An Overview of USDA Rural Development
Programs
Tadlock Cowan
Analyst in Natural Resources and Rural Development
February 18, 2014
Congressional Research Service
7-5700
www.crs.gov
RL31837
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 also
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
Under Secretary for Rural Development and consolidated the rural development portfolio into
four principal agencies responsible for USDA’s mission area: the Rural Housing Service, the
Rural Business-Cooperative Service, the Rural Utilities Service, and the Office of Community
Development.
The Agricultural Act of 2014 (P.L. 113-79), the most recent farm bill, was enacted on February 7,
2014. Among other changes, the law consolidates several business loan and grant programs into a
single business support platform. The law allows prioritization of rural development projects that
support strategic economic and community development. The new law provides $150 million in
mandatory spending for backlogged rural development loans and grants, and $63 million in
mandatory spending for the Value-Added Product Grants program. Most existing programs
authorized by the Consolidated Farm and Rural Development Act and the Rural Electrification
Act were reauthorized. The Access to Broadband Telecommunication Services in Rural Areas
Program was reauthorized, and establishes new procedures to compare applications and set
funding priorities. Additionally, a new Gigabit Network Pilot Program for high-speed broadband
service was authorized at $10 million for each fiscal year FY2014-FY2018. The bill also
authorizes a new Rural Energy Savings Program to fund loans to qualified consumers to
implement energy efficiency measures. A new provision directs USDA to begin collecting data on
the economic activities it funds to assess the short- and long-term viability of award recipients.
This report provides an overview of the various programs administered by USDA Rural
Development’s mission agencies, their authorizing legislation, program objectives, eligibility
criteria, and FY2005-FY2014 funding for each program. The report will be updated as new
USDA Rural Development programs are implemented or amended.
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Contents
U.S. Rural Policy: Background........................................................................................................ 1
Major Authorizing Legislation for USDA Rural Development Programs ....................................... 2
Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.) ........................................................... 3
Consolidated Farm and Rural Development Act of 1972 (Title V, 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
Food, Conservation, and Energy Act of 2008 (P.L. 110-246) .................................................... 6
The Agricultural Act of 2014 ..................................................................................................... 7
American Recovery and Reinvestment Act of 2009 (P.L. 111-5) .............................................. 8
USDA Mission Agencies ................................................................................................................. 8
USDA Rural Housing Service (RHS) .............................................................................................. 9
Rural Housing Issues: Background ........................................................................................... 9
Housing Act of 1949 (P.L. 81-171) (42 U.S.C. 1441 et seq.) .............................................. 9
The Housing and Urban Development Act of 1968 (P.L. 90-448) (42 U.S.C.
1441a) (82 Stat. 476) ...................................................................................................... 10
Rural Housing Amendments of 1983 (P.L. 98-181) (42 U.S.C. 1490k to 1490o)............. 10
Rural Housing Service Programs ............................................................................................ 10
Section 502 Single Family Housing Direct Loan Program ............................................... 11
Section 502 Guaranteed Single Family Housing Purchase and Refinance Loans ............ 12
Section 504 Very Low-Income Rural Housing Repair Loan and Housing
Assistance Grants Program ............................................................................................ 12
Section 514 and 516 Farm Labor Housing Program Loan and Grant Program ................ 13
Section 523 Mutual and Self-Help Grant Program ........................................................... 13
Section 523 Rural Housing Site Loan Program ................................................................ 14
Section 524 Rural Housing Site Loan Program ................................................................ 14
Section 533 Housing Preservation Grant Program ............................................................ 15
Section 515 Rural Rental Housing Direct Loans .............................................................. 15
Section 538 Multi-Family Housing Guaranteed Loan Program ........................................ 16
Section 521 Rental Assistance Grant Program .................................................................. 16
Housing Demonstration Program ...................................................................................... 17
Rural Community Facilities Program Account ....................................................................... 17
Community Facility Direct and Guaranteed Loans ........................................................... 17
Community Facility Grants ............................................................................................... 18
Rural Community Development Initiative Grants ............................................................ 18
USDA Rural Business-Cooperative Service (RBS) ....................................................................... 19
Rural Intermediary Relending Program (Also known as the Rural Development
Loan Program) ............................................................................................................... 19
Rural Economic Development Loans................................................................................ 20
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Rural Economic Development Grants ............................................................................... 20
Rural Cooperative Development Grants ........................................................................... 21
Appropriate Technology Transfer for Rural Areas (ATTRA) Program ............................. 22
Value-Added Agricultural Product Grants ........................................................................ 22
Rural Business Investment Program ................................................................................. 23
Rural Energy for America Loan and Grants (formerly the Renewable Energy
Loan and Grant Program) ............................................................................................... 23
Rural Microentrepreneur Assistance Program .................................................................. 24
Locally or Regionally Produced Agricultural Food Products ........................................... 24
Rural Business Program Account ............................................................................................ 25
Business and Industry (B&I) Direct and Guaranteed Loans ............................................. 25
Rural Business Opportunity Grants ................................................................................... 26
Rural Business Enterprise Grants ...................................................................................... 26
Delta Regional Authority .................................................................................................. 27
USDA Rural Utilities Service (RUS) ............................................................................................. 27
Electrification Loan Program ............................................................................................ 27
Telecommunications Loans ............................................................................................... 28
Distance Learning and Telemedicine Grants ..................................................................... 29
Rural Telephone Bank ....................................................................................................... 29
Broadband Loans and Grants ............................................................................................ 29
Enhancement of Access to Broadband Service in Rural Areas ......................................... 30
Rural Water and Waste Disposal Program Account................................................................. 31
Water and Waste Disposal Direct and Guaranteed Loans ................................................. 31
Water and Waste Disposal Grants ..................................................................................... 32
Solid Waste Management Grants ...................................................................................... 32
Emergency and Imminent Community Water Assistance Grants ...................................... 33
Water and Well System Grants .......................................................................................... 33
Technical Assistance and Training (TAT) Grants .............................................................. 34
Rural Water Circuit Rider Program ................................................................................... 34
High Energy Cost Grants .................................................................................................. 35
USDA Office of Community Development ................................................................................... 35
Empowerment Zone/ Enterprise Community Initiative (EZ/EC) ..................................... 35
Rural Economic Area Partnership Zones (REAP) ............................................................ 37
National Rural Development Partnership.......................................................................... 37
New Regional Development Commissions ................................................................................... 38
Contacts
Author Contact Information........................................................................................................... 39
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U.S. Rural Policy: Background
When the effects of the 1929 Depression began to be felt by the rest of the nation, rural residents
had been struggling for several years with low incomes and low standards of living. The Federal
Emergency Relief Administration began aiding rural families in 1932. Later, the Farm Security
Administration and the Work Projects Administration provided much needed assistance to rural
families and farm households.
In the post-World War II era, widespread rural poverty, most notably among farmers, continued to
dominate rural policy concerns. The Eisenhower Administration’s Under Secretary 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. With the continued decline in
agriculture 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 physical infrastructure development remain key foci of federal rural
policy.
The rural population has declined over the past decade. According to the U.S. Census, as of July
2012, approximately 46.2 million people (14.6% of the U.S. population) lived in rural areas,
down from approximately 16% in 2000. While rural farming and mining counties have long
experienced dwindling populations, more recently rural retirement and recreation areas have also
seen declines as the baby-boomer generation increasingly opts for urban areas in retirement.1
Manufacturing now accounts for about 22% of rural private sector earnings and about 11% of all
rural jobs. The service sector, as with the U.S. domestic economy as a whole, however, dominates
rural job opportunities. Although over 90% of total farm household income now comes from off-
farm sources, farming, and agriculture more generally, remain the major legislative focus for
much of congressional debate on rural policy. Since 1973, omnibus farm bills have included a
rural development title. The most recently passed is Title VI of the Food, Conservation, and
Energy Act of 2008 (P.L. 110-246).2 Agriculture and manufacturing issues are increasingly seen
as part of global and regional restructuring issues, which have significant implications for rural
areas, especially those areas where these production sectors remain dominant. How to position
rural areas to better compete in a global environment is a key issue framing debates about the
future of rural America.
