AB684: Bill Text

LRB-1624/4

RCT/RJM:kmg:jf

2003 - 2004 LEGISLATURE

2003 Assembly BILL 684

December 1, 2003 - Introduced by Representatives Ott, Ainsworth, Musser, Suder, Olsen, Jensen, Plouff, Loeffelholz, Towns, Hahn, Freese, Gielow, Albers, McCormick, Hines, Bies, Owens, Weber, Vruwink, Lothian, Zepnick, Hundertmark, Kestell, Gunderson, Balow, Petrowski, Molepske, Hebl, M. Williams and Miller, cosponsored by Senators Schultz, S. Fitzgerald, Welch, A. Lasee, Brown, Harsdorf, Roessler and Lassa. Referred to Committee on Agriculture.

AB684,2,2 An Act to amend 7.33 (1) (c), 13.172 (1), 13.62 (2), 13.94 (4) (a) 1., 16.002 (2), 16.004 (4), 16.004 (5), 16.01 (1), 16.045 (1) (a), 16.41 (4), 16.417 (1) (b), 16.52 (7), 16.528 (1) (a), 16.53 (2), 16.54 (9) (a) 1., 16.70 (2), 16.75 (1m), 16.838 (1) (b), 16.85 (2), 16.865 (8), 23.175 (1) (b), 77.54 (9a) (a), 100.45 (1) (dm), 101.177 (1) (d), 106.16 (2), 106.16 (3), 230.03 (3), 234.66 (2), 234.90 (4), 234.907 (3), 234.91 (5) (a), 281.75 (4) (b) 3., 285.59 (1) (b), 560.032 (1) and 706.11 (1) (c) 2.; and to create 19.42 (10) (q), 40.02 (54) (j), 71.05 (1) (c) 7., 71.26 (1m) (h), 71.45 (1t) (h), 219.09 (1) (g), chapter 238 and 600.01 (1) (b) 7m. of the statutes; relating to: creating the Wisconsin Rural Finance Authority, authorizing the Wisconsin Rural Finance Authority to operate certain agricultural programs, and eliminating the authority of the Wisconsin Housing and Economic Development Authority to guarantee certain loans made for agricultural purposes and to operate a loan program for beginning farmers.

Analysis by the Legislative Reference Bureau

Wisconsin Rural Finance Authority

This bill creates the Wisconsin Rural Finance Authority (WRFA) and authorizes WRFA to operate certain programs related to agriculture. An authority is a public body created by state law that is not a state agency. The bill does not provide any funding for WRFA.

Under this bill, the board of directors of WRFA consists of 11 members. Eight members of the board are appointed by the governor with the advice and consent of the senate for four-year terms. Three of those members must be agricultural producers, three must be commercial lenders, and two must be individuals who are not agricultural producers or commercial lenders. The other board members are the secretary of commerce, the secretary of agriculture, trade and consumer protection, and the executive director of the Wisconsin Housing and Economic Development Authority (WHEDA), or their designees. The executive director of WRFA is appointed by the secretary of agriculture, trade and consumer protection.

The bill authorizes WRFA to issue bonds to carry out its functions. WRFA's bonds are not state debt. The bill authorizes WRFA to have no more than $26,000,000 in outstanding bonds at any one time, excluding bonds for the Beginning Farmer Program (described below). The bill creates an individual and corporate income tax exemption for interest on bonds issued by WRFA.

Because WRFA is not a state agency, numerous laws that apply to state agencies do not apply to WRFA. However, WRFA is treated like a state agency in the following respects, among others: 1) it is subject to the open meetings laws; 2) it is subject to auditing by the Legislative Audit Bureau; 3) it is treated like a state agency for purposes of the law regulating lobbying; 4) the Code of Ethics for Public Officials and Employees covers WRFA; and 5) employees of WRFA are considered state employees for the purposes of state retirement benefits and health insurance coverage. WRFA is subject to the open records law, except that personal and financial information provided by a person seeking financial assistance from WRFA is confidential.

Agricultural loan programs

The bill authorizes WRFA to operate four agricultural loan programs. Under these programs, WRFA participates in loans made by private lenders to eligible borrowers. An eligible borrower is a natural person who resides in this state or a partnership or family farm corporation that operates in this state with a net worth below amounts specified in the bill. The limits on net worth may be adjusted by a two-thirds vote of the board. WRFA may establish additional requirements for eligible borrowers. The interest rate that WRFA charges for its portion of a loan must be less than the interest rate charged by the private lender. WRFA must ensure that its interest in the security for a loan has a higher priority than the private lender's interest.

