Order Code RL31837 CRS Report for Congress Received through the CRS Web An Overview of USDA Rural Development Programs Updated August 26, 2004 Tadlock Cowan Analyst in Rural and Regional Development Policy Resources, Science, and Industry Division Congressional Research Service ˜ The Library of Congress An Overview of USDA Rural Development Programs Summary More than 88 programs administered by 16 different federal agencies target rural economic development. The United States Department of Agriculture (USDA) administers the greatest number of rural development programs and has the highest average of program funds going directly to rural counties (approximately 50%). The Rural Development Policy Act of 1980 designated USDA as the lead federal agency for rural development. The Federal Crop Insurance Reform and Department of Agricultural Reorganization Act of 1994 created the Office of the Undersecretary for Rural Development and consolidated the rural development portfolio into four principal agencies responsible for USDA’s mission area: Rural Housing Service, the Rural Business-Cooperative Service, the Rural Utilities Service, and the Office of Community Development. This report provides an overview of the various programs administered by these four USDA agencies, their authorizing legislation, program objectives, eligibility, and recent funding for each program. This report will be updated as events warrant. Contents U.S. Rural Policy: Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Authorizing Legislation for USDA Rural Development Programs . . . . . . . . 2 Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.) . . . . . . . . . . . . 3 Title V Rural Development Act of 1972 (P.L. 92-419) (Title III of the Consolidated Farmers Home Administration Act of 1961 (P.L. 87-128), 7 U.S.C. 1926 et seq.) . . . . . . . . . . . . . . . . . . . . . . . 3 Rural Development Policy Act of 1980 (P.L. 96-355) . . . . . . . . . . . . . 3 Rural Economic Development Act of 1990 (Title XXIII of the Food, Agriculture, Conservation, and Trade Act of 1990 (P.L. 101-624)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) . . . . . 4 Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (P.L. 103-354) . . . . . . . . 4 Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104-127) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Farm Security and Rural Investment Act of 2002 (P.L. 107-171) . . . . . 5 USDA Mission Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 USDA Rural Housing Service (RHS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Rural Housing Issues: Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Housing Act of 1949 (P.L. 81-171) (42 U.S.C. 1441 et seq) . . . . . . . . . 7 The Housing and Urban Development Act of 1968 (P.L. 90-448) (42 U.S.C. 1441a) (82 Stat. 476) . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Rural Housing Amendments of 1983 (P.L. 98-181) (42 U.S.C. 1490k to 1490o) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Housing Legislation in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . 8 Rural Housing Service Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 502 Single Family Housing Direct Loan Program . . . . . . . . . 10 Section 502 Guaranteed Single Family Housing Purchase and Refinance Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 504 Very Low-Income Rural Housing and Repair Loan and Grant Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 514 and 516 Farm Labor Housing Program Loan and Grant Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 523 Mutual Self-Help Grant Program . . . . . . . . . . . . . . . . . . . 12 Section 523 Rural Housing Site Loan Program . . . . . . . . . . . . . . . . . . 12 Section 524 Rural Housing Site Loan Program . . . . . . . . . . . . . . . . . . 12 Section 533 Housing Preservation Grant Program . . . . . . . . . . . . . . . 13 Section 515 Rural Rental Housing Direct Loans . . . . . . . . . . . . . . . . . 13 Section 538 Multi-Family Guaranteed Loan Program . . . . . . . . . . . . . 14 Section 521 Rental Assistance Program . . . . . . . . . . . . . . . . . . . . . . . 14 Housing Demonstration Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 USDA Rural Business-Cooperative Service (RBS) . . . . . . . . . . . . . . . . . . . . . . . 15 Rural Intermediary Relending Program . . . . . . . . . . . . . . . . . . . . . . . . 15 Rural Economic Development Loans . . . . . . . . . . . . . . . . . . . . . . . . . 16 Rural Economic Development Grants . . . . . . . . . . . . . . . . . . . . . . . . . 16 Rural Cooperative Development Grants . . . . . . . . . . . . . . . . . . . . . . . 16 Appropriate Technology Transfer for Rural Areas (ATTRA) Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Value-Added Agricultural Production Market Development Grants . 17 National Sheep Industry Improvement Center . . . . . . . . . . . . . . . . . . . 18 Rural Business Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Rural Strategic Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Renewable Energy Loan and Grant Program . . . . . . . . . . . . . . . . . . . . 19 USDA Rural Utilities Service (RUS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Electric Loan Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Telecommunications Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Distance Learning and Telemedicine Loans and Grants . . . . . . . . . . . 21 Rural Telephone Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Broadband Loans and Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Enhancement of Access to Broadband Service in Rural Areas . . . . . . 22 Local Television Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 High Energy Cost Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Rural Community Advancement Program (RCAP) . . . . . . . . . . . . . . . . . . . . . . . 23 Community Facilities Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Community Facility Direct and Guaranteed . . . . . . . . . . . . . . . . . . . . 25 Community Facility Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Rural Community Development Initiative Grants . . . . . . . . . . . . . . . . 26 Rural Business-Cooperative Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Business and Industry (B&I) Direct and Guaranteed Loans . . . . . . . . 26 Rural Business Opportunity Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Rural Business Enterprise Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Rural Utilities Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Water and Waste Disposal Direct and Guaranteed Loans . . . . . . . . . . 27 Water and Waste Disposal Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Solid Waste Management Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Emergency and Imminent Community Water Assistance Grants . . . . 29 Technical Assistance and Training (TAT) Grants . . . . . . . . . . . . . . . . 29 Rural Water Circuit Rider Program . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 USDA Office of Community Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Empowerment Zone/ Enterprise Community Initiative (EZ/EC) . . . . 30 Rural Economic Area Partnership Zones (REAP) . . . . . . . . . . . . . . . . 31 National Rural Development Partnership . . . . . . . . . . . . . . . . . . . . . . 32 An Overview of USDA Rural Development Programs U.S. Rural Policy: Background In the post-World War II era, widespread rural poverty, most notably among farmers, dominated rural policy concerns. The Eisenhower Administration’s Undersecretary for Agriculture, True D. Morse, began a Rural Development Program in 1955 to assist low-income farmers. Because agriculture was the major economic activity in many rural areas of the time, a focus on farms and farm households became de facto rural policy. The War on Poverty during the 1960s continued the focus on rural poverty as a central policy issue. When agriculture began to decline as rural America’s dominant economic activity, policy attention shifted to rural revitalization. The 1980s farm financial crisis and economic dislocation in rural America brought the importance of rural structural change to the forefront of policy concerns. The further decline of farming to less than 8% of rural employment and the loss of many manufacturing jobs during the past decade have highlighted the growing gap between many rural areas and the Nation’s urban/suburban areas. While no overarching framework guides rural policy at the federal level, adequate housing, employment creation and business retention, human capital concerns, poverty issues, medical care, and infrastructure development remain key foci of federal rural policy. Farming, and agriculture more generally, however, remain the major backdrop to much of congressional debate on rural policy. Since 1973, omnibus farm bills have included a rural development title. The most recent is Title VI of the Farm Security and Rural Investment Act of 2002 (P.L. 107-171). Agricultural issues are increasingly seen as part of global and regional restructuring issues which have significant implications for rural areas, especially in those where agriculture remains a dominant sector. Positioning rural areas to better compete in a global environment is one of the key issues framing much of the debate about the future of rural America. Omnibus farm bills have been the major modern legislative force for addressing many rural development issues.1 While it is true that other legislation has significant implications for rural areas and rural residents (e.g., transportation initiatives, environmental regulation, finance and taxation, Medicare, Social Security), Congress has used periodic farm bills to address emerging rural issues as well as to reauthorize a wide range of rural programs administered by the various USDA rural development agencies. As the role of agriculture has continued to decline in rural economies, however, some are raising questions about the effectiveness of linking farm and rural 1 By virtue of its specific geographic targets, legislation authorizing the Appalachian Regional Commission, the Mississippi Delta Region, the Great Plains Region, and the Tennessee Valley Authority also has had a significant impact on rural development issues in these areas. CRS-2 policy. While the extent of overlap between federal agencies and programs targeting rural areas has been a concern noted by some rural policy observers, legislation enacted since 1990 reflects an effort to address rural issues more comprehensively.2 Authorizing Legislation for USDA Rural Development Programs USDA’s rural development mission is to enhance rural communities by targeting financial and technical resources to areas of greatest need. Three agencies, established by the Agricultural Reorganization Act of 1994 (P.L. 103-354), are responsible for the mission area: the Rural Housing Service (RHS), the Rural Business-Cooperative Service (RBS), and the Rural Utilities Service (RUS).3 An Office of Community Development provides further community development support through USDA Rural Development’s state offices. The mission area also administers the rural portion of the Empowerment Zones/Enterprise Communities Initiative and the National Rural Development Partnership. Congress has enacted many public laws bearing on rural policies and rural residents. The Rural Electrification Act of 1936, to cite one significant example, was central to the provision of electrical power and telephone service throughout rural America. In 1966, Congress created the National Commission on Rural Poverty which published its famous report, The People Left Behind, the following year. Various loan and grant programs that target improvements in rural social welfare (e.g., housing) were also authorized and administered by the Farmers Home Administration (FmHA), the agency forerunner of today’s USDA Office of Rural Development. Rural policy as an identified congressional concern, however, may be dated to the 1972 Rural Development Act, an amendment to the Consolidated Farmers Home Administration Act of 1961.4 New rural development legislation generally amends two authorizing statutes: (1) the Consolidated Farm and Rural Development Act of 1972 (P.L. 92-419) and (2) the Food, Agriculture, Conservation, and Trade Act of 1990 (P.L. 101-624). (Title III of the Consolidated Farmers Home Administration Act of 1961 was the original short title of this latter title, but the short title was re-designated the 1972 Act and is 2 The Government Accountability Office identified 88 programs administered by 16 federal agencies that targeted rural development. See Rural Development: Federal Programs that Focus on Rural American and its Economic Development, GAO/RCED-89-56-BR, January 1989. 