Legislation Allows Cities to Apply for REDLG Loans/Grants to Aid in Economic Development

February 17, 2013
by: 
Dwayne Page
Mark Pody

Legislation is moving through the committees of the General Assembly that would make funding of up to one million dollars available for economic and industrial development to Smithville and other cities across the state on behalf of local utilities who wish to apply through the Rural Economic Development Loan and Grant program.

State Representative Mark Pody made the announcement Friday during a visit to Smithville.

According to the Tennessee General Assembly's website, this bill (House Bill 0051 and Senate Bill 0078) authorizes all municipalities to participate as a borrower and a lender in the rural economic development loan and grant program (REDLG). Under current law, the program is only available to cities in six Tennessee counties.

Present law authorizes any municipality in Hardeman, Lincoln, Dickson, Campbell, Rhea, or Marion county to promote economic and industrial development through participation both as a borrower and a lender in various programs established by the rural electrification administration or other federal programs.

This bill rewrites this provision to instead authorize each municipality in this state to promote economic and industrial development through participation both as a borrower and a lender in the rural economic development loan and grant program established and administered by the federal rural development administration.

"The bill should be going to the calendar and rules committee next week and probably to the House floor the following week. Its going to allow Smithville to apply for up to one million dollars from Rural Development. It's a zero percent loan for areas that want more development. This will be opened up to cities in all ninety five counties. I'm hoping that any cities that want to do it will be jumping on and applying for it quickly in getting the money because it is a limited amount of money so its almost going to be on a first come, first served basis. Its used to attract industry and develop areas," said Representative Pody.

According to USDA, the RED Loan program provides zero interest loans from the
USDA to local utilities which then provide loans to local businesses; the local business
directly repays the local utility who then repays the USDA.. The maximum amount of a RED Loan is $1,000,000.

• The RED Grant program provides grants to the local utility which then establishes a
revolving loan program. Upon termination of the revolving loan fund, the grant is
repaid by the local utility to the USDA.. The maximum amount of a RED Grant is $300,000.

• In the event a loan recipient defaults on a loan, the local utility will be responsible for
repayment to the USDA, resulting in a possible increase in local government
expenditures.

• The USDA requires a participating local utility to provide a 20 percent match of funds
for which the utility is applying.

• In the event a local utility opts to participate in the REDLG program, and it is
successful, it is reasonably assumed there will be an increase in local government
revenue resulting from an increase in local business success.

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