Presentation to the Maryland Agriculture Stewardship Commission by Robert Frazee Chairman, MARBIDCO President, Mid Atlantic Farm Credit November 8, 2005.

Presentation to the Maryland Presentation to the Maryland Agriculture Stewardship CommissionAgriculture Stewardship Commission

by by Robert FrazeeRobert Frazee

Chairman, MARBIDCOChairman, MARBIDCOPresident, Mid Atlantic Farm CreditPresident, Mid Atlantic Farm Credit

November 8, 2005November 8, 2005

Maryland Agricultural and Resource-Based Industry Development Corporation

Introducing Introducing MARBIDCOMaryland Agricultural and Resource-Based Industry

Development Corporation

Background

Resource-based Resource-based industries underpin industries underpin the economy in the economy in many rural many rural counties – counties – including those in including those in Western Maryland Western Maryland and on the and on the Eastern ShoreEastern Shore

Development pressure threatens Development pressure threatens existing farmland and woodlandexisting farmland and woodland

Price of land also makes it Price of land also makes it difficult for new farmers to enter difficult for new farmers to enter the field the field

Land Development Pressure

Support for Ag/RBI Business is Fragmented

Long-standing disconnect between traditional and agricultural economic development strategies

Traditional strategies focus on recruiting new companies and creating (high wage) jobs

Rural economic development requires Rural economic development requires sharper focus on business retention sharper focus on business retention and entrepreneurshipand entrepreneurship

Food and fiber production and resource- Food and fiber production and resource- based industry is a key component of based industry is a key component of the rural economic mix (and keeping the rural economic mix (and keeping working lands from being converted)working lands from being converted)

Top AG/RBI Business Development Concerns

Access to Capital (Low-Interest Loans & Loan Guarantees)

Business Planning AssistanceAppropriate Information/ReferralHelp for Young/Beginning Farmers

Solution:Solution:

A nimble and A nimble and collaborative collaborative service provider to service provider to focus exclusively focus exclusively on enhancing on enhancing viability and viability and profitability of profitability of resource-based resource-based businesses and businesses and industriesindustries

Modeled on:

MEDCO (MD Economic Development Corporation) – which focuses primarily on real estate development

TEDCO (MD Technology Development Corporation) – which focuses on high technology development

Ag financing authorities in other states

2004 legislation created MARBIDCO to provide targeted development services in nimble, non-bureaucratic fashion

MARBIDCO is a quasi-public corporation governed by 17-member Board of Directors

MARBIDCOMARBIDCO

VisionVision

To ensure that To ensure that Maryland’s Maryland’s

resource-based resource-based businesses businesses survive and survive and

thrive well into thrive well into the 21the 21stst Century Century

MARBIDCO Mission Help farm, forestry, and seafood businesses achieve profitability and sustainability.

Provide targeted services and a specialized infrastructure that helps retain existing business and commerce

Promote rural entrepreneurship and nurture emerging Ag/RBI industries

In short. . .

MARBIDCO will become the “go to place” for rural heritage business development assistance by becoming a fully integrated information and financial services hub.

The key players are engaged….

2004 Legislation authorizes MARBIDCO to:– Alleviate shortage of affordable,

non-traditional capital and credit

– Develop ag industries & markets

– Support appropriate tech transfer and commercialization

Additional Aim: Leverage knowledge, human and financial resources – both public & private

MARBIDCO Board

MD Dept. of Ag Dept. Natural

Resources Dept. Business &

Economic Development

MD Cooperative Extension

MD Food Center Authority

Rural MD Council

Governor appoints 11 from dairy, forest, equine, poultry, horticultural and seafood industries; and experts in food processing, commercial finance and rural economic development.

Other Partners

USDA (and other Federal Agencies) MD Ag Land Preservation Foundation Commercial Banks Farm and Commodity groups Rural Industry Associations Rural Regional Development Councils Local economic development agencies Local land trusts

Rural Maryland Council is providing interim staffing and other support to MARBIDCO

In FY 2007, MARBIDCO should have its own staff, offices, etc., and be operational

Coming in 2006 (Planned)

Maryland Farm and Producer Viability Program and Fund

Maryland Resource Based Industry Financing Fund

Critical Farms Program (w/ MALPF)

Installment Purchase Agreement (w/ MALPF)

Next Generation Farmland Acquisition Program

MARBIDCO Rural Business Development Programs

Basic Operating Philosophy Concerning MARBIDCO Loans

Commercial lender and/or another public financing institution must be involved

MARBIDCO’s participation will not exceed that of a commercial lender’s

Maryland Farm and Producer Viability Program and Fund

Business plan development grants up to $17,000Low interest business implementation grants and loans up to $200,000 for working capital and equipment. (No more than $50,000 may be used for working capital.)Landowners contractually agree to keep land and/or facilities in use at least five years

Goal: Improve financial viability of small producers

Maryland Resource-Based Industry Financing Fund

Provide low interest loans and loan guarantees to Ag/RBI-industry firms for land and capital equipment (10-15 years)

Help finance environmental or water-quality enhancement projects

MARBIDCO would provide up to 35% of needed project financing (Participation in deals initially limited to about $500,000)

House Bill 1594 (2005) House Bill 1594 (2005) reaffirmed the General reaffirmed the General Assembly’s intent to try Assembly’s intent to try to fully capitalize to fully capitalize MARBIDCO by the Year MARBIDCO by the Year 2020 (up to $45 million 2020 (up to $45 million for rural business for rural business development).development).

$4 to $5 million in FY 2007 for business development and loan programs.Includes about $500,000 for staffing and start-up.

MARBIDCO FY 2007 Operating Budget Request:

Farmland Preservation

Programs

• Two programs done in conjunction with

MALPF

• One freestanding program to help young

farmers

Legislation was enacted in Legislation was enacted in 2005 establishing a 2005 establishing a Critical Farms ProgramCritical Farms Program (under MALPF)(under MALPF)

Additional Legislation Additional Legislation enacted in 2005 (HB enacted in 2005 (HB 1594) authorizes 1594) authorizes MARBIDCO to assist with MARBIDCO to assist with the Critical Farms the Critical Farms ProgramProgram

Critical Farms Program

• In cooperation with the Maryland Ag Land Preservation Foundation

• Will facilitate financing for ag preservation easements or fee simple purchases of land under immediate threat of conversion.

Installment Purchase Agreements Installment Purchase Agreements Program (IPAs)Program (IPAs)

Also done in partnership with MALPF Provides structured tax-advantaged

financial arrangements to help purchase easements on agricultural property likely to otherwise be lost to development

Typically term lengths between 15 and 30 years (25- to 30-year terms preferable, MALPF cannot legally do)

Next Generation

Farmland Acquisition Program MARBIDCO to work with commercial lenders to

assist young and beginning farmers purchase farmland which would be placed under easement

Program details currently under development

(including easement purchase options)

.$10 to $15 million for Critical Farms and Young Farmers Land Acquisition (approximately a 50-50 split between MALPF and MARBIDCO)Existing MALPF revenue streams can fund the IPA program (clarifying legislation may be needed).

MARBIDCO FY 2007 Special Funds Request for Land Preservation:

....helping Maryland’s

agricultural and rural industries

survive and thrive in the 21st Century

THANK YOU!

Questions?Questions?Maryland Agricultural and Resource-Based

Industry Development Corporation