<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=iso-8859-1">
<META content="MSHTML 6.00.6000.16414" name=GENERATOR>
<STYLE></STYLE>
</HEAD>
<BODY bgColor=#ffffff>
<DIV><STRONG><FONT size=5>Rural Aid Goes to Urban Areas<BR></FONT></STRONG>USDA
Development Program Helps Suburbs, Resort Cities<BR>
<P><FONT size=-1>By Gilbert M. Gaul and Sarah Cohen<BR>Washington Post Staff
Writers<BR>Friday, April 6, 2007; A01<BR></FONT></P>
<P></P>
<P>PROVINCETOWN, Mass. -- In a few weeks, artists, lawyers and bankers will
begin arriving here for the busy summer season on high-speed ferries that take
90 minutes to make the trip from Boston. They will land at a recently
refurbished municipal dock that was built with the help of a $1.95 million
low-interest loan from the U.S. Department of Agriculture.</P>
<P>A few blocks away, the Provincetown Art Association and Museum has used
nearly $3 million in grants and loans from the Agriculture Department to add
gallery space and renovate a historic sea captain's house. A short drive back
down the Cape, the department is financing a new actors theater in Wellfleet and
recently awarded a grant to a garden center in Hyannis to build a windmill.</P>
<P>Although Cape Cod is only a short trip from Boston and Providence, R.I., and
is home to some of the wealthiest beach towns in the United States, to the
Agriculture Department it meets the definition of rural America. That means it
qualifies for aid originally intended for farmland and backwoods areas that were
isolated and poor, struggling to keep their heads above water.</P>
<P>"Provincetown is many things to many people, and to USDA we're rural," said
Keith A. Bergman, the town manager. "We'll take it."</P>
<P>He isn't alone.</P>
<P>On Martha's Vineyard, the USDA guaranteed a $4.5 million loan for the popular
Black Dog Tavern. The loan, which has since been repaid, was to refinance the
tavern's mortgage and expand Black Dog's retail clothing stores. On Nantucket,
where the population swells to the size of a small city in summer months, the
Agriculture Department provides rental subsidies for families priced out of the
local market.</P>
<P>All told, the USDA has handed out more than $70 billion in grants, loans and
loan guarantees since 2001 as part of its sprawling but little-known Rural
Development program. More than half of that money has gone to metropolitan
regions or communities within easy commuting distance of a midsize city,
including beach resorts and suburban developments, a Washington Post
investigation found.</P>
<P>More than three times as much money went to metropolitan areas with
populations of 50,000 or more ($30.3 billion) as to poor or shrinking rural
counties ($8.6 billion). Recreational or retirement communities alone got $8.8
billion.</P>
<P>Among the recipients were electric companies awarded almost $1 billion in
low-interest loans to serve the booming suburbs of Atlanta and Tampa. Beach
towns from Cape Cod to New Jersey to Florida collected federal money for water
and sewer systems, town halls, and boardwalks. An Internet provider in Houston
got $23 million in loans to wire affluent subdivisions, including one that
boasts million-dollar houses and an equestrian center.</P>
<P>The USDA's regulations determining eligible rural communities vary from
program to program and are often influenced by Congress. There are 40 separate
programs under Rural Development. They include low-interest housing loans,
USDA-backed loans for businesses, and grants for communities and nonprofit
groups.</P>
<P>In some programs, awards are limited to towns with populations of less than
2,500. In others, it's 5,000, 10,000, 20,000 or 50,000. In still other cases,
the USDA bases its decisions on individual streets or blocks, using census
data.</P>
<P>"Nobody understands it. I don't understand it," said J. Gregory Greco, a
business specialist who works out of the USDA's Rural Development office in
Harrisburg, Pa. "You may find one area of town is eligible and another isn't. It
can be by street: One side is eligible and another is not. I defy you to give
the logic of it."</P>
<P>Although Harrisburg is the state capital and is surrounded by growing
suburbs, businesses still qualify for USDA-backed loans because the city's
population -- 48,000 at the last census -- is 2,000 below the cutoff for certain
programs. In 2004, the USDA guaranteed a $1.2 million loan for a new Hyundai
dealership near a major interstate there. There are about a dozen other car
dealers in the same Zip code, according to government data.</P>
<P>A few miles away, in Camp Hill, the USDA backed more than $5 million in loans
to Coliseum Entertainment Group, which recently opened a restaurant and
entertainment complex. And in State College, home of Pennsylvania State
University, the USDA guaranteed a $4.6 million loan to United Entertainment of
St. Cloud, Minn., to open a multiplex movie theater. A loan guarantee from the
government allows businesses to borrow money at cheaper rates.</P>
<P>Patrick Myers, the president of Coliseum Entertainment, said he learned about
the loan program from his bank.</P>
<P>"Apparently, it goes by population," he said of the "rural" designation. "I
guess if we compare it to Washington, D.C., we are, but if you compare it to
Kansas, we're not."</P><B>The Growing Program</B><BR>
<P>The USDA's role in rural development dates to the Dust Bowl in the 1930s,
when thousands of farmers went broke and many of the small communities where
they lived dried up like the ground beneath their feet.</P>
<P>President Franklin D. Roosevelt responded with programs to resettle farmers
and bring electricity to isolated corners of the nation. Rural electrification
was a resounding success that brought many communities out of abject poverty.
Over the years, programs followed for housing, telephones, business loans and
community grants -- and the eligibility criteria expanded.</P>
<P>Today, 40 separate programs operate under the USDA's Rural Development
division. They are included as a separate title in the Farm Bill, the
government's five-year master plan for agriculture, currently up for renewal
before Congress. There are programs for broadband Internet access, telemedicine
and long-distance learning. Rural Development also provides billions in housing
loans and rental subsidies for residents in more than 400,000 apartments
scattered across the country.</P>
<P>The agency operates programs in every state, Puerto Rico and the U.S. Virgin
Islands and has nearly 7,000 employees. Most states have multiple offices. New
Jersey, for example, has five, as well as a satellite operation near the beach.
Almost 50 employees in New Jersey work on sewer, housing and business programs,
awarding loans and grants of nearly $50 million a year.</P>
<P>Thomas C. Dorr, the undersecretary for Rural Development, describes the
division's role as the "venture capitalist for rural America." The program
provides "equity, liquidity and technical assistance to finance and foster
growth" and preserve rural communities, the political appointee said in
testimony before Congress.</P>
<P>But as the program has expanded, it has become more complicated, bureaucratic
and secretive. The USDA instructed its employees not to answer questions from a
Post reporter, steering all queries to Washington. Some documents obtained under
the Freedom of Information Act were heavily redacted, so reporters could not
determine the amounts of loans or locations of businesses. New Jersey officials
blotted out names and figures in one of their own news releases.</P>
<P>In general, USDA officials maintain that they are parceling out aid to rural
areas according to the rules laid out by the department and Congress. "Rural
America is vast," covering 75 percent of the nation's land mass, Dorr testified
in October.</P>
<P>Members of Congress take a keen interest in Rural Development programs. Often
a member will arrange a photo opportunity when the Agriculture Department awards
a grant in the lawmaker's district. In several instances, members have
interceded so towns and cities that would not otherwise be eligible could still
get money, records and interviews show.</P>
<P>But even members of Congress have pointed out that the rules have become
unwieldy. The "mixed definitions" of what is considered rural continue to
challenge the Rural Development program, Rep. Frank D. Lucas (R-Okla.) said at a
March 2006 hearing. "I believe we should work to find a consistent definition of
the term 'rural' that would apply to all of the programs across all agencies,"
he said.</P><B>Boons for Provincetown</B><BR>
<P>Provincetown, at the tip of Cape Cod, qualified for Rural Development aid
because it has a year-round population of about 4,000, below the threshold of
20,000 for community loans and grants. The USDA does not take into account that
the summer population is at least 10 times as large. Nor does it consider that
Provincetown has some of the most expensive real estate in the United States and
relatively modest taxes.</P>
<P>Property values are more than six times what they were 20 years ago, and the
tax base tops $2 billion. More than two-thirds of the houses in Provincetown are
investment properties or second homes.</P>
<P>But in the eyes of the Agriculture Department, it is still considered to be
rural.</P>
<P>"Our regulation says a city or town of less than 20,000. That's it," said
Daniel Beaudette, director of community programs for Rural Development in
Massachusetts.</P>
<P>Many of the historic houses in Provincetown are being carved up into
condominiums, with a tiny one-bedroom unit selling for upwards of $600,000,
according to the town's tax assessor, Paul M. Gavin. "We're kind of like a
little Manhattan here," he said.</P>
<P>In 2003, the town received its $1.95 million government loan from Rural
Development to help rebuild MacMillan Pier. In an e-mail, a spokeswoman for the
Massachusetts program explained that the pier was "considered an essential
facility as it is the hub of the local fishing industry and the ferry to
Boston."</P>
<P>But the local fishery is in decline. "The business of the harbor is now
largely related to tourism," the town's Web site says. The ferry costs about $50
each way.</P>
<P>A short walk from the pier up Commercial Street, the nonprofit Provincetown
Art Association and Museum has received four Rural Development loans and grants
since 2004, using the money to increase its space, add climate-controlled
facilities and renovate the sea captain's house. One loan, for $775,000, was
awarded to cover cost overruns, records show.</P>
<P>Museum Executive Director Christine McCarthy said museum staffers stumbled
upon the Rural Development program while looking for grants. "I had no idea they
funded cultural projects," she said. USDA officials took a strong interest in
the museum. "We're geographically challenged here," McCarthy said.</P><B>Rural
by Some Measure</B><BR>
<P>In New Jersey, the most densely populated state, Rural Development has
awarded $250 million for projects in the past five years, including at least $75
million to beach and coastal towns, a Post analysis found. Last year, the agency
spent $8.6 million on rental assistance there -- more than it spent on such aid
in Nebraska, Kansas, Montana or North Dakota.</P>
<P>The city of Wildwood, on the Atlantic north of historic Cape May, experiences
population swings similar to those of other beach towns. In the winter, the
population is less than 6,000 and includes many poor seasonal workers. But in
the summer, the boardwalk and spacious beaches fill up and the population nears
250,000, transforming Wildwood into one of the largest cities in the state. Best
known for its low-slung motels and "Doo-Wop" style of architecture, the city is
undergoing a revitalization, with property values tripling to about $2
billion.</P>
<P>Since 2001, Wildwood has been awarded about $13 million by Rural Development
in loans and grants, records show. Nearly $10 million has been awarded for sewer
repairs to handle the surging summer crowds and traffic from a new convention
center. Wildwood has also received millions to replace windows and doors at its
city hall, renovate a long stretch of boardwalk, repair public restrooms, spruce
up streets, and conduct a parking study.</P>
<P>"Because of the densities of Wildwood, Wildwood may not appear to be rural,
but it meets the formula for rural," said Gordon Dahl, a federally funded
economic development official who has helped the city obtain many of its grants.
"It's sort of like saying, 'Is the tax code fair?' Some people would say it is,
and some people would say it isn't."</P>
<P>The city, which has been designated an "Urban Enterprise Zone" by state
officials, has enjoyed the backing of Rep. Frank A. LoBiondo (R-N.J.). The
congressman and his staff have made numerous inquiries to Rural Development
officials on behalf of Wildwood and other towns in LoBiondo's district,
correspondence obtained under the Freedom of Information Act shows.</P>
<P>"As I've always said, we are blessed to have Frank LoBiondo as a leader in
Congress," Wildwood Mayor Ernie Troiano Jr. was quoted as saying in a news
release issued by LoBiondo's office in August. "He continues to be proactive in
obtaining necessary grants to help our communities and a fine example of what
dedicated public servants means to our communities."</P>
<P>LoBiondo's spokesman said the congressman was responding to Wildwood's
request for help. "The congressman is happy to write a letter," Jason Galanes
said. "But that's the extent of his involvement.</P>
<P>"It's not for the congressman to create the definition or to dole these
grants out," Galanes added. "The argument could be made that the federal
government should update its definition. But it's not for the congressman to
decide."</P>
<P>The four other beach towns on the five-mile barrier island with Wildwood
received grants and loans from Rural Development totaling more than $10 million,
a Post analysis found. Cape May got about $4 million to repair its sewers. City
Manager Luciano V. Corea Jr. said the money is a form of tax relief for local
property holders. "It's obviously going to save us a significant amount of
money," he said. The median price of a house in Cape May is about $450,000.</P>
<P>Up the New Jersey coast, the beach town of Lavallette received more than $5
million for its water and sewer systems. The population is 10 times as large in
the summer, more than 30,000, and places a strain on the systems, according to
Michele Burk, the town's chief financial officer. The average price of a house
in Lavallette is about $700,000.</P>
<P>Burk said "USDA went out of its way to advertise" that money was available.
Ten to 15 years ago, year-round residents had to drive across the bridge to
shop, Burk said. "Not so much anymore. Ten to 15 years ago," she said, "it was
quite rural."</P>
<P>Rural Development aid can go even to areas from which the spires of Manhattan
are visible. Haledon, N.J. -- about 10 miles from New York -- was awarded grants
and loans for its water system totaling $4 million. "Haledon is a small
community, well under 10,000, and it's not wealthy," said Justin Mahon, an
engineer who worked on the project. "But would I characterize it as rural? No.
This isn't Mississippi."</P><B>Subsidized Suburbs</B><BR>
<P>Rural Development money does not go just to beach towns and hamlets looking
to spruce up their boardwalks and rebuild their aging infrastructure. The money
also fuels massive suburban growth.</P>
<P>Three utilities serving the booming Atlanta suburbs have received more than
$400 million since 2001, records show.</P>
<P>Jackson Electric Membership Corp. describes its service area as one of the
"most dynamic growth centers in America."</P>
<P>Greystone Power serves "eight metropolitan Atlanta counties," according to
its Web site, including "some of the fastest growing areas not only in the state
but in the nation."</P>
<P>Sawnee Electric Membership Corp. boasts that its territory includes the
fastest-growing county in the nation, Forsyth County, in northern Georgia.</P>
<P>Utility companies are allowed to keep coming back to the USDA under a policy
known as "once a borrower, always a borrower," which provides rural utilities
access to a pool of cheap capital, even if the once-rural territory they served
is rapidly transforming into a suburb.</P>
<P>Attempts by the Bush administration to repeal the provision have been
rebuffed by Congress.</P>
<P>In addition to electricity, Rural Development money is also funding
high-speed Internet service. In 2005, the USDA's inspector general questioned
more than $100 million in loans to wire subdivisions near Chicago, Minneapolis,
Pittsburgh and Kansas City. In one case, ETS Telephone Company &
Subsidiaries got $22.9 million to wire a series of new subdivisions outside
Houston, including one near a golf course.</P>
<P>"They met the definition for a rural area," USDA officials said.</P>
<P><I>Research editor Alice Crites contributed to this
report.</I></P></DIV></BODY></HTML>