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SUMMER 2002

COMMUNITIES

P U B L I S H E D Q U A RT E R LY
BY THE COMMUNITY
A F F A I R S D E PA RT M E N T O F
THE FEDERAL RESERVE
B A N K O F S T. L O U I S

INDEX

4

BRIDGES
8

Farmers Seek
Bigger Piece
of the Pie

Rural Housing

Spanning the Region

W W W. S T L S . F R B . OR G

11
10

Calendar/Resources

Fall Conferences

12

Team Work Makes the Dream Work
A f t e r Fa c t o r i e s C l o s e , L e a d e r s U n i t e t o Tu r n E c o n o m y A r o u n d
By Faith Weekly
Community Affairs Analyst
What do you do when life
delivers a bunch of lemons? If
you’re smart and resourceful,
you make lemonade.
That’s exactly what Campbellsville, Ky., decided to do a
few years ago when a series of
factory closings caused the
unemployment rate to soar
to 26 percent.

For a span of 50 years, while
Fruit of the Loom operated an
underwear factory in the area,
the local unemployment rate
never rose above 5 percent.
At its peak, Fruit of the Loom
employed 4,000 people. By
the mid-1990s, that number
dropped to 3,200. In June
1998, Fruit of the Loom shut
down its Campbellsville factory
to relocate to Latin America.
Fruit of the Loom was the

Industrial recruiter Kevin Sheilley, left, and Mayor Paul Osborne of Campbellsville, Ky., stand outside
Frost-Arnett Co., a bill collection agency that came to town in 1999. (W.D. McCubbin photo)

primary employer of Taylor
County, home to 22,000 residents. The majority of
the factory’s work force
had never worked
anywhere else.
Sheila Douglas, a 10-year
employee, recalled the anxiety
during the last few months at the
plant and the mood when the
closing was officially announced.
“For most of us, it was a relief
because for months we lived
with the uncertainty of our
future,” she said. “It was scary
and frightening.”
Batesville Casket, another
employer in the area, closed its
factory shortly after, leaving an
additional 200 people unemployed. The workers there and
from the underwear factory
joined a growing list of unemployed in this part of Kentucky
as Fruit of the Loom closed two
more plants, in Greensburg and
in Russell Springs, and another

clothing manufacturer, OshKosh
B’Gosh, shuttered plants in
Columbia and Liberty. In a
period of 18 months, the
region lost 8,000 jobs.
The wave of layoffs caught
local governments off guard.
Economic development was
never a priority of the city and
county governments—Fruit of
the Loom provided economic
stability. In retrospect, Campbellsville Mayor Paul E. Osborne
said, Fruit of the Loom sent signals that it might move its operations overseas as much as 10
years earlier. However, when a
community has experienced such
a long period of stable employment and low unemployment,
complacency can develop.
continued on Page 2

continued from Page 1

At a time when it would have
been easy to throw blame around,
local leaders decided instead to
unite and quickly focus on turning around Campbellsville’s
unemployment woes. In
October 1998, the city and
county governments formed
Team Taylor County Industrial
Development Authority and
established a strategy to economically revitalize Campbellsville.
They recognized the importance of having a diverse economy and committed themselves
to attracting manufacturing, service and distribution businesses
to Campbellsville and Taylor
County. They leveraged the
area’s central location and accessibility to domestic and
Canadian markets, the area’s
abundant work force, infrastructure, low cost of doing business,
state financial incentives for
businesses and education/training to attract industry.
A new industrial recruiter,
Kevin T. Sheilley, was hired as
executive director of Team
Taylor County. He became the
point person for representing
the best interests of the community. A 1 percent employee payroll tax and a 1 percent tax on
employers’ profits were implemented to fund a portion of the
industrial authority’s budget.
Four months later, in January
1999, a new mayor, county
executive/judge and university
president took office.
Mayor Osborne identified four
practices that were instrumental
in helping to revitalize the city.

