Community Food Systems and Cooperatives

1
Community Food Systems and Cooperatives

• Nebraska Sustainability Leadership Workshop
• April 30, 2009
• Norfolk, NE
• Michael Heavrin
• Center for Rural Affairs Lyons, NE

2
Value-Added Programs

• In 2002, Value-Added Agricultural Product Market
  Development Grant was known as the Value-Added
  Development Grant (VADG) Program
• In 2003, the grant program became known as the
  Value-Added Producer Grant (VAPG) program.

3
Community Food Systems

• The food and agricultural systems in the US has
  changed a great deal through the last half of the
  20th Century
• Trend toward industrialization of agriculture
• Trend toward centralization of production and
  processing operatives
• Farmer control over production, marketing and
  labor is being replaced by corporate control
• The farmer share of the consumer food dollar was
  41 in 1920, while in 1990, it had dropped to 9.
  The number is now only about 4.

4
Community Food Systems

• The food and agricultural systems in the US has
  changed a great deal through the last half of the
  20th Century
• The nation is losing thousands of farmers
  annually.
• Fewer farmers result in the deterioration of
  rural communities both socially and
  economically.
• Today, few consumers really know where their food
  comes from
• In many areas of the country especially in
  poverty areas people are not able to access
  fresh, locally grown food

5
Community Food Systems

• According to Washington State University, a
  community food system is one in which
  sustainable food production, processing,
  distribution and consumption are integrated to
  enhance the environmental, economic and the
  social and nutritional health of a particular
  location.

6
Community Food Systems

• Today, food system issues include
• Improving access to an adequate, affordable,
  good tasting, fresh and nutritious diet.
• Supporting a stable base of family farms and
  ranches that can and will supply local food to a
  specific area.
• Most consumers prefer to buy from producers who
  use fewer chemicals and less energy, and who
  emphasize local inputs where possible.

7
Community Food Systems

• Other issues include
• Finding marketing and processing techniques that
  create more direct and beneficial links between
  farmers and consumers.
• Development of food and agriculture-related
  businesses that create jobs, re-circulate money
  in the community, and provide for community
  economic development.
• Value-Added Producer Grant program
• Farmers Market Promotion Program grants
• Creating food and agricultural policies that
  promote local food production, processing and
  consumption.

8
Community Food Systems

• It is essential that community food systems be
  established using a collaborative approach
• Local participation and support is necessary.
• Relevant stakeholders throughout the food
  system need to participate in organizational
  activities
• Local elected officials
• Farmers, ranchers or their associations
• Public health personnel and nutritionists
• Food processors and food retailers
• Food and agricultural agency representatives
• Small businesses and lending institutions
• Cooperative Extension, Non-Profits and
  Universities
• Area transportation, storage, labeling and
  packaging businesses

9
Community Food Systems

• Funding Resources are important to the successful
  formation of a community food system some
  potential resources include
• USDA programs VAPG, FMPP, CFP
• Community, regional or national private
  foundations (i.e. Kellogg, Kraft, Noyes)
• Churches national and local
• Civic Groups (i.e. Chamber, Rotary, Elks)
• Local, state or federal government programs
  including CDBG SARE EPA and DOE Sustainable
  Futures
• Individual donations, including fund raisers

10
Community Food Systems

• Due to the fact that farmers and ranchers will
  need to drastically revise the way they work, it
  is essential that funds be available to them in
  order to transition their farms from being
  producers of feed to being producers of food.
  One such USDA grant program is especially
  valuable the Value-Added Producer Grant program.

11
Value-Added Producer Grant Program

• Program Description
• Projected status of this years program
• Newest funding amount is uncertain at this point,
  but USDA expects the Notice to be released at any
  time.
• Grant Purpose, eligibility, terms, application
  process
• Opportunities for projects
• Funding How when to apply, preparing your
  application.

