USDA Rural Development Brownsfields 101 Funding Resources March 31, 2011 Brandon Prough Area Specialist USDA Rural Development

USDA Rural Development Agency Goals Increase economic opportunity in rural America Improve the quality of life for all rural Americans Lead Federal Agency Serving Rural America

USDA Rural Development Over 40 Programs Delivered Utilities / Infrastructure Business Housing (Single-family & Multi-family)

USDA Rural Development Community Development Programs What are your community’s needs? What capital projects is your community contemplating? What capital projects should they be contemplating?

USDA Rural Development Community Development Programs How might the projects be developed? Have we prioritized our needs?

USDA Rural Development Community Development Programs What does the list include? Heath Care Water Quality Storm Shelter / Siren Business Park Child Care Fire and Rescue Community Transportation

USDA Rural Development Community Development Programs Where might we find financial help? Community Contributions USDA Rural Development Other financial partners

USDA Rural Development Community Development Programs USDA Rural Development has numerous programs to help address community projects: Water & Environmental Programs (WEP) Essential Community Facilities (CF) Housing development Business development

Community Development Programs Water & Environmental Program Distance Learning & Telemedicine Rural Electric Loan Community Facility

Water & Environmental Program (WEP)

Water & Waste Disposal Program Purpose: Develop and upgrade rural water distribution and waste water facilities Eligible Areas: Rural Communities with a population of less than 10,000

Community Facility Program (CF)

Community Facility Program Program Purpose: Enhance / improve essential community services and/or facilities Public Service Public Safety Health Care Eligible Areas: Rural areas with a population of less than 20,000

Community Facility Program Eligible Categories Rural fire truck, north central Kansas Fire Trucks and Equipment. Rescue and Ambulance Vehicles & Equipment. Police Vehicles. Fire department truck and equipment, southeast Kansas

Community Facility Program Eligible Categories Local Hospital Hospitals/Admin. Buildings Physicians Clinics Out-Patient Care Migrant Health Centers County Health Department Facilities Trego County

Community Facility Program Eligible Categories Rural fire station, north central Kansas Ambulance, Fire, Police, Rescue Building Rural fire station, northeast Kansas

Community Facility Program “Before & After” Former Library Former City Hall New City Hall / Library

Guaranteed Rural Housing (GRH) Program Your USDA lending partner

Home Buyer Benefits 103.5% LTV No Mortgage Insurance 30 Year Fixed Rate Partner with Approved Lenders No Loan Limit Fees & Repairs may be Financed Unlimited Gifts or Seller Contributions LTV = Appraised Value + GRH Fee Partner with State Finance Authority programs, other down payment or closing cost assistance programs, MCC’s, etc. Income/debt ratio limits limit the loan. Please check with investor. They may have further restrictions.

GRH Loan Purposes Purchase New Purchase Existing Stick, Modular or Manufactured Purchase Existing Stick, Modular Repairs (initial loan only) Typical Loan Closing Costs to 100% of appraisal 3.5% GRH Fee can be financed above appraised value Limited Refinance: RD Direct or GRH ONLY Rural areas with a population up to 50,000 1980.310 Typical Costs “take out” financing for new construction necessary appliances on a limited basis 2 loan discount points for low income applicants only

Prohibited Purposes Furniture & Personal Property Existing Manufactured Home Income Producing Property In-Ground Swimming Pool 1980.311 Existing Manufactured Homes unless already financed by RD Non-Essential Assets – have obvious income potential; such as feedlots with large grain storage. Rural tracts may have one machine shed or smaller low value buildings. Income Producing Property – duplexes, businesses 1980.311 Special Provisions Spec home without inspections and warranties can only be financed at 90% of market value Homeowners association (HOA) acceptable when approved by HUD, VA, Fannie Mae or Freddie Mac.

502 DIRECT RURAL HOUSING LOANS Direct Housing Loans – loans made by USDA Rural Development to low and very low income applicants to buy, build or repair homes—payments may be subsidized.

