Operator:
Good day everyone and welcome to the USDA Rural
Development Community and Business Program. Today's conference is
being recorded.
At this time, I would like to turn the conference
over to Mr. Bill Finerfrock; please go ahead, sir.
Bill Finerfrock:
Thank you, Operator. This is the National Association
of Rural Health Clinics, Rural Health Clinics Technical Assistance
conference call. I appreciate everyone's participation today.
Today's topic is Access to Capital. We have three
presenters today. We have Joseph Ben-Israel, Director of the Community
Program Guaranteed Loan Division, Department of Agriculture, Yoonie
MacDonald, who is the Community Programs Direct Loans and Grants
Division, of USDA, she is the Deputy Director of that program, and
we also have Chuck Andilucci who is loan specialist with the Business
Programs, USDA Rural Development.
I want to welcome everybody to today's call. These speakers today
will address how non-profit and for-profit rural health clinics
can obtain capital they need to expand facility, buy equipment,
renovate an existing facility and then we'll leave some time at
the end for questions. The program is scheduled for one hour. First
45 minutes will consist of the presentation from the USDA representatives
and the remaining 15 minutes will be dedicated to questions and
answers.
This project, this call series is sponsored by the Health Resources
and Services Administration, Federal Office of Rural Health Policy
in conjunction with the National Association of Rural Health Clinics.
The purpose of the project is to provide RHC staff with valuable
technical assistance and RHC specific information. Today's call
is the 17th in the series which began in late 2004 and will continue
for the next five years. There is no charge, as you know, to participate
in this series. Individuals can sign up to receive announcements
regarding call dates, topic and speaker presentations at www.ruralhealth.hrsa.gov/rhc.
If, in the future you have questions you'd like
to submit in advance, you can send those to info, I-N-F-O at narhc
(info@narhc.org) and put RHC teleconference question in the subject
line. Callers should have all received a copy of the presentation
and you can follow along as you're listening. We've asked a speakers
to indicate when they moved to the next slide. In addition, if you
want other information about this series, you can go to our website
which is www.narhc.org.
I want to thank you and turn it over to our first
speaker, Joseph Ben-Israel.
Joseph Ben-Israel:
Thank you, Bill and let me just say it's a privilege
to be able to visit with you today. We at USDA Rural Development
are proud to be partnering with the National Association of Rural
Health Clinics and its members association and we think this partnership
is a great thing for rural American and we're pleased to bolster
support or it.
Today, like to highlight three areas. We're going
to be talking about one, USDA Rural Development and the Community
Facilities Guaranteed Loan Program. Secondly, we're going to be
talking about our Community Facilities Direct and Grant Program
and, lastly, we'll be talking USDA Rural Development Business and
Industry Guaranteed Loan Program. Next slide.
Not so long ago, USDA Rural Development and its
predecessor agency, Farmer's Home Administration was viewed as the
lender of last resort. A lot has changed in the last five or six
years. And, today, we're focused more on emerging opportunities
and leveraging private, commercial investment in more sustainable,
market driven programs.
The mission of USDA Rural Development is two
things, one, to create economic opportunities for rural communities
and two, to essentially improve the quality if life of rural communities.
We are, essentially, an investment bank for rural America with a
current portfolio of 95 billion invested in infrastructure, housing,
business development and essential Community facilities. You know,
there are three big factors that draw people to a city despite the
negative. You've got jobs. Secondly, opportunities for upward mobility
and lastly, critical services, with health care and education at
the top of the list. And what's so exciting today from the standpoint
of USDA rural development is, probably for the very first time we
have the Opportunity to level the playing field in all of these
areas. And we feel that the bottom line is that rural communities
that can offer good schools, quality health care, public safety
and economic Opportunity are really a great place to live. Next.
Well Community Programs administers programs
designed to develop and/or improve essential Community facilities
and services for public use in rural communities of 20,000 or less
including, unincorporated areas. And these facilities include everything
from schools to health care facilities to fire and rescue, police
stations, child care, public buildings, to name a few. In fact,
as my staff often reminds me that we have the flexibility to finance
over a hundred separate types of essential Community facilities.
Next slide.
Community Programs has essentially three financing
tools for helping develop an essential Community facility. One,
a guarantee loan program. Two, a direct loan program and three,
a small competitive grant program. Now, we have the challenge, as
all of you do out there, of trying to allocate limited resources
as sparingly and as cost effectively as possible. And quite frankly,
from a national statewide basis, that's a hard thing to do given
the level of demand. We push hard for guaranteed loans because it
allows us to, to service and help more rural Americans, more rural
communities and serve more essential Community facilities. And borrowers
frequently push hard for direct loans because it gives them just
a little better interest rate in some instances and the tension
is never going to go away. However, our funding continues to, to
move from direct loans and grants, towards guaranteed loans. These
guaranteed loans essentially generate a multiplier on the tax payer's
investment and allows us to serve more essential Community facilities
and more rural communities at any given level of budget authority.
Let me give you an example. Rural Development
represents just 1.5 percent of all of the Department of Agriculture's
congressional budget authority. But, Rural Development generates
over 11.5 percent of all USDA's program level funding. And the reason
for that is because of the multiplier effect with our guaranteed
loan program. And, clearly, in terms of budget authority, the guaranteed
loans allow us to really crunch way above our weight.
Now the Community Facility Guaranteed Loan Program
is designed to foster the availability of commercial credit for
rural communities to develop their essential Community facilities.
And under the CF Guaranteed Loan Program, we can guarantee a loan
made by a commercial lender to a qualified borrower. The program's
essentially a lender driven program. So a lender will request a
guarantee, and, if approved, the lender will make and service the
loan. Also, the CF Guaranteed Loan Program can be made in conjunction
with a CF direct loan. Next slide.