3 While the 1994 Act reorganized the administering agencies, the programs themselves predate the reorganization. 4 The Cooperative Marketing Act of 1926, the Agricultural Marketing Act of 1946, and the Agricultural Acts from 1931 to 1970 are also significant for the role of agriculture within rural economies. While these statutes do not address rural development directly, they do provide marketing assistance for farmers and ranchers and thus, have contributed to rural welfare especially in those areas where agricultural production is also a significant economic focus. CRS-3 classified principally as Title 7 U.S.C. Chapter 50, 1921 et seq.5). A brief description and overview of key sections of the basic statutory authority for rural development programs are provided below. Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.). The act established the Rural Electrification Administration during the Great Depression to create jobs and electrify rural areas by providing subsidized loans and grants to rural electric cooperatives. In 1949, telephone cooperatives also were brought under the program. Cooperatives are a common form of business organization in rural areas, structured essentially as non-taxed entities owned by their users. In the 1930s, only a few farms and rural households had access to electricity; by the mid-1950s, the proportion of rural homes with electricity matched suburban penetration, and by 1975, more than 99% of all farms had electricity. Likewise, by the mid-1970s, telephone penetration in rural areas had topped 90% and it has held steady at roughly 95% of households for the past 20 years. Title V Rural Development Act of 1972 (P.L. 92-419) (Title III of the Consolidated Farmers Home Administration Act of 1961 (P.L. 87-128), 7 U.S.C. 1926 et seq.). This title is part of the Consolidated Farm and Rural Development Act of 1972 and is often referred to as the “ConAct.” Title V directed the Secretary of Agriculture to provide leadership within the executive branch and to assume responsibility for coordinating a nationwide rural development program using the services of executive branch departments and agencies, including, but not limited to, the agencies, bureaus, offices, and services of the Department of Agriculture, in coordination with rural development programs of state and local governments. The act also authorized the Community Facility Loan program, the Rural Business and Industry Loan program, and the Rural Business Enterprise Grant program. Rural Development Policy Act of 1980 (P.L. 96-355). This legislation affirmed USDA as the lead agency for rural development. (The 1972 Act named USDA as the lead federal coordinator for rural policy). The act also added responsibilities to the 1972 Rural Development Act. It authorized the Secretary of Agriculture to expand the Department’s leadership role through which multi-state, state, sub-state, and local rural development needs, plans, and recommendations can be received and assessed on a continuing basis. Rural Economic Development Act of 1990 (Title XXIII of the Food, Agriculture, Conservation, and Trade Act of 1990 (P.L. 101-624)). Part of the omnibus 1990 farm bill. Title XXIII amended the Consolidated Farm and Rural Development Act of 1972 to establish in USDA the Rural Development Administration (RDA). Legislative action saw significant debate between House and Senate Appropriations Committees with the House Agriculture Committee over establishing the RDA. The newly formed RDA absorbed all non-farm FmHA functions. Important provisions include: 5 See Section 301 of P.L. 87-128 as enacted on August 8, 1961, 75 Stat. 307. CRS-4 ! Establishing (1) a Rural Partnerships Investment Board to provide lines of credit for rural economic development revolving funds; (2) (in the Department of the Treasury) the Rural Business Investment Fund; and (3) local revolving funds. Amended the Consolidated Farm and Rural Development Act of 1972 to establish a delivery system for certain rural development programs; ! Providing water and waste facilities. Amended the Farm Credit Act of 1971 to authorize lending for water and waste projects and revised water and waste facility financing provisions. Established a rural wastewater treatment circuit rider program. Amended the Consolidated Farm and Rural Development Act to establish emergency community water assistance grants and water and waste facility loans and grants to alleviate health risks. ! Enhancing human resources. Provided for enhanced rural community access to advanced telecommunications. Amended the Consolidated Farm and Rural Development Act to authorize loans for business telecommunications partnerships and establish rural emergency assistance loans; ! Supporting rural business. Amended the Rural Electrification Act of 1936 to establish a technical assistance unit, defer economic development loan payments, and establish the Rural Incubator Fund to promote rural economic development. The Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66). Title VIII established the first rural Empowerment Zones and Enterprise Communities (EZ/EC). The EZ/EC program is a grant-making initiative whose objective is to revitalize low-income rural communities (and low-income urban areas) in ways that attract private sector investment. USDA administered the rural EZ/EC program and the Department of Housing and Urban Development administered the urban EZ/EC program. In December 1994, three rural Empowerment Zones (EZ) and 30 rural Enterprise Communities (EC) were named. The Taxpayers Relief Act of 1997 added two additional rural EZs and 10 more rural ECs. A third round of competition, authorized by the Consolidated Appropriations Act of 2001, created two more rural EZs. Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (P.L. 103-354). Title II authorized reorganization of the Department of Agriculture. It authorized the Secretary to establish the position of Under Secretary of Agriculture for Rural Economic and Community Development to succeed the Under Secretary of Agriculture for Small Community and Rural Development. The act further organized rural development into the Rural Housing Service (community facilities, technical assistance, and outreach), Rural BusinessCooperative Service (cooperatives, Business and Industry loans) and the Rural CRS-5 Utilities Service (electric, telecommunications, water).6 The legislation also abolished the Rural Electrification Administration established under the Rural Electrification Act of 1936 establishing the Rural Utilities Service as its successor. Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104127). (The 1996 omnibus farm bill.) Title VII was the Rural Development title. Several major initiatives were established in this legislation including the following: ! Revised the rural distance learning and medical link programs into programs to finance the construction of facilities and systems to provide rural areas with telemedicine and distance learning services. ! Amended the Consolidated Farm and Rural Development Act to increase the amount of grants authorized to be made by the Secretary for water and waste facilities. Revised the definition of “rural” and “rural area,” for the purposes of eligibility for grants and loans for such facilities, to limit eligibility to only those cities, towns, or unincorporated areas with populations of no more than 10,000. ! Established mandatory funding for a Fund for Rural America for rural research, economic development, and housing. ! Established the Rural Community Advancement Program (RCAP), a consolidated program of grants, loans, guarantees, and other assistance to local communities and federally recognized Indian tribes. Farm Security and Rural Investment Act of 2002 (P.L. 107-171). This legislation, enacted in May 2002, is the most recent omnibus farm bill. Title VI, in addition to providing funds for various rural loan and grant programs, also authorizes several new rural development initiatives. Major new initiatives include provisions funded through direct (mandatory) spending. Mandatory programs do not require annual appropriations. Funding is made available either through the Treasury or from the Commodity Credit Corporation. For FY2002-2007, new mandatory programs include: 6 ! The Rural Strategic Investment Fund establishes a National Board on Rural America that will provide $100 million in planning grants to certified Regional Investment Boards. ! The Rural Business Investment Program provides $100 million in loan guarantees and subsidies to form Rural Business Investment corporations that will make equity investments to small firms. The program will be administered through the Small Business Administration. USDA Rural Development (RUS, RBS, RHS) assumed administration of the former Farmers Home Administration’s non-farm functions. CRS-6 ! Enhanced Access to Broadband Service to Rural Areas provides $10-$20 million per year, FY2002-2007, in grants and loans. ! Rural Local Television Broadcast Signal Loan Guarantees authorizes $80 million under the Launching Our Communities’ Access to Local Television Act of 2000. ! Value-added Agricultural Product Market Development Grants provide $40 million per year, FY2002-2007, to independent producers and producer-owned enterprises. There is also a 5% setaside for organic production. $15 million of this funding is earmarked for 10 new Agriculture Innovation Centers for technical assistance to value-added agricultural businesses. The 10 centers were named in FY2003. ! The Rural America Infrastructure Development Account authorizes a one-time funding of pending water and waste water applications at $360 million; ! Rural Firefighters and Emergency Personnel Grant Program provides $10 million per year, FY2003-2007 funding to train emergency personnel. The legislation also repealed the Fund for Rural America established in the 1996 farm bill. USDA Mission Agencies The following sections outline the various loan and grant programs administered by the three principal USDA Rural Development mission agencies: Rural Housing Service (RHS), Rural Business-Cooperative Service (RBS), and Rural Utilities Service (RUS). Program objectives, statutory authority, eligibility, and FY20032004 and FY2005 (Administration requested) funding levels are provided. An overview of the Rural Community Advancement Program (RCAP) and the Office of Community Development is also provided. USDA Rural Housing Service (RHS) Rural Housing Issues: Background.7 Key characteristics of rural housing needs are suggested by the following: ! 