LRB-3037/1
AJM:jld&amn
2015 - 2016 LEGISLATURE
January 11, 2016 - Introduced by Representatives Nerison, Novak, Ballweg,
Loudenbeck, Quinn and Ripp, cosponsored by Senators Moulton, Harsdorf,
Harris Dodd, LeMahieu, Olsen, Petrowski, Shilling and Vinehout. Referred
to Committee on Agriculture.
AB675,1,11 1An Act to repeal 234.905 (2) (e), 234.905 (3m) and 234.905 (4) (b); to renumber
2and amend
234.90 (4); to amend 234.90 (2) (b), 234.90 (3) (b), 234.90 (3) (c),
3234.90 (3g) (b), 234.90 (3n) (b), 234.90 (5), 234.905 (title), 234.905 (1) (b) (intro.),
4234.905 (1) (b) 1., 234.905 (1) (b) 2., 234.905 (1) (b) 3., 234.905 (1) (e), 234.905
5(1) (f), 234.905 (2) (intro.), (a), (b), (c), (d), (f) and (g), 234.905 (3) (a), 234.905 (3)
6(b), 234.905 (3) (e), 234.905 (4) (a), 234.905 (5), 234.907 (2) (c), 234.907 (2) (cm),
7234.907 (2) (f), 234.907 (3), 234.91 (2) (c), 234.91 (3) (a) (intro.), 234.91 (3) (b),
8234.91 (4), 234.91 (5) (a), 234.91 (5) (b) and 234.93 (1) (d); and to create 234.90
9(4) (b), 234.905 (1) (cm), 234.905 (4) (bn) and 234.91 (3) (a) 3. of the statutes;
10relating to: agricultural loan guarantee programs administered by the
11Wisconsin Housing and Economic Development Authority.
Analysis by the Legislative Reference Bureau
The Wisconsin Housing and Economic Development Authority (WHEDA)
administers a number of loan guarantee programs. This bill makes various changes
to several of the agricultural loan guarantee programs administered by WHEDA.

Agricultural production loan guarantee program
WHEDA operates a program under which it provides guarantees for certain
agricultural production loans (agricultural production loan guarantee program).
Under the agricultural production loan guarantee program, WHEDA is prohibited
from guaranteeing a loan if the total outstanding principal of all loans to a borrower
under the program is more than a maximum amount set annually by WHEDA that
is not more than $150,000. Under the bill, WHEDA is prohibited from guaranteeing
a loan if the total guarantee, rather than the total outstanding principal, of all loans
to the borrower is more than $250,000. This limitation also applies to a guaranteed
loan that is used to refinance a loan guaranteed under the agricultural production
loan guarantee program. The bill also allows WHEDA to extend an agricultural
production loan guarantee beyond the original term of the guaranteed loan if the loan
is part of a loan workout agreement.
Under current law, a farmer is eligible for a loan guarantee under the
agricultural production loan guarantee program if the farmer's debts total at least
40 percent of the farmer's assets. This bill restricts the farmer's debts and assets that
are compared to only those that are related to the agricultural production that is the
subject of the loan. Current law also requires that to be eligible for a guaranteed loan,
it must be reasonably likely that, if the farmer receives a guaranteed loan, the farmer
will not be subject to voluntary or involuntary liquidation before April 1 of the
following calendar year. This bill changes the April 1 date to the end of the loan term.
Under current law, WHEDA is required under the agricultural production loan
guarantee program to guarantee repayment of 80 or 90 percent of the principal of an
eligible loan, depending on the total principal of the loan. Additionally, under
current law, when commercial interest rates exceed a certain amount, WHEDA must
make interest reduction payments equal to 2 percent of the principal amount of a
guaranteed loan to participating lenders. This bill makes both of these requirements
permissive rather than mandatory. Additionally, the bill changes the amount of a
guarantee under the program to no more than 90 percent, regardless of the principal
amount of a loan, and changes the amount of the interest reduction payments to an
amount not to exceed 2 percent of the principal amount of the guaranteed loan.
Farm assets reinvestment management loan guarantee program
WHEDA operates the farm assets reinvestment management loan guarantee
program (FARM program) under which WHEDA guarantees loans to farmers for the
acquisition of agricultural assets or the cost of improvements to facilities or land.
Under current law, a farmer is eligible for a loan under the FARM program if, among
other things, the person is currently operating farm premises or if the person intends
to operate farm premises and has at least three years of farming experience,
including managing the day-to-day operations of a farm. The bill expands eligibility
for loan guarantees under the program to include a person who intends to operate
farm premises and maintain the family farmstead on the farm premises and who has
experience farming the specific farm.
Current law requires WHEDA to charge an origination fee on every loan
guaranteed under the FARM program in an amount that is 1 percent of the loan.
