PRINTER'S NO. 2117
No. 1438 Session of 1984
INTRODUCED BY JUBELIRER, ZEMPRELLI, WENGER, STAPLETON, CORMAN,
BRIGHTBILL, BODACK, ANDREZESKI, FISHER, HANKINS, HELFRICK,
HESS, HOPPER, HOWARD, KRATZER, KUSSE, LINCOLN, LLOYD, LYNCH,
MELLOW, MOORE, MUSTO, O'CONNELL, O'PAKE, REIBMAN, RHOADES,
ROCKS, ROMANELLI, ROSS, SCANLON, SHAFFER, SHUMAKER, SINGEL,
STOUT, STREET, WILLIAMS, WILT AND HAGER, JUNE 15, 1984
REFERRED TO APPROPRIATIONS, JUNE 15, 1984
AN ACT
1 Providing for agricultural development; establishing the
2 Agricultural Development Advisory Committee and providing for
3 its powers and duties; providing for certain guaranteed loans
4 and interest deferral; providing further duties of the
5 Secretary and Department of Agriculture and the Secretary and
6 Department of Commerce; and making an appropriation.
7 TABLE OF CONTENTS
8 Section 1. Short title.
9 Section 2. Definitions.
10 Section 3. The Agricultural Development Advisory Committee.
11 Section 4. Reports to General Assembly.
12 Section 5. General powers and duties of the secretary.
13 Section 6. Review of applications by the Secretary of
14 Commerce.
15 Section 7. Review of applications by the committee and the
16 secretary.
17 Section 8. Eligibility for interest deferrals and loan
18 guarantees and limitations thereon.
1 Section 9. Sale or conveyance by applicant.
2 Section 10. Rules and regulations.
3 Section 11. Limitation on amount of interest deferrals
4 and loan guarantees.
5 Section 12. Conflict of interest prohibited.
6 Section 13. Appropriation.
7 Section 14. Limitation.
8 Section 15. Effective date.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 Section 1. Short title.
12 This act shall be known and may be cited as the Agricultural
13 Development Act.
14 Section 2. Definitions.
15 The following words and phrases when used in this act shall
16 have the meanings given to them in this section unless the
17 context clearly indicates otherwise:
18 "Agricultural activity" or "farming." The commercial
19 production of agricultural crops, livestock or livestock
20 products, poultry products, milk or dairy products, or fruits
21 and other horticultural products.
22 "Applicant." Any family farm enterprise applying for a
23 family farm loan guarantee or an interest deferral.
24 "Area loan organization." A local development district of
25 the Appalachian Regional Commission, an industrial development
26 corporation organized and existing under the act of May 17, 1956
27 (1955 P.L.1609, No.537), known as the Pennsylvania Industrial
28 Development Authority Act, or any other nonprofit economic
29 development organization certified by the Secretary of
30 Agriculture and the Secretary of Commerce as possessing an
19840S1438B2117 - 2 -
1 acceptable loan review committee, professional staff support and
2 such other qualifications as are necessary to evaluate and
3 administer loan guarantees and interest deferrals made under the
4 provisions of this act.
5 "Committee." The Agricultural Development Advisory
6 Committee.
7 "Department." The Department of Agriculture.
8 "Family farm corporation." A corporation formed for the
9 purpose of farming in which the majority of the voting stock is
10 held by and the majority of the stockholders are natural
11 persons, or the spouses of such persons or other persons related
12 to such persons or spouses and at least one of such majority
13 stockholders is residing on or actively operating or managing
14 the farm and none of the stockholders of which are corporations.
15 "Family farm enterprise." A natural person, family farm
16 corporation or family farm partnership engaged in farming,
17 including the processing and marketing of its agricultural
18 commodities directly, provided that those agricultural
19 commodities are or would be produced on the farm for which
20 financial assistance is sought.
21 "Family farm partnership." A general partnership entered
22 into for the purpose of farming having no more than three
23 unrelated members and having at least one member residing on or
24 actively operating or managing the farm.
25 "Farmland." Land in the Commonwealth that is capable of
26 supporting the commercial production of agricultural crops,
27 livestock or livestock products, poultry products, milk or dairy
28 products, fruit or other horticultural products and land in the
29 Commonwealth on which a family farm enterprise would process or
30 market its agricultural commodities directly, provided that
19840S1438B2117 - 3 -
1 those agricultural commodities are or would be produced on the
2 farm for which financial assistance is sought.