Direct Guidelines Loan Terms Up to 100% of the Appraised Value Maximum repayment period is 33 years & under certain conditions, 38 years Interest rate currently 4.675% - Interest rate can be subsidized to as low as 1%. Borrowers will always pay at least 24% of adjusted gross income. Rural areas with a population up to 50,000 Not a competition for lenders. Talk about timelines for closings and the differences from banks.

Business Programs Business and Industry Guaranteed Loan Rural Economic Development Loan & Grant Rural Business Enterprise Grant Renewable Energy / Energy Efficiency

Business & Industry Guaranteed Loan Program (B&I)

B&I Guaranteed Loan Program Program Purpose: Create and maintain employment & improve the economic climate in rural communities. Assist in creating and saving jobs Eligible Area: Rural areas with a population up to 50,000

B&I Guaranteed Loan Program Eligible Entities: Any legal entity, including individuals, corporations, public and private organizations and federally recognized Indian tribal groups

B&I Guaranteed Loan Program Eligible Purposes – eligibility includes, but not limited to: Business acquisitions Construction / Expansion Repair / Modernization Development Costs Equipment purchase Start-up working capital Refinancing under certain conditions

Manufacturing facility Grain handling facility central Kansas southeast Kansas

Cotton Gin southwest Kansas

Rural Economic Development Loan and Grant Program (REDLG)

Rural Economic Development Loan & Grant Program Program Purpose: Loans to eligible utilities to make a pass-thru loan to a rural business Grants to eligible utilities to establish revolving loan funds to initially make loans to eligible rural projects Eligible Areas: Rural areas with population up to 50,000

Rural Economic Development Loan & Grant Program Eligible Entities: Electric and Telephone Rural Utility Cooperatives Eligible Ultimate Loan/Grant Recipients: Any legal entity, including individuals, public bodies, and federally recognized Indian Tribes

Rural Economic Development Loan & Grant Program Term (Loan): Maximum of 10 years Interest Rate (Loan): 0% (Loan)

Rural Economic Development Loan & Grant Program Eligible Types of Projects Grocery Store Community College Improvements Livestock Handling Equipment Feed Mill Seed Company Industrial Building Repair Shops Hospital Improvement Library Furniture Business Supply Store Implement Dealer Fire / Emergency Vehicles Hotels

Rural Economic Development Loan & Grant Program Grocery store southeast Kansas Electrical repair company northeast Kansas

Rural Energy for America Program (REAP or 9007)

What size of grant is available? Not exceed 25% of total eligible project costs Minimum grant request Renewable energy system - $2,500 Energy efficiency improvements - $1,500 Maximum grant request Renewable energy system - $500,000 Energy efficiency improvements - $250,000 If grant recipients sell the project to a buyer that is not eligible under the above definitions, the Government may recapture a prorated portion of the grant funds for up to 20 years. Applicant must provide at least 75% of eligible project costs to complete the project Applicant in-kind or other federal grant awards cannot be used to meet 75% match requirement Third-party in-kind contributions allowed, but will be limited to 10% of the 75% match requirement Third party in-kind contributions are acceptable within accordance with 7 CFR part 3015 Maximum grants per applicant per fiscal year is $750,000

What size of Guaranteed Loan (GL) is available? Not exceed 75% of total eligible project costs Maximum combination GL and grant cannot exceed 75% of total eligible project costs Minimum GL request is $5,000 (less grant amount) Maximum GL request is $10 million Guaranteed loans opens Section 9006 program to much larger projects and no need to demonstrate financial need. Guaranteed loans will be processed continuously throughout the year (anticipated application deadline end of July) First in, first out Can combine with 9006 grant funds Make projects more attractive to lenders, could improve loan terms Only 50 percent of total eligible project costs can be guaranteed, but better loan terms than similar programs. (20-year equipment) Application similar to grants, but lender submits application Can combine with up to $25M of Business and Industry GL for larger projects

