Farmer & Rancher Agricultural easement Revolving Loan Fund
Challenge – placing easements on farmland to keep it in farmer and rancher hands and agricultural in-perpetuity can be cost prohibitive for farmers. Few farmers in Hawaii have the $10,000 to pay for an appraisal and additional costs associated with placing agricultural easements on their land, e.g. EA, surveys.
Opportunity – establish a loan fund for land trusts to pay for farmers’ costs for appraisals, etc. that are associated with securing agricultural easements. Costs are typically $6,000 to $12,000 per farm or ranch.
Repayment – loans repaid from ag easement payment to farmer (farmer pays back loan) + 1% of easement monies to grow loan fund and cover administration costs. For example, if a farmer borrows $10,000 to cover the costs to secure an ag easement and the value of the easement payment is $400,000, the farmer would reimburse the fund $10,000 (repaying the borrowed amount) + $4,000. (1% of ag easement payment). So the loan fund would grow by $4,000.
Lender – A nonprofit with statewide presence and mission to support agriculture. The Kohala Center (TKC) and the Hawaii Farmers Union Foundation (HFUF) might be strong fits for administeringthis program.
Funding of Loan Fund – U.S. Department of Agriculture Rural Development, donations, private no-interest long-term loan.
Initial Funding Goal - $50,000 to fund approximately 4 agricultural easements around the state and $10,000 for administrative costs. As 1% of ag easement payments grow loan fund so more ag easements can be funded each year.
Loan Screening – because the land trusts vet and select farms for which they know they can secure funds, the Revolving Loan Fund Lender (e.g. potentially, TKC or HFUF) does not need to do any traditional lending screening such as review of finances, etc.
Process
- Land trust(s) submits loan project with costs to Lender (e.g. potentially, TKC or HFUF).
- Lender (TKC or HFUF) approves/denies loan request based on transparent criteria or first come, first served until funds for year are exhausted and then paid back.
- Once loan is approved by Lender, the land trust(s) 1.) provides a list of items land trust will need to pay on behalf of farmer to secure ag easement and 2.) submits bills to Lender to be paid.
- Land trust(s) reimburses Lender from ag easement payment to farmer: loan amount + 1% of easement payment to grow fund and cover administrative costs.