3 "Federal agency." Includes the United States of America, the
4 President of the United States of America and any department or
5 corporation, agency or instrumentality heretofore or hereafter
6 created, designated or established by the United States of
7 America.
8 "Lender." Any bank, savings bank, mutual savings bank,
9 building and loan association and savings and loan association
10 organized under the laws of this Commonwealth or the United
11 States, trust companies, trust companies acting as fiduciaries
12 and other financial institutions subject to the supervision of
13 the Department of Banking; and any foreign or domestic
14 corporation engaged in the business of insurance which is
15 subject to the supervision of the Insurance Commissioner; and
16 any financial institutions operating under the supervision of
17 the Federal farm credit administration. The term shall also mean
18 the seller of the property in cases of seller-sponsored loan or
19 purchase money loan.
20 "Secretary." The Secretary of Agriculture.
21 Section 3. The Agricultural Development Advisory Committee.
22 (a) Establishment.--There is hereby created the Agricultural
23 Development Advisory Committee.
24 (b) Composition.--The committee shall be composed of the
25 following:
26 (1) The Secretary of Agriculture, who will serve as
27 chairman.
28 (2) The chairmen of the Senate and House Agriculture and
29 Rural Affairs Committees or their respective designees.
30 (3) Six members to be appointed by the Secretary of
19840S1438B2117 - 4 -
1 Agriculture as follows:
2 (i) one officer from a commercial lending
3 institution experienced in agricultural financing;
4 (ii) three farmers;
5 (iii) one officer from a farm credit association;
6 and
7 (iv) one agricultural economist.
8 A majority of the committee shall constitute a quorum. In
9 appointing the three farmers to the committee, the Secretary of
10 Agriculture may consider farmers recommended by the Statewide
11 general farm organizations.
12 (c) Appointment, terms and vacancies.--The members of the
13 committee initially appointed by the Secretary of Agriculture
14 and any person appointed by the secretary to fill a vacancy
15 shall serve until June 30, 1987.
16 (d) Staff services.--The Department of Agriculture shall
17 provide staff services for carrying out its powers and duties
18 under this act, including liaison between the committee and
19 lenders, the Department of Agriculture, the Department of
20 Commerce, and other agencies of the Commonwealth whose
21 facilities and services may be useful to the committee in its
22 work.
23 (e) Expenses of committee members.--The members of the
24 committee shall be entitled to no compensation for their
25 services as members, but shall be entitled to reimbursement for
26 all necessary expenses incurred in connection with the
27 performance of their duties as members of the committee.
28 Section 4. Reports to General Assembly.
29 On or before March 1 of each year in which loan guarantees or
30 interest deferrals are outstanding, the secretary shall submit a
19840S1438B2117 - 5 -
1 report to the Secretary of the Senate and the Chief Clerk of the
2 House of Representatives detailing each loan guarantee and
3 interest deferral accepted or rejected by type, amount, interest
4 rate, lending institution, location, dates of application and
5 final decision, type of farm, and acreage of farm. The secretary
6 shall also estimate the amount of farmland preserved and the
7 increase in the amount of farm receipts in the Commonwealth due
8 to this program.
9 Section 5. General powers and duties of the secretary.
10 The secretary may exercise all powers necessary or
11 appropriate to carry out this act, including the following
12 powers, in addition to others herein granted:
13 (1) To review all applications for interest deferrals
14 and loan guarantees under this act.
15 (2) To determine, after consideration of the
16 recommendations of the Secretary of Commerce and the
17 committee, which applications for interest deferrals and loan
18 guarantees should be rejected, which applications should be
19 approved, and which applications should be approved subject
20 to special conditions.
21 (3) To determine, after consideration of the
22 recommendations of the Secretary of Commerce and the
23 committee, the scope and operation of the interest deferral
24 and loan guarantee programs.