12
Value-Added Producer Grant Program

• Philosophy of the Program
• Help producers expand the customer base (by
  opening EMERGING markets) for their products or
  commodities, and ensure that a greater portion of
  the revenues derived from the value-added
  activity is available to the producer to allow
  farmers and ranchers capture a larger percentage
  of the consumer food dollar and assist producers
  in their efforts to diversify their operations

13
Value-Added Producer Grant

• Program designed to assist eligible agriculture
  producers or groups of producers add value to
  their commodity production.
• This program provides grants for planning
  activities or for working capital to implement a
  value added venture.
• Created via the 2002 Farm Bill, Reauthorized in
  2008 Farm Bill

14
What is an emerging market?

• An emerging market is a new or developing market
  for the applicant. That is, a market the
  applicant has not traditionally supplied. The
  venture must be focused on this new or developing
  market.
• An example of this emerging market is the
  community food system. Farmers and ranchers
  are encouraged by this grant program to diversify
  their operations and enable them to supply fresh,
  healthy and safe food products to their own area.

15
Value-Added Producer Grant Program

• Nationwide Allocation Funded in Nebraska
• FY02 37.0MM 1.6MM 13
  projects
• FY03 28.7MM 3.7MM 18 projects
• FY04 13.2MM 1.3MM 7 projects
• FY05 14.3MM 1.1MM 16 projects
• FY06 19.7MM 1.2MM 18 projects
• FY07 19.5MM 681,176 8
  projects
• FY08 18.4MM 123,000 4
  projects

16
Value-Added Producer Grant Program

• Three Categories of Eligibility
• Applicant Eligibility
• Product Eligibility
• Purpose (value-added activity) Eligibility

17
Value-Added Producer Grant Program

• Applicant Eligibility (4 Categories)
• Independent Producers
• Farmer or Rancher Cooperative
• Agriculture Producer Group
• Majority-Controlled Producer Based Business
  Ventures
• (Producers have 51 or greater ownership and
  control)

18
Value-Added Producer Grant Program

• 1. Independent Producer
• An individual producer of agricultural
  commodities or products (including products from
  aquaculture, fish harvesting, and wood lot
  enterprises).
• An association of producers such as a producer
  owned corporation, LLC, or LLP solely owned by
  producers.

19
Value-Added Producer Grant Program

• 1. Independent Producer (continued)
• A steering committee composed of agricultural
  producers in the process of organizing an
  association to operate a value-added venture.
• An independent producer can not produce under
  contract or joint ownership with any organization
  other than their own.

20
Value-Added Producer Grant Program

• 2. Farmer or Rancher Cooperative
• A business incorporated under state cooperative
  or corporation statutes that is farmer or rancher
  owned, farmer or rancher controlled, and benefits
  are returned to the farmer or rancher owner on
  the basis of patronage of the cooperative.
• Farmer or rancher owned cooperatives must propose
  ventures that are entering into emerging markets.

21
Value-Added Producer Grant Program

• 3. Agricultural Producer Groups
• Any organization that represents independent
  producers such as a producer trade association or
  a state or national commodity group. Agricultural
  Producer Groups must propose ventures that are
  entering emerging markets.
• Corn Growers Association Hog Producers
  Association Cattlemen and Grange are examples.

22
Value-Added Producer Grant Program
4. Majority-Controlled Producer Based
Business Ventures

• A corporation, LLC, LLP, or other type of
  business structures where producers have 51 or
  greater ownership and control of the entity.
  Majority-Controlled Producer Based Business
  Ventures must propose project activities that are
  entering emerging markets.

No more than 10 percent of the grant funds will
be awarded to these ventures.
23
Value-Added Producer Grant Program

• Value-Added Products
• Four distinct categories are considered
  value-added.
• A Value-Added Product Must
• Expand the customer base for the product or
  commodity, AND
• Result in a greater portion of the revenues
  derived from the value-added activity that is
  available to the producer.

24
Value-Added Producer Grant Program

• Value Added Product Eligibility
• 1. The changing of the physical state or form of
  the product to the extent that it cannot be
  returned to its original state.
• Examples include processing wheat into flour,
  corn into ethanol, slaughtering livestock or
  poultry, or slicing tomatoes.

25
Value-Added Producer Grant Program

• Value Added Product Eligibility
• 2. A product produced in a manner that enhances
  its value, as demonstrated through a business
  plan.
• An example is organically produced products.
• This category is not eligible for PLANNING funds.