Omnibus farm bills are the major modern legislative vehicle for addressing many rural
development issues.3 While other legislation has significant implications for rural areas and rural
1 Data from the 2012 Census show that Florida had the highest share of residents 65 and older (18.2%), followed by
Maine and West Virginia. Alaska had the lowest share of older residents (8.5%), followed by Utah and Texas.
2 For details, see CRS Report RL34126, Rural Development Provisions of the 2008 Farm Bill, by Tadlock Cowan.
3 By virtue of specific geographic targets, legislation authorizing the Appalachian Regional Commission, the
Mississippi Delta Region, the Great Plains Region, and the Tennessee Valley Authority has also had a significant
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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 mission agencies. While the extent of overlap between federal agencies and
programs targeting rural areas has been of concern to some rural policy observers, legislation
enacted since 1990 reflects an effort to address rural issues more comprehensively.4
Major 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).5 An Office of Community Development provides further community development
support through USDA Rural Development’s state offices.
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
1961.6
In addition to periodic omnibus farm bills, new rural development legislation generally amends
three major authorizing statutes: (1) the Consolidated Farm and Rural Development Act of 1972
(P.L. 92-419);7 (2) the Food, Agriculture, Conservation, and Trade Act of 1990 (P.L. 101-624);
and the Rural Electrification Act of 1936. To illustrate the range of congressional legislative
activity targeting rural areas, a brief description and overview of key sections of the basic
statutory authorities for rural development programs are provided below.
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impact on rural development issues in these areas.
4 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 America and Its Economic
Development, GAO/RCED-89-56-BR, January 1989.
5 While the 1994 Act reorganized the administering agencies, the programs themselves predate the reorganization.
6 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 remains a significant economic focus.
7 Title III of the Consolidated Farmers Home Administration Act of 1961 was the original short title of this act, but the
short title was re-designated in the 1972 act and is classified principally as Title 7 U.S.C. Chapter 50, 1921 et seq.
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Rural Electrification Act of 1936 (7 U.S.C. 901 et seq.)
The act established the Rural Electrification Administration (REA) 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 tax-exempt
entities owned by the cooperative membership. 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. The Rural Utilities Service
(RUS) is now the agency administering rural electric programs that were previously overseen by
the REA. The REA was eliminated in the 1994 USDA reorganization (see below) and replaced by
the RUS.
Consolidated Farm and Rural Development Act of 1972 (Title V,
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.)
The legislation was originally enacted as the Consolidated Farmers Home Administration Act of
1961. In 1972, Title V was changed to the Consolidated Farm and Rural Development Act, and is
often referred to as the ConAct. The ConAct, as amended, currently serves as the authorizing
statute for most USDA rural development lending and grant programs. 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
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with the House Agriculture Committee over establishing the RDA. The newly formed RDA
absorbed all non-farm FmHA functions. Important provisions included
• 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 rural 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 authorized the first rural Empowerment Zones and Enterprise Communities (EZ/ECs).
The EZ/EC program was 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 administers 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
additional rural EZs. Although tax incentives for EZ Communities were extended through
December 31, 2013, by P.L. 112-240, the rural EC program expired on December 2009, per P.L.
111-20. This means that all rural ECs designations expired on December 31, 2009. Currently,
USDA Rural Development is not authorized to designate any new Empowerment Zones or
Enterprise Communities.
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 Business-Cooperative Service
(cooperatives, Business and Industry loans), and the Rural Utilities Service (electric,
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telecommunications, water).8 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. 104-127)
This act is 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 of 1972 to increase
the grant amounts 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 those
cities, towns, or unincorporated areas with populations of no more than 10,000
residents.
• 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 existing 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 is the 2002 farm bill. Title VI, in addition to providing funds for various existing rural loan
and grant programs, also authorized several new rural development initiatives. Major new
initiatives included provisions funded through direct (mandatory) spending. Historically,
mandatory funding for rural development initiatives had not been authorized. Mandatory
programs do not require annual appropriations. Spending for these programs is made available
through the Commodity Credit Corporation. For FY2002-FY2007, new mandatory programs
included
• The Rural Strategic Investment Fund established a National Board on Rural
America that would provide $100 million in planning grants to certified Regional
Investment Boards.
• The Rural Business Investment Program provided $100 million in loan
guarantees and subsidies to form Rural Business Investment corporations that
would make equity investments to small firms. The program would be
administered through the Small Business Administration.
8 USDA Rural Development (RUS, RBS, RHS) assumed administration of the former Farmers Home Administration’s
non-farm functions.
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• Enhanced Access to Broadband Service to Rural Areas provided $10 million-$20
million per year, FY2002-FY2007, in grants and loans.
• Rural Local Television Broadcast Signal Loan Guarantees authorized $80 million
under the Launching Our Communities’ Access to Local Television Act of 2000.
• Value-added Agricultural Product Market Development Grants provided $40
million per year, FY2002-FY2007, to independent producers and producer-
owned enterprises. There was also a 5% set-aside for organic production. $15
million of this funding was 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 authorized a one-time
funding of pending water and waste water applications of $360 million.
• Rural Firefighters and Emergency Personnel Grant Program provided $10 million
per year, FY2003-FY2007 funding to train emergency response personnel.
Appropriators blocked most of the mandatory funding for several of these programs between
FY2004 and FY2007. Other mandatory programs were funded through authorized discretionary
appropriations, although not always in the same amounts as authorized. These provisions expired
in 2007, although the 2008 farm bill (P.L. 110-246) reauthorized several of these programs and
funded them through annual appropriations rather than mandatory spending.
Food, Conservation, and Energy Act of 2008 (P.L. 110-246)
This is the most recent omnibus farm bill, enacted in June 2008. The bill expired in September
2012 and was extended through December 2013 at current funding levels by the American
Taxpayer Relief Act of 2012 (P.L. 112-240). Title VI of this farm bill expanded broadband access
in rural areas, created a new micro-entrepreneurial assistance program and a new rural
collaborative investment program, and authorized three new regional economic development
authorities. The bill also authorized $120 million for a one-time funding of pending water and
wastewater infrastructure projects.
Several programs authorized with mandatory spending in the 2002 farm bill were reauthorized
with discretionary funding in the farm bill (Rural Firefighters and Emergency Personnel, Rural
Business Investment Program, and Access to Broadband Services in Rural Areas). The Value-
Added Product Grants Program, similarly authorized in the 2002 farm bill, was also reauthorized
by P.L. 110-246 with $15 million of annual mandatory funding and $40 million of annual
discretionary funding.
The 2008 farm bill also modified the 2002 definition of “rural” to include “areas rural in
character.” This latter designation gives the Under Secretary for Rural Development discretion to
make eligible certain rural areas that otherwise might be excluded from eligibility for USDA
loans and grants. The section also made special designations for San Juan, Puerto Rico, and
Honolulu, Hawaii. The provision also modified the definition of “rural” to establish criteria for
defining rural areas that are contiguous to urban areas. Other new provisions in the rural
development title included the following programs:
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• loans and loan guarantees for locally or regionally produced agricultural food
products supported by a 5% carve out from the Business and Industry Guaranteed
Loan program;
• a Rural Microentrepreneur Assistance Program to target economically
disadvantaged microentrepreneurs (i.e., those who could compete in the private
sector but have been impaired because of lack of credit opportunities and limited
equity capital options);
• a Rural Collaborative Business Investment Program to increase the availability of
equity capital in rural areas; the provision authorizes Regional Investment
Strategy Grants, Rural Innovation Grants, and a Rural Endowment Loan
Program; and
• three new regional economic development commissions: (1) Northern Border
Regional Commission, (2) Southeast Crescent Regional Commission, and (3)
Southwest Border Regional Commission.
In addition to these newly authorized programs, the rural development title also included other
provisions to create or to reauthorize and/or amend a wide variety of loan and grant programs that
provide further assistance in four key areas: (1) broadband and telecommunications, (2) rural
utilities infrastructure, (3) business and community development, and (4) regional development.9
The Agricultural Act of 2014
The 2008 farm bill expired in 2012, but the 112th Congress did not complete action and instead
extended the law for one year (P.L. 112-240). On February 7, 2014, the President signed into law
the most recent farm bill, the Agricultural Act of 2014 (P.L. 113-79).
