AB556: Bill Text

LRB-4252/1

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1995 - 1996 LEGISLATURE

1995 Assembly BILL 556

September 12, 1995 - Introduced by Representatives Ott, Ainsworth, F. Lasee, Ward, Harsdorf, Baldus, Wilder, Green, Freese, Hahn, Olsen, Gard, Albers, Hutchison, Kreibich, Gunderson, Dobyns, Musser, Seratti, Plombon and Ladwig, cosponsored by Senators Fitzgerald, Schultz, Breske, Rude, Clausing and Decker. Referred to Committee on Agriculture.

AB556,1,4 An Act to amend 234.265 (2), 234.68 (3) (b), 234.69 (3) (b), 234.87 (5) (b) and (c), 234.90 (4) (b) 1. and 600.01 (1) (b) 8.; and to create 234.91, 234.93 (1) (d) and 234.93 (3g) of the statutes; relating to: a loan guarantee program for the acquisition or improvement of farm assets.

Analysis by the Legislative Reference Bureau

Under current law, the Wisconsin Housing and Economic Development Authority (WHEDA) guarantees collection of loans from the Wisconsin development reserve fund (fund) for the recycling, stratospheric ozone protection, clean air, small business, business improvement, targeted development, nonpoint source pollution abatement and agricultural chemical cleanup, agricultural production, agricultural production drought assistance, agricultural development and cultural and architectural landmark loan guarantee programs. This bill creates a farm assets reinvestment management loan guarantee program.

The bill authorizes WHEDA to guarantee collection from the fund of a portion of the principal of an eligible loan made to an eligible borrower by a participating private lender. For any eligible loan, the principal amount that WHEDA may guarantee may not exceed the borrower's net worth or 25% of the loan principal, whichever is less. An eligible borrower is a farmer who is currently operating farm premises and whose debts do not exceed 85% of the farmer's assets. An eligible loan is one for the acquisition of agricultural assets, defined as machinery, equipment, facilities, land or livestock, or for the cost of improvements to facilities or land. The agricultural assets must be purchased, and the improvements must be made, for agricultural purposes. The total outstanding guaranteed principal amount of all loans to an individual borrower that WHEDA may guarantee under the program may not exceed $100,000, or $50,000 if any of the loans is affected by any other state or federal credit assistance program. The bill specifies that WHEDA must charge an annual service fee for each loan guarantee, to be deposited in the fund to back up loan guarantees under the program. The amount of the fee is based on the outstanding guaranteed principal amount. The bill also limits the term of a guarantee to 5 years if the loan is for the acquisition of machinery, equipment or livestock or for improvements to facilities or land. The term may not exceed 10 years if the loan is for the acquisition of facilities or land.

The total outstanding guaranteed principal amount of all loans that WHEDA may guarantee under the program may not exceed $10,000,000. The bill reduces the total outstanding principal amount of all loans that WHEDA may guarantee under the agricultural production loan guarantee program (CROP) from $30,000,000 to $20,000,000. Additionally, the bill provides that, if there is a difference between the amount actually guaranteed and the maximum amount that WHEDA may guarantee under the stratospheric ozone protection loan guarantee program, the clean air loan guarantee program or the nonpoint source pollution abatement and agricultural chemical cleanup loan guarantee program, WHEDA may increase the amount that it guarantees under the new program by the amount of any such differences. The amount that WHEDA may guarantee under any of the specified programs must then be reduced by the amount by which the total guaranteed principal amount under the new program was increased on account of the difference under the specified program between its guarantee limit and the amount actually guaranteed.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB556, s. 1 Section 1. 234.265 (2) of the statutes is amended to read:

AB556,2,9 234.265 (2) Records or portions of records consisting of personal or financial information provided by a person seeking a grant or loan under s. 234.08, 234.49, 234.59, 234.65, 234.67, 234.68, 234.69, 234.70, 234.765, 234.82, 234.83, 234.87, 234.90, 234.905 or, 234.907 or 234.91, seeking a loan under ss. 234.621 to 234.626, seeking financial assistance under s. 234.66 or under ss. 234.75 to 234.802, seeking investment of funds under s. 234.03 (18m) or in which the authority has invested funds under s. 234.03 (18m), unless the person consents to disclosure of the information.

AB556, s. 2 Section 2. 234.68 (3) (b) of the statutes is amended to read:

AB556,3,2 234.68 (3) (b) Except as provided in s. 234.93 (3) and (3g), the total outstanding principal amount of all guaranteed loans under par. (a) may not exceed $500,000.

AB556, s. 3 Section 3. 234.69 (3) (b) of the statutes is amended to read:

AB556,3,5 234.69 (3) (b) Except as provided in s. 234.93 (3) and (3g), the total outstanding principal amount of all guaranteed loans under par. (a) may not exceed $1,000,000.

AB556, s. 4 Section 4. 234.87 (5) (b) and (c) of the statutes are amended to read:

AB556,3,9 234.87 (5) (b) Except as provided in s. 234.93 (3) and (3g), the total guaranteed principal amount of all loans for the installation of best management practices that the authority may guarantee under par. (a) may not exceed $850,000.

