Covering more than 75% of the nation’s total landmass, rural America is home to only 50 million people. Formerly defined by the agricultural industry, rural areas are increasingly diverse, requiring a varied approach to development that addresses traditional problems caused by isolation, poverty and lack of infrastructure and community resources—as well as modernization and integration projects such as the government’s recent investments in broadband and general focus on business development.
The U.S. Department of Agriculture (USDA) Rural Development (RD) office, often referred to as the “venture capitalist” for rural America, consolidates a number of agencies with roots in the Great Depression that were successful over the years in supporting the agriculture industry, electrifying rural America and building community resources.
RD’s mission is “assisting rural communities to create prosperity by providing financial and technical assistance to rural residents, businesses, and private and public entities for a broad range of purposes that bring prosperity and better living to Rural America,” which it approaches through more than 40 rural development programs focusing on housing, community facilities, water and waste management, business and technological development, among other areas. It claims $91 billion in investments in rural home ownership, business development and community and technological infrastructure between 2001 and 2008, with more than 1.7 million jobs created or saved as a result. Speaking in 2008, then-RD Under Secretary Thomas C. Dorr noted that the agency’s loan and loan guarantee portfolio exceeds $100 billion for the first time in history. In FY 2012, RD claims to have a $155 billion portfolio of loans and expects to administer $20 billion in loans, loan guarantees and grants through its programs.
Since The Washington Post broke the story in April 2007, RD has come under increasing criticism for the fact that the vast majority of its budget actually goes to metropolitan areas, including resort and retirement developments—more than three times the amount provided to poor or shrinking rural areas.
Dorr was once forced to pay fines for violating the rules of the very agency he once headed.
In 1935, President Franklin D. Roosevelt established the Resettlement Administration to help relocate families stricken by the Depression, to address soil-erosion and to provide emergency funding for farmers. The Administration’s functions were expanded to include funding for housing, community projects and business development when Congress established the Farmers Home Administration (FmHA) in 1946. The Rural Electrification Administration (REA, established 1935, integrated into USDA in 1939) also contributed to rural development through electrification, telephone and telecommunications—and most recently, Internet services.
“Rural policy as an identified congressional concern, however, may be dated to the 1972 Rural Development Act, an amendment to the Consolidated Farmers Home Administration Act of 1961,” according to congressional sources.
The USDA Rural Development agency was created as part of a 1994 Department reorganization, in which former FmHA’s “non-farm financial programs for rural housing, community facilities, water and waste disposal and rural businesses,” as well as the former REA’s utility programs, were consolidated under the authority of Rural Development.
At that time, the Rural Development mission was divided into three components. Because these three are closely aligned, they are commonly referred to as the USDA Rural Development, Business & Cooperative Programs. They are:
1. Rural Business-Cooperative Service (RBS). Its mission is to "to enhance the quality of life for rural Americans by providing leadership in building competitive businesses including sustainable cooperatives that can prosper in the global marketplace."
2. Rural Housing Service (RHS). This service is responsible for providing safe, sanitary, and affordable housing for very-low-income, low-income, and moderate-income rural families.
3. Rural Utilities Service (RUS). It traces its roots directly to the REA (mentioned above).
With a $155 billion loan portfolio, Rural Development (RD) administers $20 billion in program loans, loan guarantees, and grants. There are more than 40 separate programs, which include low-interest housing operations, U.S. Department of Agriculture (USDA)-backed loans for businesses and grants for communities and non-profit groups.
Electric services are historically and currently an integral part of rural development. According to the USDA, rural America “currently enjoys high-quality electric service.”
Most rural electric utilities are cooperatives, serving 11% of the population and 75% of the country’s total land mass. Average service coverage is 10,000 customers (as compared with typical investor-owned utilities, which service an average of 315,000), who are mostly residential, more sparsely distributed and tend to have different demands and peak use schedules. This makes rural utilities costly, requiring extra capacity and larger per-capita investment to serve peak demand.
Recent policy initiatives to restructure the electric market have caused price increases—and controversy. The RD has begun to shift focus toward business development that incorporates alternative energy sources and production.
In 2000, the National Telecommunications and Information Administration said Internet access was 62% for urban households and 53.7% in rural areas.
But advances in technology now make access to broadband the key measurement of Internet usage and the NTIA says, according to 2010 census figures, that rural areas lag significantly behind urban areas, 65.9% to 51%.
Water investment is also more costly in rural areas (which are sparsely populated with a limited tax base), requiring higher per capita investments for development, environmental compliance and maintenance costs for drinking water and wastewater treatment operations.
Budget: FY 2013, the presidential budget includes $6.1 billion for RD electric programs; $25 million for distance learning and telemedicine; and $22 million for broadband programs. Water and waste disposal spending for FY 2013 is a proposed $1 billion in direct loans and $415 million in grants.
Housing and Community Facilities
Community development programs tend to focus on activities like fostering community organizations and infrastructure to encourage leadership, cohesion and involvement rather than economic development. Programs are also meant to target high-poverty and isolated areas, and encourage private sector development and investment. Specific programs deal with housing stress and offer rental assistance.