Current law also requires that all collected origination fees must be deposited in the

Wisconsin development reserve fund and must be used for the FARM program. This
bill allows WHEDA to charge origination fees but does not require it to do so and, if
collected, origination fees must be deposited in the Wisconsin development reserve
fund but do not have to be used for the FARM program.
Additionally, similar to the changes made to the agricultural production loan
guarantee program, this bill changes the current limitation on the amount extended
to the borrower under the FARM program from the total outstanding principal
amount of all loans to the borrower to the total guarantee amount of all the loans
made to the borrower under the program. The bill also limits the debt to asset
comparison for purposes of farmer eligibility to refer to the debts and assets related
to the agricultural assets that are the subject of the eligible loan.
Agricultural production drought assistance loan guarantee program
Current law provides that, prior to July 1, 1989, WHEDA was authorized to
guarantee collection of 90 percent of eligible loans made to farmers for certain
extraordinary drought-related costs (agricultural production drought assistance
loan guarantees). This bill reinstates WHEDA's authority to guarantee agricultural
production drought assistance loan guarantees and expands the program to include
loans for certain extraordinary costs related to any act of nature for which the
governor issues a declaration of disaster. Under the bill, agricultural production
drought assistance loan guarantees are renamed agricultural production disaster
assistance loan guarantees.
Under current law, if WHEDA guarantees an agricultural production drought
assistance loan, WHEDA is also required to pay an amount equal to 3.5 percent of
the loan to the participating lender to reduce the interest rate charged to the farmer
receiving the loan. Under the bill, WHEDA is authorized, but not required, to make
an interest reduction payment in an amount up to 3.5 percent of the loan. The bill
also increases the maximum amount of guarantee that WHEDA may extend to a
borrower from the amount guaranteed on $15,000 of total principal to $25,000 of
total guarantee and eliminates the existing limitation on the term of a loan that is
eligible to be guaranteed under the program. However, the bill restricts the period
of time that WHEDA may guarantee a loan under the program to no more than three
years.
Under current law, WHEDA is required to guarantee 90 percent of the principal
of a loan under the agricultural production drought assistance loan guarantee
program. Under the bill, WHEDA is authorized, but not required, to guarantee a
loan under the program in an amount that is up to 90 percent of an eligible loan. The
bill also makes similar changes that are made to the agricultural production loan
guarantee program and the FARM program, related to an eligible farmer's debt to
asset ratio.
Agricultural development loan guarantee program
WHEDA operates a program under which it provides guarantees for loans for
working capital or to finance certain items, if the working capital or item is necessary
to, or used to, process or market a product from a raw agricultural commodity
produced in this state or to commercially harvest whitefish from Lake Superior
(agricultural development loan guarantee program). Under the agricultural

development loan guarantee program, WHEDA is prohibited from guaranteeing a
loan if the total principal of all loans to the borrower under the program is more than
$750,000 or the total principal amount of loans to the borrower under the program
for commercially harvesting whitefish in Lake Superior is more than $100,000. This
bill changes these maximum amounts from the total principal amount of the loans
to the borrower to the total amount guaranteed under the program to the borrower.
The bill also creates an exception for loans that are included in a loan workout
agreement from the current limitation on the term of a loan that may be guaranteed
under the agricultural development loan guarantee program. Current law requires
WHEDA to guarantee an eligible loan under the agricultural development loan
guarantee program. This bill makes WHEDA's authority to make guarantees under
the program permissive instead of mandatory.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB675,1 1Section 1. 234.90 (2) (b) of the statutes is amended to read:
AB675,4,92 234.90 (2) (b) In order to maximize the benefits of the program under this
3section, the
The total outstanding principal amount guarantee of all loans to the
4borrower that are guaranteed under this section will not exceed an amount set
5annually, no later than December 1, by the authority that is not less than $2,000 nor
6more than $150,000. For purposes of adjusting the total outstanding principal

7amount of all loans to a borrower under this paragraph, the authority shall consider
8changes in the index of prices paid by farmers published by the federal department
9of agriculture
$250,000.
AB675,2 10Section 2. 234.90 (3) (b) of the statutes is amended to read:
AB675,4,1411 234.90 (3) (b) The amount of the farmer's debts related to the production of the
12agricultural commodity that is the subject of the guaranteed loan
totals at least 40%
1340 percent of the amount of the farmer's assets related to the production of the
14agricultural commodity that is the subject of the guaranteed loan
.
AB675,3 15Section 3. 234.90 (3) (c) of the statutes is amended to read:
AB675,5,5
1234.90 (3) (c) In the judgment of the participating lender, it is reasonably likely
2that if the farmer receives a guaranteed loan the farmer's assets, cash flow, and
3managerial ability are sufficient to preclude voluntary or involuntary liquidation
4before April 1 of the calendar year following the calendar year in which the
5participating lender granted
the end of the loan term.
