CFC Closes on Government-Guaranteed Funding
Program That Benefits Rural Development

Excerpted from Solutions Vol. 7, No. 24

CFC and USDA Celebrate Funding for Rural Economic Development

At a ceremony on June 14 in Washington, D.C., CFC Governor and CEO Sheldon C. Petersen and USDA Acting Under Secretary for Rural Development Gilbert Gonzalez signed a commitment to continue to work together for economic health and growth for rural communities and the quality of life of rural citizens. The ceremony was held to celebrate the first loan guarantee that will provide 20 years of funding stability and certainty to USDA’s Rural Economic Development Loan and Grant (REDL&G) program.

“Today’s closing is another example of the commitment of CFC, NRECA and the USDA to work together for the benefit of rural America,” Petersen said. “The REDL&G program funds are used for economic development projects that provide job creation, needed community facilities and availability to medical resources for rural residents served by rural electric cooperatives and telephone systems. CFC looks forward to supporting this worthwhile initiative as an important component of CFC’s mission to serve our member/owners and help them strengthen their communities.”

Since 2001, CFC and NRECA have been working to develop a solution to ensure that funding for the USDA REDL&G program does not decline. REDL&G provides grants and loans—through current and former Rural Utilities Service (RUS) borrowers—to rural community and economic development projects.

In a press release referencing the signing, Agriculture Secretary Mike Johanns said, “Economic vitality of rural America depends on local business and community leaders having the resources to increase economic opportunities and improve the quality of life. These [REDL&G] loan and grant investments will allow for the creation and retention of thousands of rural jobs.”

Under section 6101 of the 2002 Farm Bill, Congress authorized a new REDL&G funding program—an RUS guarantee of private lender bonds used to further the goals of the Rural Electrification Act, where fees paid by the private lender would be targeted to fund the REDL&G program.

Following years of delay, which included lengthy negotiations to revise proposed rules to make them workable, final rules implementing the bond guarantee program were issued by RUS in October 2004.

The next month CFC filed an application for a $1 billion bond guarantee under the program. In May of this year, CFC, USDA and Treasury reached agreement on details of the first RUS bond guarantee, and Tuesday’s ceremony marked the closing for that guarantee and the establishment of the new revenue stream for REDL&G.

Joining Petersen and Gonzalez at the ceremony were NRECA CEO Glenn English and New Mexico Congressman Steve Pearce. English lauded the CFC/RUS pact, saying, “CFC and its member utilities are also to be applauded for their commitment, demonstrated here today, to the economic future of America’s rural communities. The Rural Utilities Service and CFC are closer today than ever before. The strength of their new relationship will benefit small towns across America, increasing economic opportunity and preserving local institutions.”

Rep. Pearce, who also had praise for the new REDL&G funding, said, “I am pleased that after a lengthy delay, the USDA has empowered our rural electric and telecommunications cooperatives with an additional tool to help our smaller communities prosper. Through this revitalization of funding for the Rural Economic Development Loan and Grant program, Congress has provided a powerful impetus for economic developments in locales where ideas are big, but capital is often scarce.”