A New Approach

Finding funding in rural America can be like searching for a needle in a haystack .

Will a federal investment fund help?

BY ROB SWENSON

Anew, $10 billion loan fund has been designed to boost the national economy by helping finance needed infrastructure improvements in rural America.

Projects in rural areas that could benefit from the financing help include community facilities, water systems, energy operations and broadband infrastructure.

“This fund represents a new approach to our support for job-creating projects across the country,” U S Agricultural Secretary Tom Vilsack said recently in announcing the creation of the fund

“With new efforts like this, we can move beyond existing programs and help encourage substantial private investment in projects that grow the economy and improve quality of life for millions of Americans,” said Vilsack, a former governor of Iowa.

Vilsack chairs the White House Rural Council, which President Barack Obama created by executive order in 2011 to promote economic prosperity and the quality of life in rural communities

Rural America offers promising investment potential, but investors in urban areas are not always aware of the opportunities, according to Vilsack and other officials

“The financial community should look at investing in rural America not just as a good thing to do there is a huge opportunity for them to see a return on their investment in rural America as well,” Vilsack has said

Colorado-based CoBank, which is part of the U S Farm Credit System, is the anchor investor in the new fund.

“The continued success of the U S rural economy and the improvement of rural communities depends on the strength of our infrastructure,” said Robert Engel, CEO of CoBank, in announcing the bank’s participation “To remain competitive, we must develop innovative financing strategies that will ensure infrastructure investment keeps pace with the needs of agriculture and other key rural industries.”

Creation of the U S Rural Infrastructure Opportunity Fund was announced in late July at the White House Rural Opportunity Investment Conference in Washington, D.C.

Jasper Schneider, state director for USDA Rural Development in North Dakota, says details of fund implementation still are being developed But he considers the creation of the fund to be a significant step ahead for rural America.

“In my experience the bottleneck for development in rural areas is access to capital,” Schneider says “I think there’s a tremendous opportunity in rural America to leverage resources between public and private funds ”

The oil-production boom in western North Dakota and good prices for agricultural products have strengthened the state’s economy and added to investors’ interest, Schneider says

“Anytime we can get capital flowing in rural America, that’s a good thing. It stimulates the economy. In the long run, it lays the foundation for economic growth,” he says

Regional Reaction Positive

Regionally, private investment executives and business leaders have reacted positively to the creation of the infrastructure fund.

Creating funds to help get more investment capital to rural America is a great idea, says Blaine Crissman, who attended the national conference He is the founding partner of Badlands Capital in Sioux Falls, S.D. The company focuses on business investments in fields such as manufacturing and agribusiness in the Dakotas and other rural states in the region

“The economy in the Great Plains is stable and growing,” he says. “It is important to keep this momentum and spread it to rural parts of the region by providing appropriate types of capital for business and employment growth ”

Mark Luecke, who runs the venture capital firm South Dakota Innovation Partners, also likes what the USDA is doing

“They are actually creating a pipeline of projects that investors might not otherwise have access to,” says Luecke, whose company invests in research startups in fields such as agriculture

“USDA does a good job of putting these types of programs together, and leveraging one program with the next one, ” Luecke says

Mark Shlanta, CEO of SDN Communications in Sioux Falls, spoke on a panel at the conference where the new fund was announced SDN provides broadband connectivity and related hightech services to businesses and institutions.

Shlanta, who is also a community-development leader in Sioux Falls, was a member of a panel that discussed opportunities for improving the telecommunications infrastructure in rural America. The discussion focused largely on satellite communications and enduser connectivity

“One of the things the conference tried to stress was better coordination and cooperation when capital infrastructure projects are being rebuilt, making sure that different needs are coordinated,” Shlanta says

If a road is going to be widened, for example, the work should be coordinated with providers of water and telecommunications services There’s lots of room for improvement in that kind of communication throughout the United States, not just in rural America, he says

Recruiting Investors, Identifying Projects

Capitol Peak Asset Management, which has offices in Denver and Washington, D C , is managing the Rural Infrastructure Opportunity Fund The firm is actively recruiting investors beyond traditional finance providers, such as banks and insurance companies.

Capitol Peak in partnership with CoBank also is identifying critical infrastructure projects that would be appropriate for the fund and could help spur economic growth, create jobs and benefit rural economies, says Leo Tilman, executive chairman of Capitol Peak

New investors could include pension funds, endowments, foundations, sovereign wealth funds as well as family offices with high net worth individuals

Tilman says the new fund is enabling new types of investors to participate in stable investment opportunities that will provide much-needed capital to rural America.

“It’s a very exciting story in so many ways, ” Tilman says “It’s time for the financial and investment community to contribute more deeply to the rural economy. ”

The fund leadership set in motion by Vilsack will strive to deliver tangible results for rural communities, such as the construction of hospitals, improvement of water systems and the expansion of access to broadband connectivity, Tilman says

The early response from prospective investors and projects “has been overwhelming,” he says

Prospective borrowers who want to make sure that their projects are not overlooked for consideration may contact Capitol Peak They also may contact CoBank or their local USDA office

Other new funding tools also have been created to assist in the development of rural America

Earlier this year, Vilsack announced the creation of a fund to help small businesses and create jobs The fund is designed to facilitate equit y investments in ag-related businesses. Advantage Capital Agribusiness Partners, which manages the fund, and nine

Farm Credit institution partners have pledged to invest more than $150 million.

Among the investors and partners in the fund is AgStar Financial Services, a cooperative and Farm Credit association based in Minnesota

AgStar is pleased to partner with Advantage Capital and other Farm Credit institutions in the $150 million fund, says Aaron Knewtson, an associate vice president with AgStar

“We believe this fund will raise awareness throughout the investment community and serve as the impetus for more funds under the Rural Business Investment Program,” Knewtson says

Federal officials point out that other agencies also are reaching out to help stimulate economic growth and job creation in rural America

Membership of the White House Rural Council includes about 25 federal departments and agencies, such as the Small Business Administration Matt Varilek is the regional administrator for SBA Region VIII, which includes the Dakotas, Montana, Wyoming, Colorado and Utah

-Jasper Schneider, North Dakota director USDA Rural Development

SBA loan guarantee and advisory programs are designed to help small businesses everywhere and might be especially beneficial and accessible to enterprises in rural areas, he says Denver-based Varilek says he has a special interest in making small businesses throughout his heavily rural region aware of SBA programs. He’s a native of rural South Dakota. “It’s a personal issue for me, ” he says

Representatives from departments such as Commerce, Energy, Labor and Defense also serve on the Rural Council and contribute to its efforts

“All these agencies are charged with finding ways to facilitate investments in rural places,” Varilek says PB

Rob Swenson Contributing Writer RobSwensonMediaServices@gmail.com