The Rural Development title of the 2014 farm bill reauthorized most existing rural development
programs. The bill amended the water and waste water direct and guaranteed loan programs to
encourage financing by private or cooperative lenders to the maximum extent possible. The law
also provided a 3%-5% carve-out of the Community Facilities appropriation for technical
assistance, and also encouraged the use of loan guarantees where possible. The law also included
a new provision directing the Secretary of Agriculture to begin collecting data on the economic
effects of the projects that USDA Rural Development funds to assess their long- and short-term
viability, and directed the Secretary to develop simplified applications for funding.
The Agricultural Act of 2014 eliminated several business programs, but consolidated many of
their objectives into a broader program of Business and Cooperative Development grants. The
law provided $150 million in mandatory spending for pending rural development loans and
grants, and $63 million in mandatory spending for the Value-Added Product Grants program.
The law retained the 2008 farm bill provision permitting communities that might otherwise be
ineligible for USDA funding to petition USDA to designate their communities as “rural in
character,” thereby making them eligible for program support. The law also amended the
definition of rural area in the 1949 Housing Act so that areas deemed rural between 2000 and
9 For more detail on rural development provisions in the new farm bill, see CRS Report RL34126, Rural Development
Provisions of the 2008 Farm Bill, by Tadlock Cowan.
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2010 would retain that designation until USDA receives data from the 2020 decennial census.
The provision also raised the population threshold for eligibility from 25,000 to 35,000.
The law also reauthorized funding for programs under the Rural Electrification Act of 1936,
including the Access to Broadband Telecommunications Services in Rural Areas Program and the
Distance Learning and Telemedicine Program. For Access to Broadband Telecommunication
Services in Rural Areas, the law also established new procedures to compare applications and to
set funding priorities. Additionally, a new Gigabit Network Pilot Program for high-speed
broadband service was authorized at $10 million for each fiscal year FY2014-FY2018. The law
also authorized a new Rural Energy Savings Program to fund loans to qualified consumers to
implement energy efficiency measures.
American Recovery and Reinvestment Act of 2009 (P.L. 111-5)
The American Recovery and Reinvestment Act of 2009 (ARRA) authorized $4.36 billion in
supplemental budget authority over two years (FY2009-FY2010) for various rural development
loan and grant programs. With the exception of the broadband program and some modification to
the Business and Industry Guaranteed loan program, the programs are administered under
existing regulations. The programs include Section 502 housing loans, Business and Industry
guaranteed loans, Rural Business enterprise grants, broadband infrastructure loans and grants, and
community facility loan and grants. The appropriation supported a total program level (direct and
guaranteed loans and grants) of $24.37 billion. These basically two-year amounts represented a
sizeable increase compared to a regular annual appropriation of about $2.5 billion for all USDA
Rural Development loan and grant programs and regular annual loan and grant program levels of
about $16 billion.
ARRA provided $2.5 billion for rural broadband development. Rural broadband and rural water
projects accounted for 89% of the total budget authority and 36% of the program level for rural
development programs in the ARRA.10 Rural housing accounted for almost half of the total
program level.11
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 FY2005-FY2011 funding levels are provided. An overview of
the programs administered by USDA’s Office of Community Development is also provided.
10 See CRS Report R40436, Broadband Infrastructure Programs in the American Recovery and Reinvestment Act, by
Lennard G. Kruger.
11 For more detail on the programs, see CRS Report R40160, Agriculture, Nutrition, and Rural Provisions in the
American Recovery and Reinvestment Act (ARRA) of 2009, coordinated by Jim Monke.
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USDA Rural Housing Service (RHS)
Rural Housing Issues: Background
Key characteristics of rural housing needs are suggested by the following:
• Rural areas have a disproportionate share of the nation’s substandard housing.
• There is a high incidence of poverty in rural America.
• There is an inadequate supply of affordable rural housing to meet demand in
many rural areas.
• Mobile homes are increasingly pervasive in many 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
residential 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.12
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 1955.13 While the provisions of these titles were
strongly influenced by cities and their immediately adjacent suburban areas, the Housing Act also
recognized the shortages and low-quality housing that characterized much of rural America.
12 National Rural Housing Coalition. Recommendations to the Commission on Affordable and Healthy Facility Needs
for Seniors in the 21st Century, October 2001.
13 This goal, however, was not achieved until the early 1970s.
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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
rental 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 for home purchases, repair, and rental housing
development.
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 (now Rural
Housing Service) 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.
Rural Housing Service Programs
The following programs are authorized by the Housing Act of 1949 (as amended) and include
programs for individual homeownership and rental housing. The programs 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 to a borrower. Loan authorization refers to the total amount of loan
indebtedness that Congress permits a particular program to assume.
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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 levels for individual grants, loan subsidies, and total levels of loan
authorization are established in annual appropriations legislation.14
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) are 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 (50%-80% of median family income). Housing
must be modest in size, design, and cost.15
Funding: Enacted loan authorization in FY2005: $1.14 billion; FY2006: $1.13 billion; FY2007:
$1.13 billion; FY2008: $1.12 billion; FY2009: $1.1 billion; FY2010: $1.1 billion; FY2011: $1.1
billion; FY2012: $900 million; FY2013: $840.1 million; FY2014: $900.0 million. Loan subsidies
(budget authority) FY2005: $132.1 million; FY2006: $128.6 million; FY2007: $113.3 million;
FY2008: $105.1 million; FY2009: $75.4 million; FY2010: $40.7 million; FY2011: $70.1 million;
FY2012: $45.6 million; FY2013: $50.1 million; FY2014: $24.5 million.
14 For more detail on rural housing, see CRS Report RL33421, USDA Rural Housing Programs: An Overview, by
Bruce E. Foote.
15 Modest housing is generally defined as housing costing less than the HUD Section 203(b) loan limits.
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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.
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: Enacted loan authorization in FY2005: $3.28 billion; FY2006: $3.64 billion; FY2007:
$3.64 billion; FY2008: $4.19 billion; FY2009: $6.2 billion; FY2010: $12.0 billion; FY2011:
$24.0 billion; FY2012: $24.0 billion; FY2013: $24.0 billion. Loan subsidies (budget authority) in
FY2005: $33.3 million; FY2006: $40.5 million; FY2007: $42.6 million; FY2008: $50.0 million.
FY2009: $79.0 million; FY2010: $172.8 million; FY2011: $0; FY2012: $0;16 FY2013: $0;
FY2014: $0.
Section 504 Very Low-Income Rural Housing Repair Loan and Housing
Assistance Grants 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. Grants may be made to cover the costs of such improvements as
repairing roofs, providing toilet facilities, providing a convenient and sanitary water supply, and
installation costs in obtaining central water and sewer service.
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. Loan and grant assistance cannot exceed $27,000 to an individual.
Funding: Enacted loan authorization in FY2005: $36.7 million (includes emergency
supplemental); FY2006: $68.8 million (includes emergency supplemental); FY2007: $34.6
million; FY2008: $34.4 million; FY2009: $34.4 million; FY2010: $34.4 million; FY2011: $23.4
million; FY2012: $10.0 million; FY2013: $26.1 million; FY2014: $26.3 million. Loan subsidies
(budget authority) in FY2005: $10.6 million (includes emergency supplemental); FY2006: $20.1
16 Beginning in FY2011, the Section 502 guaranteed loan program became self-funding, i.e., no subsidies (budget
authority) are required to support the loan authorization level.
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million (includes emergency supplemental); FY2007: $10.2 million; FY2008: $9.7 million;
FY2009: $9.2million; FY2010: $4.4 million; FY2011: $4.4 million; FY2012: $1.4 million.
Housing Assistance Grants in FY2005: $37.4 million (includes emergency supplemental);
FY2006: $49.6 million (includes emergency supplemental); FY2007: $29.7 million; FY2008:
$38.7 million; FY2009: $41.5 million; FY2010: $45.5 million; FY2011: $40.3 million; FY2012:
$33.1 million; FY2013: $3.6 million; FY2014: $2.2 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.17 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.