25 (4) To conduct examinations and investigations and to
26 hear testimony and take proof, under oath or affirmation, at
27 public or private hearings, on any matter material for its
28 information and necessary to:
29 (i) the determination of an applicant's eligibility
30 to receive an interest deferral or loan guarantee;
19840S1438B2117 - 6 -
1 (ii) the determination of the economic viability of
2 the interest deferral or loan guarantee; and
3 (iii) the power to review the operation of any
4 family farm enterprise that has received an interest
5 deferral or loan guarantee.
6 (5) To issue subpoenas requiring the attendance of
7 witnesses and the production of books and papers pertinent to
8 any hearing before the secretary or the committee.
9 (6) To apply to any court, having jurisdiction of the
10 offense, to have punished for contempt any witness who
11 refuses to obey a subpoena, or who refuses to be sworn or
12 affirmed or to testify, or who is guilty of any contempt
13 after summons to appear.
14 (7) To conduct hearings and to administer oaths, take
15 affidavits and issue subpoenas.
16 (8) To authorize any member or members of the committee
17 to conduct hearings and to administer oaths, take affidavits
18 and issue subpoenas.
19 (9) In determining eligibility for an interest deferral
20 or a loan guarantee, to consult with the committee and staff
21 of any local farm credit association or agricultural
22 stabilization and conservation service office in the area
23 where an applicant resides or where the family farm
24 enterprise is located or proposed to be located.
25 (10) To prescribe the form and manner for the submission
26 of applications for interest deferrals and loan guarantees
27 and the information to be included in those applications.
28 (11) To determine the information to be provided by the
29 applicant, the lender, the Secretary of Commerce and the
30 committee.
19840S1438B2117 - 7 -
1 (12) To do all other acts and things necessary or
2 convenient to carry out the powers granted to him by this act
3 or any other acts.
4 Section 6. Review of applications by the Secretary of Commerce.
5 (a) Form of application.--Prior to recommending the approval
6 or rejection of any interest deferral or loan guarantee
7 authorized by this act, the Secretary of Commerce shall receive
8 from the prospective borrower an application in the form and
9 manner prescribed by the Secretary of Agriculture together with
10 any other information as the Secretary of Agriculture shall
11 require the prospective borrower and the prospective lender to
12 provide.
13 (b) Review of application.--Upon receipt of a properly
14 submitted and documented application, the Secretary of Commerce
15 shall conduct a financial review of the application and
16 recommend approval, approval with special conditions, or
17 rejection of the application on the basis of the following
18 criteria and the eligibility criteria and loan limits prescribed
19 by section 8:
20 (1) The ability of the applicant to meet and satisfy all
21 debt service as it becomes due and payable.
22 (2) The sufficiency of available collateral, including
23 satisfactory lien positions on real and personal property
24 which shall consist of no less than second lien positions on
25 such real and personal property.
26 (3) The relevant criminal and credit history and ratings
27 of the applicant as determined from credit reporting services
28 and other sources.
29 (4) The eligibility of the applicant and the project for
30 the guarantee or interest deferral which is being sought.
19840S1438B2117 - 8 -
1 (5) The capital needs of the applicant.
2 (6) The payment to date of all tax obligations due and
3 owing by the applicant to the Commonwealth or any political
4 subdivision thereof.
5 (c) Transmittal to the Secretary of Agriculture.--Following
6 the review and recommendation, the Secretary of Commerce shall
7 transmit the application and the recommendation on that
8 application to the Secretary of Agriculture together with the
9 rationale for that recommendation and any other information
10 requested by the Secretary of Agriculture.
11 (d) Use of area loan organizations.--In carrying out his
12 duties and responsibilities under this section, the Secretary of
13 Commerce may utilize area loan organizations which have been
14 certified by the Secretary of Agriculture and the Secretary of
15 Commerce. In determining if an area loan organization should be
16 certified for the purposes of this act, the secretaries shall
17 consider, in addition to other relevant factors, the expertise
18 of that area loan organization for the purposes of performing
19 some duties and responsibilities under this section but deny
20 certification for the purpose of performing other duties and
21 responsibilities for which the organization is determined not to
22 have sufficient expertise or personnel.
23 Section 7. Review of applications by the committee and the
24 Secretary of Agriculture.
25 (a) Application form.--Prior to recommending the approval or
26 rejection of any interest deferral or loan guarantee authorized
27 by this act, the committee shall receive from the prospective
28 borrower an application in the form and manner prescribed by the
29 secretary together with any such other information as the
30 secretary shall require the prospective borrower and the
19840S1438B2117 - 9 -
1 prospective lender to provide.