For FY 2007, we have available approximately 219 million in CF guaranteed
loan funds. The amount allocated to Rural Development State offices
is approximately 187 million. And currently we have available approximately
just over 30 million available in our National office reserve. Essentially,
once a State - Rural Development State office has exhausted their
State allocation, they may request funds from our National Office
Reserve. And, just one other note, States that haven't used their
State allocation by August 3rd, those monies are pulled, they revert
back to our National office fund to fund other worthy projects where
States have exhausted their State allocation. Next slide.
Eligible organizations include public bodies
such as cities, towns and special service districts such as health
care district. Non-profit organizations are eligible I they can
demonstrate Community support and ties with the local Community
as well as tribal - federal recognized Indian tribes. Next slide.
Proceeds can be used to construct. They can be
used to enlarge or otherwise improve essential Community facility.
Includes everything from the purchase of machinery, equipment to
vehicles. Reasonable professional service fees such as legal, engineering,
architectural, feasibility studies. Proceeds can be used for interest
on the interim financing, the construction loans. Basically, initial
operating expenses for inaudible organizations as well as reasonable
loan fees and costs. Next slide.
Now, we may guarantee up to 90 percent of a loan
or bond issuance made by a qualified lender to a borrower depending
on risk of the credit. To date all requests for 90 percent guarantees
have been honored and, I didn't' mention from the past, we've been
administering the CF Guaranteed Loan Program since 1992.
And, lastly, the lender may sell the guaranteed
portion of the loan on the secondary market but, must retain 50
percent of the unguaranteed portion and continue to service the
loan or bond instrument. Next slide.
Now, under the CF Guaranteed Loan Program, USDA
only charges a one time, one percent guarantee fee on the guaranteed
portion. And unlike the majority of federal guaranteed loan programs,
there is no annual renewal service fee. Most Federal programs now
charge a two percent guaranteed loan fee and an annual renewal service
fee. Next slide.
Now the interest rate is the lender's customary rate. It may be
variable or fixed and essentially it's negotiated between the lender
and the borrower. Next slide.
And loan terms may not exceed inaudible life
of the asset or 40 years, typically whichever is less. Some States
and local laws may further limit the terms. And, again, the term
of the loan is negotiated between the lender and the borrower. Next
slide.
Lender benefits. There is an active secondary
market for the CF guarantees significantly increasing the lenders
return on investment. Again, all loans are eligible for 90 percent
guarantee against loss with a Federal guarantee. Excellent Community
public relations allows the lender to give something back to the
Community. A lot of these banks, their employees live in these rural
communities and lenders use their own forms, their own loan documents
and security instruments. Next slide.
The guarantee allows the bank to extend longer
terms to their customers reducing the burden on cash flow. Funding
outlooks excellent compared with limited and competitive CF direct
loans. CF guaranteed loans may be leveraged with CF direct loans
effectively buying down the overall interest rate, improving cash
flow and helping to stretch the organizations limited resources.
There's no down payment required for the CF guarantee loan program.
We can guarantee up to 100 percent of the project costs, except
packaging fees. And only game in town in most markets, access to
financing for non-profits is extremely limited. There's no maximum
loan limits. The amount is based on project feasibility, repayment
ability and reasonable project costs. Again, USDA only charges a
one time, one percent guarantee fee on the guaranteed amount and
there is no annual renewal fee. And we'll go to the next slide.
Now just a quick snapshot of the application
process. Basically what happens is the lender and the borrower will
submit a joint pre-application for an eligibility determination
and USDA field staff from our Rural Development State offices or
one of our local area offices will meet with all the parties at
the project site, usually within 15 days of submitting a pre-application
to make a preliminary eligibility determination and to determine
whether or not there might be any environmental issues. At that
point, if eligible, the lender and the applicant will submit a joint
pre-application. And what - Rural Development at that point will
conduct - pretty simultaneously they'll conduct their financial
credit analysis and conduct the environmental assessment. And, if
approved, Rural Development at that point will obligate the funds
and issue, what we call a conditional commitment for guarantee to
the lender. And when that conditional commitment for guarantee,
the lender will complete their interim construction financing and
then project development will commence.
And once development work is completed and the
facility is operational, the lender, at that point, will close their
take out financing and they request the loan note guarantee. And
Rural Development just verifies that the conditions have been met
and issues the loan note guarantee. And under some - some lenders
and applicants may choose to submit a complete application in lieu
of a pre-application. Also, typically, loan approval takes approximately
30 to 60 days from the date of completion of the complete application
and, again, obviously, depending on the nature, scope and complexity
of the project. Next.
Since conception of the Community Facility Guaranteed
Loan Program we've invested approximately 59 percent of our guaranteed
loans made in health care facility, about 14 percent in schools,
13 percent in public bodies and the remainder in public safety,
recreation and others. Next slide.
And based on or outstanding loan portfolio, our
delinquency - current delinquency rate based on the number of loans
inaudible compare to that total loan portfolio is approximately
2.5 percent. Generally its an average that range from about two
percent. Now, if you look at our delinquency rate based on dollars,
our delinquency rate is actually only one-half of one percent. We
attribute this to the fact that these programs - these projects
have close ties to the Community and significant Community support.
So, in times of need what you'll see is that the Community will
come band together to help keeps the doors open. I think that's
really important when your looking at these essential Community
facilities. Next slide.
And with that I will turn it over to Yoonie.
Yoonie MacDonald:
Thank you, Joseph.