Eligibility Criteria: Farm workers 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 FY2005: $32.9 million ($15.5 million in subsidies) and $30.3
million in grants; FY2006: $38.1 million ($17.0 million in loan subsidies) and $13.9 million in
grants; FY2007: $38.1 million ($18.3 million in loan subsidies) and $13.9 million in grants;
FY2008: $27.5 million ($11.9 million in loan subsidies) and $9.9 million in grants; FY2009:
$21.7 million ($9.1 million in loan subsidies) and $9.1 million in grants; FY2010: $27.3 million
($9.9 million in subsidies) and $9.9 million in grants; FY2011: $25.7 million ($9.8 million in
subsidies) and $9.8 million in grants; FY2012: $27.3 million ($7.1 million in subsidies) and $7.1
million in grants; FY2013: $21.4 million ($7.1 million in subsides) and $8.3 million in grants;
FY2014: $23.8 million ($5.6 million in subsidies) and $8.3 million in grants.
Section 523 Mutual and 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.
17 Unlike other RHS programs, the funding for the Farm Labor Housing Program may be used in for housing
development urban areas to house nearby farm labor.
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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 FY2005: $34.0 million; FY2006: $ 32.3 million; FY2007: $33.9 million;
FY2008: $38.7 million; FY2009: $38.7 million; FY2010: $41.9 million; FY2011: $36.9 million;
FY2012: $30.0 million; FY2013: $27.7 million; FY2014: $25.0 million.
Section 523 Rural Housing Site Loan Program
This program provides funds to nonprofit organizations to develop building sites for low and
moderate-income 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 FY2005: $2.3 million; FY2006: $5.0 million; FY2007: $5.0
million; FY2008: $5.0 million; FY2013: $10.0 million; FY2014: $5.0 million. Subsidy levels
(budget authority) FY2005: $0; FY2006: $51,000; FY2007: $123,000; FY2008: $141,000;
FY2009: $82,000; FY2010: $0; FY2011: $288,000; FY2012: $0; FY2013: $0; FY2014: $0.
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 self-help
participant.
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 FY2005: $450,000; FY2006: $5.0 million; FY2007: $5.0
million; FY2008: $5.0 million; FY2009: $5.0 million; FY2010: $5.0 million; FY2011: $5.0
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million; FY2012: $0; FY2013: $0; FY2014: $5.0 million. Loan subsidies (budget authority) in
FY2005: $0; FY2006: $0; FY2007: $0; FY2008: $0; FY2009: $0; FY2010: $0; FY2011
$293,000; FY2012: $0; FY2013: $0; FY2014: $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 (amended by Section 522
of the Housing and Urban-Rural Recovery Act of 1983); 42 U.S.C., Chapter 8A, Subchapter III,
1490m.
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. Assistance is limited to $15,000 per unit.
Funding: FY2005: $8.8 million; FY2006: $9.9 million; FY2007: $9.9 million; FY2008: $9.7
million; FY2009: $10.1 million; FY2010: $9.4 million; FY2011: $8.6 million; FY2012: $7.4
million; FY2013: $3.3 million; FY2014: $0.
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 FY2005: $99.2 million; FY2006: $99.0 million; FY2007: $99.9
million; FY2008: $68.2 million; FY2009: $67.7 million; FY2010: $69.5 million; FY2011: $69.5
million; FY2012: $64.5 million; FY2013: $29.2 million; FY2014: $28.4 million. Loan subsidies
(budget authority) for FY2005: $46.7 million; FY2006: $45.4 million; FY2007: $45.2 million;
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FY2008: $29.0 million; FY2009: $27.8 million; FY2010: $18.9 million; FY2011: $23.4 million;
FY2012: $22.0 million; FY2013: $10.3 million; FY2014: $6.6 million.
Section 538 Multi-Family Housing 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 FY2005: $97.2 million; FY2006: $99.0 million; FY2007: $99.0
million; FY2008: $129.0 million; FY2009: $120.8 million; FY2010: $129.1 million; FY2011:
$31.0 million; FY2012: $130.0 million; FY2013: $150.0 million; FY2014: $150.0 million. Loan
subsides (budget authority) for FY2005: $3.4 million; FY2006: $5.4 million; FY2007: $7.6
million; FY2008: $12.1 million; FY2009: $8.1 million; FY2010: $1.5 million; FY2011: $3
million; FY2012: $0; FY2013: $0; FY2014: $0.
Section 521 Rental Assistance Grant 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: FY2005: $587.3 million; FY2006: $646.6 million; FY2007: $608.1 million; FY2008:
$478.7 million; FY2009: $902.5 million; FY2010: $968.6 million; FY2011: $953.7 million;
FY2012: $904.6 million; FY2013: $834.3 million; FY2014: $1.1 billion. (Rental assistance
funding also includes rental assistance under the Section 502 (c)(5)(D) program, Section 515, and
farm labor housing new construction).
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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 low- income 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.
Funding: Program funding is reserved through other RHS programs listed above.
Rural Community Facilities Program Account
The Community Facilities loan and grant program, administered by RHS, supports essential
community facilities in rural areas with a population of 20,000 or less. Essential facilities include
fire stations, community centers, child care centers, and medical clinics, among other uses.
Funding is allocated to state rural development offices, where state directors set priorities
particular to their state’s rural needs.
Community Facility Direct and Guaranteed Loans
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 Farm and Rural Development Act of
1972.
Financing: Direct and guaranteed loans.
Eligibility Criteria: Priority is for loans to build essential community facilities that support
public health and safety. The highest priority goes to projects located in communities with a
population of 5,000 or less and to projects serving communities with median household incomes
below the higher of the poverty line or 60% of the state non-metropolitan median household
income. Healthcare, public safety, or public and community services are priority areas.
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Funding: Loan authorization levels for direct loans in FY2005: $729.3 million (includes
hurricane emergency supplemental funding); FY2006: $297.0 million; FY2007: $297.0 million;
FY2008: $294.9 million; FY2009: $294.9 million; FY2010: $294.9 million; FY2011: $290.5
million; FY2012: $1.3 billion; FY2013: $82.2 million; FY2014: $1.5 billion. Subsidy levels for
direct loans in FY2005: $29.5 million; FY2006: $9.9 million; FY2007: $19.0 million; FY2008:
$16.4 million; FY2009: $16.8 million; FY2010: $3.8 million; FY2011: $3.8 million; FY2012: $0;
FY2013: $0; FY2014: $0. Loan authorization levels for guaranteed loans in FY2005: $194.9
million; FY2006: $207.9 million; FY2007: $207.9 million; FY2008: $206.4 million; FY2009:
$206.4 million; FY2010: $206.4 million; FY2011: $167.7 million; FY2012: $105.7 million;
FY2013: $53.3 million;. FY2014: $59.5 million; Subsidy levels for guaranteed loans in FY2005:
$6.8 million; FY2006: $7.6 million; FY2007: $7.6 million; FY2008: $7.6 million; FY2009: $6.4
million; FY2010: $6.6 million; FY2011: $6.6 million; FY2012: $5.0 million; FY2013: $3.6
million; FY2014: $3.8 million.
Community Facility Grants
In most cases, these grants are used in conjunction with the direct loan program to make essential
community facilities available 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 Farm 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, and 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. The Community Facilities Grant
Program is typically used to fund projects under special initiatives, such as Native American
community development efforts; child care centers linked with the federal government’s Welfare-
to-Work initiative; Economic Impact Initiative Grants, federally designated Enterprise and
Champion Communities, and the Northwest Economic Adjustment Initiative.
Funding: FY2005: $24.5 million (includes hurricane emergency supplemental funding);
FY2006: $16.8 million; FY2007: $16.8 million; FY2008: $20.4 million; FY2009: $20.4 million;
FY2010: $20.4 million; FY2011: $15.0 million; FY2012: $11.4 million. Additional grant funds
are earmarked in the Community Facilities Account for Economic Impact Initiative Grants
targeted to communities suffering economic hardship and population out-migration: FY2005:
$19.7 million; FY2006: $17.8 million; FY2007: $17.8 million; FY2008: $20.4 million; FY2009:
$10.0 million; FY2010: $13.9 million; FY2011: $7.0 million; FY2012: $6.0 million; FY2013:
$12.1 million; FY2014: $13.0 million.