7 Rural areas have a disproportionate share of the nation’s substandard housing; See Housing the Poor: Federal Programs for Low-Income Families, CRS Report RL30486, March, 2000. CRS-7 ! ! ! ! ! ! ! ! ! There is a high incidence of poverty in rural America; There is an inadequate supply of affordable rural housing to meet demand; Mobile homes are increasingly pervasive in rural areas; Homeownership is the principal form of housing in rural America; Rural households pay more of their income for housing than their urban counterparts; Hundreds of rural communities nationwide do not have access to clean drinking water and safe waste disposal systems; Development costs in rural areas are often disproportionately higher; Rural residents may have more limited access to mortgage credit; Rural minorities are less likely to own their homes than rural white households.8 Housing Act of 1949 (P.L. 81-171) (42 U.S.C. 1441 et seq). The preamble to this landmark legislation declares that every American deserves a “decent home and a suitable living environment.” Housing in the post-World War II era was in short supply and many cities had housing that was in deteriorating condition. The Housing Act for the first time placed the federal government in the role of physically shaping U.S. urban and suburban areas. In doing so, the act influenced state and local polices regarding not only housing, but more broadly, social welfare policy, race relations, and economic development decisions. The act was significant in its creation of a new federal role, but it also was significant in establishing housing as a central policy focus, a focus that is more diminished today. To meet the goals of more and better housing, Title I of the Housing Act financed slum clearance under urban redevelopment/renewal programs. Title II increased authorization for Federal Housing Administration mortgage insurance. Title III committed the federal government to building 810,000 new public housing units by 1955.9 While the provisions of these titles were strongly influenced by cities and their immediately adjacent suburban areas, the Housing Act also particularly recognized the shortages and low-quality housing that characterized much of rural America. Title V of the act gave authorization to the Farmers Home Administration to grant mortgages for the purchase or repair of rural single-family houses. Title V authorized financial assistance in rural areas to farmers, owners, developers, and elderly persons for the purchase of rural property and construction of adequate facilities, insurance on various loans, and financial assistance for low rent housing for farm workers. Through the Rural Housing Insurance Fund Program account established by the Housing and Urban Development Act of 1965 (P.L. 89-117), the USDA Rural Housing Service today, as with the Farmers Home Administration in the past, insures and guarantees a variety of housing loans. 8 National Rural Housing Coalition. Recommendations to the Commission on Affordable and Healthy Facility Needs for Seniors in the 21st Century, October 2001. 9 This goal, however, was not achieved until the early 1970s. CRS-8 The Housing and Urban Development Act of 1968 (P.L. 90-448) (42 U.S.C. 1441a) (82 Stat. 476). This legislation reaffirmed the 1949 Housing Act, but also placed greater emphasis on the failures of the 1949 Act to address the problems of housing for low-income families. The 1968 Act authorized the Federal Housing Administration’s Section 235 homeownership program with the goal of expanding homeownership, especially among low-income families. The 1968 Act had the goal of creating nearly 26 million new units of housing, 6 million of which were to be reserved for low-income persons. The legislation enacts the New Communities Act of 1968, National Flood Insurance Act of 1968, Urban Property Protection and Reinsurance Act of 1968, and Interstate Land Sales Full Disclosure Act. The 1968 Act also created the Government National Mortgage Association (Ginnie Mae). Rural Housing Amendments of 1983 (P.L. 98-181) (42 U.S.C. 1490k to 1490o). Titles I through V are also referred to as the Housing and Urban-Rural Recovery Act of 1983. It amends the Housing and Community Development Act of 1974 and the United States Housing Act of 1937. Title V amends the 1949 Housing Act to require that at least 40% of all dwelling units financed by a rural housing loan through the Farmers Home Administration and at least 30% of such units in each state be available only for very low-income persons and families. It authorizes loans for manufactured homes and lots meeting specified safety standards and installation, structural, site and energy conserving requirements, whether such homes and lots are real property, personal property, or both. Housing Legislation in the 108th Congress. Rural rental housing and affordable housing are important housing concerns in the 108th Congress. Several bills addressing these and other housing issues included: ! H.R. 839. Renewing the Dream Tax Credit Act. Amends the Internal Revenue Code of 1986 to provide rural rental housing assistance. The bill gives priority to very low-income families, low-income communities, communities lacking affordable rental housing, or certain other applicants. ! S. 1248/H.R. 1102. National Affordable Housing Trust Fund Act of 2003. This legislation provides funds to build, restore and preserve 1.5 million affordable housing units for very low-income households over the next 10 years. Modeled on the more than 280 state and local housing trust funds, the Trust Fund is intended to help families earning less than 30 percent of the local median income. ! H.R. 1722. Rural Rental Housing Act of 2003. This bill authorizes the Secretary of Agriculture to provide rural rental assistance, with applicant priority given to very low income families, low-income communities, rural areas, and communities with severe lack of affordable rental housing. Eligible rural areas are those with 25,000 or less population. ! H.R. 1088/S. 532. Colonias Gateway Initiative Act. Authorizes the Secretary of Housing and Urban Development to make grants CRS-9 through September 30, 2009, to regional organizations to enhance the availability of affordable housing, economic opportunity, and infrastructure in the colonias. Colonias are recognized communities along the United States-Mexico border region in Arizona, California, New Mexico, and Texas. These communities lack such services as potable water, adequate sewage systems, and safe and sanitary housing. ! H.R. 2740. Rural Multifamily Housing Loan Guarantee and Ginnie Mae Corrections Act. The bill amends the National Housing Act of 1949 to authorize the Government National Mortgage Association (Ginnie Mae) to guarantee securities backed by loans insured or guaranteed by the Rural Housing Service under Title V of the Housing Act of 1949. ! H.R. 3485. Affordable Housing Preservation Tax Relief Act of 2003. This legislation would amend the Internal Revenue Code of 1986 to provide a tax incentive to preserve affordable housing in multifamily housing units which are sold or exchanged. ! S. 1205. Rural Teacher Housing Act of 2003. The bill requires the Secretary of Housing and Urban Development to provide grants to states with a population of fewer than 1 million people and to make grants to eligible school districts located within a population of 6,500 or fewer. The grants may be used for (1) construction of new housing units within a qualified municipality; (2) the purchase and rehabilitation of existing housing units within a qualified municipality; or (3) the rehabilitation of housing units within a qualified municipality that are owned by an eligible school district. ! H.R. 284/S. 595. Housing Bond and Credit Modernization and Fairness Act of 2003. Legislation would amend the Internal Revenue Code of 1986 to modify the housing purchase price limitation under mortgage subsidy bond rules based on median family income. Rural Housing Service Programs The following programs are authorized by the Housing Act of 1949 and include programs for individual homeownership and rental housing. They, accordingly, do not require annual reauthorization or reauthorization in periodic omnibus farm bills. Budget authorization is expressed in terms of loan subsidies and loan authority. Housing loan subsidies are transfers from the Treasury to lenders who may then provide loans at reduced interest rates to low-income borrowers who otherwise would not be able to obtain credit under a lender’s usual criteria. Loan authority refers to the total value of all loans made under a particular program. A subsidy “leverages” a larger loan amount. A small total loan subsidy permits a relatively large amount of principal actually lent. Loan authorization refers to the total amount of loan indebtedness that a particular program may assume. CRS-10 Funding for Rural Housing Service homeownership programs is provided by the Rural Housing Insurance Fund through three financing mechanisms: (1) direct loans, (2) guaranteed loans, and (3) grants. Direct loans are loans whose principal is subsidized by the federal government. The principal for a guaranteed loan is provided by a private lender, but the lender is protected by the federal government in the event a borrower defaults. If a guaranteed loan is made at market interest rates and the default rate is zero, then the cost to the federal government for making the guaranteed loan is zero. A grant is a direct outlay to an applicant, often on the basis of a competition for funds. Funding limits for individual grants and total levels of loan authorization are stated in legislation authorizing the loans and grants. Section 502 Single Family Housing Direct Loan Program. This is USDA’s main housing loan program and is designed to help low-income individuals purchase houses in rural areas. Funds can also be used to build, repair, or renovate a house, including providing water and sewage facilities. The program provides fixed-interest mortgage financing to low-income families who are unable to obtain credit elsewhere. The program also provides “supervised credit” including pre-loan and post-loan credit counseling to its borrowers to help them maintain their homes during financial crises. While the program benefits rural areas nationwide, the highest benefits (in per capita dollars) were in low-income areas such as the Delta South and rapidly growing areas in the West. Statutory Authority: Title V, Section 502 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1471, et seq. Financing: Loans are subsidized at a graduated interest rate from 1% over Treasury’s cost of money, depending on family income. Applicants may obtain 100% financing and loans are for up to 33 years (38 years for those with incomes below 60% of the area median household income). Interest rates are determined so that a family pays from 22% to 26% of their income for principal, interest, taxes, and insurance. Eligibility: Borrowers must be either very-low income (less than 50% of median family income in the rural area where they reside) or low-income (5080% of median family income). Housing must be modest in size, design, and cost.10 Funding: Total loan authorization in FY2003: $1.04 billion; FY2004: $1.35 billion; FY2005: $1.100 billion (est.). Lend subsidies (budget authority) FY2003: $201.0 million; FY2004: $125.3 million; FY2005: $127.4 million (est). Section 502 Guaranteed Single Family Housing Purchase and Refinance Loans. Provides loan guarantees to private lenders for low and moderate income families to purchase housing. Objective is to provide an incentive to private lenders to offer loans for 30-year mortgages to rural residents who would otherwise be unable to obtain credit. 