NO. 25. AN ACT RELATING TO AGRICULTURAL CREDIT.
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 10 V.S.A. chapter 16A is added to read:
CHAPTER 16A. VERMONT AGRICULTURAL CREDIT PROGRAM
§ 374a. CREATION OF THE VERMONT AGRICULTURAL CREDIT
(a) There is created the Vermont agricultural credit program, which will provide an alternative source of sound and constructive credit to farmers who are not having their credit needs fully met by conventional agricultural credit sources at reasonable rates and terms. The program is intended to meet, either in whole or in part, the credit needs of eligible agricultural facilities and farm operations in fulfillment of one or more of the purposes listed in this subsection by making direct loans and participating in loans made by other agricultural credit providers:
(1) to encourage diversification, cooperative farming and the development of innovative farming techniques;
(2) to increase energy efficiency and reduce energy consumption in agricultural facilities, including the construction of water pollution control facilities which implement best management practices for farm waste abatement pursuant to chapter 215 of Title 6;
(3) to encourage innovative and diversified processing, marketing and distribution of Vermont agricultural products;
(4) to assist beginning farmers to start new farms and new agricultural facilities to commence or strengthen their operations;
(5) to assist or financially strengthen existing farms; and
(6) to refinance loans incurred by eligible borrowers for any of the purposes enumerated in subdivisions (1) through (5) of this subsection.
(b) No borrower shall have loans from the corporation outstanding at any time having an aggregate principal balance in excess of $500,000.00, or outstanding operating loans from the corporation in excess of $300,000.00 in the aggregate.
§ 374b. DEFINITIONS
As used in this chapter:
(1) "Agricultural facility" means land and rights in land, buildings, structures, machinery and equipment which is used for, or will be used for producing, processing, preparing, packaging, storing, distributing, marketing or transporting agricultural products which have been primarily produced in this state, and working capital reasonably required to operate an agricultural facility.
(2) "Agricultural land" means real estate capable of supporting commercial farming.
(3) "Agricultural products" mean crops, livestock, forest products and other farm commodities produced as a result of farming activities.
(4) "Asset acquisition loan" means a loan to purchase land, to purchase, improve, enlarge, construct or reconstruct buildings and structures, to purchase or install machinery, equipment and fixtures, and to purchase livestock to be used in a farm operation or an agricultural facility, together with professional fees and other expenses reasonably related to those activities or undertakings.
(5) "Authority" means the Vermont economic development authority.
(6) "Cash flow" means, on an annual basis, all income, receipts and revenues of the applicant or borrower from all sources and all expenses of the applicant or borrower, including all debt service and other expenses.
(7) "Farmer" means an individual directly engaged in the management or operation of an agricultural facility or farm operation for whom the agricultural facility or farm operation constitutes two or more of the following:
(A) the source for the majority of the farmer's income;
(B) the majority of the farmer's assets; and
(C) the farmer's primary occupation.
(8) "Farm operation" shall mean the cultivation of land or other uses of land for the production of food, fiber, horticultural, orchard, maple syrup, Christmas trees or forest crops; the raising, boarding and training of equines, and the raising of livestock; or any combination of the foregoing activities. Farm operation also includes the storage, preparation, retail sale, and transportation of agricultural commodities accessory to the cultivation or use of such land.
(9) "Livestock" shall mean cattle, sheep, goats, equines, fallow deer, red deer, reindeer, American bison, swine, poultry, pheasant, chukar partridge, coturnix quail, ferrets, camelids and ratites, cultured trout propagated by commercial trout farms and bees.
(10) "Loan" means an operating loan or an asset acquisition loan, including a financing lease, provided that such lease transfers the ownership of the leased property to each lessee following the payment of all required lease payments as specified in each lease agreement.
(11) "Operating loan" shall mean a loan to finance or refinance seed, feed, fertilizer, horticultural and silvicultural supplies, and other annual operating expenses of an agricultural facility or farm operation, or to refinance machinery, equipment or livestock.
(12) "Program" means the Vermont agricultural credit program established by this chapter.
(13) "Project" or "agricultural project" means the creation, establishment, acquisition, construction, expansion, improvement, strengthening, reclamation, operation or renovation of an agricultural facility or farm operation.
(14) "Resident" means a person who is domiciled in this state as evidenced by an intent to maintain a principal dwelling place in the state indefinitely and to return there if temporarily absent, coupled with an act or acts consistent with that intent, including but not limited to the filing of a Vermont income tax return within 18 months of the application for a loan under this chapter. In the case of a limited liability company, partnership, corporation or other business entity, resident means a business entity formed under the laws of Vermont, and owned and operated by Vermont residents who are natural persons.
§ 374c. INCORPORATION; BOARD OF DIRECTORS
The Vermont economic development authority shall incorporate a nonprofit corporation to administer the Vermont agricultural credit program and to fulfill the goals and purposes of this chapter. The voting members of the authority shall be the board of directors of the corporation, and the manager of the authority shall serve as the president and chief executive officer of the corporation. Such corporation shall be organized and operate under the nonprofit corporation laws of the state of Vermont to the extent not inconsistent herewith. The authority will have the power to contract with the corporation to provide staff and management needs of the corporation.