Joseph gave a very good overview of the Community
Facilities Direct Loan and Grant Programs in addition to his presentation
on the guaranteed program because much of what he said also applies
to the direct loans and grants.
As he indicated, Community facilities direct
loans and grants can be used to develop essential Community facilities
such as health care, public safety, public service and educational
projects and since the inception of the direct loan program in 1974
as Joseph indicated, we have funded over approximately a hundred
different types of Community facilities projects.
Essential Community facilities, what are we talking
about. We're talking about those facilities which provide essential
service to the local Community. And this service is one that is
typically provided by the local Unit of government. It's a facility
that's needed for the orderly development of a Community. And the
facility for a direct loan cannot include private, commercial or
business undertakings.
Eligible areas for the program as same as the
guaranteed program. It's rural areas such as cities, towns and Unincorporated
areas with a population of 20,000 or less according to the latest
e san e o census.
Eligible organizations are the same, public bodies,
federally recognized Indian tribes and non-profit corporations.
And for non-profit corporations, again, that is if they can demonstrate
significant ties with the local rural Community. And significant
ties or significant Community support can be demonstrated by the
applicant by having a broadly based board of directors that's representative
of the Community served or if they're receiving public funding through
taxes or Community fund raising. Or, if the not for profit has association
or has support from the local public body. Again, that is the requirement
for the non-profit organizations.
Legal authority. All our applicants must have
the legal authority to own, construct operate and maintain the facility.
They must also have legal authority to issue security and repay
debt. I'm sorry, I haven't been saying next slide for quite awhile.
But, anyway, next slide.
Test for other credit. Applicants for Community
facilities direct loans must provide certification that they're
unable to obtain credit elsewhere at reasonable rates and terms
and that they're unable to finance the proposed project from their
own resources. Also, they must have legal authority to issue security
and repay the debt. Next slide.
Community facilities direct loan terms are, as
Joseph said, the same, the useful life of the facility or maximum
of 40 years. There are no balloon payments allowed and, of course,
these terms are subject to State laws and organizational structures.
The interest rates - next slide. The interest
rates for the direct loans are adjusted quarterly and are tied to
the bond buyer index. We have three categories. Poverty rate, intermediate
rate and the market rate. The poverty rate is set by law at four
and a half percent. The intermediate and market rates apply to all
loans that do not meet the poverty rate. And the intermediate and
market rates are adjusted quarterly in accordance with the bond
buyer index and those are based on current use or municipal obligations.
Next slide.
In fiscal year 2006, we provided under the CF
Direct Loan Program, 574 loans totaling over $394 million. The average
loan size was $686,882. In 2007, we have available $297 million
in the direct loan program authority. Next slide.
Community facilities grants. As with the Direct
Loan Program, our Community facilities grants provide financial
assistance for public use facilities to primarily serve rural residence
and communities. The purposes again are the same as for those with
Direct and Guaranteed Programs. The amount of grant assistance which
is eligible is based on the financial feasibility of the project.
CF grants funds are generally made for smaller projects and those
that are not economically feasible without the grant. Recently,
grant funds have primarily been used for equipment purchases. Grant
determinations are made on a sliding or a graduated scale based
on the population and the median household income of the area. Next
slide.
In fiscal year 2006, 563 grants were made for
over $17.9 million. In fiscal year '06 the average size grant was
$31,959. In fiscal '07 we have $17 million for a special initiative
grant program for rural communities with extreme unemployment and
severe economic depression. What do we mean by that? These are areas
where the not employed rate is greater than 19.5 percent as determined
by Department of Labor of the State or the Community is located.
These grants are in addition to the CF Grant Fund. The program administration
and eligibility requirements for the economic impact initiative
grants are the same as for our CF Grant Program. Next slide.
I just wanted to recap that in fiscal year 2007
in direct loan funds we had - we have $297 million dollars and in
grants, 17 million. That's our regular Community Facilities Grant
program. Then we also have the Special Initiative Economic Impact
Grant program of 17 million. Next slide.
As you can see, of those projects funded in fiscal
year 2006, most of our direct loan and grant dollars went toward
health care such as clinics. This amounts to about 46 percent of
all direct loan and grant funds in '06 which went to health care.
Next slide.
As of March 30, 2007 the Community Facilities
Direct Loan portfolio was 3,422 borrowers with 4,898 loans totaling
approximately $2.3 billion. The direct program is 98 percent current.
And, as also with the guaranteed program, the delinquency rate has
been averaging around two percent or lower for many years. Next
slide.
Application process. Applications are processed
at the Rural Development field offices and we would like you to
check out our website - the Rural Development website for State
office address and phone numbers. For additional information on
our programs or about the application process, ask for the Community
Programs Director or Community Programs staff member. Next slide.
I want to take a few minutes to go over the types
of projects financed with Community Facilities Program funds. I
know we keep these hundred different types of projects. Next slide.
Since the inception of the program - Direct Loan
Program in 1974, approximately 50 percent of all program funds,
that's direct, guaranteed and grant, have gone toward the development
of health care projects. Some examples of these projects are hospitals
- and that includes critical access hospitals, assisted living facilities,
nursing homes, clinics and office buildings. We have funded over
500 clinics with our direct, guaranteed and grant funds and I want
to go over some of these clinics which were funded.
In Ashley, Arkansas, Main Line Health Systems
Incorporated received $1,000,405 direct loan and a $100,000 grant.
The funds were used to construct a 12,000 square foot medical center
for delivery of medical and dental services to the low income residents
of Southeast Arkansas.
In Yerington, Nevada, the Gray Basin Primary
Care Association received a $35,000 grant to be used for purchase
of dental equipment. This equipment included an x-ray Unit, operatory
lights, two operatory chairs, a film processor and a doctor's stool.