Rural Community Development Initiative Grants
A program authorized in FY2002. The program provides grants for capacity-building among
private, nonprofit community development organizations and low-income rural communities in
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the areas of housing, community facilities, and community and economic development. Funds are
available to qualified intermediaries that can be public or private organizations (including tribal
organizations) that have been legally organized for at least three years and have experience
working with eligible recipients.
Statutory Authority: Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Appropriations Act, 2001 (P.L. 106-387; 7 U.S.C. 1932).
Financing: Competitive grants. Requires dollar for dollar 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: FY2005: $3.9 million; FY2006: $6.3 million; FY2007: $6.3 million; FY2008: $6.3
million; FY2009: $6.3 million; FY2010: $6.3 million; FY2011: $5 million; FY2012: $3.6 million;
FY2013: $5.7 million; FY2014: $6.0 million.
USDA Rural Business-Cooperative Service (RBS)
Creating, expanding, and retaining employment in rural areas have been central concerns 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 sectors
declined. Abundant and largely non-unionized 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. Low-skilled,
peripheral manufacturing facilities have left many U.S. rural areas. Even employers in more
advanced manufacturing production have moved from rural U.S. areas to offshore employment.
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.18 Other RBS programs provide
specialized technical and marketing assistance. Several programs authorized in the 2002 farm bill
(P.L. 107-171) and in the 2008 farm bill addressed the new needs of rural businesses, especially
in capital formation.
Rural Intermediary Relending Program (Also known as the Rural
Development Loan Program)
These direct loans are made to private nonprofit corporations, state or local government agencies,
Indian tribes, and cooperatives that, in turn, capitalize a revolving loan program and lend the
18 Other RBS-administered programs within the Rural Community Advancement Program are discussed in a later
section.
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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 to capitalize a revolving loan program that
provides 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 FY2005: $33.9 million; FY2006: $33.9 million; FY2007: $33.9
million; FY2008: $33.0 million; FY2009: $33.5 million; FY2010: $33.5 million; FY2011: $19.2
million; FY2012: $17.7 million; FY2013: $17.4 million; FY2014: $18.9 million. Loan subsidies
(budget authority) for FY2005: $15.7 million; FY2006: $14.5 million; FY2007: $14.9 million;
FY2008: $14.5 million; FY2009: $14.4 million; FY2010: $8.5 million; FY2011: $7.4 million;
FY2012: $6.0 million; FY2013: $5.6 million; FY2014: $4.1 million.
Rural Economic Development Loans
This program provides zero-interest loans for RUS borrowers who then re-lend the funds at zero
interest to rural businesses. Budget authority for the loans does not come from annual
appropriations, but from a “cushion-of-credit” account in the U.S. Treasury. RUS borrowers
forward pay on their loans into the Treasury account, which earns a 5% annual interest rate.
Appropriators authorize a level of loans that can be made, and the requisite budget authority to
leverage that amount of loans comes from the interest earned on the cushion-of-credit account.
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 FY2005: $24.3 million; FY2006: $24.7 million; FY2007: $24.7
million; FY2008: $33.1 million; FY2009: $33.1 million; FY2010: $33.1 million; FY2011: $33.1
million; FY2012: $33.1 million; FY2013: $33.1 million; FY2014: $33.1 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
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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: FY2005: $8.1 million; FY2006: $10.0 million; FY2007: $0; FY2008: $10.0 million;
FY2009: $10.0 million; FY2010: $10.0 million; FY2011: $10.0 million; FY2012: $10.0 million;
FY2013: $10.0 million; FY2014: $0.
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.
Grants are also made to assist small minority producers. The 2008 farm bill (Section 6013)
reserves 20% of the appropriated funding (if the total appropriation exceeds $7.5 million) for
cooperative development centers, individual cooperatives, or groups of cooperatives that serve
socially disadvantaged groups.
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. The program was amended in the 2008 farm bill
(Section 6013 of P.L. 110-246).
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.
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Funding: FY2005: $7.0 million; FY2006: $4.4 million; FY2007: $3.7 million; FY2008: $4.4
million; FY2098: $4.4 million; FY2010: $7.9 million; FY2011: $7.9 million; FY2012: $5.8
million; FY2013: $6.5 million; FY2014: $5.8 million.
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, AR, 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 FY2005: $2.5 million; FY2006: $2.5 million; FY2007: $936,000; FY2008: $2.6
million; FY2009: $2.6 million; FY2010: $2.8 million; FY2011: $0; FY2012: $2.2 million;
FY2013: $2.1 million; FY2014: $2.2 million.
Value-Added Agricultural Product Grants
The program provides grants to assist farmers and ranchers in creating greater value for
agricultural commodities. The 2002 farm bill makes mandatory funding for this program through
FY2007. A portion of the funds 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.
The program was reauthorized through 2012 in the 2008 farm bill (P.L. 110-246).
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. 107-171).
Financing: Competitive grants.
Eligibility Criteria: Profit and nonprofit organizations, cooperatives.
Funding: FY2005: $15.5 million; FY2006: $20.5 million; FY2007: $20.3 million; FY2008:
$18.9 million; FY2009: $3.9 million; FY2010: $20.7 million; FY2011: $18.8 million; FY2012:
$14.0 million;19 FY2013: $13.9 million; FY2014: $15.0 million.
19 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) was provided by the 2002 farm bill. In FY2004-FY2006, appropriators blocked
(continued...)
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Rural Business Investment Program
This program was authorized by the 2002 farm bill and amended in the 2008 farm bill. The
program authorizes limited liability companies (Rural Business Investment Companies) to make
equity capital investments in rural businesses. These companies are financed with both private
funds and debt instruments guaranteed by the federal government. The program operates under a
Memorandum of Agreement with the U.S. Department of Commerce’s Small Business
Administration. The 2008 farm bill (P.L. 110-246) amended some of the original provisions (e.g.,
permitting more time to capitalize a Rural Business Investment Company). The farm bill also
provided $50 million for the program.
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 begin
the program. The program was reauthorized in the 2008 farm bill and provided $50 million for
the period FY2008-FY2012.
Rural Energy for America Loan and Grants (formerly the 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. The program was
reauthorized in the 2008 farm bill and renamed the Rural Energy for America Program (REAP).
Statutory Authority: Section 9006, Farm Security and Rural Investment Act of 2002 (P.L. 107-
171). Reauthorized as the Rural Energy for America Program (REAP, Section 9007) in the 2008
farm bill (P.L. 110-246).
Financing: Loans and grants.
Eligibility Criteria: Agricultural producers.
Funding: The program was authorized for $23.0 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 FY2005-FY2006, but did provide $23.0 million in discretionary funding
in each year. The Administration requested cancelling the mandatory funding for FY2007 and
providing $10.2 million in discretionary funding. For FY2007, $22.8 million was provided. For
FY2008, $35.7 million was appropriated for loan subsides and grants. For FY2009-FY2012, $255
(...continued)
the mandatory funding and provided discretionary funds, but in amounts less than the authorized mandatory level.
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million in mandatory spending was authorized. In addition, $25 million annually in discretionary
funding was also authorized for FY2009-FY2012. FY2010: $39.3 million; FY2011: $5 million;
FY2012: $6.5 million in loan authorization and $1.7 million in loan subsidies, $0 grants; FY2013:
$13.1 million in loan authorization and $3.1 million in loan subsidies, $0 grants; FY2014: $12.8
million in loan authorization and $3.5 million in loan subsidies, $0 grants.
Rural Microentrepreneur Assistance Program
The Rural Microentrepreneur Assistance Program (RMAP) provides grant funding to
microenterprise development organizations (MDOs) and approved microlenders to support
microenterprises in rural areas. Microenterprises will generally have 10 or fewer employees.
MDOs also use funds from the Rural Business Cooperative Service to make fixed-interest rate
micro-loans of up to $50,000 for startup and growing rural microenterprises. Grants are also
available for training or other services for MDOs that support rural microenterprises.
Statutory Authority: Title VI, Subtitle D, Section 6022 of the Food, Conservation, and Energy
Act of 2008 (P.L. 110-246); 7 U.S.C. 1981, et seq.