2 (b) Majority required.--The committee shall not recommend
3 the approval of an application for an interest deferral or a
4 loan guarantee unless a majority of the quorum present at a
5 meeting vote in favor of the action.
6 (c) Financial status of borrower.--In determining whether to
7 recommend any interest deferral or loan guarantee in accordance
8 with this act, the committee shall give primary consideration to
9 the borrower's ability to repay and secondary consideration to
10 the security available.
11 (d) Recommendation to secretary.--The committee shall
12 forward its recommendation of the approval or rejection of any
13 interest deferral or loan guarantee to the secretary together
14 with the rationale for the committee's decision, any other
15 information requested by the secretary and any recommendation of
16 special conditions to be placed on an approved interest deferral
17 or loan guarantee.
18 (e) Criteria for committee recommendations.--In determining
19 whether to recommend the approval or rejection of any interest
20 deferral or loan guarantee, the committee shall adhere to the
21 eligibility criteria and loan limits prescribed by section 8.
22 (f) Action by the secretary.--The secretary shall grant an
23 interest deferral or a loan guarantee to an applicant only after
24 consideration of the recommendation of the committee and the
25 recommendation of the Secretary of Commerce and only in
26 accordance with the eligibility criteria and loan limits
27 prescribed by section 8. The secretary may grant an interest
28 deferral or a loan guarantee in a lesser amount and on less
29 favorable terms than recommended by the committee or the
30 Secretary of Commerce and may impose conditions not recommended
19840S1438B2117 - 10 -
1 by the committee or the Secretary of Commerce.
2 Section 8. Eligibility for interest deferrals and loan
3 guarantees and limitations thereon.
4 (a) Eligibility criteria.--To be eligible for an interest
5 deferral or a loan guarantee, an applicant must demonstrate:
6 (1) That he is a resident of the Commonwealth, or that
7 its principal operating or managing members or shareholders
8 in the case of either a family farm partnership or a family
9 farm corporation are Pennsylvania residents or show
10 sufficient evidence that he or they intend to become a
11 resident or residents. If the applicant is a corporation, it
12 must be a Pennsylvania corporation in order to be eligible.
13 (2) That the applicant or the principal operating or
14 managing members or shareholders thereof have sufficient
15 education, training or experience in the type of farming for
16 which he or they wish the interest deferral or loan guarantee
17 and will participate in a farm management program, approved
18 by the secretary, for the duration of the loan on which the
19 interest will be deferred or for the duration of the loan
20 guarantee.
21 (3) That the applicant has been processed by a lender
22 for the loan on which the interest deferral or loan guarantee
23 is sought and that the lender will make and service such
24 loan.
25 (4) That the applicant will use the loan proceeds for
26 the agricultural purposes set forth in the application and
27 that the farmland or family farm enterprise is located in
28 Pennsylvania.
29 (5) That the applicant is credit worthy, based on the
30 applicant's net worth, cash flow projections, and credit
19840S1438B2117 - 11 -
1 rating and on the type of farmland or family farm enterprise
2 involved.
3 (6) That the terms offered by the lender without an
4 interest deferral or loan guarantee are not adequate to
5 permit the applicant to carry out the agricultural purposes
6 for which he is seeking the loan.
7 (7) That the loan guarantee or interest deferral would
8 facilitate the continued operation or transfer of a farm in
9 Pennsylvania which is currently active, would help the
10 applicant to replace all or part of its production with
11 production of a commodity or commodities for which there is
12 more likely to be an adequate market, or would help the
13 family farm enterprise to process or market directly a
14 commodity or commodities produced on the farm for which
15 financial assistance is sought.
16 (b) Loan limit for acquiring farmland and farm structures.--
17 The secretary may guarantee a loan or loans not to exceed the
18 lesser of 90% of the amount of the loan or loans or $200,000 for
19 each family farm enterprise for a term not to exceed 20 years if
20 the loan is guaranteed for the purpose of acquiring farmland,
21 farm structures or a combination thereof.