$35,000 grant went a long ways on that project.
In All Knack, Washington, we funded the Okanogan
Behavioral Health Care Center. This is a psychiatric center. A $3,540,000
guaranteed loan was made for construction of a 29,328 square foot
office building which included 18 medical examination rooms to treat
clinical dependency. This also included private offices with exam
rooms, training rooms, a waiting room and four conference rooms.
In New Castle, Pennsylvania, we funded a group
home, The Human Services Center. A $500,000 direct loan and a $100,000
grant was used to renovate and expand an existing farm house for
adolescence with mental disorders. Prior to this group home being
available, the service was not available to the area and the children
had to be placed outside the Community which caused tremendous hardships
for the children and the parents.
In DeLeon, Texas we funded a migrant clinic.
This was The Cross Timbers Health Clinic Incorporated. This was
a migrant health center which was leasing space that was not adequate
to meet the growing demand of the area. So, a guaranteed loan of
$575,000 was made and with that they purchased an existing building
which was large enough to accommodate the growth. They also purchased
examination tables, office furniture and computers. Next slide.
Some other examples of projects funded are public
safety projects. We funded fire stations, fire trucks, ambulances,
police stations, rescue and ambulance buildings as well as purchase
of equipment. Next slide.
Examples of educational facilities financed.
Public schools, charter schools, colleges, libraries, vocational
schools as well as equipment for those schools. Next slide.
Finally, some other examples of facilities financed
are child care and adult day care centers, homeless shelters, domestic
violence centers, Community centers and municipal office buildings.
Next slide.
The Community Facilities contact - I'm representing
Chad Parker today, so this is what's on the slide - is Chad Parker.
He is the Director of the Community Programs Direct Loan and Grant
Division and this - his mailing address and also his phone and e-mail
address. If you need additional information you can always go to
the Rural Development website, www.rurdev.usda.gov.
This concludes the presentation on the Community
Facilities Direct Loan and Grant Program and I would like to turn
this back over to Joseph.
Joseph Ben-Israel:
OK. Thank you, Yoonie. I'd just like to make
two, two quick comments.
One is two months ago Secretary Johanns rolled
out the President's proposal for the 2007 Farm Bill. And outside
of farm country a lot of people have this view that the Farm Bill
is all about farmers and the safety net. But, really, the Farm Bill
is about a lot more. It's about expanding America's export market.
It's also about renewable energy opportunities and building stronger
rural communities and it's about many other things. It's also about
having access to critical quality health care services that are
vital to rural communities.
You know, in a critical moment following a farm
accident, it can be a heart attack or some other health care emergency.
Time wasted inaudible to reach a emergency room or some other critical
care facility, obviously, can mean the difference between life and
death. And I think many of you know that first hand. So, rural health
care is going to be a key priority for the 2007 Farm Bill.
The Administration is proposing funding to complete
the reconstruction, as well as rehabilitation of many of our 1200
plus rural critical access hospitals over the next five years. And
because of subsidy costs for this guaranteed loan and the direct
loan are relatively low, it's going to take a relatively small amount
of investment to address this problem. So, what this initiative
will do is proposing to invest approximately 85 million in budget
authority to support over 1.6 billion in Community facility guaranteed
loans and direct loans for these critical access hospitals.
Another issue I'd like to bring up is that rural
- using rural development through our Community programs, we entered
into a memo of understanding with the Department of Health and Human
Services Health Resource and Service Administration, also known
by the acronym of HRSA. And what this agreement does is provide
- HHS provides projects with annual operating grants, if needed,
during the life of the Community facility direct or guaranteed loan
in amounts sufficient to essentially amortize annual loan costs
and, obviously, to the extent funds are available. But, I just wanted
to add those two other notes.
And with that, I will turn it over to Chuck.
Chuck Andilucci:
OK, good afternoon. I'm here to speak about the
Business and Industry Guaranteed Loan Program. Next slide please.
Our program is the Rural Business Cooperative
Service. Next slide.
Our program, as you heard before, probably has
some of the same qualifications as previously discussed but, we
have some differences. But, again, we also like to finance business,
industry, unemployment in rural areas and we also like to bolster
the existing private credit structure to the guarantee of quality
loans. Next slide please.
Location. Important the definition of rural area.
Rural area, you'd have to be located in that. Of course, inaudible,
you have to be for profit, inaudible deal with the for profit side
of this. You heard previously about not for profit. We are for profit.
You have
Male:
Can I interrupt a second just to make a point
that in your program, rural is defined as 50,000?
Chuck Andilucci:
I was ready to inaudible, that was my inaudible
slide
Male:
OK.
Chuck Andilucci:
Yes.
Male:
Thank you.
Chuck Andilucci:
The boundaries of the city or town with no more
than 50,000 inhabitants or the organized area of a city and town.
Next slide please.
The borrower can be any legal entity, federally
recognized, tribal group, public body or individual, cooperative,
corporation, partnership, et cetera and also deal with various sectors,
various inaudible codes, main factions, wholesaling, retailing,
service oriented. So, we're not hospitals. Hospitals, medical facilities
are part of us but, our spectrum of offering loans is very wide.
Next slide please.
Partnership. We have types of lenders. We have
traditional lenders such as the Federal or State chartered banks,
farm credit banks, savings and loans inaudible lenders. We have
non-traditional lenders also that inaudible approval from inaudible
office and we recognize. And we insist that all lenders must have
adequate experience and expertise to make service and collect V
and I loans. Next slide please.