AB556,3,13 (c) Except as provided in s. 234.93 (3) and (3g), the total guaranteed principal amount of all loans for the taking of corrective action in response to the discharge of an agricultural chemical that the authority may guarantee under par. (a) may not exceed $650,000.

AB556, s. 5 Section 5. 234.90 (4) (b) 1. of the statutes is amended to read:

AB556,3,17 234.90 (4) (b) 1. Except as provided in subd. 2., the total outstanding principal amount of all loans which the authority may guarantee under par. (a) may not exceed $30,000,000 $20,000,000.

AB556, s. 6 Section 6. 234.91 of the statutes is created to read:

AB556,3,20 234.91 Farm assets reinvestment management loan guarantee program. (1) Definitions. In this section:

AB556,3,22 (a) "Agricultural assets" means machinery, equipment, facilities, land or livestock.

AB556,3,24 (b) "Farm credit service" includes a production credit association, federal land credit association and agricultural credit association.

AB556,3,25 (c) "Farmer" has the meaning given in s. 102.04 (3).

AB556,4,1 (d) "Farm premises" has the meaning given in s. 102.04 (3).

AB556,4,6 (e) "Participating lender" means a bank, farm credit service, credit union, savings bank, savings and loan association or other person who makes loans for the acquisition or improvement of agricultural assets and who has entered into an agreement with the authority under s. 234.93 (2) (a). The term does not include a seller under a land contract.

AB556,4,9 (2) Eligible loans. A loan made by a participating lender is eligible for guarantee of collection from the Wisconsin development reserve fund under s. 234.93 if all of the following apply:

AB556,4,10 (a) The borrower is a farmer who is eligible for a guarantee under sub. (3).

AB556,4,13 (b) The loan is made to finance the acquisition of agricultural assets or the cost of improvements to facilities or land. The agricultural assets must be acquired, and the improvements must be made, for agricultural purposes.

AB556,4,16 (c) The total outstanding guaranteed principal amount of all loans made to the borrower that are guaranteed under this section will not exceed $100,000, or $50,000 if any of the loans is affected by any other state or federal credit assistance program.

AB556,4,18 (d) The rate of interest and the loan terms, including any associated fees or charges, are approved by the authority.

AB556,4,20 (e) The participating lender obtains a security interest in agricultural assets acquired or improvements made with the proceeds of the loan.

AB556,4,22 (f) The proceeds of the loan are not applied to the outstanding balance of any other loan or forbearance.

AB556,4,24 (3) Eligible farmers. A farmer is eligible for a guarantee of a loan under this section if all of the following apply at the time the loan is made:

AB556,4,25 (a) The farmer is currently operating farm premises.

AB556,5,3 (b) The amount of the farmer's debts, including the loan, does not exceed 85% of the farmer's assets, including the value of the agricultural assets to be acquired, or the improvements to be made, with the proceeds of the loan.

AB556,5,6 (c) The participating lender considers the farmer's assets, cash flow and managerial ability sufficient to preclude voluntary or involuntary liquidation during the term of the loan.

AB556,5,16 (4) Service fees and payment proration. (a) The authority shall charge an annual service fee on every loan guarantee under this section. The fee shall be 1% of a loan's outstanding guaranteed principal not exceeding $50,000 plus 1.5% of a loan's outstanding guaranteed principal exceeding $50,000. The fee shall be calculated and charged when the loan is made and on each anniversary date of the loan's inception during the term of the guarantee. The participating lender shall collect the fee as part of the interest charged on the loan and transmit the proceeds to the authority. The authority shall deposit all fees received under this paragraph in the Wisconsin development reserve fund to be used to guarantee loans under this section.

AB556,5,21 (b) In applying principal payments to the outstanding loan balance, the participating lender shall prorate the payments between that portion of the outstanding loan principal that is guaranteed under this section and the remainder of the outstanding principal balance to reduce the liability of the authority over the term of the guarantee.

AB556,6,2 (5) Guarantee of collection. (a) Subject to par. (c), the authority shall guarantee collection of a portion of the principal of a loan eligible for a guarantee under sub. (2). The principal amount of an eligible loan that the authority may guarantee may not exceed the borrower's net worth or 25% of the total loan amount, whichever is less, calculated at the time the loan is made.

AB556,6,6 (b) The term of a loan guarantee for a loan made to finance the acquisition of machinery, equipment or livestock, or the cost of improvements to facilities or land, may not exceed 5 years. The term of a loan guarantee for a loan made to finance the acquisition of facilities or land may not exceed 10 years.

AB556,6,9 (c) Except as provided in s. 234.93 (3) and (3g), the total outstanding guaranteed principal amount of all loans that the authority may guarantee under par. (a) may not exceed $10,000,000.

AB556, s. 7 Section 7. 234.93 (1) (d) of the statutes is created to read:

AB556,6,12 234.93 (1) (d) To be used for guaranteeing loans under s. 234.91, fees collected under s. 234.91 (4) (a).