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

2. Briefing Overview
Mission
History
Funding
Programs
New Authorization

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

4. 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

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

6. 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

7. 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

8. 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

9. 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 $ 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

10. 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

11. 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

12. 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

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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. RFA Program Overview
Questions