CEO’s Report: Protecting rural development through advocacyMarch 5, 2019
Heartland focused on the USDA REDLG program during 2019 APPA Legislative Rally
We’ve been talking a lot lately about state legislation that could potentially have a negative impact on municipal electric systems in South Dakota. That doesn’t mean we’ve forgotten about the importance of advocacy at the federal level.
The APPA Legislative Rally was held the last week of February in Washington, D.C. While this crazy winter weather prevented some of us from attending, several Heartland board members were able to make it and had quality visits with legislators and representatives from the U.S. Department of Agriculture regarding economic development.
Our main focus on this trip was our economic development programs, particularly our use of REDLG funds and a requirement of the program that may hinder development in our communities.
USDA’s Rural Economic Development Loan and Grant Program (REDLG) provides 0% interest loans to utilities, such as Heartland, which we pass through to customers, their economic development corporations or local businesses to spur rural economic development. The ultimate recipients repay the lending utility (Heartland) and the utility is responsible for repayment to USDA.
Because Heartland is not an RUS borrower through USDA, we are required to provide a Letter of Credit, and generally assessed a fee, anywhere from 1% to 6%, by a local bank, which is passed on to the recipient. The fee schedule is set by the bank and we are responsible for that amount.
This fee can add up quickly over the course of the loan, and essentially, we are no longer offering a 0% loan.
Heartland has provided several REDLG loans over the years for projects such as infrastructure improvements, industrial park development and business development.
One of the best example is in White, SD, population 485, where a developer purchased a former care center which had been closed for several years, to create a mixed-use facility known as The Farmstead, with a healthcare clinic, daycare, fitness center, office space and apartments and the creation of over 15 jobs.
Heartland was awarded a REDLG loan to pass on to The Farmstead. But, the entire project was almost derailed due to the letter of credit requirement. Today, the project is providing much needed services to the community of White as well as jobs and other economic benefits.
This unnecessary requirement will stop projects in rural communities from moving forward. Also, the only entities that stand to gain for this requirement are the banks.
“As with any economic development project in rural areas, the margins on our project in White were very thin. If not for other incentives provided, the community would have lost these businesses, jobs, tax revenue and the building would have been torn down. The Farmstead is a true rural economic development success story, but was almost derailed due to the LOC requirement in the USDA regulations. This unnecessary requirement will certainly stop other projects in rural communities from moving forward.”
– Randy Hanson, project developer, The Farmstead
We had a very productive meeting with USDA officials and look forward to continuing the conversation. We want to keep utilizing this valuable tool to promote development in our rural customer communities.
While in Washington, we also had the pleasure of meeting with Senator Mike Rounds (R-SD), Representative Dusty Johnson (R-SD), Representative Ron Estes (R-KS), Representative Roger Marshall (R-KS), Representative Steve Watkins (R-KS), as well as the energy policy advisors for Representative Jim Hagedorn (R-MN) and Senator Joni Ernst (R-IA).
Advocacy at every level is important for public power. From advocating to our own customers, at the state or federal level, we must continue telling the public power story and promoting all the benefits it has to offer.
I hope you all continue to stay safe and warm as we ride out the rest of this long winter.