§ 374d. GENERAL POWERS
The corporation shall have the powers necessary to carry out the purposes and provisions of this chapter, including those general powers provided a business corporation by section 302 of Title 11A. In addition, the corporation shall have the power to:
(1) execute contracts and all other instruments necessary for the exercise of its powers and functions under this chapter;
(2) without limitation, acquire or dispose of real or personal property or any interest in real or personal property;
(3) receive and accept gifts, grants, or contributions from any source, for any purpose consistent with this chapter;
(4) provide or contract for consolidated processing of any aspect of the financing of eligible borrowers in order to avoid duplication;
(5) procure insurance against any loss;
(6) invest monies of the corporation not required for immediate use;
(7) borrow money and issue notes and other evidences of indebtedness for lending and administrative and other expenses. The corporation may sell, transfer, pledge, mortgage, hypothecate or otherwise dispose of loans under its management. Neither the full faith and credit nor the moral obligation of the state of Vermont nor any of the assets of the authority are pledged to secure repayment of the indebtedness of the corporation;
(8) consent to any modification with respect to rate of interest, time and payment of any contract or agreement of any kind to which the corporation is a party;
(9) procure or agree to the procurement of insurance, guarantees or interest rate subsidy assistance on any notes or any other evidence of indebtedness issued to the corporation;
(10) make loans or advances secured by a mortgage or a security agreement, which may be subordinate to one or more prior mortgages or security agreements, to eligible borrowers under such terms and conditions as the corporation deems prudent and consistent with the purposes of this chapter and for such fees, and at such rate or rates of interest, as determined by the corporation, provided that the interest rate or rates charged by the corporation shall not exceed the rate paid or to be paid by the corporation for monies borrowed by the corporation to fund loans plus 300 basis points;
(11) take title, by foreclosure or other process available under the law, to any real or personal property where such action is necessary to protect any loan previously made by the corporation, pay all costs arising out of the legal action and acquisition from monies held in the fund, and sell or transfer any such property to any responsible buyer. If the transfer or conveyance of assets acquired under this subdivision cannot be effected with reasonable promptness, the corporation may, in order to minimize financial losses and sustain a farm operation or agricultural facility, lease the assets owned by it to responsible persons on such terms and conditions as the corporation deems reasonable;
(12) purchase prior mortgages and make payments on prior mortgages or security interests on any assets pledged as security for loans of the corporation where the purchase or payment is necessary to protect any loan previously made by the corporation. In addition, the corporation may sell, transfer, and assign a prior mortgage or prior security interest. Monies used by the corporation for the purchase of any prior mortgages, or any payments on prior mortgages, shall be withdrawn from the fund established pursuant to section 374e of this title, and any monies derived from the sale of any prior mortgages shall be deposited in the fund;
(13) employ or contract for services with agents, consultants, legal advisors and other experts, as may be necessary for its purposes;
(14) participate in eligible and qualified loan projects with lenders, including the farm credit system, banks and insurance companies;
(15) execute lease agreements for the purpose of leasing personal property under financing leases, which leases transfer the ownership of the leased personal property to each lessee following the payment of all required lease payments as specified in each lease agreement;
(16) sell loans, or portions thereof, in order to provide further funding for lending under this chapter. Proceeds from sales of loans shall be deposited in the agricultural credit development fund established under section 374e of this title;
(17) establish policies and procedures consistent with the purpose of providing sound and constructive credit to eligible loan applicants; and
(18) do all things necessary to carry out the purposes and provisions of this chapter.
§ 374e. AGRICULTURAL CREDIT DEVELOPMENT FUND
The agricultural credit development fund is created and shall be used by the corporation for the purposes of this chapter. All reasonable administrative expenses of the corporation shall be paid from the fund. The fund shall be credited with any appropriations made by the general assembly, all payments of principal and interest received from loans transferred or assigned to or made by the corporation, any available grants or gifts made to the corporation, the proceeds of any sale, transfer, pledge, mortgage, hypothecation or other disposition of loans transferred or assigned to the corporation by the authority and loans made by the corporation pursuant to this chapter, and any funds borrowed by the corporation. Monies in the fund may, after payment of reasonable administrative expenses and debt service on the indebtedness of the corporation incurred in furtherance of its purposes under this chapter, be loaned by the corporation directly to eligible borrowers, used to purchase or acquire portions of loans made by unrelated third party lenders to eligible borrowers, or to subsidize the payment of interest on the debt of the corporation so as to lower the interest rate on loans made by the corporation to eligible borrowers.
§ 374f. RECORDS; ANNUAL REPORT; AUDIT
The corporation shall keep an accurate account of all its activities and report to the authority and to the governor and the general assembly in accordance with section 217 of this title. The administrative costs of the program shall be accurately stated in the report.
§ 374g. CONSTRUCTION
The provisions of section 218 of this title shall apply to this chapter. Information concerning loan applicants or recipients shall be kept confidential.