Budget: FY 2013, the presidential budget requests approximately $1.486 billion in budget authority for a $28.3 billion program encompassing all rural housing services. (Those numbers were $1.4 billion and $26.7 billion respectively FY 2012.) Some $320 million in budget authority and $12.9 billion of the total program in 2009 were one-year-only costs associated with the Recovery Act passed to deal with the financial downturn.
Further Reading: USDA’s Economic Research Service (ERS) offers information on community development issues, which underscore rural development community programs. (See AllGov’s ERS page, Development at the Urban Fringe and Beyond: Impacts on Agriculture and Rural Land, Rural Areas Benefit From Recreation and Tourism Development, One in Four Nonmetro Households are Housing Stressed, The Two Faces of Rural Population Loss Through Outmigration, U.S. Farm Structure: Declining -- But Persistent -- Small Commercial Farms and Debt Landscape for U.S. Farms Has Shifted.
For more information on Housing and Community Facilities:
Also, the Empowerment Zones and Enterprise Community program (EZ/EC) provides community-based grants.
Business and Cooperative Programs
Business development programs aim at building industry, attracting investment, and helping rural economies integrate in national/global economies. There are a wide range of approaches and assistance programs offered by RD. See the USDA general approaches for support to business development.
The FY 2013, the presidential budget requests $132 million in budget authority for $986 million in Rural Business-Cooperative Services. That compares to $364 million and $1.3 billion, respectively, FY2012.
Special Initiatives include: Rural Cooperative Development Grants, Value-Added Agricultural Product Market Development Grants, Business Information System Network (BISNet), Biobased Products and Bioenergy Program (BIOMASS) and Community Adjustment and Investment Program (CAIP), among others.
From the Web Site of Rural Development
Stakeholders include residents of rural areas (including those being developed for retirement and recreation) and metro and suburban areas that qualify for Rural Development (RD) assistance; business investors; utility companies and Internet/technology providers; water and waste treatment industries (also environmental regulators); agricultural and manufacturing industries concentrated in rural areas; alternative fuel industry; politicians pandering to rural base; etc.
Recipients of business loans and grants may include individuals, corporations, partnerships, cooperatives, public bodies, nonprofit corporations, Indian tribes, and private companies.
The Cooperatives Program serves cooperative members, directors, management, educational institutions, organizations, rural residents, and all others with an interest in the cooperative form of business.
Single Family Housing Programs provide home ownership opportunities to low- and moderate-income rural Americans.
Multi-Family Housing Programs offer loans to provide rental housing for very low-, low-, and moderate-income families; the elderly; and persons with disabilities.
On July 19, 2010, Shirley Sherrod was forced to resign her position as Georgia State Director of Rural Development (RD) days after video excerpts were posted online by Andrew Breitbart, blogger and media commentator, which purported to show her making racist remarks to a gathering of the NAACP Freedom Fund. The story was quickly picked up by the national media and evoked widespread condemnation of her inside and out of government, including a tweet from NAACP President Benjamin Jealous that he was “appalled.”
However, within days it was established that Sherrod’s videotaped comments had been edited and taken out of context. Sherrod, who is black, was making precisely the opposite point with an uplifting story of how she helped a white family avoid loss of their farm through foreclosure in 1986 while employed at a private advocacy firm for African-American farmers. Most of the media quickly reversed course, President Obama personally called Sherrod to express his “regret” about the controversy and Agriculture Secretary Tom Vilsack offered her a new job, which she declined.
Oliphant, Los Angeles Times)
Rural Development Funds Going to Suburbs Resort Towns
With more than 40 programs under its aegis and growing, the Rural Development division of the U.S. Department of Agriculture (USDA) is a quiet but controversial presence, distributing billions of dollars in development aid and loans/loan guarantees. Many observers note what can seem like arbitrary administration of these funds to areas designated by a vague policy definition of “rurality.” The majority of recipient communities are, in fact, not at all rural—but suburban, retirement- or resort-economy-based, and positively metropolitan.
USDA officials maintain that they follow regulations as directed by the department and Congress, but those regulations are increasingly confusing or opaque. Rural America covers 75% of the nation’s landmass, and can no longer be predominantly defined (culturally, demographically, or economically) by the agriculture industry. But inconsistent definitions of “rural” lend well to subjective—and ultimately, strategic interpretations.
According to an article published in The Washington Post in April 2007, the USDA has doled out in excess of $70 billion in grants, loans and loan guarantees through its Rural Development program since 2001. A Post investigation found that more than half of that money has gone to “metropolitan regions or communities within easy commuting distance of a midsize city, including beach resorts and suburban developments.” Metropolitan areas with populations of 50,000 or more received $30.3 billion—more than triple the amount given to poor or shrinking rural counties (which are the ostensible beneficiaries of Rural Development), which received a total of $8.6 billion for the same period. (Even retirement or recreational communities got $8.8 billion).