One type of agricultural loan in which WRFA may participate is a loan for the purchase of farm property in this state. The seller of the property must partially finance the purchase by lending the eligible borrower the amount by which the purchase price exceeds the principal of the farm purchase loan plus any downpayment. WRFA may not finance more than 45% or $125,000, subject to adjustment by a two-thirds vote of the board, of the principal of a farm purchase assistance loan.

Another type of agricultural loan in which WRFA may participate is a loan to an eligible borrower for agricultural improvements, including the purchase and construction or installation of improvements to land or buildings and including facilities for generating energy from wind or animal waste. The collateral for a loan must include a first mortgage on farm real estate. WRFA may not finance more than 45% or $125,000, subject to adjustment by a two-thirds vote of the board, of the principal of an agricultural improvement loan.

The bill also authorizes WRFA to participate in a loan to an eligible borrower for the purchase of stock or other interest in a cooperative that owns and operates, or proposes to build or purchase and operate, a facility for processing an agricultural commodity or a byproduct of an agricultural commodity. The eligible borrower must produce the commodity that will be processed or the byproduct of which will be processed at the facility. WRFA may not finance more than 45% or $24,000, subject to adjustment by a two-thirds vote of the board, of the principal of an agricultural cooperative stock loan.

The final type of loan in which the bill authorizes WRFA to participate is a loan to an eligible borrower that raises livestock for improvements to land or buildings or other permanent structures that are useful for the purpose of raising livestock. The collateral for a loan must include a first mortgage on farm real estate. WRFA may not finance more than 45% or $250,000, subject to adjustment by a two-thirds vote of the board, of the principal of a livestock operation modernization loan.

Loan guarantee programs and program for beginning farmers

Current law authorizes the Wisconsin Housing and Economic Development Authority (WHEDA) to operate three agricultural loan guarantee programs and a Beginning Farmer Program. Under the loan guarantee programs, WHEDA guarantees repayment of a percentage of the outstanding principal amounts of loans made by private lenders to qualified borrowers. This bill eliminates the authority of WHEDA to make new loan guarantees under these programs and to issue bonds for the Beginning Farmer Program beginning one year after this bill is enacted. The bill gives authority to WRFA to operate similar programs.

The bill authorizes WRFA to operate an Agricultural Production Loan Guarantee Program, which is similar to the program currently operated by WHEDA that is commonly known as the Credit Relief Outreach Program (CROP). This program provides guarantees to lenders for loans to farmers to finance the purchase of seed, feed, tillage services, or other services or consumable goods necessary to produce an agricultural commodity. Generally, to be eligible for a loan guarantee, a farmer must not meet the lender's minimum standards of creditworthiness to receive the loan without the guarantee and the farmer's debts must total at least 40% of the amount of the farmer's assets. The total outstanding amount of all loans to a borrower that are guaranteed under the program may not exceed an amount set by WRFA that may not exceed $100,000 (the maximum is $50,000 under CROP). The term of a loan may not extend after March 31 of the calendar year following the calendar year in which the loan was made.

The bill authorizes WRFA to operate a Farm Assets Reinvestment Management Loan Guarantee Program. This program provides guarantees to lenders for loans to farmers to finance the acquisition of agricultural assets or the improvement of facilities or land. To be eligible for a loan guarantee, the amount of the farmer's debts may not exceed 85% of the farmer's assets. The total outstanding amount of all loans to a borrower that are guaranteed under the program may not exceed $300,000, or $150,000 if any of the loans is affected by any other state or federal credit assistance program. The term of a loan guarantee may not exceed five years, except that the term of a loan guarantee for the acquisition of land or facilities may not exceed ten years.

The bill authorizes WRFA to operate an Agricultural Development Loan Guarantee Program. This program provides guarantees to lenders for loans for working capital, physical plant, or machinery and equipment used to process or market a product from a raw agricultural commodity produced in this state. The loan must result in new or more viable methods for processing or marketing the product from a raw agricultural commodity. To be eligible for a loan guarantee, a borrower must not meet the lender's minimum standards of creditworthiness to receive the loan without the guarantee and the borrower's principal place of operations must be in a city, village, or town with a population of less than 50,000. The total outstanding amount of all loans to a borrower that are guaranteed under the program may not exceed $750,000. The term of a loan guarantee may not exceed 15 years unless the loan is extended by WRFA.

The bill authorizes WRFA to operate a Nutrient Technology Loan Guarantee Program. There is no similar program under current law. Under this program, WRFA would provide guarantees to lenders for loans for nutrient management or odor mitigation technology on farms. The bill authorizes WRFA to establish maximum terms for loans that are guaranteed and other eligibility requirements for the program.