10 Modest housing is generally defined as housing costing less than the HUD Section 203(b) loan limits. CRS-11 Statutory Authority: Title V, Section 502 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1471, et seq. Financing: The government guarantees 90% of loan principal as an encouragement to private lenders to make loans to rural residents whose incomes are between 80 and 115% of the median county income. Loans may be up to 100% of market value or acquisition costs, whichever is less. There is no down payment requirement. Funding: Loan authorization in FY2003: $3.09 billion; FY2004: $2.71 billion; FY2005 (est.): $2.73 billion. Loan subsidies (budget authority) in FY2003: $35.2 million; FY2004: $39.7 million; FY2005: $33.7 million (est.). Section 504 Very Low-Income Rural Housing and Repair Loan and Grant Program. This program provides loan and grant assistance to very-low and low-income homeowners to make housing repairs that remove various health and safety hazards from their houses or to improve or modernize a home. Statutory Authority: Title V, Section 504 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1471, et seq. Financing: Loans of up to $20,000 and grants of up to $7,500 are available. Eligibility Criteria: Loans are available to very low-income rural residents who own and occupy a dwelling in need of repair. A homeowner must be unable to obtain affordable credit elsewhere. Grants are limited to elderly home owners (age 62 and older) whose incomes are 50% or less of the median in the rural area where they reside. Grant funds may be used only for removal of a health or safety hazard. Funding: Loan authorization in FY2003: $31.6 million; FY2004: $34.8 million; FY2005(est): $35 million. Loan subsidies (budget authority) in FY2003: $9.8 million; FY2004: $9.6 million; FY2005 (est.): $10.2 million. Grants in FY2003: $31.5 million; FY2004: $30.1 million; FY2005: $31.5 million. Section 514 and 516 Farm Labor Housing Program Loan and Grant Program. This is the only nationwide program to provide housing for farm laborers.11 Loans and grants are provided to buy, build, improve, or repair housing for farm labor, including persons whose income is earned in aquaculture and on-farm processing. Section 516 grants are used in conjunction with the loans to finance affordable, off-farm rental housing to low-wage farm workers Statutory Authority: Title V, Section 514 and 516 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1484 and 1486. Financing: This program provides direct loans to farm owners, Indian tribes, farmer associations, public bodies, and nonprofit organizations to provide living quarters, furnishings, and related facilities for domestic farm workers. Section 514 loans have a 1% interest rate and a maximum repayment term of 33 years. Grants may cover up to 90% of development costs. 11 Unlike other RHS programs, the funding for Farm Labor Housing Program may be used in urban areas for nearby farm labor. CRS-12 Eligibility Criteria: Farmworkers who lease Section 514/516 units must be either U.S. citizens or permanent residents and the majority of their income must come from farm work. Grants are available only to governments or nonprofit organizations. Funding: Loan authorization in FY2003: $55.9 million ($27.4 million in subsidies) and $5.8 million in grants; FY2004: $42.6 million ($18.2 in loan subsidies) and $17.9 million in grants; FY2005 (est.): $36.7 million ($19.8 in loan subsidies) $17 million in grants. Section 523 Mutual Self-Help Grant Program. This program allows very-low and low income rural Americans to use “sweat equity” to reduce the costs of home ownership. Nonprofit organizations and local governments may obtain grant funds to enable them to provide technical assistance to groups of families that work cooperatively to build their houses. Typically, future homeowners use Section 502 direct loans to finance their mortgages and, through their own labor on constructing the house are able to reduce costs by 10-15% while learning construction skills. Statutory Authority: Title V, Section 523 (b)(1)(A) of the Housing Act of 1949; 42 U.S.C. 1490(c)(B). Financing: Grants. Grantees typically also use Section 502 loans although other mortgage tools are also used. Funds may be used to pay salaries, rent, and office expenses of the participating nonprofit organizations. Pre-development grants up to $10,000 are available to qualified organizations. Eligibility Criteria: Low income (50%-80% of area median family income) Funding: Grants for FY2003: $40.1 million; FY2004: $33.8 million; FY2005: $34.0 million (est.). Section 523 Rural Housing Site Loan Program. This program provides funds to nonprofit organizations to develop building sites for low and moderateincome participants in the Self-Help Housing Program. The nonprofit organizations resell these improved sites to program participants at cost. The interest rate on the loans is 3% and the nonprofit organizations repay the loans when they sell these properties. Statutory Authority: Title V, Section 523 (b)(1)(A) of the Housing Act of 1949; 42 U.S.C. 1490(c)(B). Financing: Loans are for two years. Section 523 loans bear 3% interest rates. Eligibility Criteria: Section 523 loans are made to acquire and develop sites only for housing constructed by the self-help method. Funding: Loan authorization FY2003: $978,000 million; FY2004: $2.4 million; FY2005 (est.): $5.0 million. Subsidy levels (budget authority) FY2003: $220,000; FY2004: $75,000; FY2005: $0 (est.). Section 524 Rural Housing Site Loan Program. This program is very similar to the Section 523 program above except that once the sites are developed, they may be provided to any low- or moderate-income person, not just to the selfhelp participant. CRS-13 Statutory Authority: Title V, Section 524 (b)(1)(A) of the Housing Act of 1949; 42 U.S.C. 1480(d). Financing: Loans are for two years. Section 524 loans bear the market rate of interest. Eligibility Criteria: Section 524 loans are made to acquire and develop sites for any low-or moderate-income family. Funding: Loan authorization in FY2003: $5.0 million; FY2004: $5.0 million; FY2005 (est.): $5.0 million. Loan subsidies (budget authority) in FY2003: $55,000; FY2004: $0; FY2005 (est.): $0. Section 533 Housing Preservation Grant Program. This program provides funding through nonprofit groups, Indian tribes, and government agencies to very-low and low-income home owners to repair their houses, and to rental property owners for the rehabilitation of rental and cooperative housing to be rented to very-low and low-income families. Statutory Authority: Title V, Section 533 of the Housing Act of 1949; 42 U.S.C., Chapter 8A, Subchapter III, 1480m. Financing: Grants. Eligibility Criteria: Low and very-low income rural residents. Grants may also be made to rental property owners if they agree to make such units available to low and very-low income occupants. Funding: For FY2003: $10.1 million; FY2004: $9.9 million; FY2005 (est.): $10.0 million. Section 515 Rural Rental Housing Direct Loans. The Section 515 rental housing program houses the poor through 50-year, 1% loans and rental assistance. The program is typically used in conjunction with the Section 521 Rental Assistance Program (see below). With assistance, tenants pay a maximum of 30% of their income toward rent and utilities. Some 515 projects also use Housing and Urban Development Section 8 project-based assistance which enables additional very-low income families to be helped. There are four variations of the Section 515 loan program: (1) Cooperative Housing, (2) Downtown Renewal Areas, (3) Congregate Housing or Group Homes for Persons with Disabilities, and (4) the Rural Housing Demonstration Program. Statutory Authority: Title V, Section 515 of the Housing Act of 1949; 42 U.S.C. 1490(c). Financing: This program uses a public-private partnership to provide direct subsidized interest loans at 1% interest rate to limited-profit and nonprofit developers to construct or to renovate affordable rental complexes in rural areas. Eligibility Criteria: For very-low, low-, and moderate-income families. In new Section 515 projects, 95% of tenants must have very-low incomes. In existing projects 75% of new tenants must have very low incomes. Funding: Loan authorization for FY2003: $115.1 million; FY2004: $115.9 million; FY2005 (est.): $60.0 million. Loan subsidies (budget authority) for FY2003: $53.6 million; FY2004: $49.8 million; FY2005 (est.): $28.3 million. CRS-14 Section 538 Multi-Family Guaranteed Loan Program. The program funds construction, acquisition, and rehabilitation of multifamily housing for low to moderate-income residents. It provides 90% loan guarantees to certified lenders to make rental housing affordable to low and moderate-income residents. For the nonprofit sector, the program covers 97% loan-to-value ratios. Statutory Authority: Title V, Section 538 of the Housing Act of 1949; 42 U.S.C. 1485. Financing: Guarantees market-rate loans made by private lenders. Eligibility Criteria: Residents of the completed housing facility must be very low- to moderate-income households; or elderly, or disabled persons with income not in excess of 115% of the median income of the surrounding area. Funding: Loan authorization in FY2003: $99.1 million; FY2004: $99.4 million; FY2005 (est.): $100 million. Loan subsides (budget authority) for FY2003: $4.5 million; FY2004: $5.9 million; FY2005 (est.): $3.5 million. Section 521 Rental Assistance Program. The objective of this program is to help mitigate the burden on the nearly 25% of rural households who pay more than 30% of their income on housing costs. Statutory Authority: Title V, Section 521(a)(2) of the Housing Act of 1949; 42 U.S.C. 1490. Financing: Rental Assistance is project-based assistance used in conjunction with Section 515 and Section 514/516 loan/grant programs. The program provides rental assistance directly to the owners of some RHS-financed projects under contracts specifying that beneficiaries will pay no more than 30% of their income for rent. The program makes up the difference between the tenant’s contribution and the rental charge. Eligibility Criteria: The subsidy goes to the housing unit, not an individual tenant. In effect, the subsidy indirectly goes to the tenant through lower rent payments. Funding: FY2003: $721.1 million; FY2004: $574.1 million; FY2005 (est.): $586.0 million. Housing Demonstration Program. Under this program, RHS may provide loans to low income borrowers to purchase innovative housing units and systems that do not meet existing published standards, rules, regulations, or policies. The objective of the demonstration programs is to test new approaches to constructing housing under the statutory authority granted to the Secretary of Agriculture. The intended effect is to increase the availability of affordable rural housing for lowincome families through innovative designs and systems. Statutory Authority: Title V, Section 506(b), Housing Act of 1949; 42 U.S.C. 1476. Financing: Loans and grants. Aggregate expenditures for the demonstration may not exceed $10 million in any fiscal year. Eligibility Criteria: Section 506 (b) requires that the health and safety of the population of the areas in which the demonstrations are carried out will not be adversely affected. CRS-15 Funding: Program funding is reserved through other RHS programs listed above. In FY2004, $5 million is provided for a demonstration housing program for processing workers in Alaska, Mississippi, Utah, and Wisconsin. USDA Rural Business-Cooperative Service (RBS) Creating and retaining employment in rural areas has been a central focus of rural development policies for nearly 75 years. Originally, agriculture, mining, fishing, and timbering related jobs were major targets of public funding. Since the mid-1950s, manufacturing was regarded as the most promising source of rural employment as jobs in the primary sector declined. Abundant and largely nonunionized labor, inexpensive land, and minimal environmental regulation were rural America’s competitive advantage as many manufacturing facilities sought branch production facilities. While manufacturing has provided relatively high-paying and stable employment for many rural residents, the U.S. rural manufacturing sector finds itself today competing with developing countries and with Eastern Europe. Lowskilled, peripheral manufacturing facilities are leaving U.S. rural areas. Today, rural areas are trying to create new sources of competitive advantage in more technologically sophisticated production with higher-skill labor. With lack of capital a significant factor in many rural areas, the RBS provides loans and grants to help local entrepreneurs in starting up businesses and in expanding existing businesses.12 Other RBS programs provide specialized technical and marketing assistance. Several programs authorized in the 2002 farm bill (P.L.107-171) address the new needs of rural businesses, especially in capital formation. Rural Intermediary Relending Program. These direct loans are made to private nonprofit corporations, state or local government agencies, Indian tribes, and cooperatives who, in turn, lend the funds to rural businesses, private nonprofit organizations, and others. Assistance from the intermediary to the ultimate recipient must be for economic development projects, establishment of new businesses, and/or expansion of existing businesses, creation of new employment opportunities and/or saving existing rural jobs. Statutory Authority: Health and Human Services Act of 1986, Section 407, P.L. 99-425, 7 U.S.C. 1932 note; Food Security Act of 1985, Section 1323, as amended, P.L.99-198, 7 U.S.C. 1631; Community Economic Development Act of 1981, Section 623, as amended, P.L.97-35, 42 U.S.C. 9812. ;7 U.S.C. 1932; 42 U.S.C. 9812. Financing: Loans are made by RBS to intermediaries that provide loans to ultimate recipients for business facilities and community development projects. Eligibility Criteria: Financing is limited to community development projects not within the outer boundary of any city having a population of 25,000 or more. Funding: Loan authorization for FY2003: $39.7 million; FY2004: $39.8 million; FY2005:$34.2 million (est.). Loan subsidies (budget authority) for FY2003: $19.2 million; FY2004: $17.2 million; FY2005 (est.): $15.9 million. 12 Other RBS-administered programs within the Rural Community Advancement Program are discussed in a later section. CRS-16 Rural Economic Development Loans. This program provides zerointerest loans for RUS borrowers who then re-lend the funds at zero interest to rural businesses. Statutory Authority: Rural Electrification Act of 1936, as amended, Title III, 7 U.S.C. 930-940c; 7 U.S.C. 1932(a). Financing: Direct loans. Eligibility Criteria: Loans are made to electric and telephone utilities that have current loans with the Rural Utilities Service (RUS) or Rural Telephone Bank loans or guarantees outstanding and are not delinquent on any federal debt or in bankruptcy proceedings. Funding: Loan authorization for FY2003: $14.9 million; FY2004: $14.9 million; FY2005 (est.): $25.0 million. Loan subsidies (budget authority) for FY2003: $3.2 million; FY2004: $2.8 million; FY2005 (est.): $4.7 million. Rural Economic Development Grants. Grants are used to establish a revolving loan fund program to promote economic development in rural areas. The revolving loan fund provides capital to nonprofit organizations and municipal organizations to finance community facilities in rural areas that promote job creation and education and training to enhance marketable skills, or improve medical care. Statutory Authority: Section 313 of the Rural Electrification Act of 1936; 7 U.S.C. 930-940(c); 7 U.S.C. 1932. Financing: Grants. Funds are provided from the interest differential on Rural Utilities Service borrowers’ cushion of credit accounts. The cushion of credit account was established under Section 313 of the Rural Electrification Act (REA). Under this program, RUS borrowers may make voluntary deposits into a special cushion of credit account. A borrower’s cushion of credit account balance accrues interest to the borrower at an annual rate of 5%. The amounts in the cushion of credit account (deposits and earned interest) can only be used to make scheduled payments on loans made or guaranteed under REA. Eligibility Criteria: Economic development projects benefitting rural areas. Funding may be used for feasibility studies, start-up costs, and incubator projects. Funding: FY2003: $4.1 million; FY2004: $4.0 million; FY2005 (est.): $4.0 million. Rural Cooperative Development Grants. The grants were established under the 1996 farm bill (P.L. 104-127) which eliminated the term “technology “ from the previously authorized Rural Technology and Cooperative Development Grant Program. Grants are made to fund the establishment and operation of centers for rural cooperative development with their primary purpose being the improvement of economic conditions in rural areas through the creation of new or improvement of cooperatives. Grants may be made to nonprofit institutions or higher education institutions. Grants may be used to pay up to 75% of the cost of the project and associated administrative costs. The applicant must contribute 25% from non-federal sources. Grants under this program are competitive and awarded on specific selection criteria. CRS-17 Statutory Authority: Section 310 B(e) of the Consolidated Farm and Rural Development Act of 1972; 7 U.S.C. 1932(e); 42 U.S.C. 9817. Financing: Grants. Eligibility Criteria: Grants to nonprofit corporations and institutions of higher education. For this program, rural is defined as all territories of a state not within the outer boundary of any city having a population of 50,000 or more based on the latest decennial census of the United States. Funding: FY2003: $5.4 million; FY2004: $5.0 million; FY2005: $3.5 million (est.). Appropriate Technology Transfer for Rural Areas (ATTRA) Program. A cooperative agreement established by the 1985 farm bill, the program was transferred to the Department of Interior’s Fish and Wildlife Service in 1990. The 1996 farm bill transferred the program back to USDA’s Rural Business Service. The program is an account of the Rural Cooperative Grants program. It provides information to farmers and other rural users on a variety of sustainable agricultural practices that include both cropping and livestock operations. The ATTRA program is located on the University of Arkansas campus at Fayetteville, Arkansas, and functions as an information and technical assistance center staffed with sustainable agriculture specialists. Statutory Authority: Section 1323 of the Food Security Act of 1985; 7 U.S.C. 1932. Financing: The program is funded through a cooperative agreement between the not-for-profit National Center for Appropriate Technology and the Rural Business-Cooperative Service. Eligibility Criteria: Open. Funding: For FY2003: $2.5 million; FY2004: $2.5 million; FY2005: $0. Value-Added Agricultural Production Market Development Grants. The program provides grants to assist farmers and ranchers in creating greater value for agricultural commodities. A provision in the 2002 farm bill makes mandatory funding for this program to FY2007. A portion of the fund was reserved for the establishment of Agricultural Demonstration Centers which will provide training and technical assistance to new or expanding value-added agricultural enterprises. Ten centers were established in FY2003 and funded at $1 million each. Statutory Authority: Agricultural Risk Protection Act of 2000 (P.L.106-224); Section 6401 of the Farm Security and Rural Investment Act of 2002 (P.L.107171). Financing: Competitive grants. Eligibility Criteria: Profit and nonprofit organizations, cooperatives. CRS-18 Funding: FY2003: $19.8 million;13 FY2004: $14.9 million; FY2005: $15.5 million (est.). National Sheep Industry Improvement Center. Established by the 1996 farm bill, this program is an industry-driven education and marketing program directed at enhancing the U.S. sheep and goat industry. The program provides seedmoney that promotes investment to allow the program to become independent by 2006. Statutory Authority: Federal Agricultural Improvement and Reform Act of 1996; 7 U.S.C. 2008j. Financing: A revolving fund providing a variety of financing mechanisms, e.g., direct and guaranteed loans, grants. Eligibility Criteria: Eligible entities include public, private, or cooperative organizations, associations, including corporations not operated for profit, Federally recognized Indian tribes, or public or quasi-public agencies. An individual is not considered an eligible entity. Fifty-one percent of the entity must be owned by citizens of the United States or reside in the United States after being legally admitted for permanent residence. Funding: Initially, $20 million was authorized to establish the fund, without fiscal year limitations. Additional appropriations for FY2003: $850,000 FY2004: $496,000; FY2005 (est.): $0. The center is scheduled to be privatized by April 2006. Rural Business Investment Program. This program was established by the 2002 Farm Bill and creates limited liability companies (Rural Business Investment Companies) to make equity capital investments in rural businesses. These companies will be financed with both private funds and debt instruments guaranteed by the federal government. The program will be operated under a Memorandum of Agreement with the U.S. Department of Commerce’s Small Business Administration. Statutory Authority: Section 6029, Farm Security and Rural Investment Act of 2002 (P.L. 107-171). Financing: Direct loans, guaranteed debentures, and grants. Eligibility Criteria: Designation by the Secretary as a Rural Business Company. Funding: “Such sums as necessary” are authorized to cover the costs of guaranteeing a total of $280 million of debentures. In addition, $44 million in mandatory funding is authorized for grants and $56 million for direct loan subsidies. A portion of the mandatory funding for the program was blocked by appropriators in FY2003 and FY2004 while providing some initial funding to 13 FY2001 funds were provided in the Agricultural Risk Protection Act of 2000 and the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2002 (P.L.106-387). Subsequent funding (FY2002-FY2007) is provided by the 2002 farm bill. In FY2004, appropriators blocked the mandatory funding and provided discretionary funds. For FY2005, the Administration has proposed cancelling the mandatory funds and providing discretionary funds. CRS-19 begin the program. Additional grant funding is requested for FY2005, while cancelling the remaining portion of the authorization. For FY2005, the Administration has also requested a reduction in the level of debentures. Rural Strategic Investment Program. This program was established by the 2002 farm bill. It establishes a National Board on Rural America that will make planning grants and innovations grants to certified Regional Investment Boards. As with the Rural Business Investment Program above, this program is also designed to address the general lack of investment capital in many rural areas. Statutory Authority: Section 6030, Farm Security and Rural Investment Act of 2002 (P.L. 107-171). Financing: Planning grants and innovation grants. Eligibility Criteria: Designation by the Secretary as a Regional Investment Board. Funding: The program was authorized for $100 million in mandatory funding in FY2002. Those funds were not distributed in FY2002 and the funding carried over to FY2003. Appropriators prohibited the expenditure of any funds to carry out the program in FY2003 and FY2004. The Administration requests that funds be cancelled for FY2005. Renewable Energy Loan and Grant Program. This program provides funding to eligible farmers, ranchers, and small businesses in purchasing renewable energy systems and making existing energy systems more efficient. Statutory Authority: Section 9006, Farm Security and Rural Investment Act of 2002 (P.L. 107-171). Financing: Loans and grants. Eligibility Criteria: Funding: The program was authorized for $23 million in mandatory funds per fiscal year, FY2003-FY2007. Appropriators prohibited the expenditure of any of the mandatory funds to carry out the program in FY2003 and FY2004, but did provide $22.8 million in discretionary funding for the program in FY2004. The Administration has requested cancelling the mandatory funding for FY2005 and providing $10.7 million in discretionary funding. USDA Rural Utilities Service (RUS) Arguably, the earliest rural development policy consisted of providing infrastructure