26
Value-Added Producer Grant Program

• Value Added Product Eligibility
• 3. The physical segregation of an
  agricultural commodity or product in a manner
  that results in the enhancement of the value of
  that commodity or product.
• Examples include an identity preservation
  system for a variety or quality of grain desired
  by an identified end-user or the traceability of
  hormone-free livestock to the retailer.

27
Value-Added Producer Grant Program

• Value Added Product Eligibility
• 4. The term value-added agricultural
  product includes any agricultural commodity or
  product that is used to produce renewable energy
  on a farm or ranch.
• Examples collecting and converting methane from
  animal waste to generate energy

28
Value-Added Producer Grant Program

• Planning
• a defined program of economic activities to
  determine the viability of a potential
  value-added venture including feasibility
  studies, marketing plans, business plans and
  legal evaluations.
• Working Capital
• Funds which are used to operate the venture and
  pay the normal expenses associated with the
  operation of the venture.
• Completed feasibility study business plan on
  specific venture required.

29
Value-Added Producer Grant Program

• Costs that are Not Eligible include
• Plan, repair, rehabilitate, acquire, or construct
  a facility
• Purchase, rent, or install processing equipment
• Pay for the preparation of the grant activity
• Pay expenses not directly related to the funded
  venture
• Pay costs incurred prior to receiving the grant
• Fund political and lobbying activities
• Pay any expenses related to agricultural
  production

30
Value-Added Producer Grant Program

• Maximum Planning Grant Amount 100,000
• Priority points for smaller requests
• Maximum Working Capital Grant is 300,000
• - Priority points for smaller requests
• Applicants must provide matching non-federal
  funds at least equal to the grant
• Matching funds must also meet the purpose
  eligibility
• NOSA can be downloaded from web-site.

31
VAPG Application Process

• An Application consists of these things
• SF-424 Application for Federal Assistance
• SF-424A Budget Information - Non-Construction
  Programs
• SF 424 B Assurances - Non-Construction Programs
• Table of Contents
• Proposal Summary
• Eligibility Statement
• Proposal Narrative
• Project Title
• Information Sheet
• Goals of the Project
• Evaluation Criteria
• Verification of Matching Funds

32
VAPG Opportunities/Scenarios/Examples

• Goat producers initiating a feasibility study.
• Meat Cooperative requesting funds to complete a
  business plan and marketing plan.
• Cooperative requesting funds to hire a marketing
  manager.
• Producer requesting funds for advertising costs
  and office equipment.
• Cooperative requesting funds to pay for attorney
  fees.

33
VAPG Future Funding Periods

• Call for applications once a year
• Application announced via NOFA
• Information can be found on USDA RD website or
  can be mailed to you by contacting the Center for
  Rural Affairs or USDA RD
• --joan.scheel_at_ne.usda.gov
• --mikeh_at_cfra.org
• Template based on this years NOFA found at
• http//fpc.unl.edu/marketing/grant.htm

34
Other USDA Rural Development Funding Resources

• Business Industry Guaranteed loan program
• Business Industry Cooperative Stock Purchase
  Program
• Rural Business Opportunity Grant (RBOG)
• Rural Business Enterprise Grant (RBEG)
• Rural Cooperative Development Grant Program

35
Cooperative Marketing

• Center for Rural Affairs
• Rural Opportunities Stewardship Program
• Kathie Starkweather, Director

Nebraska Sustainability Leadership
Workshop Madison County Extension Office April
30, 2009 Norfolk, Nebraska
36
What is a Cooperative?

• Cooperatives are owned and controlled by the
  people who use them.
• Cooperatives operate for the benefit of members,
  rather than earn profits for investors.
• Cooperatives are incorporated under State Law.

