Transcript Rural Electric Economic Development, Inc.

Economic Development
Finance Service
August 24, 2011
USDA REDL&G Program
• USDA Rural Economic Development Loan
and Grant Program
– REDL – Loan Program (1989)
– REDG – Grant Program (1994)
– Both are nationally competitive programs
• REDG program is the basis for REED Fund
Definitions
• RUS Eligible Borrower is applicant —
“Intermediary”
• Project — “Ultimate Recipient of Funds” at 0%
interest
• REDL— “Rural Economic Development Loan”
a/k/a “Pass Through Loan”
• REDG— “Rural Economic Development Grant”
for loan fund
Grant is to Intermediary (Applicant Co-op)
0% Loan to Initial Project (Ultimate Recipient)
• Eligible Location
– Rural Areas with populations < 50,000
– Priority for areas of under 2,500 and under 1,250
USDA Rural Economic
Development Loan (REDL)
– RUS Borrower’s Assets Guarantee the Loan
– Impacts to their Balance Sheet
REDL or “Pass Through” Loan
$740,000 max
Intermediary loans to
recipient at 0%
interest
Intermediary
borrows from
UDSA RD at 0%
interest
Intermediary
REDL&G Loan Terms
• Maximum $740,000 or up to 80% of
Project, whichever is less (less than 50% is
better for scoring purposes)
• 0% Interest Loan
• Up to 10 Year Term
• Up to 2 year deferment until payments
start
• Monthly payments match Co-op’s
repayment to USDA
** Intermediary Guarantees Loan **
** Adequate Security a Must **
Rural Economic Development Grant
(REDG) for Revolving Loan Fund
3. Intermediary
Administers RLF
of $360,000
1st loan at 0%
4. Funds revolve
for lending at
interest
2. Intermediary
match is 20%
$60,000 (max)
1. USDA RD grants
$300,000 (max)
to Intermediary (Co-op)
Intermediary
USDA Grant for RLF
-- “Initial Loan” Terms
Application is submitted on behalf of one or
more projects
• Initial Loan must be to a Non-Profit Entity or
Public Body
• Project receives up to $300,0000 in a 0%
interest loan
• Up to a 10 year yerm
• Up to 2 year deferment until payments start
• Application can be up to 80% of project costs
(less is better)
• Revolved funds are re-loaned at interest not
to exceed ‘prime’
USDA Grant for RLF
-- RLF Operation Basics
Risk / Exposure
 Adequate security needed--RLF is taking risk
 Each revolved loan considered 17% Intermediary funds
 Losses do no have to be replenished
 Allowance for loan losses protects fund from losses
 Future interest earnings build RLF
Compliance
 Must Collect Annually
Financial Statements from Borrower
 Job Count

 Submit Annual Report to USDA
 Expected to be web-based in future
 Annual Loan Fund Budget (if applicable)
REDL&G Applications
• Submitting a REDL&G application is a
cooperative board decision
• Recipients cannot be limited to
customers only
• RLFs can use third party administration
RLF Administration—
Responsibilities & Limitations
• Conflict of Interest, cannot lend to:
– Cooperative, it’s Subsidiaries or Affiliates
– Board Member or relative
– Key Management Staff or relative
• May lend to non-profit entities when
board or key staff serve on the board
• Cannot limit lending only to Customers
– Or use that as a reason to say no
RLF Administration—
Interest & Administrative Fees
• Interest on “Subsequent Loans”
– Allowed to Charge from 0% to WSJ Prime Rate
– Administrative fee may also be charged
– Interest paid to RLF increases fund, may not be
withdrawn by cooperative
– Interest may be used for loan making expenses per
an annual budget (i.e. loan loss reserve)
• 1% Annual Administrative Fee
– To cover Intermediary operational expenses
• Can be charged on initial 0% Loan and subsequent loans
• Can be used to offset cost of staff time
USDA REDG Program
Eligible vs. Competitive Projects
Eligible
More Competitive
• Medical Facilities
• Non-Profit Expansions
• Hospital Renovation
and Start-ups
• New Medical Clinics
• Medical, Safety and
• Educational Facilities
Training Facilities
• Computer / Technology
• Community Development • Key Component:
Projects
– Direct Job Creation
• Business Incubator
– “High Tech” training and/or
equipment
Projects
– Technology Plan
REDL&G Scoring Criteria
—Summary of Key Factors
• Support the program
– Participate in Cushion of Credit
• Type of Project
– Business Expansion with good job training / new
technology (pass through loan)