to get rural products to markets or to transportation nodes. Building railroads and telegraph lines represented early examples. Later electricity and telephones constituted essential rural infrastructure. Because of great geographical distances and low population densities, rural areas would unlikely have had such services without federal support. The 1936 Rural Electrification Act discussed above was central to the provision of rural utilities in an urbanizing society. Today, rural electrification, telecommunications, and water infrastructure are the core programs CRS-20 administered by the Rural Utilities Service.14 New infrastructure includes facilities for health service delivery, e.g., telemedicine, and new broadband telecommunication resources. As in the early years of the Nation, great distances and sparse populations have also led Congress to provide funding for these new rural utilities as well as continuing support for telephones and electrical generation and transmission. Electric Loan Program. Loans are made to expand, upgrade, maintain, and replace rural electric infrastructure. Interest rates are tied to the economic conditions of the areas served and the costs of providing services to the area. Most RUSfinanced systems have their loan rates capped at 7% although there are three interest rate levels: (1) direct loans for distressed areas, (2) Treasury rate loans, and (3) municipal rate loans. Borrowers must generally obtain approximately half their capital needs from the private sector. RUS also makes guaranteed loans through the Federal Financing Bank, National Bank for Cooperatives, and National Rural Utilities Cooperative Finance Cooperation. The interest rate on loans by the Federal Financing Bank is based on the Treasury rate plus 1/8%. Because of a very low default rate, the FFB loan guarantee program has a zero subsidy cost. Most loans are made for 35 years and are secured by the borrower’s electric system assets. Statutory Authority: Section 305, Rural Electrification Act of 1936; 7 U.S.C. 904, 935. Financing: Three loan levels: Hardship loans are made to applicants whose consumers fall below average per capita and household income thresholds. Municipal rate loans are based on interest rates available in the municipal bond market. Borrowers are required to seek supplemental financing for 30% of their capital requirements. Treasury rate loans are based on rates established daily by the U.S. Treasury. Eligibility Criteria: Electricity producers and transmitters serving rural populations. Funding: Loan authorization levels for FY2003: $3.99 billion; FY2004: $4.99 billion; FY2005 (est.): $2.64 billion. Subsidies (budget authority) for FY2003: $29.4 million; FY2004: $60,000; FY2005 (est.): $5.1 million.15 Telecommunications Loans. This program makes loans for infrastructure improvement and expansion to furnish and improve telephone service, including a variety of related telecommunications purposes such as broadband service in rural areas. RUS lends directly to rural telecommunication systems and guarantees loans made by other lenders. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 922. Financing: Direct loans for construction, expansion, and operation of telecommunication lines and facilities or systems. Eligibility Criteria: Three loan levels: Hardship loans are made to applicants whose consumers fall below average per capita and household income thresholds. Municipal rate loans are based on interest rates available in the 14 Water and waste water programs are administered under the Rural Community Advancement Program and are discussed in the following section. 15 Includes loan authorization for guaranteed loans. CRS-21 municipal bond market. Treasury rate loans are based on rates established daily by the U.S. Treasury. Guaranteed loans are made through the Federal Financing Bank. Funding: Telecommunication loan authorization levels for FY2003: $482.8 million; FY2004: $513.5 million; FY2005 (est.): $495.0 million. Loan subsidies (budget authority) for FY2003: $1.4 million; FY2004: $124,000; FY2005 (est.): $100,000. Distance Learning and Telemedicine Loans and Grants. This program provides financial assistance to rural community facilities, e.g., schools, libraries, hospitals, and medical centers. The Telecommunications Act of 1996 targeted rural areas because of the difficulties they have in providing high quality education and medical services. This program helps rural schools and hospitals obtain and use advanced telecommunications for health and educational services. Statutory Authority: Food, Agriculture, Conservation, and Trade Act of 1990; 7 U.S.C. 950 aaa-2 et seq. Financing: Interest rates depend on the financial condition of the borrower system and the costs of providing service to rural subscribers. Cost of money loans are supplemented by loans from the Rural Telephone Bank. Most rural systems are eligible for loans at a hardship rate of 4%. The program also makes guaranteed loans. Eligibility Criteria: Loans are made to utilities serving rural communities. Funding: Grants and combination loan/grants ($10 in loans to $1 in grants). Loan authorization in FY2003: $20.7 million; FY2004: $300.0 million; FY2005: $0 (est.). Loan subsidies (budget authority) for FY2003: $0; FY2004: $0 million; FY2005: $0 (est.). Grant funding for FY2003: $33.5 million; FY2004: $24.8 million; FY2005: $25.0 million (est.). Rural Telephone Bank. The Rural Telephone Bank (RTB) was designed to ensure rural telephone systems’ access to private sources of capital by establishing a supplemental credit mechanism to which borrower systems may turn for all or part of their future capital requirements. The capital structure of the Telephone Bank consists of three classes of stock: Class A, Class B, and Class C. Class A stock was issued to the Telephone Bank in exchange for appropriated $600 million of capital provided by the taxpayers. This provided the Telephone Bank with its initial “seed” money to begin its lending operations. Through sales of Class A stock, the RTB is being privatized. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 941, et seq. Financing: Interest rates depend on the financial condition of the borrower system and the costs of providing service to rural subscribers. Most rural systems are eligible for loans at a hardship rate of 5%. Eligibility Criteria: Utilities serving rural communities. Funding: Loan authorization level FY2003: $167.8 million; FY2004: $173.5 million; FY2005 (est.): $0. Loan subsidies (budget authority) for FY2003: $2.3 million; FY2004: $0; FY2005: $0 (est.). Broadband Loans and Grants. New telecommunication technologies will increasingly rely on infrastructure that can carry signals more complex than simple CRS-22 voice and at significantly faster speeds. Rural areas are currently at a disadvantage in gaining access to these newer technologies, in part, because the costs per user are higher than in more urbanized areas. RUS provides loans and grants to support acquisition./construction of broadband facilities in under-served rural areas. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 922. Financing: Interest rates on loans depend on the financial condition of the borrower system and the costs of providing service to rural subscribers. There are three interest rate levels: Three interest rate levels: hardship, Treasury, and municipal. Treasury loans may be supplemented by loans from the Rural Telephone Bank. Most rural systems are eligible for loans at a hardship rate of 4%. Eligibility Criteria: The “community-oriented connectivity” approach will target rural, economically-challenged communities and offer a means for the deployment of broadband transmission services to rural schools, libraries, education centers, health care providers, law enforcement agencies, public safety organizations as well as residents and businesses. Community eligibility requirements for funding through the Community Connect Broadband Grant Program include areas with (1) 20,000 or fewer residents, (2) no prior access to a broadband transmission service; and (3) a minimum matching contribution equal to 15% of the grant amount awarded. Funding: Loan authorization levels for FY2003: $0; FY2004: $598.1 million; FY2005 (est): $331.1 million. Loan subsidies (budget authority) for FY2003: $0; FY2004: $13.0 million; FY2005: $9.9 million. Broadband telecommunication grants for FY2003: $32.8 million; FY2004: $8.9 million; FY2005: $0 (est.). Enhancement of Access to Broadband Service in Rural Areas. This program provides loans, grants, and loan guarantees to construct, improve, and acquire facilities and equipment to provide broadband service to rural areas with less than 20,000 residents. Statutory Authority: Section 6103, Farm Security and Rural Investment Act of 2002 (P.L. 107-171). Financing: Loans and grants. Loans are made at 4%. Eligibility Criteria: Rural areas of less than 20,000 population and outside of an urban/metro commuting area. Funding: Mandatory funding was authorized at $20 million per year, FY20022005 and $10 million in FY2006 and FY2007. Appropriators have blocked funding for the program in FY2002-2004. The Administration requests no funding for FY2005. Other RUS loan and grant programs provide discretionary funding for broadband (see above). Local Television Loans. This program was authorized by the Launching Our Communities’ Access to Local Television Act of 2000 (P.L. 106-553). The legislation provides for the establishment of the Local Television Loan Guarantee Board. The program facilitates access, on a technologically neutral basis, to signals of local television stations for households located in non-served or under-served areas. CRS-23 Statutory Authority: Title X of the FY2001 Commerce, Justice, State Appropriations Act (P.L.106-553); 7 U.S.C. 1932(f). Financing: Loan guarantees. Eligibility Criteria: The Loan Guarantee Board is authorized to approve loan guarantees of up to 80% of the total loan amount for no more than $1.25 billion in loans. Funding: Loan authorization level for FY2003: $0; FY2004: $0; FY2005: $0 (est.). High Energy Cost Grants. The purpose of this grant program is to provide financial assistance for a broad range of energy facilities, equipment and related activities to offset the impacts of extremely high residential energy costs on eligible communities. Eligible facilities include on-grid and off-grid renewable energy systems and implementation of cost-effective demand side management and energy conservation programs that benefit eligible communities. Statutory Authority: Rural Electrification Act of 1936; 7 U.S.C. 918(a). Financing: Competitive grants. No cost sharing or matching funds are required as a condition of eligibility under this grant program. However, RUS will consider other financial resources available to the grantee and any voluntary commitment of matching funds or other contributions in assessing the grantee’s capacity to carry out the grant program successfully and will award additional evaluation points to proposals that include such contributions. As a further condition of each grant, section 19(b)(2) of the RE Act requires that planning and administrative expenses may not exceed 4 percent of the grant funds. Eligibility Criteria: Areas with high energy costs are those where the average residential expenditure for home energy is 275% of the national average. Funding: For FY2003: $34.8; FY2004: $27.8 million; FY2005: $0.16 Rural Community Advancement Program (RCAP) The Rural Community Advancement Program (RCAP), one of the largest federal general assistance programs, was authorized by the 1996 farm bill, the Federal Agriculture Improvement and Reform Act (P.L. 104-127). The program consolidates funding for 12 rural development loan and grant programs into three accounts: Rural Community Facilities, Rural Utilities, and Rural BusinessCooperative Programs. RCAP was created as a mechanism to enhance the performance of many of USDA’s categorical rural development programs. For example, the Community Facility Grant program reorganized by the 1996 farm bill is used in conjunction with existing loan and grant programs for the development of community facilities such as fire stations, community centers, and hospitals. RCAP also was designed to provide greater flexibility in targeting financial assistance to local needs by permitting a portion of the various accounts’ funds to be shifted from one funding stream to another. Funding is allocated to state rural development 16 In FY2003, $29.8 million was transferred from the Rural Community Advancement Program account plus $5 million in unobligated funds. In FY2004, $27.8 was transferred from the Rural Community Advancement Program account. CRS-24 offices where state directors set priorities on a state-by-state basis. State directors are authorized to transfer up to 25% of the amount in each RCAP account allocated for the state to any of the other accounts. Although RCAP has its own appropriation, the various programs consolidated under RCAP are administered by RHS, RBS, and RUS. Within the three RCAP accounts discussed below, there are various funding earmarks for FY2003 and FY2004. The following table lists the FY2003-FY2004 funding for these earmarks and a brief description of the programs. Earmark Target FY2003 FY2004 Federally Recognized Native American Tribes Community facilities and economic development funding for Native American Tribes $24 million $24 million Rural Community Development Initiative See description below $7 million $6 million Delta Regional Authority Assistance to counties in the Mississippi Delta Region $2 million $1.75 million Colonias Water and waste water assistance to impoverished areas along the U.S.