37
What are the differences between a cooperative
and other businesses?

• Differences can be expressed in three basic
  principles
• the User-Owner Principle
• the User-Control Principle
• the User-Benefit Principle
• Cooperatives are a form of corporation, and as
  such, have some protection from risk

38
Why organize as a marketing cooperative?

• Increase supply for larger markets
• Improve bargaining position
• Reduce costs
• Expand new and existing market opportunities
• Improve product or service quality
• Increase income
• Enhance the local economy
• Efficient management of risk

39
Cooperatives involve

• Member-Ownership and Control
• Risk Management advantages
• Benefits (Common marketer)
• Opportunity for larger markets
• Quality and production standards are uniform
• Connections (Market and Production)

40
Nebraska Food Cooperative
                                                                                                 Our Mission To foster a local food community and promote a culture of stewardship by cultivating farmer-consumer relationships, promoting the enjoyment of healthful food, increasing food security through diversity, and enhancing overall rural sustainability.
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
41
Join the Co-opJoin the Co-op as a ShopperClick
here to join so you can purchase from the
cooperative. Join the Co-op and register to
sellWant to buy and sell through the Co-op?
First complete this membership form. Then you
will have the opportunity to continue to the
producer application.Current members register
to sell (you will need to login first)Click here
if you have products you would like to offer for
sale and you're already a member. Gift
MembershipsClick here if you would like to
purchase a membership for someone. (You don't
need to be a Food Co-op member to purchase a gift
membership.)If you've already registeredIf
you've registered as a member but haven't yet
paid for your membership, click here. Renew
Your MembershipClick here if you would like to
renew your membership.
42
Steps in Organizing a Marketing Cooperative

• Identify a market, product or project
• Form a leadership group of potential members
  (steering committee)
• Authorize Feasibility Study
• Prepare a Business Plan
• Secure Legal Assistance
• Organizational structure
• Liability issues
• Articles of Incorporation

43
Steps in Organizing a Marketing Cooperative

• Contact CPA for financial advice
• Contact resource persons for advice regarding
  risk management
• Insurance coverage
• Farm Liability
• Product Liability
• Risk analysis
• Hold a meeting of potential members to determine
  interest in forming a marketing cooperative

44
Steps in Organizing a Marketing Cooperative

• Conduct a survey of producers to determine
  feasibility of forming a marketing cooperative
• Raise start-up capital
• Seed Contribution from members
• Grant Funding
• USDA Value-Added Producer Grants
• Nebraska Cooperative Development Center
• Foundations
• Loans
• Investors

45
Steps in Organizing a Marketing Cooperative

• Compile an inventory of current and future
  product availability and supply
• Present a financial analysis to potential members
  (CPA)
• Develop a marketing plan
• Hold a general membership meeting to discuss
  current plan and determine whether or not to
  proceed.

46
Steps in Organizing a Marketing Cooperative

• Prepare Articles of Incorporation
• File the Articles of Incorporation with the
  Nebraska Secretary of State Office in Lincoln
• Establish membership standards
• Prepare Cooperative Bylaws
• Hold a general membership meeting
• Adopt Cooperative Bylaws
• Elect Board of Directors
• Board will elect officers of the Board

47
Steps in Organizing a Marketing Cooperative

• Call first meeting of the Cooperative Board of
  Directors
• Board of Directors should elect officers
• Secure working capital as outlined in the
  Business Plan
• Membership / Stock Certificate
• Grant Funding
• Loan Funding
• Investor Funding

48
Steps in Organizing a Marketing Cooperative

• Hire necessary staff (Complete with compensation
  package and job descriptions)
• Manager of the Cooperative
• Marketing Representative
• CPA
• Attorney
• Logistical Coordinator
• Transportation / Shipping
• Storage
• Distribution of products
• Certifying Officer (Farms/Feed Facilities)
• Quality Assurance / Control Officer (Meat)

49
Steps in Organizing a Marketing Cooperative

• Contract with buyers
• Contract with distributors
• Contract with shippers
• Contract with Cold Storage facilities where
  necessary
• Acquire facilities (if necessary)
• Begin operations

50
Potential Problems
51
Pitfalls

• Lack of rewarding market
• Lack of a clearly identified mission
• Inadequate planning
• It is not enough for the cooperative to decide
  WHAT SHOULD be done -- it must also determine HOW
  THINGS should be done
• Detailed plans must be adopted to achieve the
  goals of the cooperative, and to accomplish the
  Co-ops Mission

52
Pitfalls

• Lack of Member Leadership
• Input and prospective of producers is critical to
  the success of a cooperative.
• Role of producers should include contributing
  their knowledge and expertise.
• Lack of Member Commitment
• A cooperative MUST have broad base support -- not
  just support of leaders.
• If members are not totally committed to the
  project, it will probably not succeed.