The bill provides for a Wisconsin agricultural reserve fund which would consist of funds to guarantee loans, but the bill does not provide funding for the reserve fund. The bill authorizes WRFA to guarantee loans up to a total principal amount of $25,000,000, but this amount may be increased or decreased by the Joint Committee on Finance. The bill requires WRFA to ensure that the cash balance in the reserve fund is sufficient to maintain a ratio of $1 of reserve funding to $4.50 of total outstanding principal of loans guaranteed.

The bill authorizes WRFA to administer a program to assist beginning farmers to purchase agricultural land. The program provides below-market interest rate financing to new farmers through the use of a federal tax exemption provided to lenders. The bill authorizes WRFA to issue up to $17,500,000 in bonds for this program. Beginning farmer bonds are limited obligations of WRFA, payable solely out of the revenue derived from loan agreements. The lender assumes all risk of default on a loan under this program.

Additional powers

The bill authorizes WRFA, in consultation with the Department of Commerce, to implement the following programs for the purpose of promoting the development of agricultural business:

1. A revolving loan fund program for loans to finance agricultural businesses.

2. An equity financing program under which WRFA acts as an intermediary to facilitate investments in agricultural businesses.

3. A conservation trading program under which WRFA acts as an intermediary in the aggregation and trading of environmental credits related to agricultural production.

This bill will be referred to the Joint Survey Committee on Tax Exemptions for a detailed analysis, which will be printed as an appendix to this bill.

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:

AB684, s. 1 Section 1. 7.33 (1) (c) of the statutes is amended to read:

AB684,5,3 7.33 (1) (c) "State agency" has the meaning given under s. 20.001 (1) and includes an authority created under ch. 231, 232, 233, 234, or 237, or 238.

AB684, s. 2 Section 2. 13.172 (1) of the statutes is amended to read:

AB684,5,9 13.172 (1) In this section, "agency" means an office, department, agency, institution of higher education, association, society or other body in state government created or authorized to be created by the constitution or any law, which is entitled to expend moneys appropriated by law, including the legislature and the courts, and any authority created in ch. 231, 233 or, 234, or 238.

AB684, s. 3 Section 3. 13.62 (2) of the statutes is amended to read:

AB684,6,2 13.62 (2) "Agency" means any board, commission, department, office, society, institution of higher education, council or committee in the state government, or any authority created in ch. 231, 232, 233, 234, or 237, or 238, except that the term does not include a council or committee of the legislature.

AB684, s. 4 Section 4. 13.94 (4) (a) 1. of the statutes is amended to read:

AB684,6,18 13.94 (4) (a) 1. Every state department, board, examining board, affiliated credentialing board, commission, independent agency, council or office in the executive branch of state government; all bodies created by the legislature in the legislative or judicial branch of state government; any public body corporate and politic created by the legislature including specifically the Fox River Navigational System Authority and the Wisconsin Rural Finance Authority, a professional baseball park district, a local professional football stadium district, a local cultural arts district and a family care district under s. 46.2895; every Wisconsin works agency under subch. III of ch. 49; every provider of medical assistance under subch. IV of ch. 49; technical college district boards; development zones designated under s. 560.71; every county department under s. 51.42 or 51.437; every nonprofit corporation or cooperative to which moneys are specifically appropriated by state law; and every corporation, institution, association or other organization which receives more than 50% of its annual budget from appropriations made by state law, including subgrantee or subcontractor recipients of such funds.

AB684, s. 5 Section 5. 16.002 (2) of the statutes is amended to read:

AB684,6,23 16.002 (2) "Departments" means constitutional offices, departments and independent agencies and includes all societies, associations and other agencies of state government for which appropriations are made by law, but not including authorities created in chs. 231, 232, 233, 234, 235, and 237, and 238.

AB684, s. 6 Section 6. 16.004 (4) of the statutes is amended to read:

AB684,7,6 16.004 (4) Freedom of access. The secretary and such employees of the department as the secretary designates may enter into the offices of state agencies and authorities created under chs. 231, 233, 234, and 237, and 238, and may examine their books and accounts and any other matter which in the secretary's judgment should be examined and may interrogate the agency's employees publicly or privately relative thereto.

AB684, s. 7 Section 7. 16.004 (5) of the statutes is amended to read:

AB684,7,11 16.004 (5) Agencies and employees to cooperate. All state agencies and authorities created under chs. 231, 233, 234, and 237, and 238, and their officers and employees, shall cooperate with the secretary and shall comply with every request of the secretary relating to his or her functions.

AB684, s. 8 Section 8. 16.01 (1) of the statutes is amended to read: