The Hagstrom Report

Agriculture News As It Happens

Obama's USDA: Undersecretary Tonsager says Recovery Act a big help through Rural Development


Third of an occasional series of U.S. Department of Agriculture interviews


Agriculture Undersecretary for Rural Development Dallas Tonsager runs what former President Clinton last week called “an underappreciated division of USDA that will become more important in the years ahead.”

Many economists and develop experts would agree, because USDA’s Rural Development mission area is charged with bringing high-speed Internet service to the remotest areas of the country, as well as supporting essential public facilities and services such as water and sewer systems, housing, health clinics and emergency services in some of the country’s poorest and remotest areas. It also provides loans to businesses through banks and community-managed lending pools.

In the Recovery Act, Congress recognized Rural Development’s role in stimulating the economy and gave it most of the money that went to USDA, except for food stamps. The stimulus package spending has come under criticism, but in an interview Tonsager said Rural Development’s stimulus spending had created 200,00 jobs and made improvements to rural America.

The rural development mission area was formed in 1994 during Clinton’s presidency by bringing together the old Farmers Home Administration non-farm financial programs for rural housing, community facilities, water and waste disposal, and rural businesses and the former Rural Electrification Administration’s electricity and telephone programs, which became part of the Rural Utilities Service. Since then, bringing high-speed Internet service to rural America has been added to RUS’s responsibilities.

Rural Development has a $115 billion portfolio of loans and administers $20 billion in loans, loan guarantees and grants per year, according to its website. The Recovery Act gave Rural Development approximately $3 billion for a rural business enterprise grant program, $2.5 billion in loans and grants for broadband and $968 million for housing loans.

Tonsager, who grew up on a farm near Oldham, S.D., was the South Dakota state director for rural development in the Clinton administration, served two terms as the president of the South Dakota Farmers Union, served as the executive director of the South Dakota Value Added Agriculture Development Center from 2002 to 2004, and from 2004 to 2009 was on the board of directors for the Farm Credit Administration. He co-chaired the private sector effort in favor of Obama in the 2008 presidential campaign.

Following are excerpts from the interview.

HAGSTROM: Rural development is such a broad area. What do you consider your major accomplishments in the first two years?

TONSAGER: The stimulus act was by far the largest accomplishment of the mission area. We had our regular program but the stimulus doubled it for 18 months. Broadband was at the top of that list. We created or saved 200,000 jobs, [built or improved] 81,000 homes, [funded] 3,800 water and sewer projects. That affected about 9 million people. We did 1,400 community facilities — hospitals, hospitals, clinics, schools, fire stations, libraries. Financing construction affected 15 million rural residents. We did first-responder vehicles and equipment, police cars and fire trucks.

There were tens of thousands of people in local organizations [who applied for the money]. We did not push the money at them. They had to come and ask for it. They pursued this. They competed for it. I can’t let it pass that people are beating up on [the Recovery Act] without [noting] the huge things it’s done.

HAGSTROM: Rural development programs are now fairly separate. You have said you would like Congress to give you more flexibility in the administration of those programs. Do you have any more details to provide on what you want and what impact you think this flexibility would have?

TONSAGER: The “great regions” approach the secretary [Tom Vilsack] has advocated — several agencies are taking that approach. People recognize we have to have communities and groups of communities working together. [Through the stimulus] we really expanded our relationship with the private sector lenders — $3 billion in business and industry loan guarantees.

The old telephone loan program, the new broadband program — maybe they need only to be one program.

The revolving loan funds — maybe we do not need quite so many.

We have 40 programs. Each has strong constituencies. There are particular needs. We are not looking to cut somebody out, but maybe we could be more effective.

HAGSTROM: A recent report said that USDA had made housing loans under the stimulus package to people who were not qualified. How you do respond to that?

TONSAGER: The Office of the Inspector General did a sample of 100 of our guaranteed home loan stimulus money out of 81,000. They found difficulties in 28 out of 100. We disagree with them. We found problems with 10. OIG is important. They provided ideas.

We don’t belief the kinds of things they are [citing] are a systematic problem or a material threat. The foreclosure rate is low. We strongly believe in the program. We implemented this at the depth of the crisis. It kept the market moving. Going forward it won’t be a cost of the taxpayers. We’ve implemented a fee.

HAGSTROM: With agricultural prices so high, how can you justify these programs in rural America?

TONSAGER: Most of these loans are not to agriculture producers. The commodity prices have been a bit cyclical.

The great bulk of the single-family [housing] loan programs are to people in communities of 20,000 or less. The business and community loans go to communities of 50,000 or less.

HAGSTROM: You have said previously you were disappointed that there have not been more applications for loans for development of renewable energy plants. Has there been any change in that situation?

TONSAGER: We implemented nine new programs out of the farm program. We’ve taken up the mantle on biofuels and advocacy for biofuels and alternative energy.

We haven’t gotten a huge number of applications. Anecdotally I hear a lot of things are developing. I think there is a burgeoning number that are coming along. [The questions are] How will the marketplace respond? Will investors invest? Of course, they’ve got to be economically viable.

HAGSTROM: How do you feel about the last two years? What do you want to accomplish in the next two years?

TONSAGER: We feel great about the effort on the stimulus. The biofuels complex is really exciting. The next two years will continue with renewable energy, broadband.

Bringing in capital has to be a push in the next two years. We need to develop a relationship with people in those markets.

I hope we are at the bottom of the recession. We think the agency should be nimble and take on new tasks. It’s time to build confidence.

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