Loan purposes. Common purposes is to finance
loans proceeds, real estate purchase and improvement, machinery
and equipment, working capital, integrated agricultural production,
debt refinancing, feasibility studies, and things such as that.
Next slide please.
The fee and percentage. We are a little bit different
than what you heard before, we do charge fees. We have an annual
renewal fee which is .25 percent and which is due on the balance
every December 31st and that does change annually. Right now, it
currently is .25 percent and a guarantee fee is two percent and
some occasions one percent but, it's two percent normally. Loan
limits for us are $25 million. And we have a sliding scale for the
percentage of guarantee limits. If the loan is up to and including
$5 million, that's an 80 percent guarantee. If it's more than $5
million and less and including 10 million it's a 70 percent guarantee.
And if it's over 10 million, it's a 60 percent guarantee. Next slide
please.
Calculation annual renewal fee is based on the
following. The outstanding - as I said, the outstanding principal
balance as of December 31st, multiplied by the percentage of the
guarantee. inaudible rate is annually published in the Federal Register,
right now its .25 as we said here for 2007 and the fee remains fixed
at half percentage - at the percentage for the life of the loan.
Next slide please.
The loan structure. Negotiated by the lender
and borrower and approved by the agency. It can be a fixed rate.
It can be a variable rate. It can be a combination thereof. Its
maximum terms are for real estate, 30 years, for machinery, equipment
the lesser of 15 years or useful life, for working capital, seven
years. We do not have inaudible payments. Next slide please.
We encourage a pre-application for all loans
in excess of $10 million. So we encourage that. Again, just to understand
all this and to get more specifics, you must - it would be very
good to contact our State office and at the end of this discussion
I will give you a web address for that.
Application, we have an application form 4279
dash 1, Parts A and B and it must be signed by the lender, the borrower.
If it's created jobs, jobs creation is an important part of our
program. So, if it needs a Department of Labor clearance, creates
more than 50 jobs, we need that. A form 194020, Environmental Assessment
Analysis, it's a very important part of this whole process.
Personal and commercial credit reports, appraisals
as well as financial statements on annual - well, for the application
and the pre-application. Next slide please.
The application. The lenders written analysis
are very important part of this. Included in that are spreadsheets
for three previous years for an existing business and two years
pro forma before a balance sheet at start up and on closing. And
as I said, two years projected year end balance sheets or income
statements with ratios, comparisons with industrial standards and
data shown in complete dollars and in common size form. Next slide
please.
Other elements of the application and of the
credit - lender's credit analysis. Lender's primarily responsible
for determining credit quality. The lender needs to document the
necessity of debt refinancing, determining the project - whether
or not the project is viable and, if necessary, approve cash flow
and create new or save existing jobs. Also in that analysis the
lender must address the borrower's management, the history of the
debt repayment, necessity of any debt refinancing and credit reports
of the borrower and/or their principals. Next slide please.
Also, the proposed loan agreements attached,
a business plan, a feasibility study will be required if the new
business and as well as a lender's certification. Next slide please.
The feasibility study, it's five elements that
we insist on be included in it. Economic feasibility, market feasibility,
technical feasibility, financial feasibility and management feasibility
and remember a business plan is not a feasibility study. So, identify
as such.
For equity, we require some different from the
others. The tangible balance sheet equity. We require a minimum
of ten percent for existing businesses and a minimum of 20 percent
for new businesses. We ask for financial statements prepared in
accordance with GAAP, except for the inaudible soft purchase program.
But for - what we're talking about here for hospitals and/or clinics,
financial statements prepared in accordance with GAAP. So, next
slide please.
Tangible balance sheet equity. Appraisal surplus
for the most part is not allowed. Subordinate debt is debt, not
equity and so again, including that can also include intangibles,
good will, R and D, customers list, et cetera. Again, when it's
presented to the State office, be very clear on how your equity
is being calculated. Next slide please.
Collateral. Sound and sufficient to protect interest
of the lender and Agency. Appropriately discounted and normally,
inaudible know, for machinery and equipment, all depends on the
useful life of it and the condition of it at the time through the
appraisal. V and I guarantees are not collateral and cannot secure
a guaranteed portion with other collateral separate from the guaranteed
loan. Next slide please.
Planning and performing development. Lenders
responsibilities include if there is a design on this structure,
for instance, they would have to do - they would have to monitor
and as far - and in addition, project control. Next side please.
We also require insurance and the various types
of insurance that we require are hazard insurance, life insurance
or worker's compensation and flood insurance, among others.
Conditional commitment. Once the application
is sent into the State office and it's within their authority limits
- each State office has different authority limits. If it's within
theirs, then they handle it there and would approve it as such and
would issue conditional commitment. If its in excess of their authority
limit, would - brought into the State office where that would be
analyzed and, again, a memo would be, you know, be approved or denied.
And with the approval, be sent back to the State office and they
would issue a conditional commitment which would include the Agency's
requirements, all conditions that must be met and incorporated into
the final loan agreement. And, always a caution, please never let
that expire. Next one.
OK. On this next one, the just - we're just trying
to explain the - and reference the CFR regulations of our program.
Its 4279-A, 4279-B and 4287-B. Next slide please.
Now, you've heard me - at other presentations
of our fair examples of health care projects - and we've had several.
The Sabine Medical Center in Many, Louisiana. That loan was for
$7.28 million, loan guarantee to fund salary - inaudible finance,
working capital and re-finance existing debt. This facility is a
one story structure with slightly over 28,000 square feet of space,
has 48 acute care beds, including four intensive care Unit beds.
Another one we're proud of is Potomac Valley
Hospital of West Virginia in Keyser, West Virginia. This hospital
is currently being constructed. It's a $10 million guarantee loan
to construct a new 25 bed critical access hospital. Next slide please.