53
Pitfalls

• Failure to use outside professionals
• Advisors and/or consultants.
• Farmers are experts at producing their products,
  but usually not experts in forming and operating
  a new cooperative.
• It is essential for a new cooperative to put
  together a team of outside experts
• Attorney
• CPA / Accountant
• Financial Institution / Lender
• Insurance Agent
• Consultant familiar with the industry

54
Pitfalls

• Failure to supply the demand of markets being
  tapped.
• Failure to identify and minimize risk
• Liability
• Competitors
• Governmental regulations
• Environmental issues
• Industry trends
• Unproven technology/methods
• Employing competent staff

55
Pitfalls

• Inadequate staff
• Farmers are usually engaged in the full-time
  business of farming.
• Farmers generally do not have the time, interest
  or expertise to manage a cooperative business.
• A competent manager MUST be hired to coordinate
  staff functions and direct business activities of
  the cooperative.
• Staff persons generally should NOT be active
  members of the cooperative.

56
Pitfalls

• Not having enough capital
• The first few months in the life of a cooperative
  are very rough -- too many bills and not enough
  income.
• It takes time to turn a profit, so members should
  be ready to step in and cover the legitimate
  expenses of the cooperative.
• Operations will probably not show a profit for at
  least four to seven years (IRS figures an average
  of five years).
• A financing plan should be adopted early to be
  sure the cooperative can weather the storm.

57
Pitfalls

• Ineffective or inadequate communication
• Communication is critical to the success of a
  cooperative venture
• Learn these points quickly
• Who should know
• What should be communicated
• How should the message be communicated
• When the message should be communicated
• Overly Optimistic Assumptions
• Failure to be a COOPERATIVE member of the group

58
Center for Rural Affairs

• Cooperative Marketing Assistance
• Available from the Center for Rural Affairs
• Marketing Alliances Project

59
Partnership Work

• Center for Rural Affairs
• College of Saint Mary
• Creighton University School of Law Community
  Economic Development Law Clinic
• Rural Community Advancement Project
• Nebraska Cooperative Development Center
• University of Nebraska

60
Marketing Alliances Project

• Articles of Incorporation - Draft to be reviewed
  by an attorney
• Cooperative Bylaws
• Labeling assistance
• USDA FSIS Approval assistance
• Form preparation assistance
• Linkage to personnel at USDA when necessary
• Linkage to label expediters when necessary

61
Marketing Alliances Project

• Risk Management Assistance
• Limiting liability of individual members
• Insurance explanation
• Farm Liability
• Product Liability
• Legal structure
• Limited Liability Company
• Limited Liability Partnership
• Corporation
• S-Corporation
• Communication assistance
• Facilitation of meetings

62
Marketing Alliances Project

• Linkage to funding sources
• USDA Value-Added Development Grants
• USDA RBEG
• USDA Renewable Energy Grants
• USDA FMPP
• North Central Region SARE
• Nebraska Cooperative Development Center
• Private foundations
• Other USDA Grant programs
• Government grant sources

63
Marketing Alliances Project

• Linkage to other collaborators
• USDA Rural Development
• College of Saint Mary
• Creighton University School of Law Community
  Economic Development Clinic
• Rural Community Advancement Project
• University of Nebraska Cooperative Extension
• Nebraska Cooperative Development Center
• Nebraska Department of Agriculture
• Nebraska Rural Development Commission
• Nebraska Department of Economic Development
• RCD Districts

64
Marketing Alliances Project

• Marketing assistance training
• Feasibility/Pre-Feasibility Studies
• Market identification
• Business Plan Development
• Market Plan Development
• Linkage to existing professionals
• Attorneys
• Insurance companies
• Accountants / CPAs
• Lenders

65
Other Center Projects

• Land Link Project
• Michael Heavrin and Wyatt Fraas
• Beginning farmer assistance
• Linkage between retiring farmers and new farmers
• Family Farm Sustainable Agriculture Project
• Wyatt Fraas
• Martin Kleinschmit
• Farming and ranching practices demonstration
• Farming and ranching education
• Technical assistance for farmers and ranchers