-Mexican border $25 million $25 million Alaskan Villages Community facilities and economic development in Alaska Native villages $30 million $28 million Technical Assistance For rural water and waste water systems $18.3 million $17.7 million Circuit Rider Program Technical assistance for rural water systems $12.1 million $13 million Empowerment Zones/Enterprise Communities and Rural Economic Partnership Zones See Section description below $37.6 million $22.1 million Economic Impact Initiative Grants Economic development funding for areas experiencing high unemployment and outmigration $25 million $22 million High Energy Cost Grants Funding for rural areas experiencing high residential energy costs $30 million $28 million Tribal Colleges Community facility grants for Native Tribal colleges $4 million $0 CRS-25 Earmark Target FY2003 FY2004 Rural Health Cooperatives A demonstration program for home-based health care $1 million $0 Rural Community Assistance Program Technical assistance to water and waste water systems $5.5 million $5.5 million The following section provides an overview of the major components of RCAP’s three accounts. Community Facilities Account Community Facility Direct and Guaranteed. Loans are made for constructing, enlarging, or improving essential community facilities in rural areas and towns of not more than 20,000 population. Eligible applicants must demonstrate that they cannot obtain funding in the commercial market at reasonable rates. Applications for health and public safety projects receive the highest priority. Interest rates are determined by the median family income of the area and range from 4.5% to 5.375%. In the case of guaranteed loans, the loans are made by a private lender and the interest rate is negotiated between lender and borrower. Statutory Authority: Section 306(a)(1) of the Consolidated Agriculture and Rural Development Act of 1972. Financing: Direct loan subsidies and guaranteed loans. Eligibility Criteria: Priority is for loans to build essential community facilities that support public health and safety. Funding: Loan authorization levels for direct loans in FY2003: $253.3 million; FY2004: $500.0 million; FY2005: $300.0 million (est). Subsidy levels for direct loans in FY2003: $15.8 million; FY2004: $0; FY2005: $12.2 million (est.). Loan authorization levels for guaranteed loans in FY2003: $161.2 million; FY2004: $210 million; FY2005: $210 million (est.). Community Facility Grants. In most cases, these grants are used in conjunction with the direct loan program to make community facilities available, (e.g., fire stations, community centers) to the neediest communities, which often cannot afford even direct loans without additional subsidies. These grants were authorized under the 1996 farm bill (P.L.104-127). Statutory Authority: Section 306(a)(1) of the Consolidated Agriculture and Rural Development Act of 1972. Financing: Grants. Eligibility Criteria: Low-income communities unable to secure funding on a loan basis. Public bodies, nonprofit organizations, special purpose districts, e.g., nursing homes, are eligible applicants. Funding is for communities of 20,000 or less. Priority is given to communities of 5,000 or less. Facility must serve areas where median household income is below the poverty line or 90%of the state non-metropolitan median household income. Funding: FY2003: $18.5 million; FY2004: $15.8 million; FY2005: $17.0 million (est). Additional grant funds were earmarked in the Community CRS-26 Facilities Account for Economic Impact Initiative Grants targeted to communities suffering economic hardship and population out-migration: FY2003: $23.3 million; FY2004: $21.9 million; FY2005: $0 million (est.). Rural Community Development Initiative Grants. A new program authorized in FY2002. The program provides grants from RCAP accounts for capacity-building among private, nonprofit community development organizations and low-income rural communities in the areas of housing, community facilities, and community and economic development. Statutory Authority: Appropriation Act for Agriculture, Rural Development, Food and Drug Administration, P.L.106-387; 7 U.S.C. 1932. Financing: Competitive grants. Requires matching funds. Eligibility Criteria: Only qualified intermediary organizations are eligible for the technical assistance grants. Such organizations must supply matching funds from non-Federal sources to receive the grants. Funding: FY2003: $11.1 million; FY2004: $6.0 million; FY2005: $0 (est.). Rural Business-Cooperative Account Business and Industry (B&I) Direct and Guaranteed Loans. This program finances business and industry acquisition, construction, conversion, expansion, and repair in rural areas. Loan funds can be used to finance the purchase and development of land, supplies and materials, and pay start-up costs of rural businesses. Eligible applicants include individuals as well as public, private, and cooperative organizations. Although the RBS did make direct loans to groups in FY2001 and in previous years, the FY2002 budget did not request direct funding due to a high rate of default.17 Statutory Authority: Section 310B(a)(1) of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1932. Financing: Subsidized interest loans and guarantees for loans provided by lenders. Interest rates for guaranteed loans are negotiated between a lender and a borrower. A maximum guaranteed loan is $25 million. For loans of $5 million or less, maximum percentage of a guarantee is 80%. For loans between $5 and $10 million, maximum percentage of guarantee is 70%. For loans between $10 and $25 million, maximum percentage of guarantee is 60%. Eligibility Criteria: Borrowers must be unable to obtain credit from other lenders at reasonable rates and terms. Criteria for projects are (1) those that save existing jobs, (2) improve existing businesses or industry and (3) create the greatest number of permanent jobs. Golf courses, race tracks, and gambling operations are ineligible. Funding: Loan authorization level for direct loans in FY2003: $50.5 million with a loan subsidy of $2.9 million. No funding for the direct loan program was provided in FY2004 or requested for FY2005. Loan authorization levels 17 For RBS loan performance data, see Rural Development: Rural Business-Cooperative Service Business Loan Losses. GAO/RCED, August, 1999. CRS-27 for guaranteed loans in FY2003: $901.9 million with a loan subsidy of $35.8; million; FY2005: $600.0 million with a subsidy of $30.2 million (est.). Rural Business Opportunity Grants. Grants are made to public bodies, nonprofit organizations, Indian tribes, and cooperatives for training and technical assistance to rural businesses, economic planning for rural communities, or training for rural entrepreneurs or economic development officials. Statutory Authority: Section 741, Federal Agriculture Improvement and Reform Act of 1996; Section 306(a)(11)(A) of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1932. Financing: Competitive grants. Eligibility Criteria: Grants are made to public bodies, nonprofit corporations, Federally recognized tribal groups, and cooperatives with members that are primarily rural residents. Funding: FY2003: $3.1 million; FY2004: $3.0 million; FY2005: $3.0 million (est). Rural Business Enterprise Grants. These are grants to encourage the development of small and emerging business enterprises; creation and expansion of rural distance learning networks; and to provide educational instruction or job training related to potential employment for adult students. Grants are also available to qualified nonprofit organizations for provision of technical assistance and training to rural communities for improving passenger transportation services or facilities. Statutory Authority: Section 310N(c) and 310B(f) of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1932(c). Financing: Competitive grants. Eligibility Criteria: Priority for the grants is given to rural areas having a population of 25,000 or less. Other priorities include projects located in communities with large proportion of low-income residents and/or high unemployment. Funding: FY2003: $51.4 million; FY2004: $43.4 million; FY2005 (est.): $40.0 million (est.). Rural Utilities Account RCAP’s Water and Waste loan and grant programs assist eligible applicants in rural areas and cities and towns of up to 10,000 residents. Drinking water, sanitary sewerage, solid waste disposal and storm drainage facilities may be financed with direct and guaranteed loans and grants. Applicants must be unable to finance their needs through their own resources or with credit from commercial sources. The programs are administered by state and local USDA Rural Development offices. Water and Waste Disposal Direct and Guaranteed Loans. Loans are made to public bodies, organizations operated on a not-for-profit basis, and Indian tribes on federal and state reservations for development of storage, treatment, purification, or distribution of water or for collection, treatment, and disposal of CRS-28 waste in rural areas. Loans are repayable in not more than 40 years, or the useful life of the facility, whichever is less. Statutory Authority: Section 306 of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1926. Financing: Direct loans carry interest rates not in excess of the current market yield for comparable term municipal obligations. The interest rate on loans cannot exceed 5% (they are currently being made at 4.5%) for those areas where the (1) median household income of the service area falls below the higher of 80% of the statewide non-metro median household income or the poverty level; and (2) the project is needed to meet applicable health or sanitary standards. The intermediate rate, which is halfway between the poverty rate and the market rate, with a ceiling of 7%, applies to those projects that do not meet the requirements for the poverty rate but are located in areas where the median household income does not exceed 100% of the statewide non-metro median household income. Guaranteed loans are made to the same groups and for similar purposes except that loans are guaranteed by RUS for 80% of the loan amount or, in exceptional circumstances, 90% of the loan amount. The interest rate is negotiated between borrower and lender. Eligibility Criteria: A rural area may include an area in any city or town that has a population of not more than 10,000 residents. Applicants must be unable to obtain sufficient credit elsewhere at reasonable rates to finance actual needs. Funding: Loan authorization level for direct loans in FY2003: $779.1 million (includes emergency supplemental funding); FY2004: $1.032 billion; FY2005: $1.0 billion (est.). Loan subsidies for direct loans in FY2003: $88.3 million (includes emergency supplemental funding); FY2004: $34.4 million; FY2005: $90.0 million (est.). Loan authorization levels for guaranteed loans in FY2003: $3.6 million; FY2004: $75.0 million; FY2005: $75 million (est.). Water and Waste Disposal Grants. Grants are made to public, quasipublic, and nonprofit associations as in the loan program. Grants are directed to projects serving the most financially needy communities. Grants are made to communities that have a median household income that falls below the higher of the poverty level or 100% of the state’s non-metro household income. Grant amounts provide higher funding levels for projects in communities that have lower income levels but they may not exceed 75% of the eligible development costs of the project. In addition, between 1% and 3% of the grant funds appropriated each year for water and waste water is available for technical assistance and training to assist communities in identifying and evaluating alternative solutions to problems related to water and waste disposal, preparing applications, and improving operation and maintenance practices at existing facilities. Statutory Authority: Section 306(a)(2) of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1926. Financing: Grants. Eligibility Criteria: Grants are made only if needed to reduce user charges to a reasonable level. For a grant of up to 70% of eligible costs, service area median household income must be below the poverty level or below 80% of the State non-metropolitan median household income, whichever is higher. CRS-29 Funding: FY2003: $622.4 million (includes emergency supplemental funding); FY2004: $544.0 million; FY2005: $346.0 million (est.). Solid Waste Management Grants. Grants made to local and regional governments and to nonprofit organizations to provide technical assistance and training for the purposes of reducing or eliminating pollution of water resources and improving management of solid waste facilities. Statutory Authority: Section 310B(b) of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1932(b). Financing: Grants. Eligibility Criteria: Assistance is available in rural areas and towns with a population of 10,000 or less. Funding: FY2003: $3.6 million; FY2004: $3.5 million; FY2005: $3.5 million (est.). Emergency and Imminent Community Water Assistance Grants. The program assists rural communities that have had a significant decline in quantity or quality of drinking water. Grants can be made in rural areas and cities or towns with a population not in excess of 10,000 and a median household income not more than 100% of a State’s non-metropolitan median household income. Grants may be made for 100% of project costs. The maximum grant is $500,000 when a significant decline in quantity or quality of water occurred within two years, or $75,000 to make emergency repairs and replacement of facilities on existing systems. Statutory Authority: Sections 306A and 306B of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1926(a)(b). Financing: Grants. Eligibility Criteria: For declared emergencies and disasters and for communities facing actual or immanent drinking water shortages. Funding: The 2002 farm bill (P.L. 107-171) sets aside not less than 3% nor more than 5% of the total appropriated water and waste water funds for emergency community water assistance. Authorizes $35 million each year in additional funding for the program, FY2003-FY2007. For FY2003 $16.7 million (includes emergency supplemental funding); FY2004: $18.1 million; FY2005: $0 (est.). Technical Assistance and Training (TAT) Grants. A percentage of the Water and Wastewater Grant Program is available each year to provide technical assistance for rural communities with a population of 10,000 or less. Grant funds may be used to assist communities and rural areas in identifying and evaluating solutions to water or wastewater problems, improving facility operation and maintenance activities, or preparing funding applications for water or wastewater treatment facility construction projects. Statutory Authority: Section 306(a) of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1989. Financing: Grants. Eligibility Criteria: Private, nonprofit organizations that have been granted tax-exempt status from the Internal Revenue Service may be eligible for grant CRS-30 funds provided they can demonstrate the ability, background, experience, legal authority, and actual capacity to provide technical assistance/training on a regional basis to small, rural communities.18 Funding: Formula funding based on the Water and Waste Water Grant appropriation for the current fiscal year. Rural Water Circuit Rider Program. The program provides on-site technical assistance for the operation of rural water systems. Objective is to bring small public water systems into compliance with state and national environmental regulations. The program complements RUS loan supervision responsibilities. RUS contracts with the National Rural Water Association (NRWA) to provide this service in each state. Statutory Authority: Section 306(a) of the Consolidated Agriculture and Rural Development Act of 1972; 7 U.S.C. 1989. Financing: RUS has a management contract with National Rural Water Association which contracts with state water associations. State water associations operate the program. Eligibility Criteria: Public water and waste water systems serving rural communities of 10,000 or less. Many states have further prioritized funding for very small communities. Funding: Circuit rider staff positions are funded out of staffing authorizations for RUS. USDA Office of Community Development The Office of Community Development (OCD) is part of the USDA rural development mission area. OCD provides support for rural development activities through USDA Rural Development’s field offices. The Office implements a range of special rural development initiatives, disseminates information about rural development strategies to rural development practitioners, and promotes communication and networking among rural development experts. OCD provides leadership and administrative oversight to two major programs: the Empowerment Zone/Enterprise Community Initiative and the Rural Economic Area Partnership Zones program. Empowerment Zone/ Enterprise Community Initiative (EZ/EC). The EZ/EC Program is a grant-making and tax-credit initiative whose objective is to revitalize low-income rural communities in a manner that attracts private sector investment. The purpose of the program is to demonstrate the value of innovative and strategic alliances between State, Federal, and local resources to improve the economic strength of rural communities. Through 3 rounds of competition, there are 18 Since 1988, the Rural Community Assistance Program (RCAP), Inc., in Leesburg, Virginia operates the Technitrain Program with grant funds under the TAT Grant Program. RCAP has operated the program since 1988. The program began with 180 communities and has expanded to around 500 communities in 47 States and Puerto Rico. CRS-31 now 10 rural EZ areas and approximately 50 rural EC communities. The average poverty rate for designated EZ areas was approximately 35% in 2000 and the average unemployment rate approximately 14%. Statutory Authority: Omnibus Budget Reconciliation Act of 1993, Title XIII, P.L.103-66; Taxpayer Relief Act of 1997, P.L.105-34; Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 1999, P.L.105-277; 42 U.S.C. 11501, et seq. Financing: Loans and grants. Eligibility Criteria: A competitive program. A community must be a designated Empowerment Zone or Enterprise Community. Funding: FY2003: $27.4 million; FY2004: $12.6 million; FY2005: $0(est). In addition to these funds, other USDA Rural Development program accounts are earmarked for EZ/EC communities. Round I Empowerment Zones/Enterprise Communities are funded over 10 years. Round II and III sites are funded predominantly through tax credits for employers within EZ/EC sites. 1. Round I EZ Sites (1994) 1. Kentucky Highlands 2. Mississippi Mid-Delta 3. Texas, Rio Grande 2. Round II EZ Sites- Authorized by Taxpayer Relief Act of 1997 (P.L.105-34) 1.Ogalala Sioux Reservation 2.Desert Communities, California 3. Southernmost, Illinois 4. Griggs-Steele, Southwest Georgia 5. Lewiston, Maine 3. Round III EZ Sites - Authorized by the Community Renewal Tax Relief Act of 2000; Consolidated Appropriations Act of 2001 1. Aroostook County, Maine 2. Middle Rio Grande (FUTURO), Texas Rural Economic Area Partnership Zones (REAP). This is a pilot program for rural revitalization. The program assists rural communities suffering from out-migration, economic crises, and geographic isolation. Designated REAP Zones receive modest technical and financial assistance from USDA as well as other federal agencies. REAP zones also receive special consideration and preferences under regular Rural Development loan and grant programs. Similar to the EZ/EC programs, REAP zones engage in community-based, long-term planning and regularly report on their progress using OCD’s performance and benchmark reporting system. In 1995, two zones in North Dakota were initially designated to participate in the REAP initiative. Subsequently, two areas in upstate New York were added in 1999. In 2000, a rural area in Vermont was designated as the fifth REAP Zone. Statutory Authority: Presidential Memorandum dated August 5, 1993; variously dated Memoranda of Agreement; Agriculture, Rural Development, CRS-32 Food and Drug Administration, and Related Agencies Appropriations Act of 2001 (P.L. 106-387). Financing: Priority is given Zone applications submitted for funding through the various programs administered by RUS, RHS, and RBS. Eligibility Criteria: Designation by the Secretary as a REAP Zone. Funding: FY2003: $10.2; FY2004: $10.6; FY2005: $0 (est.). (These figures are approximate. Appropriators make earmarks for the REAP program along with earmarks for the EZ/EC program). Earmarks to other annual USDA appropriations also provide funding in addition to the line item. National Rural Development Partnership. The National Rural Development Partnership (NRDP) was authorized by the 2002 farm bill. The NRDP coordinates the efforts of public, private, and nonprofit groups interested in rural development issues. State Rural Development Councils, which exist in 36 states, are the major operative agents within the Partnership. The Partnership also includes the National Partnership Office which is housed in USDA and a National Rural Development Council. The latter consists of senior program managers from 40 federal agencies involved with rural development activities and national representatives of public interest and private sector organizations. Statutory Authority: Farm Security and Rural Investment Act of 2002 (Section 6201). Financing: State rural development offices provide matching funding to support partnership activities with State Rural Development Partnership Councils. Eligibility Criteria: State Rural Development Partnership Councils are composed of broadly representative pubic and private organizations. Funding: The 2002 farm bill (P.L. 107-171) authorized $10 million in each fiscal year FY2002-2007. No appropriations recommended/requested for FY2003-2005, although the Appropriators in FY2003-2004 encouraged the Secretary to support the NRDP through existing program funding.