Other examples, the Desert View Regional Medical
Center in Nevada, for instance, was a $17.5 million guarantee loan
to construct a 25 bed acute primary care hospital. And another one
is - was the Northern Dutchess in Rhinebeck, New York. It was 12.43
million guaranteed loan. And it took out construction financing
and debt refinancing of a 68 bed acute care facility. Next slide
please.
One more here, a CareSouth Carolina in Darlington,
South Carolina. This a 1.25 million guaranteed loan for permanent
working capital to a private, for profit health and human services
provider located in the Pee Dee District of South Carolina. And
now its CareSouth Carolina and it operates nine medical centers
in seven communities in the Pee Dee region.
Web links. If you need to contact us further
on the web, it's rurdev.usda.gov and for any area eligibility we
have a site here, www.rurdev.usda.gov/rda. Next slide please.
This completes my discussion and presentation;
I would like to return it to the facilitator for questions.
Operator:
If anyone does have a question, you can signal
at this time by pressing star one on your touch tone telephone.
If you're on a speakerphone, please make sure your mute function
has been turned off to allow your signal to reach our equipment.
A voice prompt on your phone line will indicate when your line is
open to ask a question, please state your name before posing your
question. Again, that is star one if you have a question. We'll
pause for just a moment to assemble the queue.
Again if you have a question, please press star
one now.
Male:
Just also if you would identify yourself by your
name and your state and city if possible so we know where you're
calling from.
Operator:
We have no questions at this time.
Male:
All right, I have a couple. What - Chuck what
is the advantage of your program as opposed to just going to your
local bank and securing financing? Why would someone go through
your program as opposed to just going directly to the local bank?
Chuck Andilucci:
Well, possibly a more favorable interest rate
might be secured, for one. Other, it's just the type of loan that
we give and, of course, the breadth of them. I mean, we have - we
can deal in amounts of the 25 million, for instance, up to and we
have authority, you know - a large authority, close to a billion
dollars. So, those two things alone probably would be advantageous
for the borrower to consider us.
Male:
So, a project that a local banker might not find
attractive doing on his or her own would perhaps find attractive
because they would be able to have a USDA backing behind it?
Chuck Andilucci:
That's correct. For those limitations and in
for profit, that's correct.
Male:
Yoonie, you mentioned that the - under the -
they had to demonstrate significant Community support was on one
of your slides. It indicates a broadly based board representing
Community served, public funding through taxes, fund raising, support
by a local body. Is that financial support? Or would a letter of
support? If you had a non-profit health care facility and they had
a letter of support from the Community, would that be indicative
of support by a local public body?
Yoonie MacDonald:
That would but, we would prefer if they could
give us a monetary value to that.
Male:
OK. All right and I don't know if any of you
- where in the Department of Agriculture Appropriations Bill is
this program funded?
Male:
In the terms of the appropriation pact?
Male:
Yes.
Male:
I don't have that in front of me. I inaudible
if Yoonie or
Yoonie MacDonald:
I'm sorry, what was the question?
Male:
Where in the Department of Agriculture Appropriations
Bill is this program funded?
Yoonie MacDonald:
Oh, you mean the Con Act.
Male:
Not - I don't - I think you're talking about
- you mean the annual appropriation.
Male:
Your annual appropriation.
Male:
I believe its under rural development.
Yoonie MacDonald:
inaudible.
Male:
Somewhere.
Bill Finerfrock:
OK. All right, I was - inaudible question for
me for just - for when I follow up.
We had some questions that were submitted before
the call, let me get to those. This one it says they're an independent
rural health clinic. They have six physicians, three nurse practitioners.
Independent is just how they're classified by CMS. With a need to
expand to a larger facility. Are there grants available to help
fund construction? And this clinic is Family Medicine of Port Angeles,
Washington. And I suspect I know the answer to the question but,
somebody want to take a stab at that?
Male:
Yoonie you want to
Male:
Yes.
Yoonie MacDonald:
We typically do not like - our grant agreement
has some items in there which specifically state that if, for some
reason or, some purpose - the purpose for which the grant was made
cannot continue. For example, if we put money toward construction
that they would have to repay us. So, for that reason we typically
use the grant money for such things as purchase of equipment, for
fire fighting - such as fire fighting equipment or we purchase --
things that have a short life. inaudible cars, that type of thing.
Bill Finerfrock:
OK. Also, to the extent that you give grants,
the entity getting the grant would also have to be a non-profit,
correct?
Yoonie MacDonald:
Yes, that is correct. Its not to say that a grant
could not be made with a guaranteed loan, because I think there
were a couple instances in which this was the case.
Bill Finerfrock:
I think it said in like some of your examples
it was the combination of both the loan guarantee as well as the
grant?
Yoonie MacDonald:
The examples I gave had - the direct loans had
a grant with them.
Male:
Right.
Yoonie MacDonald:
There were no grants associated with the guaranteed
loans.
Bill Finerfrock:
So they may want to contact the person whose
identified on your website as the contact for the State of Washington
and then pursue the conversation with them to see what might be
feasible.
Yoonie MacDonald:
Absolutely. The name and the State of Washington?
Bill Finerfrock:
Yes, this particular question came from Washington.
Yoonie MacDonald:
OK. Yes, the Program Director has been there
for many, many years and she's very experienced so she could provide
them with a lot of information.
Bill Finerfrock:
OK. The next question I have came from the Kessler
Community Clinic in Mc Caysville, Georgia. They have a building
that's paid for and renovations there are almost complete. Their
biggest need is some type of support for salaries. It doesn't sound
like any of your programs are really geared towards salary support.