First, all community leaders—
elected and non-elected
officials—worked as a team.
When Amazon.com decided to
relocate to Campbellsville/Taylor
County, Osborne said he
received more positive feedback
from entering the press conference to make the announcement
side by side with Taylor County
Judge/Executive Eddie Rogers

Fourth, aggressive leadership
was key. “The mayor sets the
pace,” he said. “Leadership ability at the top is super important.”
Team Taylor County, a partnership of local governments,
businesses, school systems and
Campbellsville University, practices a coordinated approach
to community and economic
development. The mission of

people. Forty-five percent of
Amazon.com’s sales activity
flows through Campbellsville.
In 21/2 years, Sheilley has
recruited 11 companies to relocate to Campbellsville/Taylor
County, and all of the jobs lost
have been replaced, plus some.
The 11 companies include manufacturers, distributors and service-oriented businesses.

“

“The more opportunities that economic
development efforts can provide a community, the better off the individual members
of the community are,” said Kevin Sheilley,
executive director of Team Taylor County.

”

Kevin Sheilley and employees of Frost-Arnett, Co., which employs 89 residents. (W.D. McCubbin photo)

than he did from the actual
announcement.
Second, the community conducted an honest assessment of
its strengths and weaknesses.
Third, a strategic plan was
developed. “Planning is as
important, if not more, as writing a budget,” Osborne said.

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Team Taylor County is quite
simple: to make the community
a better place to live.
Sheilley’s approach to economic development has yielded
outstanding results.
In May 1999, Amazon.com
opened its largest distribution
center, which employs 1,152

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“The more opportunities that
economic development efforts
can provide for a community,
the better off the individual
members of the community
are,” Sheilley said.
The relocation of these companies, along with the corresponding reduction in unemployment,
has had a ripple effect on other
economic indicators. Property tax
assessments are up 19 percent,
and retail sales are up 35 percent.
The town is home to Campbellsville University, a private,
liberal arts institution that offers
an MBA program. Recently,
the university’s new technology
training center opened as a business-driven source for training
options. The nearby Green
County Area Technology Center offers additional technical
training opportunities.

In 2001, the city applied for
and received certification as a
retirement community through
the Kentucky Tourism Development Cabinet. To qualify,
Campbellsville had to meet certain requirements and is now
one of eight Kentucky cities
with such certification. The
state advertises the certified
retirement communities in magazines such as Southern Living
and AARP’s Modern Maturity.
Since 1999, Taylor County
has sought and received $6 million in grants—about half from
the Community Development
Block Grant (CDBG) program.
Before 1999, Campbellsville/
Taylor County had not received
CDBG funds for 18 years
because no one was actively
seeking them. Two grants totaling $1,725,000 were received
from the CDBG economic development pool, and two grants of
$50,000 each were awarded for
microenterprise development.
An economic development
application for $500,000 in
CDBG funds to extend sewer
and water lines to a new
tourism project is being finalized. A women’s substance
abuse center under construction
is being funded by a $1.5 million
grant from the Center for Substance Abuse Treatment.
Community leaders also recognized that it was important for
all residents of the city and county
to benefit from the economic revitalization of Campellsville/Taylor
County. Recently, a grassroots
initiative called Greater Campbellsville United was developed

to support, nurture and develop
the minority community.
LaWanda Hazard, coordinator,
will help link the minority community with resources and contacts that can assist entrepreneurs,
provide job training and raise
education levels.
Community Ventures Corp.
(CVC), a community development corporation with headquarters in Lexington, Ky.,
opened a satellite office in
Campbellsville shortly after
Fruit of the Loom shut down.
Many displaced workers took
the opportunity to become
entrepreneurs, but needed help.
Team Taylor County officials
said CVC’s presence has been
an asset, providing quality entrepreneurial training and financing
not available through commercial
banks. Pamela Mann, business
development specialist, has
helped potential small-business
owners obtain loans that range
from as small as $500 to as large
as $3 million through CVC’s
Continuum of Business Products.
Campbellsville’s economic turnaround has been the result of
strong leadership, creativity, risktaking and a willingness to learn
from the past. However, local
leaders aren’t resting on their
success. They continue to plan
for future economic expansion.
According to Sheilley, Team
Taylor County recognizes that
efforts must include not only
diversification in the number
and type of employers, but other
economic developments if the
community is to have a longterm recovery.

