Rural Finance Authority Program Overview MDA Deputy Commissioner Matthew Wohlman January 2017

Briefing Overview Mission History Funding Programs New Authorization

RFA Mission To provide eligible Minnesota farmers affordable financing under terms and conditions not available from other credit sources

RFA History Established as a separate entity in statute (Chapter 41B) in 1986 in response to the 1980s Farm Crisis State bonds authorized by state constitution (Article XI, Sec. 5) Authorization to develop the state’s agricultural resources Authorization includes ability to extend credit on real estate security

RFA Purpose Help Minnesota farmers Increase rural economic development Partner with local lending institutions Maintain strong performance measures

RFA Performance Measures (1986 to 2016) 2,959 loans issued, totaling $228 million Losses taken on 20 loans (0.007% of total) Currently have 420 active loans with balance of $54 million* * Figures do not include Aggie Bond

RFA Board The RFA Board consists of 11-members: 6 public members appointed by the Governor 5 state agency commissioners (MDA, MMB, State Auditor, DOC, DEED) Chaired by the Commissioner of Agriculture Staffed by MDA staff Reviews loans quarterly Issues Annual Report

RFA State Bonding Based on Constitutional bonding authority Legislative authorization of RFA bond request Last request was $33 million in 2012 RFA coordinates on bond sale with MMB (Sell bonds as loan demand dictates) Bonds sold, funds deposited in RFA account RFA participates with local lenders 55%-45% Borrower repays lender, lender repays RFA, RFA repays MMB, MMB repays bond purchasers

RFA State Bonding Past RFA Authorizations Laws of Minnesota for 1986, Chapter 398 $50,000,000 Laws of Minnesota for 1996, Chapter 463 $41,000,000 Laws of Minnesota for 1997, Spec. Sess., Ch 2 $ 1,250,000 Laws of Minnesota for 2000, Chapter 492 $20,000,000 Laws of Minnesota for 2002, Chapter 393 $15,000,000 Laws of Minnesota for 2005, Spec. Sess.,Ch 3 $18,000,000 Laws of Minnesota for 2007, Chapter 16 $30,000,000 Laws of Minnesota for 2009, Chapter 93 $35,000,000 Laws of Minnesota for 2012, Chapter 293 $33,000,000

RFA Funding Sources Sale of State Bonds (RFA has to pay these back) * $33 million appropriation in 2012 (Expired on 12/31/2016) -Beginning Farmer & Seller Assisted-Tax Exempt -Agriculture Improvement- Tax Exempt/Taxable -Livestock Expansion- Taxable -Restructure II- Taxable Allocation of Federal Tax-Exempt Bonds (Paper transactions) -Aggie Bond Dedicated Revolving Account (Repayments go back into the account) -Stock -Microloan -Livestock Equipment -Farm Opportunity -Disaster -Methane Digester

RFA Program Delivery Loan participation with local lenders Local lender handles most paperwork RFA funds 45% of the bank loan Borrower pays the lender, and lender pays RFA

RFA Programs RFA application process: Lender and applicant fill out application Lender sends packet to RFA office in St. Paul RFA processes and approves loan participation Lender finalizes loan, sends paperwork to RFA RFA sends funds covering its share of loan to lender Includes amortization schedule for loan payments

RFA Programs RFA programs offered from bonding funds: Beginning Farmer and Seller Assisted Ag Improvement Livestock Expansion Restructure II

Beginning Farmer and Seller-Assisted Loans Help beginning and entry-level farmers purchase real estate RFA participates at 45% up to $400,000 Current interest rate of 3.00% fixed for 10 years Farmer’s net worth cannot exceed $450,000 Farmer-borrower must enroll in farm management program to be eligible

Ag Improvement Loans Used to finance improvements to the farm for any ag related purpose, such as livestock buildings, grain handling facilities, machine storage, and manure systems RFA participates at 45% up to $400,000 Current interest rate of 3.25% fixed for 10 years Farmer’s net worth cannot exceed $450,000

Restructure II Restructure loans help farmers reorganize their farm debt to improve cash flow RFA participates at 45% up to $525,000 Current interest rate of 3.50% fixed for 10 years Farmer’s net worth cannot exceed $848,000

Livestock Expansion Creates affordable financing for new state-of-the-art livestock production facilities RFA participates at 45% up to $525,000 Current interest rate of 3.50% fixed for 10 years Farmer’s net worth cannot exceed $848,000

New RFA Authorization The RFA’s 2012 Authorization of $33 million expired on 12/31/2016 The RFA is currently unable to fund any new loans Most farmers need their financing taken care now before the growing season starts

New RFA Authorization For the past 5 years, RFA has averaged $9.4 million per year in participation loans A new 2017 Authorization of $35 million is being requested to cover future loan demand

RFA Program Overview Questions