Yoonie MacDonald:
For the direct and the - excuse me, for the direct
and the grant program, no, we could not use those funds for salaries.
Bill Finerfrock:
OK.
Joseph Ben-Israel:
And, likewise for the Guaranteed Loan Program.
We have many for initial operating expenses for start up entities
but, unfortunately we don't have any type of like permanent, working
capital on an ongoing basis.
Bill Finerfrock:
Right. OK. Operator, do we have any calls yet
- or questions yet?
Operator:
We do. We'll take our first question. Please
state your name before posing your question.
Bill Finerfrock:
Your line's open. Hello.
Operator:
Hi, your line is open, please state your question.
OK. No response, we'll move on to our next question.
And, again, there is a voice prompt on your phone line that will
indicate when your line is open. Please state your name before posing
your question.
And let's to our next question.
Bill Finerfrock:
Go ahead.
Marty Bennett:
Hi, this is Marty Bennett from Riverside Family
Medicine in Mar a pahl Louisiana. This question is for Chuck regarding
the BMI loans.
Chuck Andilucci:
Yes.
Marty Bennett:
How do we go about finding those lenders that
are familiar with using your program?
Chuck Andilucci:
Well I think the best thing to do is just to
contact the lender that you're interested in and then that person
would - I mean that contact would say whether or not. Most lenders
are - I explained what a traditional lender was versus a non-traditional.
The only difference is if it would be a non-traditional one. Not
a bank, not, as I said before. And that one has not received approval
from us, then, there would have to be some time for that lender
to be approved. But other than that, just contact and see if they're
interested and/or familiar with our program.
Marty Bennett:
All right. Thank you.
Bill Finerfrock:
What - Chuck what is a non-traditional lender?
Chuck Andilucci:
That's anything other than what I stated before.
Anything other than a bank or the co-op bank or - it could be -
we've seen that - usually they're industrial development authorities.
Bill Finerfrock:
OK.
Chuck Andilucci:
That have lended under a State program and now
want to under our program.
Bill Finerfrock:
OK.
Chuck Andilucci:
And so they come in and get approval for that
and then they're just like any other lender, once they get the approval.
Chuck Andilucci:
OK.
Joseph Ben-Israel:
Bill, I might also add - it's Joseph Ben-Israel.
A lot of times a non-traditional lender may be like a local economic
and Community development entity. Like a CDC, for example. That
may be another good example. Also, a non-traditional lender may
be an investment banker or some type of organization that generally
deals more with bond financing.
Bill Finerfrock:
We're not talking about your Aunt Millie who,
you know, came into an inheritance who may be looking to make a
loan.
Joseph Ben-Israel:
No, unfortunately, not Aunt Millie. No.
Bill Finerfrock:
OK. All right. Next question.
Operator:
And moving to our next question. Caller please
state your name before posing your question.
Bill Finerfrock:
Go ahead.
Operator:
Caller, your line is open. Once again, a voice
prompt on your phone line will indicate when your line is open,
please state your name before posing your question. We will move
to our next question.
Bill Finerfrock:
Go ahead.
Len Hellworth:
This is Leon Hellworth. Can somebody share with
us the status of the Farm Bill as it relates to the critical access
hospitals?
Joseph Ben-Israel:
Yes, I'll be glad too. This is Joseph Ben-Israel.
I think I went over briefly, previously, the - as I mentioned Secretary
Johanns rolled out the President's 2007 Farm Bill proposal about
two months ago. And it's gone through a few gyrations working back
and forth on The Hill. And, I believe, at this point, it's pretty
much in the hands of our Congress. And they're going through their
various clearance process now. That's about as much as I can tell
you. We're hoping that we'll see something this summer.
I know if you go back to the 2002 Farm Bill -
I believe it was like in May of 2002 with the Farm Bill - 2002 Farm
Bill was published. So, it looks like if you compare it with 2002,
we're a little behind schedule but, we hopeful sometime this summer
it will be published.
But the 2007 Farm Bill will have a lot of opportunities
for rural communities - again, I mention everything from critical
access hospitals to renewable energy to just strengthening rural
communities. As well as - there's some - there's a proposal for
a half a billion dollars to fund the backlog - or reduce the backlog
of USDA Rural Development direct loan and grant applications for
water and sewer projects, as well as reduce the backlog for Community
facility - direct loans and grants for first responders. And I think
it also has some grant money in there for distance learning and
tele-medicine as well as broad band. But that's as much as I know
at this point.
Bill Finerfrock:
Len, where you from?
Len Hellworth:
Muenster, Texas.
Bill Finerfrock:
Texas. Thank you.
Len Hellworth:
Thank you.
Operator:
We'll move to our next question. Caller, please
state your name before posing your question.
Tristan Johnson:
My name is Tristan Johnson from Townsend, Vermont.
We have a four profit pharmacy that is part of our health care facility
for which we desperately need to expand. But we want - this question,
I believe is directed to Chuck.
Male:
OK.
Tristan Johnson:
So the question is would you - how would you
- how would we go about funding with you the feasibility of a increased
floor plan? Plus, a floor plan for an adequately sized, for profit
pharmacy for the demand we've already established.
Chuck Andilucci:
OK. You're in a rural area?
Tristan Johnson:
That's correct.
Male:
inaudible
Tristan Johnson:
We're basically attached to a critical active
hospital.
Chuck Andilucci:
OK. First, you're concerned about getting funding
for the feasibility study separately? Is that work?
Tristan Johnson:
That's correct.