66
Other Center Projects

• Rural Enterprise Assistance Program
• Jeff Reynolds
• Peggy Mahaney
• Eugene Rahn -- NC Nebraska
• Adriana Dungan NE Nebraska Hispanic BD
• Dena Beck -- SW and SC Nebraska
• Nancy Flock SW and SC Nebraska
• Janelle Moran -- SE Nebraska
• Jerry Terwilliger Panhandle
• Monica Braun Women's Business Development
  Center
• Business plan assistance
• Technical assistance on all aspects of small
  business formation
• Linkage to other small business
• Meeting facilitation
• Loan assistance

67
Other Center Projects

• Executive Director
• Chuck Hassebrook
• Rural Opportunities and Stewardship Program
  Director
• Kathie Starkweather
• Rural Research and Analysis Program Director
• Jon Bailey
• Rural Policy Program Director
• Chuck Hassebrook (Interim)
• Rural Enterprise Assistance Program Director
• Jeff Reynolds

68
Any Questions?

• Center for Rural Affairs
• Rural Opportunities and Stewardship Program
• Michael Heavrin
• [phone], Ext 1008
• mikeh_at_cfra.org

69
Renewable Energy and Energy Efficiency Program
70
Energy ProgramsUSDA RURAL DEVELOPMENT

• The Food, Conservation, and Energy Act of 2008
• Renewable Energy for America Program (Section
  9007)
• Biorefinery Assistance (Section 9003)
• Repowering Assistance (Section 9004)
• Bioenergy Program for Advanced Fuels (Section
  9005)
• Biomass Research and Development (Section 9008)
• Rural Energy Self-Sufficiency Initiative (Section
  9009)

71
What is the Section 9007 Program?

• Designed to assist farmers, ranchers and rural
  small businesses with energy projects

72
What is the Section 9007 Program?

• Provides Grants Loan Guarantees for
• Renewable Energy Projects
• and
• Energy Efficiency Projects

73
What is the Section 9007 Program?

• Plus NOW provides Grant funding for
• Energy Audits Renewable Energy
  Development Assistance
• and
• Feasibility Study Funding

74
What is the Section 9007 Program?

• USDA has funded approximately 1,248 loan grant
  projects worth 93,853,183 since the Program
  began in FY 2003.
• For FY 2008, 1,157 applications nationwide were
  filed, requesting 1,205,714,554
• Nebraska received 207 applications in FY08, 170
  received funding including 4 Combination
  Grant/Guaranteed Loans.

75
Who is Eligible?

• Agricultural producers and rural small businesses
  can apply

76
What Projects are Eligible?

• Any renewable energy and energy efficiency
  project as defined in the law.

77
What Projects are Eligible?

• Renewable Energy Energy derived from
• wind
• solar
• renewable biomass
• ocean (including tidal, wave, current thermal)
• geothermal
• hydroelectric source
• hydrogen derived from renewable biomass or water
  using one of the above energy sources

78
What Projects are Eligible?

• Renewable Biomass any organic material that is
  available on a renewable or recurring basis.
  Includes
• Renewable plant material, including
• Feed grains
• Other agricultural commodities
• Other plants and trees
• Algae
• Waste material, including
• Crop residue
• Other vegetative waste material (including wood
  waste wood residues)
• Animal waste and byproducts (including fats,
  oils, greases, manure)
• Food waste and yard waste
• Materials, pre-commercial thinnings, or invasive
  species from National Forest System land public
  lands (See Section 9001 for further definition)

79
What Projects are Eligible?

• Energy efficiency projects typically involve
  installing or upgrading equipment to
  significantly reduce energy (BTU) use.