Among the beneficiaries: Providence, Nantucket, Martha’s Vineyard and Cape Cod, home to some of the wealthiest beach towns in the country. Such popular destinations, which are located conveniently close to big cities and swell with summering populations (and the resultant tourist economies) and boast exorbitant real estate prices, are somehow eligible for billions of dollars in USDA rural development aid. In addition to the “beach towns from Cape Cod to New Jersey to Florida” that the Post reports “collected federal money for water and sewer systems, town halls and boardwalks,” are the electric and Internet companies awarded low-interest loans to provide for affluent southern suburbs.
A long way from the early narrow focus of the Rural Development initiative, whose roots go back to emergency relief for farmers and destitute rural communities in the Great Depression—the breadth and scope of “rural” communities in need has expanded dramatically. Requirements for determining eligibility for RD assistance tend to be quite variable and even subjective, depending on the program itself and leaving room for lawmakers to weigh in. For some programs, assistance is limited to towns with populations below 2,500, but for others numbers can reach up to 50,000, and some census-based decisions can divide eligible communities by street or block.
The Post article further argues that, over time, the RD program has “become more complicated, bureaucratic and secretive,” with reporters deferred to central authority in Washington and “heavily redacted” documents obtained under the Freedom of Information Act, which hid loan amounts and recipient locations.
Only a day before the Post article was published, Agriculture Secretary Mike Johanns had proposed changes in the 2007 Farm Bill that would include streamlining RD, with more funds going to rural health care and community facilities, as well as a consolidation of energy grant, business loan, loan guarantee and Community Programs platforms. At the same time, Under Secretary Thomas Dorr announced a $62.9 million provision for distance learning and telemedicine loans, $75 million in loan and grant combinations and $15 million in grants.
An analysis of USDA farm program payments and Rural Development funding by the private, non-profit Center for Rural Affairs concluded that “the farm commodity payment system allows larger farm operators and businesses to bypass normal, individual payment limitations through loopholes that allow for the organization of businesses and corporations in a way that leads to the massive payments.”
“In total, rural development funding for 260 counties (with over 1,400 incorporated municipalities and nearly 3 million people) received about three-fifths the amount of the 260 top farm program recipients, and for every dollar invested in rural development projects $1.69 goes to one of the individuals or business in the top 20 farm program recipient list.”
Thomas Dorr, July 2005-May 2009
A native of Marcus, Iowa, Thomas C. Dorr earned his BS degree in business administration from Morningside College in Sioux City, Iowa. For more than 30 years, he was president of a family farming and agribusiness company that consisted of a corn and soybean farm, a state-licensed commercial grain elevator and warehouse and two limited liability companies.
In 1995, the USDA forced Dorr’s Pine Grove Farm to return $17,000 in federal agricultural subsidies that it had improperly obtained. (And according to the Environmental Working Group, Dorr Farm operations received $466,673 in farm subsidies from 1995 to 2002.) Despite the dubious record, President George W. Bush appointed him Under Secretary in 2001—to the same Department he was found guilty of cheating. Following Dorr’s nomination, another USDA probe found further violations, which Dorr’s farm quieted with another $17,000 in fines. According to a Texans for Justice Report, few Republicans supported Dorr’s nomination, and shortly after his nomination, in 2002, the Senate Agricultural Committee Chair from his home state said, “Mr. Dorr lacks the judgment, outlook and temperament for this very important position.” Senator Tom Harkin was more direct, saying, “As the CEO of a corporation, Mr. Dorr, in filing false information with USDA, does not meet the standard set by President Bush when he signed a new law on corporate responsibility just last week.”
Although appointed in 2002, he was not sworn in until July 2005.
President Bush had appointed Dorr in 2000 to his Agriculture Department transition team, and invoked temporary recess appointment powers (after Congress went into recess during the summer of 2002) to install Dorr as a USDA undersecretary and as a board member of the Commodity Credit Corp. After his nomination, comments he had made in 1999 on the Iowa State Board of Regents—suggesting that Christian and European backgrounds of certain Iowa farmers “enabled them to succeed”—surfaced amid controversy. The timing was especially poignant because in the same year, the USDA has settled a class-action suit by black farmers who accused the Department of discriminatory lending practices. Other criticisms of the Under Secretary stem from his reported praise of—and policy support for, big agribusiness over family farms.
Dorr is currently president and CEO of the U.S. Grains Council, a non-profit organization that promotes the use of U.S. barley, corn and sorghum and related products worldwide. Dorr coordinates the Council’s worldwide staff and oversees market development activities in more than 50 countries around the world.
Jill Long Thompson, 1995-2001
A native of Warsaw, Indiana, Long was appointed by President Bill Clinton. She served until 2001 with the start of the George W. Bush administration.
President Barack Obama’s choice to be Under Secretary of Agriculture for Rural Development, Dallas P. Tonsager, ws confirmed by the Senate on May 12, 2009. A South Dakota farmer who was part of the Obama campaign, Tonsager has been a generous supporter of the Democratic Party. However, he also received an appointment from George W. Bush.