[Agriculture Fact Book 98]

Rural Development: Creating Opportunity for Rural Americans

USDA Rural Development is forging new partnerships with rural America by funding development projects and providing technical assistance and information to create quality jobs, services, housing, and utilities. Revitalizing rural America It is essential if it is to maintain or regain its posture as a place where millions of rural people can achieve the American dream. This need is evident from the following:

• More than 52 million people live in rural areas of the United States, 15.9 percent of whom live in households with income below the Federal poverty level.
• 55 percent of the nonmetropolitan population lives in counties with no town of even 10,000 residents; half of those people reside in remote areas that lack direct access to metropolitan areas.
• During the last 20 years, the number of family and hired workers employed on farms has decreased by 35 percent, although farm employment appears to have stabilized in recent years as advances in mechanization and labor-saving technology have leveled off and the decline in farm numbers has slowed. Today, only 24 percent of all rural employment is in farm and farm-related industries. The relocation of new businesses or industries to rural areas can help sustain the economic viability of rural areas as they adjust to changes in agricultural employment. Between 1990 and 1997, more than 75 percent of the approximately 2,300 nonmetro counties experienced some employment growth.
• Census figures from 1960-90 reveal that 535 rural counties endure persistent poverty, with more than 20 percent of their residents living below the poverty level.

USDA Rural Development is comprised of three agencies. The Rural Utilities Service (RUS) addresses rural America’s need for basic services such as clean running water, sewers and waste disposal, electricity, and telecommunications. The Rural Housing Service (RHS) addresses rural America’s need for single-family and multi-family housing as well as health facilities, fire and police stations, and other community facilities. The Rural Business-Cooperative Service (RBS) provides help to rural areas that need to develop new economic opportunities, allowing businesses and cooperatives to remain viable in a changing economy.

In addition, the Federal Government is seeking to form partnerships with other entities-- such as State, local, and tribal governments, private and nonprofit organizations, and member- owned cooperatives--to revitalize rural areas. Rural Development programs are provided across the Nation through 47 State offices and 800 area and local offices.

How Rural Development Works

The following examples illustrate how USDA Rural Development is working to serve rural citizens and bolster the quality of life in rural communities:

• In Oklahoma, a long-term rehabilitation facility was financed with the help of an $11 million guaranteed Rural Development loan. This 64-bed facility will provide full service to trauma patients in a 20-county area of Oklahoma, Texas, and Arkansas. The project will create a variety of professional and semiprofessional job opportunities, increase business and revenues to small businesses and service establishments, and provide an economic boost to the surrounding communities.
• Residents of a rural Missouri town are looking forward to getting something never before available in their community: a sewer system. Funded by USDA Rural Development, the sewer system will provide service to 103 customers when completed. The project includes construction of a complete sanitary sewer collection and pumping system.
• A rural North Dakota electric cooperative received a Rural Development grant to establish a revolving loan fund. The first loan was made to a hospital authority to aid in constructing and equipping a new outpatient clinic and service center to update the existing hospital facility. The project benefits residents of the town and surrounding counties who will receive health care from the new hospital and clinic.
• Agriculture Secretary Dan Glickman and a group of USDA employees helped raise walls at a Maryland rural housing development which will soon be home for 22 families or individuals, most of whom thought they would never share in the American dream of homeownership. The single- family homes are being built under Rural Development’s Self-Help Housing program, in which groups of low-income rural people become homeowners through the investment of “sweat equity.”
• A consortium of eight rural schools in California will use Rural Development funds to purchase equipment needed to create a distance-learning video conferencing system. The eight schools will be connected with one another and many higher educational institutions. Through this network, the schools will be able to share resources, reduce expenses, provide advanced classes for seniors, increase all class offerings for K-12, and improve the reading and language skills of younger students. The teachers will be able to communicate with others in their field of study, thus eliminating teacher isolation. Also, by connecting with area colleges, adults will gain continuing- education opportunities. It is anticipated that 3,296 students, not counting the adults, will benefit from this project.
• The Kentucky Department of Agriculture is concerned about the impact of changes in the Federal tobacco program on small farmers in the State. It obtained a Rural Development grant that provides assistance to groups that present a viable business plan to market alternative crops. USDA cooperative experts are also working with three vegetable marketing cooperatives in the State to develop business plans for operations in 1998, and will continue to provide training to management and directors in the future.
• A businessman was leasing a building to run a tire center in the Scott/McCreary Enterprise Community in Tennessee. His business was doing well until the construction of a new highway, which cut his parking lot in half. He started losing customers, was to the point of having to take out a second mortgage on his home, and even had to lay off some of his employees. He applied for an Intermediary Relending Program (IRP) loan and was able to relocate and double his work force, and his parking area.

The following overviews describe the three Rural Development Agencies and their main programs.

Rural Business-Cooperative Service

Creation of viable new and improved businesses and cooperatives in rural America is the top priority of the Rural Business-Cooperative Service (RBS). This agency works through partnerships with public and private community-based organizations to provide financial assistance, business planning, and technical assistance to rural businesses. It also conducts research into rural economic issues, including rural cooperatives, and provides educational material to the public

Business and Industry (B&I) Loan Guarantees help finance rural business and industry projects that create employment opportunities and improve the economic and environmental climate in rural communities, including pollution abatement and control. Loan guarantees are made for projects that foster lasting community benefits and bolster existing private credit structures. Priority for B&I loan guarantees is given to applications for loans from rural areas or cities of 25,000 or less, with loans limited to areas not within the outer boundary of a city having a population of 50,000 or more and its immediately adjacent urban area. Loans are limited to $25 million for any one borrower.

Direct Business and Industry (B&I) Loans are made to public, private, and cooperative organizations, Indian tribes or tribal groups, corporate entities, or individuals to improve the rural economy. The program is an economic-stimulus tool which can help rural areas in greatest need.

Intermediary Relending Program Loans finance business facilities and community development projects in rural areas, including cities of less than 25,000. Loans to intermediaries support new business facilities and community development projects in rural areas.

Rural Economic Development Loans and Grants promote rural economic development and job creation projects, including feasibility studies, startup costs, and other reasonable project expenses. The maximum amount of a grant or loan is $330,000. Loans have a maximum term of 10 years and are repaid without interest. These loans and grants are available to existing Rural Utilities Service electric and telecommunications borrowers.

Rural Business Enterprise Grants assist public bodies, nonprofit corporations, and federally recognized Indian tribal groups to finance and develop small and emerging private business enterprises located in rural areas. Grant funds may be used to acquire and develop land and to construct buildings, plants, equipment, access streets and roads, parking areas, and utility and service extensions. In addition, funds may be used for refinancing, fees for professional services, technical assistance, startup costs and working capital, financial assistance to a third party, production of television programs targeted to rural residents, and rural distance-learning networks.

Rural Cooperative Development Grants finance the establishment and operation of centers for cooperative development. The program enhances the economy of rural areas by developing new cooperatives and fostering improved operations for existing co-ops.

The Appropriate Technology Transfer for Rural Areas program provides information to farmers and other rural users on a variety of sustainable agricultural practices, including crop and livestock operations. It helps agriculture by giving reliable, practical information on production techniques and practices that reduce costs and that are friendly to the environment. Farmers can request information via a toll-free telephone number.

The National Sheep Industry Improvement Center promotes strategic development activities to strengthen and enhance production and marketing of sheep, goats, and their products in the United States. The center, which has a board of directors to oversee its activities, operates a revolving fund for loans and grants.

The Research on Rural Cooperative Opportunities and Problems program provides funding for cooperative research agreements with universities, State agencies, and nonprofit associations. Information and research findings from these projects are published by the institution or by USDA Rural Development.

Cooperative Services helps improve the performance of the Nation's cooperatives and promotes understanding and use of the cooperative form of business. By working together for their mutual benefit in cooperatives, rural residents are often able to reduce costs for production supplies and consumer goods, obtain services that might otherwise be unavailable, and achieve greater returns for their products. Cooperative Services accomplishes its mission by (1) responding to requests for technical assistance from rural residents who want to organize a cooperative or improve operations of an existing cooperative, (2) providing information and educational materials relating to cooperatives, (3) conducting research on cooperative financial, structural, managerial, policy, member governance, legal, and social issues, and (4) collecting and disseminating statistics to support research and technical assistance work.

The mission of the Alternative Agricultural Research and Commercialization Corporation (AARC) is to expedite the commercialization of new industrial products made from--or new uses for--agricultural and forestry materials and animal byproducts. The corporation makes repayable investments in small businesses in rural areas. Repayments go into a revolving fund for investment in other projects. Applicants are expected to match AARC funds with an equal amount of funding from other sources.

Rural Business Opportunity Grants can be made annually for up to $1.5 million to provide technical assistance training and planning for business and economic development in rural areas.

A Rural Venture Capital Demonstration Program is being developed to provide a guarantee for projects that serve as a catalyst to attract private investments in businesses in rural areas. The amount of the guarantee may not exceed 30 percent of any pool of funds provided by up to 10 community development venture capital organizations.

Rural Housing Service

Decent, safe, sanitary, affordable housing and essential community facilities are indispensable to vibrant rural communities. USDA's Rural Housing Service (RHS) has the responsibility to make these essential elements available to rural Americans. RHS programs help finance new or improved housing for more than 70,000 moderate- or low-income families each year. These programs also help rural communities finance construction, enlargement, or improvement of fire stations, libraries, hospitals, clinics, day-care centers, industrial parks, and other essential community facilities.

In October 1996, a Centralized Service Center in St. Louis, MO, opened to provide automated loan servicing to RHS single-family housing borrowers. This effort is considered a showcase project for the reinvention of government, intended to make government services work better and cost less. The service greatly expands services to borrowers while substantially reducing the staff needed to operate the program nationally.

Home Ownership Loans provide opportunities and assistance to low-income households in rural communities, helping them to purchase, construct, repair, or relocate a home. Borrowers are offered 33-year loans at fixed interest rates as low as 1 percent, depending on the family's adjusted income. Moderate-income rural residents can be assisted with loan guarantees offered through private lenders. The loans, both direct and guaranteed, can cover up to 100 percent of market value or acquisition cost, whichever is less.

Home Improvement and Repair Loans and Grants enable very-low-income rural homeowners to remove health and safety hazards from their homes and to make homes accessible for people with disabilities. Loans have a maximum interest rate of 1 percent. Grants are available for people age 62 and older who cannot afford to repay a loan. A combination of funds from a loan and grant can be used by eligible elderly residents. Housing preservation grants are made to nonprofit groups and government agencies to finance rehabilitation of rental units for low-income residents.

Rural Rental Housing Loans finance construction of rental and cooperative housing for low-income individuals and families, including elderly or disabled persons. Loans have a maximum term of 30 years, can equal up to 100 percent of the appraised value or development cost, whichever is less, and can be used to construct new housing or to purchase or rehabilitate existing structures.

Rental Assistance payments subsidize rent costs to ensure that low-income tenants will pay no more than 30 percent of their income for rent.

Community Facilities Loans, Loan Guarantees, and Grants finance the construction, enlargement, extension, or other improvements for community facilities providing essential services in rural areas and towns with a population of 50,000 or less. Funds are available to public entities such as municipalities, counties, special-purpose districts, Indian tribes, and nonprofit corporations.

Rural Utilities Service

Rural Utilities Service (RUS) programs touch the lives of tens of millions of rural Americans daily. Through project financing and technical assistance, RUS builds infrastructure to provide rural businesses and households with modern telecommunications, electricity, and water. Today, this also means bringing the "information superhighway" to rural America.

The Water 2000 Initiative is an ambitious undertaking to extend safe, dependable drinking water to rural communities. At least 2.2 million rural Americans live with critical quality and accessibility problems with their drinking water, including an estimated 730,000 people who have no running water in their homes. Since it started in 1994, Water 2000 has already improved drinking water quality or provided a public water supply for the first time to some 2.5 million people in more than 1,300 rural communities nationwide.

RUS is a partner with rural business and economic development efforts, providing infrastructure that is the foundation for competitiveness. It is a technical and financial resource in a time of change for rural utilities.

Rural Telecommunications Loans and Loan Guarantees build modern rural communications systems that provide rural areas with "on ramps" to the information superhighway by making financing available for telecommunications facilities. Loans made to rural telephone cooperatives and companies help bring reliable and affordable telecommunications services to more than 15 million rural Americans.

Rural Electric Loans and Loan Guarantees provide reliable, safe, and affordable electricity to rural America by financing power distribution, generation, and transmission systems. Loans are made to nonprofit and cooperative associations, public bodies, and other utilities which serve more than 25 million rural Americans.

Distance Learning and Medical Link Loans and Grants bring distance learning and telemedicine to rural America. Education and adequate medical care are crucial to the survival of rural communities, but are becoming increasingly difficult to provide. This program employs innovative ways to use existing telecommunications infrastructure to extend the reach of educational and medical expertise into communities without that expertise. The new loan program is being developed to further expand rural telecommunications infrastructure.

Water and Waste Disposal Loans and Grants develop water and waste disposal systems (including solid waste disposal and storm drainage) in rural areas and towns with populations of less than 10,000. The funds are available to public entities such as municipalities, counties, special-purpose districts, Indian tribes, and nonprofit corporations. RUS also guarantees water and waste disposal loans made by banks and other eligible lenders.

Emergency Community Water Assistance Grants help rural communities that have experienced a significant decline in drinking water quantity or quality to make emergency repairs and replace existing facilities. Grants can be made in rural areas and towns with a population of 10,000 or less and a median household income of no more than 100 percent of the State’s median nonmetropolitan household income.

Rural Empowerment Zones and Enterprise Communities

USDA Rural Development is involved in an ambitious effort to help revive the economies of some of the Nation's most economically depressed rural areas. USDA Rural Development continues to work closely with three Rural Empowerment Zones (EZ) and 30 Rural Enterprise Communities (EC) which are benefitting from special economic stimulus programs to help overcome persistently high poverty rates. These EZ/EC designations are helping to revitalize local communities by putting Americans to work.

The EZ/EC designations are based on strategic plans developed by local leaders, organizations, State officials, and the private sector. Each EZ and EC designation means special consideration for various Federal programs and other assistance, including social service block grants, new tax-exempt facility bonds, tax incentives for employment, and other special consideration for existing Federal programs.

Communities seeking designation under a second round of EZ/EC were required to file nomination packages by October 9, 1998.

The current Rural Empowerment Zones are:

• Kentucky Highlands (Clinton, Jackson, and Wayne Counties);
• Mid-Delta in Mississippi (Bolivar, Sunflower, Leflore, Washington, Humphries, and Holmes Counties);
• Rio Grande Valley in Texas (Starr, Cameron, Hidalgo, and Willacy Counties).

The 30 Enterprise Communities include counties and towns across the Nation. States with one or more ECs include: Alabama, Arizona, Arkansas, California, Florida, Georgia, Louisiana, Michigan, Mississippi, Missouri, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Virginia, Washington, and West Virginia.

Employers in the EZ qualify for tax credits for each qualified worker who resides in the zone. Each EZ receives $40 million and each EC receives $2.95 million to implement the strategic plans. In addition, each EZ and EC receives priority for certain programs available through Rural Development agencies.

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