Rural Missouri gets a boost

by Barry Hart

by Barry Hart

Rural Missouri just got a huge economic shot in the arm. Soon thousands of dollars will be pouring into rural parts of the state for all types of economic development projects. Better yet, this huge influx of funds known as the Rural Economic Development Loan and Grant Program comes at no cost to the taxpayers.

REDL&G, as the program is known, was first introduced in 1989 to increase electric cooperative investment in local economic development projects. In 2002 Congress, with strong leadership from the Missouri delegation and recognizing the value of the program, authorized more funding for the program that year as part of the farm bill.

Unfortunately, delays in issuing regulations by the Office of Management and Budget led to it being less effective than Congress intended. That’s where two friends of rural people, U.S. Rep. Jo Ann Emerson and Sen. Jim Talent, got involved. They jointly signed a letter to OMB Director Joshua Bolten strongly urging his agency to issue the necessary rules immediately.

That letter was one of the strongest congressional letters I have ever seen on a particular issue. With copies going to the USDA and the White House, it had the intended effect of getting the ball rolling. In October 2004, final rules were issued and electric cooperatives wasted no time getting into action.

In the past, REDL&G funding came from interest on money from co-ops that paid off their loans from the Rural Utilities Service (RUS) early. Under the new regulations, RUS provides guarantees to cooperative banks so they can issue bonds to help finance electric cooperative operations. Fees paid by these institutions are then earmarked to fund the program.

The Cooperative Finance Corporation, or CFC, is a bank created by electric co-ops to provide supplemental financing. When REDL&G rules were finalized in October 2004 CFC immediately applied for $1 billion in bond guarantees under the new program. CFC’s fees will be enormous.

Based on government analysis, these fees will support about $150 million in grants or $700 million in zero-interest loans while leveraging an additional $750 million of other funding and creating 20,000 jobs. For the first time in our nation’s history, the rural electric lending program will be making private donations to allow more rural development dollars to flow back to rural Missouri.

In Missouri REDL&G grants and loans have been used to make improvements to hospitals, to help manufacturers expand and add new jobs, to build spec buildings to attract new industry, for sewer lines to an industrial park, to gain a center for abused children and for a library. The list goes on and on.

Since 1989 Missouri’s RECs have made 19 loans and eight grants to establish revolving loan programs worth more than $7.7 million. Together they leveraged an additional $43 million in funding and created 1,176 jobs.

Improving the REDL&G program has been one of the chief priorities for the nation’s electric co-ops. Thanks to help from Rep. Emerson and Sen. Talent to get the ball rolling, good things are in store for the communities we serve.

For more information on this program call the USDA Rural Development office at (573) 876-9321 or (573) 876-0995.

Hart is executive vice president of the Association of Missouri Electric Cooperatives.

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