By Doug Schmitz
WASHINGTON, D.C. – U.S. Sens. Joni Ernst (R-Iowa) and Sherrod Brown (D-Ohio) have introduced a bipartisan effort to expand opportunities for first-time farmers and small- to mid-size manufacturers.
The Modernizing Agricultural and Manufacturing Bonds Act, or MAMBA, would modernize the Internal Revenue Service’s rules for industrial development bonds and first-time farmer bonds (or aggie bonds), providing new financing opportunities for first-time farmers, and small- to mid-sized manufacturers.
Ernst, who led the bipartisan effort, said the rules for both bonds have not been updated in nearly 30 years.
“Farming and manufacturing are critical to the success of Iowa’s economy,” she said. “By modernizing and clarifying the rules for aggie bonds and industrial development bonds for the first time in over 30 years, we can ensure that first-time farmers and entrepreneurs can access the capital they need to get started, create jobs, and fuel our communities.”
Ernst and Brown said the act would:
- Improve the ability of aggie bonds to support the next generation of farmers by increasing the limit on small-issue bonds for first-time farmers from a current $450,000 to $1 million;
- Triple the bond size limitation from $10 million to $30 million, indexed to inflation, for industrial development bonds to qualify for small-issue bonds;
- Remove loan restrictions for first-time farmers when purchasing land, farm equipment, or additional agricultural facilities;
- Allow up to a quarter of bond proceeds to be used for facilities that are located on the same site or ancillary to a manufacturing facility;
- Align aggie bond definitions with the USDA Farm Service Agency definitions by calculating substantial farmland with the county median rather than the average, making it easier for lenders to provide affordable capital to first-time farmers. In Iowa, Ernst said, this means a beginning farmer could own more acres and still qualify for the program; and
- Expand the definition of manufacturing to reflect today’s advanced manufacturing environment, allowing more businesses to qualify for these financing opportunities.
Brown said, “Ohio farmers and manufacturers are eager to grow and produce more Ohio-made products and food, and we can help them achieve that goal by connecting them with the capital they need to grow.
“A simple update to the way manufacturers can use private activity bonds will be a huge help to the next generation of farmers, manufacturers, and entrepreneurs as they work to hire Ohioans, and grow our economy.”
Toby Rittner, president and CEO of the Council of Development Finance Agencies in Columbus, Ohio, said, “In the wake of the COVID-19 pandemic and amid increased global economic competition, it has become clear that investments in farmers and manufacturers are necessary to shore up the United States’ supply chains.
“By updating the (nearly) 30-year-old rules around agricultural and manufacturing bonds, MAMBA allows for the innovative financing tools necessary to invest in local communities, and provide a bulwark against future food and supply chain disruptions,” he added.
Tammy Nebola, Iowa Finance Authority agricultural program specialist, said, “The enhancements to aggie bonds in the MAMBA legislation will allow more beginning farmers to qualify for the program, as well as allow more bond dollars to be utilized when purchasing or constructing facilities.
“With historically high land prices and increasing interest rates, beginning farmers need as many financing opportunities as possible,” she added. “Aggie bonds provide low-interest rate financing opportunities to help beginning farmers realize their dreams of farm ownership.”
David Howard, National Young Farmers Coalition policy development director, said, access to land – the number one challenge for this new generation of farmers and ranchers – is inextricably linked to credit accessibility.
“Aggie bonds provide a win-win mechanism that affords tax-free interest to private agricultural lenders, on lower-interest loans made to first-time farm owners,” he said. “This proposed legislation will make several common-sense updates to this important credit accessibility tool.”