USDA – Rural Development Your Partner in Advancing Rural Prosperity Puerto Rico Rural Lending Investment Summit March 7, 2019 March 7, 2019 Puerto Rico Rural Lending Investment Summit 1
Bette Brand Administrator Rural Business-Cooperative Service Acting Administrator Rural Utilities Service March 7, 2019 Puerto Rico Rural Lending Investment Summit 2
USDA Rural Development Task Force on Agriculture and Rural Prosperity Led by Agriculture Secretary Perdue • Established by Presidential Executive Order in 2017 • 22 federal agencies and departments • Focused on agriculture, economic development, job growth, infrastructure, innovation, energy security, and quality of life • Recommended over 100 legislative, regulatory, and policy actions • Actions aim to build robust, sustainable rural communities for generations to come 3
Task Force on Agriculture and Rural Prosperity Task Force Report: Answering the Call to Action Identified five key indicators of rural prosperity e-Connectivity for Rural America Improving Quality of Life Supporting a Rural Workforce Harnessing Technological Innovation Economic Development 4
Our Role: How RD Drives Rural Prosperity Infrastructure, Partnerships, and Innovation (IPI) Sec. Perdue has focused Rural Development efforts on IPI • Robust, modern infrastructure is a necessity, not an amenity • Interagency and public-private partnerships are the best way to get things done • Complex and constantly-evolving challenges require innovation Each element plays an invaluable role in facilitating economic development and improving rural quality of life. March 7, 2019 Puerto Rico Rural Lending Investment Summit 5
Our Role: How RD Drives Rural Prosperity Acting Assistant to the Secretary Joel Baxley is focusing RD on superior customer service Internal Focus • Modernization of Rural Development’s IT service • Increasing sustainability of Rural Development’s workforce Program Focus • Maximizing effectiveness by partnering with rural communities • Efficiently utilizing funding, time, and human capital March 7, 2019 Puerto Rico Rural Lending Investment Summit 6
The Four Pillars Four Pillars of Guaranteed Lending Programs 1. Economic Development / Marketing / Technical Assistance 2. Origination and Processing 3. Compliance and Oversight 4. Program Management and Policy Four Pillars of Direct Lending Programs 1. Economic Development / Marketing / Technical Assistance 2. Underwriting 3. Loan Servicing (credit and risk analysis) 4. Special / Troubled Assets March 7, 2019 Puerto Rico Rural Lending Investment Summit 7
The Farm Bill The Agriculture Improvement Act of 2018 • RD requires 40 regulations and 40 administrative actions to fully implement • Expands the Rural Broadband Access Loan and Loan Guarantee Program to allow the use of grants • Authorizes Congress to appropriate an additional $350 million • Creates the Rural Broadband Integration Working Group • Increases population limit for USDA’s guaranteed water, community facilities, and broadband programs to 50,000. • Establishes a Council on Rural Community Innovation and Economic Development as the successor to the Interagency Task Force on Agriculture and Rural Prosperity March 7, 2019 Puerto Rico Rural Lending Investment Summit 8
The Farm Bill The Agriculture Improvement Act of 2018 • Provides over $125 million in mandatory funding for RD’s renewable energy programs • Creates Local Agriculture Market Program, bringing together Value Added Producer Grant and Agriculture Marketing Service’s Farmers Market and Local Food Promotion Programs • Will receive $50 million in mandatory funds annually • RD will continue to administer VAPG program • Transfers the administration of the Biobased Markets Program to Rural Development • Mandates 20% of Distance Learning and Telemedicine funding go toward combating opioid and substance misuse 9
The One RD Guaranteed Loan Program What are the benefits? Supports One USDA Initiative and the What is One RD Guaranteed? Administration’s guidance for Reducing Regulation A standard RD regulation guaranteed loan and Controlling Regulatory Costs. making in four programs: • Simplifies, improves and enhances delivery of these Water and Waste • Community Facilities four program • Business and Industry Reduces burden on lenders, applicants and staff • Rural Energy for America End-to-End: Filing, Processing, Servicing Becomes a common platform to all for efficient Reporting delivery Standardize documents across programs Standardizes and improves customer experience March 7, 2019 Puerto Rico Rural Lending Investment Summit 10