Financing: Fixed-interest direct loans and grants. Maximum loan amount to a microlender is
$500,000. Maximum grant to an MDO is no more than 25% of the total outstanding balance of
microloans made by the MDO. An MDO must provide matching funding of up to 15% of the total
amount of the grant awarded to the MDO.
Eligibility Criteria: Funds are provided to MDOs and approved microlenders who use the
funding to capitalize rural revolving loan funds for the exclusive purpose of making microloans to
microenterprise borrowers, accepting payments from microenterprises, and repaying RBS as
required in their loan agreements.
Funding: Mandatory funding of $4 million was provided in FY2010-FY2011 and $3 million in
FY2012. Discretionary funding of $40 million each year FY2009-FY2012 was also authorized.
For FY2010, funding of $5 million was provided ($11.7 million in loan authorization), divided
evenly between loan subsidies and grants. FY2011: $0; FY2012: $0 (mandatory funding of $3
million was eliminated for FY2012); FY2013: $0; FY2014: $0.
Locally or Regionally Produced Agricultural Food Products
The 2008 farm bill (Section 6015) authorized a new program that would make loan guarantees to
individuals and businesses to provide locally and regionally produced foods. Providing food to
underserved rural and urban areas would be given priority. A locally or regionally produced food
is defined as one for which the locality or region in which the final product is marketed is within
400 miles of the product’s origin, or within the state in which the product is produced.
Statutory Authority: Section 310B(g) of the Consolidated Farm and Rural Development Act; 7
U.S.C. 1932(g).
Financing: The provision authorizes loans and loan guarantees.
Eligibility Criteria: Locally and regionally produced foods are those marketed within 400 miles
of the product’s origin, or within the state. An underserved area is one with limited access to
affordable, healthy foods, including fresh fruits and vegetables, in grocery retail stores or farmer-
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to-consumer direct markets. Areas with high rates of hunger or food insecurity or those with high
poverty rates are also prioritized.
Funding: 5% of the funds appropriated for the Business and Industry Loan Guarantee program
are reserved for loan guarantees to support locally and regionally produced foods. (See B&I
discussion below).
Rural Business Program Account
The Rural Business Program, administered by RBS, supports business development, training, and
retention. Funding for the loan program is allocated to state rural development offices by formula
where state directors set priorities particular to their state’s rural needs. The account includes four
budget lines: Rural Business Enterprise Grants, Rural Business Opportunity Grants, the Delta
Regional Authority, and the Business and Industry Guaranteed loan program. Appropriations for
FY2011 provided $85.3 million in budget authority for the Rural Business Program Account,
down from $97.1 million in FY2010. The FY2012 appropriation provided $74.8 million in budget
authority for the four budget lines.
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 in FY2001 and in previous years, with the FY2002 budget forward, there have been
no appropriations for the direct loan program.20
Statutory Authority: Section 310B(a)(1) of the Consolidated Farm 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 million and $10 million, maximum percentage of guarantee is 70%. For
loans between $10 million and $25 million, maximum percentage of guarantee is 60%. Under the
American Recovery and Reinvestment Act of 2009 (ARRA), all loans that score at least 55 points
based on loan priority variables (7 C.F.R. 4279.166) have 90% of the principal guaranteed.
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) those that improve
existing businesses or industry, and (3) those that create the greatest number of permanent jobs.
Golf courses, race tracks, and gambling operations are ineligible.
Funding: No funding for the direct loan program has been provided since FY2001. Loan
authorization levels for guaranteed loans (including North American Development Bank loan
20 For RBS loan performance data, see Rural Development: Rural Business-Cooperative Service Business Loan Losses.
GAO/RCED, August, 1999.
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guarantees) in FY2005: $678.1 million loan authorization with a loan subsidy of $34.2 million;
FY2006: $1.0 billion loan authorization with a subsidy of $48.4 million; FY2007: $914 million
with a loan subsidy of $39.8 million; FY2008: $993 million with a loan subsidy of $43 million;
FY2009; $993.0 million with a loan subsidy of $43.2 million; FY2010: $993.0 million with a
loan subsidy of $52.9 million; FY2011: $889.1 million with a loan subsidy of $45.0 million;
FY2012: $822.8 million with a loan subsidy of $45.3 million; FY2013: $890.2 million with a
loan subsidy of $52.3 million; FY2014: $958.1 million with a loan subsidy of $67.0 million
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 Farm and Rural Development Act of 1972; 7 U.S.C.
1932. Reauthorized in the 2008 farm bill (P.L. 110-246).
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: FY2005: $3.1 million; FY2006: $3.0 million; FY2007: $3 million; FY2008: $2.5
million; FY2009: $2.5 million; FY2010: $2.5 million; FY2011: $2.5 million; FY2012: $2.2
million; FY2013: $2.1 million; FY2014: $2.2 million.
Rural Business Enterprise Grants
These are grants to encourage the development of small and emerging business enterprises and
the 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 Farm 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: FY2005: $41.3 million; FY2006: $39.6 million; FY2007: $39.6 million; FY2008:
$38.7 million; FY2009: $38.7 million; FY2010: $38.7 million. Supplemental funding under
ARRA added $19.7 million for the program; FY2011: $34.9 million; FY2012: $24.3 million;
FY2013: $22.6 million; FY2014: $24.3 million.
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Delta Regional Authority
The Delta Regional Authority (DRA) is a state-federal development authority providing
economic assistance to 252 economically distressed counties and parishes in eight southern
states—Alabama, Arkansas, Illinois, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee.
The DRA makes loans and grants for a variety of community projects supporting housing,
business development, community facilities, and employment training.
Statutory Authority: Subtitle F, Consolidated Appropriations Act of 2001 (P.L. 108-447; 7
U.S.C. 1921, et seq.).
Financing: Competitive grants.
Eligibility Criteria: At least 75% of DRA funds must be invested in economically distressed
counties and parishes. Approximately half of the funds are earmarked for transportation and basic
infrastructure improvement.
Funding: FY2005: $1 million; FY2006: $2 million: FY2007: $2 million;FY2008: $3 million;
FY2009: $2.9 million; FY2010: $2.9 million; FY2011: $3 million; FY2012: $2.9 million;
FY2013: $2.8 million; FY2014: $3.0 million. This appropriation does not include funding for the
Delta Region Transportation Development program authorized by P.L. 109-59. The Delta
Regional Authority also receives funding under Independent Agency appropriations.
USDA Rural Utilities Service (RUS)
Arguably, the earliest rural economic development policy consisted of providing infrastructure to
get rural products to markets or to transportation nodes. Building railroads, roads, and telegraph
lines represent 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
administered by the Rural Utilities Service.21 New infrastructure includes facilities for health
service delivery (e.g., telemedicine) and new broadband telecommunication resources. As was the
case 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.
Electrification 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 RUS-financed 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
21 Water and waste water programs are administered under the Rural Community Advancement Program and are
discussed in the following section.
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private sector. RUS also makes direct 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. The FFB loans
account for over 90% of the loans made under the RUS electrification account.
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: Enacted loan authorization levels for FY2005: $4.32 billion; FY2006: $5.39 billion;
FY2007: $5.39 billion; FY2008: $7.1 billion; FY2009: $6.6 billion; FY2010: $7.1 billion;
FY2011: $7.1 billion; FY2012: $7.0 billion; FY2013: $7.1 billion; FY2014: $5.5 billion.
Subsidies (budget authority) for FY2005: $5.0 million; FY2006: $6.1 million; FY2007: $3.6
million; FY2008: $119,000; FY2009: $0; FY2010: $0; FY2011: $0; FY2012: $0;22 FY2013: $0;
FY2014: $0.
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 municipal bond market. Treasury rate loans are based on rates
established daily by the U.S. Treasury. Direct loans are made through the Federal Financing
Bank.
Funding: Enacted loan authorization levels for FY2005: $518.0 million; FY2006: $689.8
million; FY2007: $689.8 million; FY2008: $685.2 million; FY2009: $690.0 million; FY2010:
$690.0 million; FY2011: $690.0 million; FY2012: $690.0 million; FY2013: $690.0 million;
FY2014: $690.0 million.
22 Includes loan authorization for guaranteed loans.
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Distance Learning and Telemedicine 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: Competitive grants.
Eligibility Criteria: Funds are made available to schools, hospitals, and libraries.
Funding: Grant funding for FY2005: $34.7 million; FY2006: $29.7 million; FY2007: $29.7
million; FY2008: $34.7 million; FY2009: $34.7 million; FY2010: $37.7 million; FY2011: $32.4
million; FY2012: $21.0 million; FY2013: $17.5 million; FY2014: $24.3 million.
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 an appropriation of $600 million of capital.
This provided the Telephone Bank with its initial “seed” money to begin its lending operations.
Through sales of Class A stock, the RTB is now privatized. Final liquidation payments were made
to Class A and B shareholders at the time of liquidation on November 13, 2007.23
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 FY2005: $175.0 million; FY2006: $0; FY2007 (est.): $0.
Loan subsidies (budget authority) for FY2005: $0 million; FY2006: $0; FY2007: $0; FY2008:
$0; FY2009: $0; FY2010: $0; FY2011: $0; FY2012: $0; FY2013: $0; FY2014: $0.
Broadband Loans and Grants
New telecommunication technologies will increasingly rely on infrastructure that can carry
signals more complex than simple voice and at significantly faster speeds. Rural areas are
23 See Rural Telephone Bank Closeout Audit Report, USDA Office of Inspector General, July 2008.
http://www.usda.gov/oig/webdocs/15401-8-FM.pdf.
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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: 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, and 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. New rules promulgated in May 2013 will prioritize persistent poverty
counties, communities experiencing population declines, and the most rural areas.24
Funding: Loan authorization levels for FY2005: $331.1 million; FY2006: $495 million;
FY2007: $495 million; FY2008: $297 million; FY2009: $400.5 million; FY2010: $400.0 million;
FY2011: $400.0 million; FY2012: $212.0 million FY2013: $39.1 million; FY2014: $34.5
million. Broadband telecommunication grants for FY2005: $32.8 million; FY2006: $8.9 million;
FY2007: $8.9 million; FY2008: $13.4 million; FY2009: $13.6 million; FY2010: $17.9 million;
FY2011: $13.4 million; FY2012: $10.4 million; FY2013: $9.6 million; FY2014: $10.4 million.
Enhancement of Access to Broadband Service in Rural Areas
This program provides direct loans and loan guarantees to construct, improve, and acquire
facilities and equipment to provide broadband service to rural areas with less than 20,000
residents. Because of difficulties in implementing the program, no funding was provided after
2003 until the program could be restructured. The program was modified in the 2008 farm bill,
but a final rule has not been published to implement the program.
Statutory Authority: Section 6103, Farm Security and Rural Investment Act of 2002 (P.L. 107-
171) amends Section 601 of the Rural Electrification Act of 1936 (7 U.S.C. 950bb). Program was
amended and reauthorized in the 2008 farm bill (Section 6110, P.L. 110-246).
Financing: Direct and Guaranteed loans. For direct loans interest rate is capped at 4%.
Eligibility Criteria: Rural areas of less than 20,000 population and outside of an urban/metro
commuting area.
24 Federal Register, Volume 78, No. 86. 25787, May 3, 2013, http://www.gpo.gov/fdsys/pkg/FR-2013-05-03/pdf/2013-
10502.pdf.
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Funding: Mandatory funding was authorized at $20 million per year, FY2002-FY2005, and $10
million in FY2006 and FY2007. Funding of $20 million was provided in FY2003. Appropriators
blocked funding for the program in FY2004-FY2007. For FY2008-FY2012, $25 million annually
was authorized. Other RUS loan and grant programs also provide discretionary funding for
broadband (see above).
Rural Water and Waste Disposal Program Account
The Rural Water and Waste Disposal Account, administered by RUS, supports construction and
improvements to rural community water systems unable to get reasonable credit in the private
market. Funding for the loan program is allocated to state rural development offices by formula
where state directors set priorities particular to their state’s rural needs.
The 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.
Applications originate with State Rural Development offices.
Water and Waste Disposal Direct and Guaranteed Loans
Rural water and waste water disposal loans and grants are administered by USDA’s Rural Utilities
Service. 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 waste in rural areas. Loans are
repayable in not more than 40 years, or the useful life of the facility, whichever is less. The water
and waste disposal account is the largest of the three RCAP accounts, accounting for 87% of the
total RCAP funding.
Statutory Authority: Section 306 of the Consolidated Farm 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.
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Funding: Loan authorization level for direct loans in FY2005: $921.4 million; FY2006: $1.06
billion; FY2007: $990.0 million; FY2008: $1.3 billion; FY2009: $894.5 million; FY2010: $1.0
billion; FY2011: $898.3 million; FY2012: $730.7 million; FY2013: $923.7 million; FY2014:
$1.2 billion. Loan subsidies for direct loans in FY2005: $82.9 million; FY2006: $73.4 million;
FY2007: $98.5 million; FY2008: $69.6 million; FY2009: $0; FY2010: $77.1 million; FY2011:
$76.9; FY2012: $70.0; FY2013: $74.5; FY2014: $0. Loan authorization levels for guaranteed
loans in FY2005: $2.9 million; FY2006: $75.0 million; FY2007: $75.0 million; FY2008: $75
million; FY2009: $75.0 million; FY2010: $75.0 million; FY2011: $75.0 million; FY2012: $63.0
million; FY2013: $56.6 million; FY2014: $50.0 million. Loan subsidy levels for loan guarantees
for FY2005-FY2011 were $0; FY2012: $1.0 million; FY2013: $600,000; FY2014: $355,000.
Water and Waste Disposal Grants
Grants are made to public, quasi-public, 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 Farm 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.
Funding: FY2005: $507.5 million (includes hurricane emergency supplemental funding);
FY2006: $508.7 million (includes hurricane emergency supplemental funding); FY2007: $437.7
million; FY2008: $464.2 million; FY2009: $482.1 million; FY2010: $469.2 million; FY2011:
$331.7 million; FY2012: $327.1 million; FY2013: $397.0 million; FY2014: $345.5 million.
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 Farm and Rural Development Act of
1972; 7 U.S.C. 1932(b).
Financing: Grants.
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Eligibility Criteria: Assistance is available in rural areas and towns with a population of 10,000
or less.
Funding: FY2005: $3.5 million; FY2006: $3.5 million; FY2007: $3.5 million; FY2008: $3.4
million; FY2009: $3.5 million; FY2010: $3.4 million; FY2011: $3.4 million; FY2012: $3.4
million.
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 Farm 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, FY2005-FY2007. For
FY2005: $10.7 million; FY2006: $14.1 million; FY2007: $13.9 million; FY2008: $6.8 million;
FY2009: $13.0 million; FY2010: $0; FY2011: $0; FY2012: $0; FY2013: $3.1 million; FY2014:
$4.0 million.
Water and Well System Grants
This program provides funding for nonprofit organizations to finance the construction and
refurbishing of household water well systems in rural areas for individuals with low or moderate
incomes.
Statutory Authority: Section 6012 of the 2002 farm bill (P.L. 107-171) amends Section 306D of
the Consolidated Farm and Rural Development Act is (7 U.S.C.1926d). Reauthorized in Section
6010 of the 2008 farm bill (P.L. 110-246).
Financing: Grants.
Eligibility Criteria: Priority to non-profit organizations with demonstrated expertise in providing
well-water systems.
Funding: The 2002 farm bill (P.L. 107-171) authorized funding of $10 million annually,
FY2002-FY2007. FY2005: $1.9 million; FY2006: $990,000; FY2007: $990,000; FY2008:
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$993,000; FY2009: $993,000; FY2010: $993,000; FY2011: $993,000; FY2012: $993,000;
FY2013: $917,000; FY2014: $993,000.
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 Farm and Rural Development Act of
1972; 7 U.S.C. 1926(a)(14).
Financing: Grants.
Eligibility Criteria: Private, nonprofit organizations that have been granted tax-exempt status
from the Internal Revenue Service may be eligible for grant 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.25
Funding: Formula funding based on the Water and Waste Water Grant appropriation for the
current fiscal year. FY2005: $18.2 million; FY2006: $18.2 million; FY2007: $16.2 million;
FY2008: 17.5 million; FY2009: $18.4 million; FY2010: $19.0 million; FY2011: $19.1 million;
FY2012: $19.0 million; FY2013: $19.0 million; FY2014: $19.0 million.