– Medical Facility (grant or loan if job creation)
– Educational Facility (grant or loan if job creation)
– Job Creation/Retention (higher priority for loan)
REDL&G Scoring Criteria
—Summary of Key Factors
• Project Located in Rural Area
– Communities of under 2,500
• Complete Business Plan & Financials
– From the project, plus your analysis
• Demographic Trends
– Population Loss
– Higher Unemployment Rate than state or
nation
– Per Capita Income Levels documented
Pre-REED 1990-1994
• 12 - REDL pass through 0%Loans -$2,005,000 (9 RUS Borrowers)
• 5 – REDL applications (1993-1994) stalled in
the funding queue- $1.35 million
• USDA issues rules on REDG (Grant Program)
– Grant were to create a ‘revolving loan fund’
– REED concept defined and applications
modified to seek grant funds
• Shift from USDA pass-through 0% loans to
cooperatively-controlled loan fund
REED Today
• Twenty one cooperatives and East River
• 43 USDA Grants, $8,924,000 loaned to 48
projects at 0% and retained in REED
• $38 million loaned to 173 projects directly
through REED
• $19 million outstanding in loans to 100 projects,
$5.7 million committed
• 11 sources of Capital, $30 million
• 24 pass thru USDA 0% loans, $7.9 million
(additional impact)
Capital Resources
• USDA Rural Economic Development Grants (REDG)
• USDA Intermediary Relending Program (IRP)
• Community Development Financial Institutions Fund
(CDFI)
• Communities at Work Fund (CAW)
• Calvert Foundation
• Commercial Banks
• National Rural Utilities Cooperative Finance Corp (CFC)
• Basin Electric Power Cooperative
• South Dakota Rural Enterprise (SDREI)
• Member Cooperative Investment
• Increase in Net Assets
Loan Capital
Federal Loans
$5,499,275
22%
Federal Grants
$10,624,000
38%
REED Capital
$24,538,008
Undrawn Capital
$5,100,000
Foundation Loans
$4,900,000
20%
Earnings
Cooperative Loans
$1,915,163
$1,800,000
8% Bank Loans
7%
$250,000
1%
Debt
$11,449,276
47%
Net Assets
$13,088,732
53%
$24,538,008
Cooperative
Investment
$2,049,750
8%
Impact – 2010
• Over 6,200 jobs retained and created
• $357 million total project investment
• 87% of loans in communities of less than
4,000 people
• 95% local ownership
• $47.5 million in 213 loans
• $19 million outstanding, 100 loans
Portfolio Facts
REED Loans Assisted:
111
120
100
80
64
60
32
40
20
0
5
Start-up
Business
Organizations Expansions
Upgrading
Facilities
RLFS
Loans to Cooperative members -- 90 loans (42%)
Case Study—REDL & REDG
• Recapitalize Revolving Loan Fund
– $740,000 REDL
– Plus $300,000 REDG (and 20% match)
– Loan Fund receives 2-zero interest loans and
relends the funds at interest to local
economic development projects
– Must adhere to REDL&G regulations
– $300,000 plus the 20% match becomes the
applicant’s fund as repaid
Case Study — Health Care
• City of Bowdle Health Care
– $400,000 0% loan, $1.8 million total cost
– Connect hospital to nursing care, add
wellness center, medical records,
city offices
– 72 jobs impacted
– community of 500
Case Study—REDG for Infrastructure
• City of DeSmet
– $300,000 0% loan, $150,000 3% REED loan
– $1.5 million total cost
– Replace infrastructure
and re-surface
– 81 jobs impacted,
including school
and hospital
– Population 1,200
Case Study- Multiple Awards
• Rosholt School District 1
– $200,000 0% loan (2003)
– $400,000 total cost
– Media Center, library and 6-classroom addn.
• Rosholt School District 2
–
–
–
–
$300,000 0% loan (2008)
$2.4 million total cost
Administration
Gym/wellness, music
• 190 students,
• 33 FTE jobs
• Population 400
Case Study- Revolved Funds & REDL
• Dakota Provisions
– $2 million REED
loan to $50
million plant
– $450,000 0% loan
for equipment
– 823 jobs and
counting
– Producer owned,
state of the art
start-up
processing facility
– Expansion in
planning stage
Case Study—Revolved Funds
• Plagman’s Grocery
– $428,000 REED
loan and Bank loan
– $952,000 project
cost
– Retail grocery
facility moved to
highway location
– Population 1,100
– 10 jobs
Case Study—Revolved Funds
• Hometown Variety
– $23,000 REED
loan,
– $88,000 project
– 1 FTE Job
– Local retail store
closed
– Chamber purchased building for lease to
community store, population 1,200
Thank You
Contact Information
Linda Salmonson
605.256.8015
[email protected]