80
What Projects are Eligible?

• Pre-commercial or commercially available and
  replicable technology
• Grant requests 200,000 or less, commercially
  available technology only
• Projects must be technically feasible
• Must have sufficient revenues to provide for OM

81
What Projects are Eligible?

• Energy Efficiency Projects
• Energy Audit Required showing BTU Savings
• Renewable Energy Projects
• Business Level Feasibility Study Required
• If TPC 200,000

82
Business Level Feasibility Study
An acceptable feasibility study, completed by an
independent third party, should include, but not
be limited to, a discussion of the projects

1. Economic feasibility
2. Market feasibility
3. Technical feasibility
4. Financial feasibility
5. Management feasibility

83
Grant Program

• Grant Request cannot exceed 25 of project costs
• Maximum grant request
• 500,000 for Renewable Energy
• 250,000 for Energy Efficiency
• Minimum grant request
• 2,500 for Renewable Energy
• 1,500 for Energy Efficiency

84
Grant Program

• Applicant must demonstrate financial need
• Competitive funding process- awarded only once a
  year!

85
Guaranteed Loan Program

• Guaranteed Loan cannot exceed 75 of total
  eligible project costs.
• Minimum Guaranteed Loan 5,000
• Maximum Guaranteed Loan 25MM
• Simplified Application process for loans 600,000
  or less

86
Guaranteed Loan Program

• Maximum Percentage of Guarantee
• 600,000 or less 85
• 600,001 to 5 million 80
• 5 million to 10 million 70
• 10 million to 25 million 60
• Interest Rate set by Lender
• Guarantee fee 1 of guaranteed portion,
• with annual renewal fee of ¼ of 1 of the
  guaranteed portion.
• No Prepayment Penalty

87
Combination Grant/Guaranteed Loan

• Combination requests cannot exceed 75 of total
  eligible project cost
• Combo requests funded bi-weekly
• 100 of eligible combos funded to date
• (One state has recd 88 combo awards for 6.8MM
  to date in FY2008)
• By making an application for a guaranteed loan
  you help ensure yourself funding from
• a grant!

88
Guaranteed Loan Program

• Guaranteed Loan Terms
• Real Estate
• 30 years maximum
• Machinery and Equipment
• 20 years or the useful life
• Working Capital
• 7 years maximum
• Term W.C. Only, No Lines of Credit

89
Guaranteed Loan Program

• Equity
• 600,000 or less 15 Cash equity injection
• 600,000 - 25MM 25 Cash equity injection
• Grant funds can be used as equity for Combos
• Real Property can be substituted for equity if
  pledged as collateral

90
Guaranteed Loan Program

• Collateral
• Documented collateral value must be sufficient to
  protect the interest of the lender the Agency.
• Discounted collateral value normally equal to
  loan amount.
• Collateral should be discounted with sound
  loan-to-value policies.
• Loans must have at least a parity position with
  any unguaranteed loans.

91
Guaranteed Loan Program

• Appraisals
• 600,000 or less Summary Appraisal in
  accordance with USPAP
• 600,000 Self-Contained appraisal

92
BENEFITS OF COMBOS

• Reduce competition among grant only funding!
• Quicker notification of award!
• Lenders can assist existing customers or attract
  new via combination application!
• Assist with Increasing Energy Independence!

93
Contact Information
Grants assurance for local businesses farmers
via Combination applications.. Quicker
notification of funding.. Economic develop
partnering with a local lender. Partner with
USDA RURAL DEVELOPMENT Deb Yocum-Renewable
Energy Coordinator Ph. 402-437-5554 debra.yocum_at_ne
.usda.gov
94
Energy Community Food Systems

• As the cost of energy continues to rise, it will
  become more and more important to reduce the
  amount of energy needed to grow, raise, process,
  package, label, store, ship and sell food
  products. Community Food Systems would
  dramatically reduce the amount of energy required
  to feed people in this country.

95
Energy Community Food Systems

• Nebraska, being a rural state with many miles of
  roads between food producers and food consumers,
  is blessed with an amazing resource that can be
  used for economic development and the production
  of an incredible amount of renewable energy that
  can assist the nation in providing enough clean,
  affordable energy from within our own borders
  that resource is WIND.

96
Energy Community Food Systems

• Wind clean, renewable, inexhaustible, safe,
  and low cost energy. According to the American
  Wind Energy Association, the United States now
  generates 28,206 mega-watts (MW) of electricity
  (March, 2009) that makes the USA Number 1 in
  the amount of electricity generated from wind.