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Taylor County’s Top 15 Employers
Companies in bold opened after the Fruit of the Loom Factory closed in 1998.

EMPLOYER

PRODUCTS

Amazon.com

Books and music distribution

1,152

Cox Interior

Hardwood moldings, trim, stair
parts, interior doors, mantels

700

EMPLOYEES

Taylor County Hospital

489

Taylor County
School District

483

Wal-Mart Super Center

Discount retailer

Campbellsville University
Ingersoll-Rand

398
295

Vacuum pumps, air conditioning,
gas compressors

Campbellsville Independent
School District

250

240

Airguard

Air filtration products

235

Campbellsville Apparel

Garments

158

Fleetwood Travel
Trailers of Kentucky

Travel trailers

147

Campbellsville Industries

Steeples, cupolas, crosses, cornices,
awnings, columns, louvers, shutters,
railings, balusters

121

National Data Questing

Data collection

120

Parker Kalon

Threaded fasteners

110

Rosenbluth International

Corporate travel management

105

WWW.STLS.FRB.ORG

Farmers
Seek
Bigger
Piece
of
the
Pie
gg
Tired of Low Commodity Prices, Producers Branch Out into Processing, Marketing
By Jim Worstell
Jim Worstell, Ph.D., is coordinator
of the Delta Enterprise Network,
a consortium of universities, businesses, farmers and elected officials
working for sustainable, valueadded diversification. He has
helped develop farmer-owned processing and marketing enterprises
in 10 states and 14 countries.
The twin scourges of many
rural areas today are low commodity prices and high unemployment.
The gap between what the
farmer is paid for commodities
and what the consumer pays for
the end product is widening,
making farming a difficult business. Unemployment is high in
rural areas that have traditionally
depended on agriculture.
Is there a silver lining in this
dark cloud? Several organizations in Missouri, Kentucky,
Illinois, Tennessee and Arkansas
think so. These organizations
have united in the Delta Enterprise Network (DEN) to add
value to existing commodities
and to diversify the rural
economy of the Delta.
In real dollars, the trend lines
for commodity prices have been
negative for decades. In recent
years, prices of commodities
produced by farmers have experienced a free fall. According

to the World Bank, agricultural
commodity prices fell nearly
32 percent worldwide between
1997 and 2001.
These trends are likely to continue because of large production
increases each year in many
crops, according to the World
Bank. Money is being made in
agriculture, but in processing
and marketing, not in commodity production. A 1998 study
by Richard L. Kohls and Joseph
N. Uhl of Purdue University
showed that by the late 1990s,
the farmer received 22 percent
of the consumer dollar, and the
remaining 78 percent went to
Delta Enterprise Network
Arkansas Municipal League
Delta Caucus
Arkansas Delta Council
University of Missouri
Outreach and Extension
Delta Land & Community
University of Kentucky/Kentucky State
Cooperative Extension
University of Arkansas-Pine Bluff
University of Tennessee Extension
University of Illinois Extension
USDA/Rural Development
(Missouri, Illinois, Tennessee)

Missouri Department of Agriculture
Kentucky Department of Agriculture
Various local chambers of commerce

LENDERS

Rise of Producer-Owned
Marketing and Processing
The challenge of low commodity prices combined with
the opportunity for value-added
profits has prompted various
state and federal agencies to
establish programs to help farmers not only produce commodities but also develop marketing
and processing ventures. These
ventures allow farmers to capture a larger portion of the price
consumers pay for food. Farmers
become entrepreneurs instead of
relying on decreasing commodity
prices and government subsidies.
In some parts of the United
States, these programs were
implemented more than 10 years
ago. The result has been that
the number of producer-owned
value-added ventures has rapidly
increased in the past decade
(Figure 1).
Agencies Have United in Delta
Enterprise Network
Though most of these new
farmer-owned ventures are
located in the upper Midwest,
many people in the mid-South
are eager to create similar

USDA/Natural Resources
Conservation Service (Missouri)

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processing and marketing. The
return on investment in agricultural processing and marketing
is among the highest of any
industry, in part because of
low commodity prices.

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opportunities in their region.
In the past two years, a number
of agencies interested in valueadded diversification have
joined together to tackle the
work. These groups have provided agents to help farmers
create dozens of new businesses.
DEN participants have visited
and analyzed successful valueadded diversification programs
in North Dakota, Minnesota,
New Zealand and Australia and
have adapted these programs in
Missouri, Illinois, Tennessee
and Kentucky.
All of these programs have five
common elements. Entrepreneurs who participate must complete each stage before moving to
the next tier. DEN’s network of
agencies provides professional
help at each stage.
The sequential steps are:
1. Initial organizing
Each of the aforementioned
programs has a variety of web
sites, conferences and activities
to help educate farmers about
opportunities. DEN has worked
with institutions in Missouri,
Kentucky and Tennessee to
establish statewide conferences
to promote such opportunities
and resources.
After farmers learn about new
processing and marketing
opportunities, agents from cooperative extensions or other local
development agencies help the

Figure 1
farmers define a specific product
and market they would like to
pursue. The foremost example
of an organization that provides
agents in the Delta states is
Missouri’s Agricultural Business
Counselor program.
2. Competitive grant funds
for feasibility analysis
In this stage, farmers seek
funding for a feasibility study to
ensure they are pursuing a profitable venture. This type of
analysis has proved beneficial in
programs around the country as
long as the feasibility studies are
performed by experts in each
industry. Sometimes the answer
“no” is the best result from a
feasibility study.
3. Hiring expertise in
the industry
No matter how sophisticated
those involved in forming the
new enterprise are, they will
invariably need the services of
someone who works in the
industry. For example, funding
from North Dakota’s successful
Agricultural Products Utilization
Commission (APUC) enabled
Dakota Growers Pasta Co. to
attract an experienced general
manager for its first pasta plant.
In Iowa, the Department of
Agriculture’s Rural Economic
Value-Added Mentoring Program
sends mentors experienced in a
particular industry to help cooperatives move to the next stage.
University of Kentucky Cooperative Extension facilitators operate at this stage to bring in the
foremost experts available in
marketing and production in
the industry.

50
45

Value-Added Ventures Hit Growth Spurt

40

The number of new-generation cooperatives in the country
has increased dramatically since 1990.

35
30
25
20
15
10
5
0
’70

’74

’78

’82

’86

’90

’94

’98

Source: C.D. Merrett, M. Holmes, and J. Waner. Directory of New Generation Cooperatives (Macomb: Illinois Institute for Rural Affairs, 1999)
Published in A Cooperative Approach to Local Economic Development, ed. C.D. Merrett and N. Walzer, 2001.

Minnesota’s Agricultural
Utilization Research Institute
(AURI) brings another level of
mentor to developing enterprises.
The institute employs scientists
who have considerable experience in selected key industries
that are important to Minnesota.
These scientists then work with
local facilitators and principals
in each enterprise to solve problems in new product design or
production. Many other regional rural development programs
also recruit outside mentors to
assist in highly technical aspects
of industries new to particular
communities. Likewise, when a
community is attempting to
penetrate a new market, North
Dakota’s APUC, Minnesota’s
AURI and Missouri’s Department
of Agriculture will find someone
who is working in the thick of

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that market to advise the farmers.
There is one lesson all of these
new regional development efforts
have learned: The entrepreneur,
rather than the university, needs
to keep control of product development or marketing studies
money. The universities can often
perform valuable research in
these areas, but only if directly
controlled by the principal in
the business. Other states and
regions have heeded the siren
call of academe and suffered
through marketing studies that
were not performed in conjunction with any real business and
product development research.
4. Funding for prospectus and
equity drive
Some regional development
entities, such as Kentucky
Highlands Investment Corp.,
provide initial equity for a com-