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 Farm and Rural Development Act of
1972; 7 U.S.C. 1926(a)(22).
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. FY2005:
$13.5; FY2006: $13.7; FY2007: $9.5 million; FY2008: $13.6 million; FY2009: $14.0 million;
25 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.
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FY2010: $14.6 million; FY2011: $14.7 million; FY2012: $15.0 million; FY2013: $15.0 million;
FY2014: $15.0 million.
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 in 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% 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 FY2005: $34.8 million; FY2006: $27.8 million; FY2007: $27.8 million; FY2008:
$21.3 million; FY2009: $17.5 million; FY2010: $17.5 million; FY2011: $12.0 million; FY2012:
$9.5 million; FY2013: $9.2 million; FY2014: $10.0 million.
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 such as the
Rural Community Development Initiative and the Economic Impact Initiative, 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 (EZ/EC) and the Rural Economic Area Partnership Zones program (REAP). Although
tax incentives for EZ Communities were extended through December 31, 2013, by P.L. 112-240,
the rural EC program expired in December 2009, per P.L. 111-20. This means that all rural ECs
designations expired on December 31, 2009. Currently, USDA Rural Development is not
authorized to designate any new Empowerment Zones or Enterprise Communities.
Empowerment Zone/ Enterprise Community Initiative (EZ/EC)
The EZ/EC Program was a grant-making and tax-credit initiative whose objective is to revitalize
low-income rural communities in a manner that attracts private sector investment. Communities
participating in the Empowerment Zone/Enterprise Community program have to meet specific
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criteria for characteristics such as geographic size and poverty rate. 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 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%.
Round I authorized in 1994 (Omnibus Budget Reconciliation Act of 1993, Title XIII, P.L. 103-66)
produced 3 EZs and 30 ECs. Round II in 1997 (Taxpayer Relief Act of 1997, P.L. 105-34)
resulted in 5 new EZs and 20 ECs. A third round authorized in 2000 (Community Renewal Tax
Relief Act of 2000, P.L. 106-554) created an additional 2 EZs.
All rural EZ/EC designations expired on December 31, 2009. Several bills introduced in the 111th
Congress would have extended the program. The Tax Extenders Act of 2009 (H.R. 4213) passed
the House on December 9, 2009, but was not considered by the Senate. The bill would have
updated the expiration date of the programs to December 31, 2010. Another bill, H.R. 1677, the
Empowerment Zone, Renewal Community, and Enterprise Community Enhancement Act of
2009, sought an extension to 2015 and also allowed for the expansion of the geography of the
zones. There was a companion Senate bill of the same name (S. 1222). The bill was referred to
the House Committee on Ways and Means, where no further action was taken.
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: FY2005: $12.4 million; FY2006: $11.1 million; FY2007: $11.1 million; FY2008: $8.1
million; FY2009: $8.1 million; FY2010: $0. In addition to these funds, funding for other USDA
Rural Development program accounts may target EZ/EC communities. For example, the EZ/ECs
are targeted in the rural housing and water programs. Round I Empowerment Zones/Enterprise
Communities were funded over 10 years. Round II and III sites were funded predominantly
through tax credits for employers within EZ/EC sites. The program expired in FY2012.
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
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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 was initially 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 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, Food and Drug Administration, and
Related Agencies Appropriations Act of 2001 (P.L. 106-387). Reauthorized in the 2008 farm bill
(Section 6016, P.L. 110-246, 7 U.S.C. 1932 et seq.)
Financing: Grants.
Eligibility Criteria: Designation by the Secretary as a REAP Zone.
Funding: Appropriators provide targeted funding to REAP Zones through various RHS, RBS,
and RUS accounts.
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.
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Statutory Authority: Farm Security and Rural Investment Act of 2002 (Section 6201). Program
was reauthorized in the 2008 farm bill (Section 6019, P.L. 110-246).
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 public and private organizations.
Funding: The 2002 farm bill (P.L. 107-171) authorized $10 million in each fiscal year FY2003-
FY2007. No appropriations provided for FY2003-FY2007, although the appropriators have
encouraged the Secretary to support the NRDP through existing program funding. The program
was reauthorized in the 2008 farm bill (P.L. 110-246).
New Regional Development Commissions
The 2008 farm bill authorized the establishment of three new regional economic development
authorities: the Southeast Crescent Regional Commission, the Southwest Border Regional
Commission, and the Northern Border Regional Commission. Only the Northern Borders
Commission has had an executive director appointed. The commissions are under the jurisdiction
of the House Transportation and Infrastructure Committee. The commissions will undertake
comprehensive infrastructure development planning for their respective regions. Commissions
may make grants to states and local governments to develop basic public infrastructure, support
alternative energy development, support telecommunications, and assist economically depressed
areas of the regions. Funding was authorized at $30 million annually (FY2008-FY2012) for each
commission. Regulatory rules for the implementation of the commissions have not yet been
published, although some preliminary administrative functions have begun in the Northern
Border Regional Authority and the Southeast Crescent Regional Authority. The regional
commissions include the following counties:
• Southeast Crescent Regional Commission
All counties of the states of Virginia, North Carolina, South Carolina, Georgia,
Alabama, Mississippi, and Florida not already served by the Appalachian
Regional Commission or the Delta Regional Authority.
• Southwest Border Regional Commission
Arizona: The counties of Cochise, Gila, Graham, Greenlee, La Paz, Maricopa,
Pima, Pinal, Santa Cruz, and Yuma.
California: The counties of Imperial, Los Angeles, Orange, Riverside, San
Bernardino, San Diego, and Ventura.
New Mexico: The counties of Catron, Chaves, Dona Ana, Eddy, Grant, Hidalgo,
Lincoln, Luna, Otero, Sierra, and Socorro.
Texas: The counties of Atascosa, Bandera, Bee, Bexar, Brewster, Brooks,
Cameron, Coke, Concho, Crane, Crockett, Culberson, Dimmit, Duval, Ector,
Edwards, El Paso, Frio, Gillespie, Glasscock, Hidalgo, Hudspeth, Irion, Jeff
Davis, Jim Hogg, Jim Wells, Karnes, Kendall, Kenedy, Kerr, Kimble, Kinney,
Kleberg, La Salle, Live Oak, Loving, Mason, Maverick, McMullen, Medina,
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Menard, Midland, Nueces, Pecos, Presidio, Reagan, Real, Reeves, San Patricio,
Shleicher, Sutton, Starr, Sterling, Terrell, Tom Green Upton, Uvalde, Val Verde,
Ward, Webb, Willacy, Wilson, Winkler, Zapata, and Zavala.
• Northern Border Regional Commission
Maine: The counties of Androscoggin, Aroostook, Franklin, Hancock, Kennebec,
Knox, Oxford, Penobscot, Piscataquis, Somerset, Waldo, and Washington
New Hampshire: The counties of Carroll, Coos, Grafton, and Sullivan.
New York: The counties of Cayuga, Clinton, Essex, Franklin, Fulton, Hamilton,
Herkimer, Jefferson, Lewis, Madison, Oneida, Oswego, Seneca, and St.
Lawrence.
Vermont: The counties of Caledonia, Essex, Franklin, Grand Isle, Lamoille, and
Orleans.
Statutory Authority: Subtitle V of the Food, Conservation, and Energy Act of 2008 (P.L. 110-
246).
Financing: Commissions make economic development and infrastructure grants to state, local,
tribal, profit, and nonprofit entities to carry out the economic planning and development programs
established by the respective commissions. Matching equity funding is required.
Eligibility Criteria: Applications to a commission for a grant or other assistance for a project are
made through, and evaluated for approval by, the state-appointed member of the commission
representing the applicant.
Funding: The 2008 farm bill (P.L. 110-246) authorized $30 million in each fiscal year FY2008-
FY2012. In FY2010, the Northern Border Regional Commission and the Southeast Crescent
Regional Commission received $1.5 million and $250,000, respectively, under Energy and Water
Appropriations.
Author Contact Information
Tadlock Cowan
Analyst in Natural Resources and Rural
Development
tcowan@crs.loc.gov, 7-7600
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