22 (c) Loan limit for acquiring equipment, livestock and other
23 capital assets.--The secretary may guarantee a loan or loans not
24 to exceed the lesser of 90% of the amount of the loan or loans
25 or $150,000 for each family farm enterprise for a term not to
26 exceed seven years if the loan guaranteed is for the purchase of
27 capital assets, such as, but not limited to, equipment or
28 livestock and horticultural assets.
29 (d) Loan limit for acquiring noncapital assets.--The
30 secretary may guarantee a loan or loans not to exceed the lesser
19840S1438B2117 - 12 -
1 of 90% of the amount of the loan or loans or $50,000 for each
2 family farm enterprise for a term not to exceed one year if the
3 loan guaranteed is for the purchase of fertilizer, seed,
4 livestock feed or other supplies normally used for agricultural
5 activity or farming.
6 (e) Interest deferrals.--The secretary may make the interest
7 payments for an applicant for up to the first three years of a
8 loan if the loan is guaranteed in accordance with this section
9 or is in the amount and for the purposes for which a loan may be
10 guaranteed in accordance with this section. The secretary shall
11 prescribe the period during which, and the terms under which,
12 the applicant shall reimburse the Commonwealth for the interest
13 which the secretary paid to the lender on the applicant's behalf
14 and the security which the applicant must provide to assure
15 reimbursement to the Commonwealth.
16 Section 9. Sale or conveyance by applicant.
17 (a) Obligation due on sale.--Any applicant who sells or
18 conveys the property for which an interest deferral or loan
19 guarantee was granted shall immediately return the entire
20 indebtedness still owed to the Commonwealth or to the lender, if
21 any. The new owner may negotiate an interest deferral or loan
22 guarantee in his own right, but under no circumstances may the
23 original loan be assumed by the new owner. This subsection is
24 not intended to prohibit an applicant from granting a security
25 interest in the property for the purposes of securing an
26 additional loan.
27 (b) Default.--Any applicant who fails to maintain the land
28 covered by an interest deferral or a loan guarantee for a period
29 of time longer than one year shall be in default. Such a default
30 may be waived by the secretary, after consultation with the
19840S1438B2117 - 13 -
1 committee and the Secretary of Commerce, in the event of a
2 physical disability or other extenuating circumstances.
3 Section 10. Rules and regulations.
4 The secretary may, in the manner provided by law, promulgate
5 the rules and regulations and forms necessary to carry out this
6 act.
7 Section 11. Limitation on amount of interest deferrals and
8 loan guarantees.
9 The sum of all outstanding interest deferrals and loan
10 guarantees at any time shall not exceed the amount of money
11 appropriated for such purposes. Under no circumstances shall the
12 the Secretary of Agriculture, the Secretary of Commerce or the
13 committee have power to pledge the credit or taxing power of the
14 Commonwealth.
15 Section 12. Conflict of interest prohibited.
16 No member of the committee or officer or employee of the
17 Department of Agriculture or the Department of Commerce or
18 member or employee of an area loan organization shall either
19 directly or indirectly be a party to or be in any manner
20 interested in any contract or agreement under this act for any
21 matter, cause or thing whatsoever by reason whereof any
22 liability or indebtedness shall in any way be created against
23 the Commonwealth, provided that nothing herein shall prohibit a
24 commercial lending institution or a farm credit association from
25 either directly or indirectly being a party to or being in any
26 manner interested in any such contract or agreement if one of
27 its officers is a member of the committee as long as such
28 officer declares his conflict of interest and refrains from
29 participating in any deliberation or vote on, or other action
30 regarding, such contract or agreement. If any contract or
19840S1438B2117 - 14 -
1 agreement shall be made in violation of this section, the same
2 shall be null and void and no action shall be maintained thereon
3 against the Commonwealth.
4 Section 13. Appropriation.
5 The sum of $10,000,000 is hereby appropriated from the
6 Pennsylvania Economic Revitalization Fund for the purposes set
7 forth in this act. The appropriation made hereby shall be a
8 continuing appropriation.
9 Section 14. Limitation.
10 No loan guarantees or interest deferrals pursuant to this act
11 shall be approved after June 30, 1987.
12 Section 15. Effective date.
13 This act shall take effect immediately.
F12L3RLC/19840S1438B2117 - 15 -