WWW.STLS.FRB.ORG

pany and fund development
of a prospectus to attract the
additional needed capital.
In other cases, the prospectus
is funded by early investors
recruited to the project in the
first three stages of the process.
Other regional development
entities, such as 21st Century
Alliance in Kansas, require potential participants to provide seed
money to cover these early costs.
After each project is fully capitalized, the seed money is repaid.
The core funding for the
new value-added industries is
obtained from local farmers,
though loan programs to purchase stock are available from
some financial institutions.
Usually, such equity drives try
to raise 30 percent to 40 percent
of the needed investment.
continued on Page 6

continued from Page 5

Many of these new businesses
are farmer-owned, limited equity
cooperatives that own the processing and marketing concerns.
This legal structure requires a
sizable up-front investment by
farmers. Farmers purchase delivery rights and responsibilities
when they purchase their shares.
For example, a farmer purchasing $20,000 in shares of a pasta
cooperative would be agreeing
to deliver 20,000 bushels of
wheat of a defined quality to the

cooperative at harvest. The cooperative agrees to buy his wheat at
market price and return a share
of the profits to him and to the
other owners when the pasta
made from the wheat is sold.
These delivery rights are totally
saleable and typically appreciate
in value several percent a year.
During the last decade, these
limited equity, or new generation, cooperatives have spread
throughout the United States
from their original toehold in
the sugar beet country of the

Red River Valley between North
Dakota and Minnesota.
5. Assisting with access to
low-interest capital
The remainder of investment
costs are achieved with the fifth
component—helping businesses
obtain capital with interest rates
as low as possible. In Iowa,
enterprises that reach this stage
are eligible for the Value-added
Agricultural Products and
Processes Financial Assistance
Program. This program provides a combination of loans

Missouri Hog Farmers Patch Together a Solution
By Linda Fischer
Assistant Editor

Three hog farmers from northern Missouri embarked on a
mission in 1992 to increase their
incomes. What they did resulted
in an unusual enterprise that has
endured for 10 years and has
affected other Missouri farmers,
as well as consumers.
“It was a strong group of
farmers,” says Lindsay Howerton
of the nonprofit Missouri Rural
Crisis Center (MRCC). “Changes
in the livestock industry made
them realize they needed help.”
The most devastating change
was the growth of corporate hog
farms, which were putting small
hog operations out of business
at a fast pace. MRCC had been
formed in 1985 to address a

Pigs kick up the dust on a Patchwork farm.

tripling rate of farm bankruptcies
in the state. The farmers were
members of the organization
and turned to it for assistance.
Together, they launched Patchwork Family Farms, an economic
development project designed to

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eliminate middlemen, give
hog farmers a guaranteed price
that exceeds the market price
and provide high-quality pork
to consumers.
“We’ve had to build a name
for ourselves through quality

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and forgivable loans to cooperative efforts that accomplish all
previous steps of the process.
Missouri provides saleable tax
credits. Texas has a low-interest
bond program. The list of creative financing options is as long
as the list of agencies engaged in
this sort of work. And that list
grows longer every day.
Assessment of Successful
Programs
To assess the impact that one
such value-added diversification

and service,” Howerton says.
“We’re in a tough marketplace.
It takes a lot of people and volunteer hours and sweat equity
to make this work.”
The process starts with Patchwork farmers promising to raise
hogs in a healthy environment.
The hogs are allowed outside
in the fresh air and sunshine.
Growth hormones and antibiotics in feed are prohibited.
Once the hogs are ready for
market, Patchwork steps in and
buys them up-front so that profit
flows smoothly to the farmers.
Patchwork pays 43 cents per
pound or, if the market price
is higher, 15 percent above the
market price. Hogs were selling
for 30 to 35 cents per pound
on the market earlier this spring.
In 1998, the guaranteed price
played a critical role for
Patchwork members when the
market price sank to 7.5 cents
per pound.