AB675,4 6Section 4. 234.90 (3g) (b) of the statutes is amended to read:
AB675,5,117 234.90 (3g) (b) In the judgment of the participating lender, it is reasonably
8likely that if the farmer receives a guaranteed loan the farmer's assets, cash flow, and
9managerial ability are sufficient to preclude voluntary or involuntary liquidation
10before April 1 of the calendar year following the calendar year in which the
11participating lender granted
the end of the loan term.
AB675,5 12Section 5. 234.90 (3n) (b) of the statutes is amended to read:
AB675,5,1713 234.90 (3n) (b) The proceeds of a guaranteed loan may be used to refinance a
14guaranteed loan that has been refinanced one time if at least 60% 60 percent of the
15principal amount of the refinanced guaranteed loan has been repaid and the total
16guarantee amount to the borrower under this section after the refinancing is no more
17than the amount permitted under sub. (2) (b)
.
AB675,6 18Section 6. 234.90 (4) of the statutes is renumbered 234.90 (4) (a) and amended
19to read:
AB675,5,2420 234.90 (4) (a) The authority shall may guarantee repayment collection of a
21percentage, not exceeding
90 percent, of the principal, if less than $50,000, or 80
22percent of the principal, if $50,000 or more,
of any agricultural production loan
23eligible for guarantee under sub. (2) made to a farmer eligible for a guaranteed loan
24under sub. (3) or (3g).
AB675,7 25Section 7. 234.90 (4) (b) of the statutes is created to read:
AB675,6,3
1234.90 (4) (b) The authority may extend a guarantee under this section beyond
2the original term of the guaranteed loan if the guaranteed loan is part of a loan
3workout agreement.
AB675,8 4Section 8. 234.90 (5) of the statutes is amended to read:
AB675,6,115 234.90 (5) Interest reduction. If at the time of origination or extension the
6interest rate on a guaranteed loan and the prime lending rate as reported by the
7federal reserve board in federal reserve statistical release H. 15 each equals or
8exceeds 10% 10 percent, the authority shall may pay, from the moneys in the
9Wisconsin development reserve fund, to the participating lender making the loan,
10an amount equal to 2% that is no more than 2 percent of the principal amount of the
11loan.
AB675,9 12Section 9. 234.905 (title) of the statutes is amended to read:
AB675,6,14 13234.905 (title) Agricultural production drought disaster assistance
14loan guarantees.
AB675,10 15Section 10. 234.905 (1) (b) (intro.) of the statutes is amended to read:
AB675,6,1816 234.905 (1) (b) (intro.) "Agricultural production drought disaster assistance
17loan" means a loan to a farmer to finance extraordinary drought-related
18disaster-related costs, including the cost of any of the following:
AB675,11 19Section 11. 234.905 (1) (b) 1. of the statutes is amended to read:
AB675,6,2320 234.905 (1) (b) 1. Fertilizer, seed, fuel, pesticides, tillage services, crop
21insurance, or any other service or consumable good necessary to produce an
22agricultural commodity to replace or supplement an agricultural commodity
23adversely affected by drought disaster conditions.
AB675,12 24Section 12. 234.905 (1) (b) 2. of the statutes is amended to read:
AB675,7,2
1234.905 (1) (b) 2. Water delivery in connection with agricultural commodities
2adversely affected by drought disaster conditions.
AB675,13 3Section 13. 234.905 (1) (b) 3. of the statutes is amended to read:
AB675,7,54 234.905 (1) (b) 3. Feed and associated expenses for animals to supplement feed
5supplies adversely affected by drought disaster conditions.
AB675,14 6Section 14. 234.905 (1) (cm) of the statutes is created to read:
AB675,7,97 234.905 (1) (cm) "Disaster" means an act of nature for which the governor
8issues an executive order declaring a state of emergency for the state or any portion
9of the state under s. 323.10.
AB675,15 10Section 15. 234.905 (1) (e) of the statutes is amended to read:
AB675,7,1211 234.905 (1) (e) "Guaranteed loan" means an agricultural production drought
12disaster assistance loan on which the authority guarantees collection.
AB675,16 13Section 16. 234.905 (1) (f) of the statutes is amended to read:
AB675,7,1714 234.905 (1) (f) "Participating lender" means a bank, production credit
15association, credit union, savings bank, savings and loan association or other person
16who makes agricultural production drought disaster assistance loans and who has
17entered into an agreement with the authority under s. 234.93 (2) (a).
AB675,17 18Section 17. 234.905 (2) (intro.), (a), (b), (c), (d), (f) and (g) of the statutes are
19amended to read:
AB675,7,2320 234.905 (2) Eligible loans. (intro.) An agricultural production drought
21disaster assistance loan made by a participating lender is eligible for guarantee of
22collection from the Wisconsin development reserve fund under s. 234.93 if all of the
23following apply:
Loading...
Loading...