Chuck Andilucci:
Our program, per se, doesn't do that. But there
- Joseph, from your other hat
why don't
Joseph Ben-Israel:
inaudible
Chuck Andilucci:
you tell him about your other grant
programs that inaudible.
Joseph Ben-Israel:
Yes, I'll jump in here. USDA Rural Development
has some grant funding programs to provide technical assistance
and training to rural business entrepreneurs as well as for economic
development. There's two potential programs. One program that's
fairly broad and flexible. It's called a Rural Business Opportunity
Grant Program. Again, that The Rural Business Opportunity Grant
Program. And I believe under that program you can use monies for
conducting feasibility studies as well as economic planning type
of activities and training.
And then there's another program called the Rural
Business Enterprise Grant Program. And that also can provide technical
assistance and training, including conducting feasibility studies
for small rural businesses as well. And those are two, two sources
I can think of immediately that might meet your needs.
And what you would do there is - I encourage
you to contact our USDA Rural Development State office Program Director,
or one of the specialists in the State office as well as they have
designated area offices. And I just - let me add that all our programs,
including the intake and processing of applications, are administered
out of our USDA Rural Development State offices and their local
designated area offices.
Bill Finerfrock:
I think, Joseph, I think one of the things -
the point that you just made and I want to emphasize for folks is
that there really are a variety of different programs that are USDA
Rural Development, Community Development has available. And even
if we haven't touched on something that specifically, you know,
you may say, well, we're a little bit different in our Community.
Or our clinic is a little different
There maybe is a good chance there's some other
program. And it would really be in your best interest to contact
your USDA office. Explain to them what they do - or what you're
interested in doing. And there may be something that we haven't
been able to talk about in the time we have today, that could be
of use to the clinic.
Male:
Yes, Bill, I would agree. I would encourage all
of you. If you have an Opportunity to invite our USDA Rural Development
Program Director in the State where you're located and especially
- to come out to your facility and discuss all the programs they
have available and explore how we can play a role. I think that's
the best way to do it. And I would bring your Community leaders
too. And you'll find out that we have numerous programs for helping
rural development - rural communities develop their communities.
Bill Finerfrock:
We have time for one or two more questions. There
any on the line?
Operator:
We do have other questions. Caller please state
your name before posing your question.
Bill Finerfrock:
Go ahead.
Operator:
Caller, your line is open.
Bill Finerfrock:
Tell you a lot of folks that want to ask questions
that maybe we've answered it already.
Operator:
Hearing no response, we will move to our next
question. A voice prompt on your phone line will indicate when your
line is open. Please state your name before posing your question.
Louise Blochess:
Hello, this is Louise Blochess from Michigan.
Do any of the four programs reviewed today have deadlines?
Male:
Do they have deadlines? Well, most of our programs
have to be, you know, for example, let me talk about the guaranteed
loan programs. Usually they're over the counter. Meaning on a first
come, first served basis. But with many of our programs, you know,
the goal is we try to obligate all our monies prior to the end of
the fiscal year. So really, usually the timing cycle is pretty good
for anywhere from October first to maybe July. And then after that
it may get a little more tight.
I can speak for the Community Facility Program.
I could - I can't speak for the Business Industry Program. Yoonie,
you want to discuss some of the timing for direct or grant program?
Male:
OK.
Male:
OK.
Louise Blochess:
Can I ask another
Bill Finerfrock:
Sure.
Louise Blochess:
question?
Bill Finerfrock:
Sure, if it's a quick one.
Louise Blochess:
There are some combo grants out there, four to
one and nine to one, one is for EMR and the nine to one is for construction.
Are they separate programs from the one you mentioned and the thing
to do with inaudible my USDA State office?
Joseph Ben-Israel:
Yoonie, are you on the line?
Yes, this is Joseph Ben-Israel again. I would,
I would sit down and explore any - if you're looking for any grant
opportunities with our USDA Rural Development State office and their
area office. Again, there's a lot of Federal programs out there.
Usually Congress will establish the criteria in terms of leveraging
monies, whether it Federal or State. So, I'm not familiar with that
particular program. But, again, contact the USDA Rural Development
State or area office.
Louise Blochess:
Thank you.
Bill Finerfrock:
OK. One last question. Operator, if we have any
more.
Operator:
We have no further questions.
Bill Finerfrock:
OK. Great. I'd like thank all of our participants
from the U.S. Department of Agriculture. Joseph, Yoonie, and Chuck.
I inaudible presented some great information and I want to reiterate,
I would encourage you that your USDA Rural Development Offices can
be a tremendous asset for you. Even if you haven't heard of something
today that meets your specific needs, they may be able to assist
you with another program that would meet your needs.
I want to encourage - if you know others who
would be of value or benefit from this Raw Clinic Assistance Program,
I would encourage them to register for the information. Our next
Rural Health Clinic call is tentatively scheduled for Tuesday, July
10, two o'clock, Eastern time.
We will get out the topic and the presenter information
will be announced shortly. I want to remind everybody that, again,
if you have questions to e-mail at info@narhc.org
or suggestions for topics or speakers as the series continues forward.
In the future, when you call in we encourage you to call in about
one fifty-five, a few minutes before so we can try to get started
on time. I want to thank the Federal Office of Rural Health Policy
for their generous support for this initiative. It is a tremendous
resource in terms of getting valuable information out to the rural
health clinics Community in a very cost effective manner and we
appreciate all of the support that they have given for this initiative.
Again, thank you to our friends at the U.S. Department
of Agriculture and thank you to everybody who participated in today's
call. That concludes our call for today and look forward to talking
to you at our next meeting.
Operator:
As this concludes today's conference, we thank
you for your participation and have a great day.
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