economy. Secondary economic
benefits amounted to an additional $160 million each year.
Thus, the utilization commission
asserted that its direct annual
return on investment for these
11 projects was $97 for each
dollar spent, and its total return
(including secondary benefits)
was $297 for each dollar spent.
The 1996 study performed by
the university concluded by saying, “the projects sponsored by
the North Dakota Agricultural
Products Utilization Commission

A Survey of Policies
In a report called Value-Added Agriculture Policies Across the 50 States, the U.S.
Department of Agriculture reviews various ways in which states support value-added
agriculture. The report contains charts and maps that show the differences between
states and the impact on agribusiness in rural areas. The report is available online at
http://www.ers.usda.gov/publications/ruralamerica/ra161/ra161c.pdf or by calling
1-800-999-6779 and asking for Rural America, Vol. 16, No.1.

program had on a state’s economy,
North Dakota State University’s
Department of Agricultural
Economics analyzed 11 projects
in 1996 that had been funded

with $867,381 from the North
Dakota APCU. These 11 projects helped create businesses
that directly added $84.5 million to North Dakota’s annual

The next step is to send the
hogs for processing to one of
three federally inspected, familyowned plants that Patchwork
uses in Missouri.
Although the farmers are paid
before the meat is sold, their
work goes beyond raising hogs.
Along with staff from Patchwork,
the farmers put on their sales
hats and market the meat to
restaurants, grocery stores and
members of a food cooperative.
A husband-wife team makes all
the deliveries.
“We’ve been creative in our
marketing strategy,” Howerton
says. “Patchwork feels it is important to sell quality products to
all income levels. We don’t just
go after a niche market.”
Its market includes about
50 restaurants in mid-Missouri,
many in Columbia. They also sell
to a specialty grocery store, four
mainstream supermarkets and the
5,500-member food co-op. The

pork products bear the Patchwork
Family Farms label and are displayed in their own cases in stores.
Patchwork has received some
financial support in the form of
grants from nonprofit organizations and a grant from the U.S.
Department of Agriculture. One
of the nonprofits, the Federation
of Southern Cooperatives, provided the fledgling organization
with training on how to conduct
a feasibility study; the Catholic
Campaign for Human Development funded the study.
Patchwork Family Farms’
sales have steadily increased
since 1992. In 1997, Patchwork
recorded $60,000 in gross sales.
By 1999, that figure jumped to
$196,000. Last year, total sales
were $302,000.
The number of hog farmers
who are participating in the project has also increased, to 20.
Despite the good news, Patchwork Family Farms is not yet at

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the breakeven point, Howerton
says. “But we’re getting closer.”
In the 10 years since Patchwork Family Farms was started

are adding value to the state’s
agricultural commodities and
thereby creating new jobs, gross
business volume and tax revenues for the state economy.
The economic contributions of
these projects is substantial on
a statewide basis and even more
impressive at the local level.”
Information on DEN is available
at www.deltanetwork.org.

farmers has dropped to less than
a third of previous levels, wrote
John Ikerd, a retired University
of Missouri professor, in the
March/April
2001 issue of
Small Farm
Today.
Meanwhile,
Patchwork
Family Farms
keeps working.
The project has
been recognized
on a national
level for its
efforts to keep
A Missouri farmer coaxes his hogs to come out in the sunshine.
the independent family farmer in business.
to help farmers keep their hogIt has been featured on the
producing businesses, the trend
Discovery Channel and at a
in corporate farming has continFarm Aid concert.
ued in Missouri. The number
“We have produced a project
of hogs produced in the state
that is changing the system,”
has risen dramatically with the
Howerton says. “We’re here to say
influx of large corporate operathese projects can be successful.”
tions, but the number of
Missouri families that are hog

