and 

Roger Madsen, the Director of Labor and Acting Director of Commerce——

Senator CRAPO. We are working with all the other offices in the 

Northwest to try to make this happen. I should also acknowledge 

that Emily McClure is the Bob Ford of Washington, DC. She does 

all that. Bob does it out here, and she does the Washington, DC, 

side of it, and she is doing a great job of it. 

I just want to say to everybody who has spent the day here, 

thank you for your attention and interest in these issues. It has 

been very educational and enlightening to me to learn about these 

things, but it has also been comforting because I have come to 

know—as I knew before but it is reaffirmed to me—that there are 

a lot of really great people working on these issues from each different perspective from which you all come. You will help guide me 

in making sure I do my job right, and I will help—not guide you—

but I will help assist you in making sure you can do your job to 

the best of your ability. 

Again, I just want to thank you for both your commitment and 

your time, not just today but always. With that, the hearing is adjourned. Thank you. 

[Whereupon, at 3:15 p.m., the subcommittee was adjourned.] 

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