ReConnect Pilot Program Deploying high-speed, reliable broadband e-connectivity • $600 million available in loans and grants to expand broadband infrastructure • Loans, grants, and 50/50 loan/grant combinations available • Available for rural areas with populations under 20,000 • Expanding broadband service to areas without sufficient access: • 90% of households lack access to service delivering 10 megabits per second downstream and 1 megabit per second upstream • Goal: 25 Mbps downstream, 3 Mbps upstream • Technology neutral • USDA will be accepting applications for these funds soon and is providing technical assistance to applicants seeking this opportunity. • USDA.gov/Reconnect Puerto Rico Rural Lending Investment Summit 11
Some 2019 Rural Development Goals • Utilize our projects to fight the opioid epidemic • Increase assistance to distressed communities • Modernize rural homes and businesses with energy efficiency • Deliver Broadband Pilot Program for rural areas lacking service • Maximize Rural Water Works for modern water systems • Increase leverage of guaranteed loans into RBS projects by 1% • Achieve B&I and REAP delinquency rate of not more than 4% • Achieve Multi-Family Housing delinquency rate for reach state of less than 2% • Maintain 3% or less delinquency rate for Single Family Housing program • Increase Community Facilities applications for rural transportation 12
Joseph Ben-Israel Assistant Deputy Administrator for Community Facilities Rural Housing Service March 7, 2019 Puerto Rico Rural Lending Investment Summit 13
Mark Brodziski Deputy Administrator Rural Business-Cooperative Service March 7, 2019 Puerto Rico Rural Lending Investment Summit 14
Business & Industry (B&I) This program is authorized by the Consolidated Farm and Rural Development Act Purpose is to improve, develop, or finance business, industry, and employment, and improve the economic and environmental climate in rural communities Bolster the existing private credit structure through the guarantee of quality loans that will provide lasting community benefits March 7, 2019 Puerto Rico Rural Lending Investment Summit 15
Business & Industry (B&I) Eligible Borrowers • For-profit businesses • Nonprofits • Cooperatives • Federally-recognized Tribes • Public bodies • Individuals March 7, 2019 Puerto Rico Rural Lending Investment Summit 16
Business & Industry (B&I) Guarantee Percentages/Rates/Terms • 80% for loans of $5 million or less • 70% for loans between $5 and $10 million • 60% for loans exceeding $10 million, up to $25 million maximum • The initial guarantee fee is 3% upon issuance of the Loan Note Guarantee • An annual renewal fee of 0.5% is due based on the 12/31 principal balance • Rates and Terms – Same as REAP March 7, 2019 Puerto Rico Rural Lending Investment Summit 17
Business & Industry (B&I) Eligible Purposes • Business conversion, enlargement, repair, modernization or development • Purchase and development of land, buildings, or facilities • Purchase of equipment, machinery, supplies, or inventory • Debt refinancing when refinancing improves cash flow and creates or saves jobs • Business and industrial acquisitions when the loan will create or save jobs March 7, 2019 Puerto Rico Rural Lending Investment Summit 18
Business & Industry (B&I) 2016 Regulation Enhancements More Eligible Purposes: • Business Ownership Conversions through ESOPs or Cooperative Ownership • Projects that use New Markets Tax Credits as an equity source • Local Food Hubs FY 2019 Loan Authority: $1,375,000,000 Year-to-Date Loan: $455,000,000 March 7, 2019 Puerto Rico Rural Lending Investment Summit 19
USDA Loan Guarantees Increase Mitigate ROI Risk March 7, 2019 Puerto Rico Rural Lending Investment Summit 20
USDA Loan Guarantees Lender Benefits Expand Legal Lending Limits Mitigate Risk Guarantee against potential loss Secondary Market Reduces risk of specialized collateral Single or Multi note sale of New Business Development Guarantee Opportunities Increase ROI Community Reinvestment Act Sales Premium Consideration Interest Strip Local People and Local Access Servicing Fee Collection March 7, 2019 Puerto Rico Rural Lending Investment Summit 21
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