WWW.STLS.FRB.ORG

Searching for Affordable Homes in the Country
By Linda Fischer
Assistant Editor
Life in rural America has its
ups and downs just like any
place else. And, just like any
place else, finding a good place
to live at an affordable price is
a challenge.
Experts on rural housing
gathered recently at the 2002
Governor’s Conference on Housing in Missouri to discuss the
special challenges facing potential homebuyers and developers
in the country.
“Lack of affordable housing is
a major problem in rural cities,”
said Mark Stalsworth of the
Missouri Housing Development
Commission. “Development
costs can be quite high in rural
areas, sometimes higher than in
urban areas.”
One reason for the higher
cost is a scarcity of contractors,
Stalsworth said. Contractors go
where they can find the combination of work and high wages,
and that’s in cities.
Joseph Bayer, president of
First Integrity Mortgage Services
in St. Louis, agreed.
“Labor is an issue,” he said.
“Where will you get labor if
you’re going to build from the
ground up? In urban areas, you
have contractors who have a
labor force in place. In rural
areas, you have contractors who
build two or three homes a year
and who do not have a labor
pool to call on.”

Another problem in country
communities is a lack of planning and zoning, said Becky
Eftink, rural housing specialist
with USDA/Rural Development
in Missouri. In very rural areas,
there may not even be an infrastructure such as sewer and
water lines.
Credit problems and “payment shock” also can keep lowto moderate-income people in
the country from becoming successful homeowners, she said.
“For instance, a young couple
may go from a $300 a month
rent to $1,000 a month house
payment, and they don’t have
the experience to handle it.”

“

“Development costs can be quite high in
rural areas, sometimes higher than in urban
areas,” said Mark Stalsworth of the Missouri
Housing Development Commission.

”

What can communities do to
lessen the problems?
Eftink suggested working
with technical schools to build
a work force for the housing
industry. In addition, those in
the industry could create job
“shadowing” programs to spark
interest among young people
about careers in homebuilding.
However, Stalsworth said some
small communities have built
their pool of homebuilders only
to see them leave for more
money in bigger towns.
Where there is little or no
planning and zoning, commu-

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nity leaders need to study towns
that have good planning and
zoning and adopt similar ordinances, Eftink said. As for poor
credit or “payment shock,” she
said many problems could be
avoided if high schools taught
financial literacy.
Bayer became interested in
lending and in building houses
in rural areas about five years
ago after hearing an impassioned speech by a Federal
Housing Administration official
on the need for home loans in
the country. He formed a partnership with a builder for the

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express purpose of constructing
houses in rural Missouri.
“It’s a slow process, to be
quite honest,” he said.
Part of the problem is that
small rural banks generally do
not offer the loans that lowerincome people need, Bayer said.
Because most of these banks just
offer balloon notes, his St. Louisbased company started lending
through a network of rural banks,
which gave them the ability to
offer new products in their areas.
Bayer’s work in housing development has also given him a
builder’s perspective. If a rural
community decides to expand
its housing stock, there are issues
to address and steps to take before
proceeding, Bayer said. They are:
1. Is the community in agreement that new housing stock is
needed? If not, the project will
never succeed.
2. What will the target price
of the house be? What price
range can the community handle without having “payment
shock”? This determines what
kind of housing will be built.
3. Is there available labor?
4. The community has to
accept that quality affordable
housing costs money. If the
market is low-income people,
then the builder can construct
quality houses, but they will
have to be small.
5. The community should
take advantage of government
assistance that is available for
new construction in rural areas.

6. There has to be a firm
commitment on the part of the
developer to follow the project
through to the end. Some projects have been started and then
abandoned when problems arose.
7. Rural communities should
consider manufactured housing.
There are quality manufactured
houses that can be built on a
concrete foundation that “are a
heck of a lot better than existing
houses at the same price,” Bayer
said. Many communities have
adopted BOCA (Building Officials and Code Administrators)
codes so that they can limit
manufactured housing. “That
is a mistake,” Bayer said.
8. City officials need to be
flexible. When the community
has done all the planning, it
needs to empower one leader to
break down barriers and take
charge of the project.
Another expert on the
panel was Dottie Sheppick of
Countrywide Home Loans Inc.,
which originates and buys loans
that are guaranteed by USDA’s
Rural Housing Service. Lenders
in the rural market are needed,
she said.
“It can be difficult for firsttime home buyers with very few
resources to get a home loan in
any area,” she said. “In rural
areas, it can be even tougher
because there are fewer lenders
and less competition.”
A positive trend is that some
rural banks are offering more
mortgages that can be sold in
the secondary market, opening
up the doors to more potential
homeowners, she said.