Who is eligible to apply for funding? Agricultural producers directly engaged in ag production (≥ 50% of their gross income) Rural small businesses that meet the SBA Size Standards Demonstrated financial need Project must be located in a rural area Non-profit organizations and public entities are excluded Demonstrated Financial Need: The applicant must demonstrate that it is unable to finance the project from its own resources or other funding sources without grant assistance. Factors to consider when assessing financial need will include, but not limited to the following: Grant amount relative to total project cost. Cash flow and debt service coverage - Applicants are responsible for providing, within the technical report, financial information regarding income, expenses, and cash flow requirements of the proposed project. If the grant has only a minimal impact on the cash flow and minimal impact on enhancing the debt service coverage, the demonstrated financial need likely has not been met. Letters from commercial lenders that indicate an unwillingness to provide commercial financing for the project without grant assistance. Industry consideration: Certain industries are more established, with a history of profitable operations and a history of successful projects. Based upon Applicant’s financial resources or the project’s cash flow. Size standards: Are for the most part expressed in either millions of dollars or number of employees. For the most part size standards are the average annual receipts or the average employment of the firm. North American Industry Classification System (NAICS) codes: 325199 – Biodiesel plant – less than 1000 employees; 325193 – Ethanol plant – less than 1000 employees; there are 3 choices for production of ethanol or methanol – 2 have limits of less than 1000; employees and the third has a limit of less than 500 employees; 445110 – Supermarket (grocery store) – less than $23 million and less than 500 employees; 722110 – Restaurant – full service – less than $6 million; 222112 – Electric Power distribution – less than 4 million megawatt hours/year Actual Definitions available in 7 CFR Part 4280

What projects are eligible? Purchase RE or make EE improvements Pre-commercial or commercially available, and replicable technology (No Research and Development) Technical Merit and located in a rural area Sufficient revenues for O&M, Maintenance & Debt Service Applicant must own the project and control the revenues and expenses, including O&M Pre-commercial: At least one commercial unit in operation for at least 1 full year in the U.S. Pre-Commercial: at least one commercial unit in operation for at least 1 full year in U.S.

Eligible uses Post-application purchase and installation of equipment; (except agricultural tillage equipment & vehicles) Post-application construction or project improvements; (except residential) Energy audits or assessments; Permit fees and Feasibility Studies; Professional service fees; (except application preparation) Ineligible project costs include any costs not identified above as eligible costs. Pre-application construction, residential improvements, energy efficiency improvements related to new construction, vehicles or agricultural tillage equipment, and applicant in-kind contributions. Only costs identified in the Energy Audit for energy efficiency improvements are allowed (EE)

Energy Efficiency Examples Building Envelope Lighting HVAC Systems Water Heating Power Systems Refrigeration Grain Drying and Curing Irrigation Fans and Blowers Compressors Pumps EE Projects must have the previous 12 months history of energy use in order to measure savings from the project improvements. Some examples here are improved insulation, improved pump motors or HVAC apparatus. It could involve changing the time of day of peak usage. Envelope – 1) Reduce heat losses –ceiling roof, walls/floors, and windows/doors; 2) Reduce heat gain - windows/doors; and 3) Reduce infiltration Lighting – 1) Reduce lighting required; 2) Install more energy-efficient lighting; and 3) Use daylighting HVAC Systems – 1) Air distribution system; 2) Water/steam distribution; 3) Heating plant; 4) Cooling plant; 5) Control systems; 6) Water Heating; 7) Reduce water heating loads; 8) Reduce system losses; 9) Install more efficient water; and 10) Heating system Power Systems – 1) Reduce power system losses; 2) Install energy-efficient motors; and 3) Reduce peak power demand Refrigeration – 1) Improve controls; 2) Reduce refrigeration system losses; and 3) Improve refrigeration system efficiency Miscellaneous – 1) Heat recovery; and 2) Install more efficient ancillary equipment

USDA Rural Development Who to Contact? USDA Rural Development 2715 Canterbury Drive Hays, KS 67601 (785) 628-3081 phone (785) 625-6065 fax www.rurdev.usda.gov/ks