97
Wind Energy

• The potential wind energy generation capacity,
  however, is estimated at 10,777 billion kilowatts
  (kWh) more than twice the electricity generated
  in the United States today. Wind can generate
  electricity without consuming any natural
  resources or emitting any pollution or greenhouse
  gases.

98
Wind Energy

• Nebraska has the potential of generating
  868,000,000,000 kWh of electricity 8.05 of the
  nations wind generation capacity and
  approximately 16.1 of the current total
  electricity generated in the United States.
• Nebraska ranks 6th among the states when it comes
  to wind generation potential.
• The state, however, now produces only 153 MW or
  150,000,000 kWh of electricity from wind power

99
Wind Energy

• Currently, the installed wind power state
  gigawatt club includes the following nine
  states (in order)
• Texas 7,907 MW
• Iowa 2,883 MW
• California 2,653 MW
• Minnesota 1,804 MW
• Washington 1,479 MW
• Oregon 1,363 MW
• New York 1,261 MW
• Colorado 1,068 MW
• Kansas 1,014 MW

100
Wind Energy
101
Wind Energy

• Indiana keeps its title as fastest growing state
  with the large 400.3-MW project that was brought
  online.  States tallying the most rapid growth in
  wind capacity in the first quarter include
• Indiana 75
• Maine 55
• Nebraska 53
• Idaho 49
• New York 34

102
Wind Energy and Economic Development In Nebraska
Nebraska Wind Energy Conference Eric
Lantz Energy Analyst NREL October 24, 2020

103
A few prefacing points

• Economic Development Theory
• Economic development is driven by spending and
  investment
• Economic impacts cascade through the economy
  providing direct, indirect, and induced impacts
• The rural nature of wind projects can increase
  the benefit to rural regions but project
  ownership and business involvement is critical to
  ensuring benefits remain local.
• Analysis Themes
• Building wind power provides economic development
  to Nebraska and the country
• Local manufacturing is the single largest factor
  that can influence the outcome of economic
  development impacts, but project ownership also
  matters.

104
Projects currently under development are expected
to have direct impacts in Nebraska

• Elkhorn Ridge Wind Energy Project 82 MW
• Bloomfield, Nebraska
• 15 of the total 140 million investment is
  expected to go to Nebraska goods and services
• Lifetime property tax payments 5.7 million
• Land lease payments in excess of 325,000 per
  year
• Work for more than 100 construction workers over
  the 9-month construction period
• Project revenue payments to Nebraska individuals
  and businesses that are at least 33 of gross
  power production revenues

105
Projects currently under development are expected
to have direct impacts in Nebraska

• Crofton Hills Wind Farm 42 MW
• Crofton, Nebraska
• Lifetime property tax payments 3.2 million
• Work for 50 construction workers
• 4 permanent jobs
• Landowner lease and project revenue payments in
  excess of 300,000 per year
• Project revenue payments to Nebraska individuals
  and businesses that are at least 33 of gross
  power production revenues

106
Building 1,000 MW supports thousands of FTEs in
Nebraska
Total GDP Contribution 260 million to 514
million
107
Operating 1,000 MW supports hundreds of long-term
jobs in Nebraska
Annual GDP Contribution 30 million to 55
million
108
Lifetime Results Summary
Lowest Scenario Highest Scenario
7,800 MW Total FTE Jobs 64,000 117,000
7,800 MW Total Economic Output (millions) 7,800 14,100
7,800 MW Total Land Lease Payment (millions) 547 641
7,800 MW Total property tax payments (millions) 570 570
1,000 MW Total FTE Jobs 7,600 14,500
1,000 MW Total Economic Output (millions) 870 1,640
1,000 MW Total Land Lease Payment (millions) 70 82
1,000 MW Total property tax payments (millions) 73 73
Based on construction period and 20 years of
operations
109
Conclusions

• Across all scenarios, the economic development
  impact of utility-scale wind power is large.
• Present trends suggest that the C-BED development
  trajectory will remain popular and may dominate
  wind development in Nebraska.
• The greatest economic development benefits to
  Nebraskans are derived under conditions where
  local ownership is high and manufacturers are
  located in Nebraska