§ 374h. LOAN ELIGIBILITY STANDARDS
(a) Asset acquisition loan. A farmer, or a limited liability company, partnership, corporation or other business entity the majority ownership of which is vested in one or more farmers, shall be eligible to apply for an asset acquisition loan, provided the applicant is:
(1) a resident of this state and will help to expand the agricultural economy of the state;
(2) an owner, prospective purchaser or lessee of agricultural land in the state or of depreciable machinery, equipment or livestock to be used in the state;
(3) a person of sufficient education, training or experience in the operation and management of an agricultural facility or farm operation of the type for which the applicant requests the loan;
(4) an operator or proposed operator of an agricultural facility or farm operation for whom the loan reduces investment costs to an extent that offers the applicant a reasonable chance to succeed in the operation and management of an agricultural facility or farm operation;
(5) a creditworthy person under such standards as the corporation may establish;
(6) able to provide and maintain adequate security for the loan by a mortgage on real property or a security agreement and perfected financing statement on personal property;
(7) able to demonstrate that the applicant is responsible and able to manage responsibilities as owner or operator of the farm operation or agricultural facility;
(8) able to demonstrate that the applicant has made adequate provision for insurance protection of the mortgaged or secured property while the loan is outstanding;
(9) a person who possesses the legal capacity to incur loan obligations;
(10) in compliance with such other reasonable eligibility standards as the corporation may establish;
(11) able to demonstrate that the project plans comply with all regulations of the municipality where it is to be located and of the state of Vermont;
(12) able to demonstrate that the making of the loan will be of public use and benefit;
(13) able to demonstrate that the proposed loan will be adequately secured by a mortgage on real property with a satisfactory maturity date in no event later than 20 years from the date of inception of the mortgage, or by a security agreement on personal property with a satisfactory maturity date in no event longer than the average remaining useful life of the assets in which the security interest is being taken; and
(14) there will be sufficient projected cash flow to service a reasonable level of debt, including the loan or loans, being considered by the corporation.
(b) Operating loan. A farmer, or a limited liability company, partnership, corporation or other business entity the majority ownership of which is vested in one or more farmers, shall be eligible to apply for an operating loan, provided the applicant can satisfy the criteria specified in subdivisions (a)(1) through (14) of this section and is further able to demonstrate that the loan applied for will improve the cash flow of the agricultural facility or farm operation, or that the loan will result in a positive cash flow for the applicant's agricultural facility and farm operation within a reasonable time after the making of the loan, and there is a reasonable probability that the cash flow from the agriculture facility or farm operation will remain positive through the original term of the loan.
Sec. 1a. 10 V.S.A. § 227 is amended to read:
§ 227. ACQUISITION AND DISPOSAL OF PROPERTY
The authority may take assignments of leases, notes and mortgages securing notes and other forms of security. It may take title to, or possession of, any mortgaged property by foreclosure or conveyance*[*[
, provided however, that all real and personal property to which the authority may take title by foreclosure or voluntary conveyance in lieu thereof shall, as long as it is not leased or rented, be exempt from all taxes and assessments of the state and all local municipal property taxes for the remaining balance of the tax year in which title becomes vested in the authority and the entire next succeeding year, provided however, that thereafter the authority shall pay 50 percent of the local municipal property taxes of the authority's ownership,]*]* and may sell, lease or rent such mortgaged property for a use other than that specified in the definition of "eligible facility" in this chapter, in accordance with the terms of the insurance contract or an assignment of the mortgage.
Sec. 2. TRANSFER OF POWERS AND DUTIES, AND ASSETS AND
The corporation formed under section 10 V.S.A. § 374c shall be, in all respects, the successor to the authority for purposes of operating the programs administered through the Vermont agricultural finance program codified in 10 V.S.A. chapter 16, and repealed by Sec. 3 of this act. The policies of the authority related to programs administered by the authority through the Vermont agricultural finance program shall continue in effect to the extent that they are not inconsistent with the provisions of Sec. 1 of this act. Funds in the agricultural development fund and in the family farm debt stabilization fund on June 30, 1999 shall be deposited into the agricultural credit development fund established under 10 V.S.A. § 374e. On June 30, 1999, all loans then outstanding and all loan commitments made by the authority pursuant to 10 V.S.A. §§ 341 and 351, as repealed by Sec. 3 of this act, shall be transferred to and become the assets and obligations of the corporation enforceable by and against the corporation in accordance with their respective terms but shall otherwise be unaffected hereby. On June 30, 1999, all family farm debt stabilization certificates issued by the authority pursuant to 10 V.S.A. § 362 as repealed by Sec. 3 of this act and all notes issued by the authority to the state treasurer pursuant to 10 V.S.A. § 363 as repealed by Sec. 3 of this act shall be transferred to and shall become liabilities and obligations of the corporation enforceable by and against the corporation in accordance with their respective terms, but shall otherwise be unaffected hereby. Notwithstanding the repeal of 10 V.S.A. § 363, the full faith and credit of the state of Vermont continues to be pledged to secure repayment of the certificates issued by the authority through June 30, 1998 pursuant to 10 V.S.A. § 362 as repealed by Sec. 3 of this act.
Sec. 3. REPEAL
10 V.S.A. chapter 16 (Vermont agricultural finance program and debt stabilization program) is repealed.
Approved: May 19, 1999