New law eases farm loan access

MAT-SU - A legislative act which will restructure the Agricultural Revolving Loan Fund (ARLF) to be more competitive with Outside loan institutions, and give working farmers a louder voice on agricultural spending, has been signed into law.

House Bill 116, which Gov. Tony Knowles signed Wednesday, forms a seven-member board to address issues important to the agricultural community. Rep. Jeannette James, R-North Pole, sponsored the bill.

The agricultural community needed some stability that its never had, James legislative aide, Barbara Cotting, said Tuesday. With every change in the administration, the agricultural staff changes too, and farmers have to have more stability for years into the future.

Seven board members will be appointed by the governor from a list of qualified people with proven experience in the agriculture industry, she said.

Hopefully we will end up with board members representing different parts of the state, Cotting said.

On Thursday, James said the ARLF has about $6 million in cash, but that its total assets were worth close to $26 million.

Theres loans out, and theres also some property that has been repossessed, James told the Frontiersman. Mt. McKinley Meat belongs to [the ARLF] and the Matanuska Maid dairy.

The legislation transfers power from the Department of Natural Resources commissioner and the state director of agriculture and gives it to the new agricultural board. Although the governor and the commissioner will still appoint those respective positions, once the initial board is appointed, it will provide a list of possible board member appointees from which future board appointments can be made.

The board will also create a more flexible interest rate program for ARLF loans, doing away with the old, fixed-rate, 8-percent program.

According to Cotting, flexible ARLF interest rates allow the fund to be more competitive with outside financial institutions, which in turn brings more interest income into the ARLF budget.

The new board will have the authority to adjust interest rates, Division of Agriculture director Robert Wells said. The new legislation lets the rates be set at a rate comparable to other agricultural institutions in the (lower 48) states.

Typically, Outside financial institutions have been more willing to alter a farmers loan program than the fixed-rate ARLF loan program, especially in case of emergencies. For this reason, farmers searching for farm loan programs have bypassed the more rigid ARLF program, causing a depletion of the ARLF.

The new legislation was designed to change this trend, making the ARLF program more profitable.

Wells said although lower interest rates may generate more ARLF loan activity and interest income, there is no way to know if the outcome will be positive until the new program has a chance to work.

And that doesnt necessarily mean the interest rates will go down, Fellman said. But in the past, drought-stricken farmers have had only two choices bankruptcy or get foreclosed on.

The new board will have the authority to restructure loan accounts, he said, if a farmer has shown a good payment history but is hit with an emergency situation. The new system will allow farmers to quickly get emergency money of up to $50,000, he said.

Since the Division of Agriculture is funded by ARLF profits, one of the new board responsibilities will be approving disposal of all ARLF money so they can more closely monitor the divisions financial commitments.

Before disposal of any agricultural land (the board) has to be consulted, Cotting said. The board (will have) total control over the ARLF.

Delta Junction dairy farmer Pete Fellman said many of the Alaska farmers he knows support the new change in authority.

We have no problem with the current agricultural administration, but in the past, changes in the administration caused changes in the direction we were going, Fellman said. Farming is a long-term thing. Guidelines and directions need to stay the same.

He said he hopes the new board will be made up of fiscally conservative farmers people who will control spending and preserve the life of the ARLF.

The ARLF was originally set up to be self-perpetuating in order to continue to finance farm loans over the long term. But since the Division of Agriculture gets little financial support from the state, the ARLF has been tapped to finance the divisions day-to-day operations.

The new board will get a chance to review any new Division of Agriculture budgets.

When it comes to ARLF issues, the director will still be involved with the agricultural financial decision-making, but there will be seven new voices overseeing the financial aspects of agriculture in Alaska.

Its long overdue to get farmers involved in setting the standards for the agricultural industry, he said. I think theyre going to take this and do good things with it.Photo: Wolverine Farms owner Larry DeVilbiss patrols his herd for newborns to tag. Farmers, like DeVilbiss, could benefit from HB 116, which provides for more rapid dispersal of agricultural Revolving Loan Fund monies in case of a drought or other natural disaster.

Photo by Gene Jansen/Frontiersman.