When lenders do have products to offer people with low or
moderate incomes, they need to
be creative in getting the word
out, she said. She suggested
conducting homebuyer fairs;
using radio and newspaper
public service announcements;
working with rural service
groups, such as Rural Housing
Service; and having meetings or
distributing fliers at county fairs,
rodeos and restaurants.
“Go wherever people gather,”
she said.

Have you

HEARD

For information on USDA/
Rural Development housing
programs in your state, visit
www.rurdev.usda.gov, click on
“state offices” and click on
your state.
For information on local
housing programs, contact an
agency in your state:
• Arkansas Development
Finance Authority,
www.state.ar.us/adfa
• Illinois Housing Development
Authority, www.ihda.org/
frameihda.htm?home4c.
htm~main
• Indiana Housing Finance
Authority, www.IN.gov/ihfa/
• Kentucky Housing Corp.,
www.kyhousing.org
• Mississippi Home Corp.,
www.mshomecorp.com
• Missouri Housing
Development Commission,
www.mhdc.com and
• Tennessee Housing
Development Agency,
www.state.tn.us/thda.

ON

THE

INTERNET

AT

Reg C Changes Postponed
After a request by financial institutions and trade associations, the
Federal Reserve Board has agreed
to postpone the effective date of the
recent amendments to Regulation C
from Jan. 1, 2003, to Jan. 1, 2004.
Regulation C implements the Home
Mortgage Disclosure Act (HMDA).
The Board is, however, adopting an
interim amendment to Regulation C, effective Jan. 1, 2003, mandating the use of
2000 census data in HMDA reporting.
On Feb. 15, the Board published
amendments to Regulation C in the
Federal Register effective for data collected beginning Jan. 1, 2003.
Representatives of the financial institutions requested the postponement on
the grounds that a 2003 deadline would
not give institutions adequate time to
ensure full compliance with the new
rules. Consumer and community organizations generally opposed postponement of the effective date.
Rural Towns Eligible for Facility Loans
Direct and guaranteed loans are
available for small rural communities
wishing to build essential public facilities, such as fire stations, health-care
clinics and day-care centers. These
funds, from the Rural Housing Service
of USDA Rural Development, are limited
to communities of fewer than 20,000
people. Public bodies, nonprofit entities
or Indian tribes may apply for the loans.

9

WWW.STLS.FRB.ORG

Grants are also available for up to
75 percent of project costs. A scale is
used to determine grant funding limitations on the basis of population and
income. Assistance also may be limited
to the minimum amount needed for the
economic feasibility of the project and
may be limited by the availability of funds.
Applications are filed with USDA
Rural Development field offices, which
are listed in local telephone directories
under the heading “U.S. Government,
Department of Agriculture.”
New Markets Tax Credit
Applications Due Aug. 29
The deadline to apply for the first
round of New Markets Tax Credit
(NMTCs) allocations is Aug. 29.
Under the program, taxpayers can
receive federal income tax credits for
making qualified equity investments in
community development entities, which
in turn must use the funds for qualified
investments in low-income communities. The credit to the taxpayer, claimed
over a seven-year period, totals 39 percent of the investment.
The Treasury Department’s
Community Development Financial
Institutions Fund will allocate the
NMTCs annually under a competitive
application process.
Additional information is available on the CDFI Fund’s web site,
www.cdfifund.gov.

SPANNING

THE REGION
The region served by the Feder al Reserve Bank of

St. Louis Resource Fair to Link
Businesses, Immigrants
Financial institutions and
agencies that want to tap into
the immigrant market are being
sought to participate in the International Institute of St. Louis
annual financial resource fair
Aug. 24.
Bridges to the American Dream
Financial Resource Fair for New
Americans will provide businesses
and agencies with a way to showcase their financial services to
immigrants and refugees. Those
interested in participating can pay
a fee to reserve a table at the fair,
which will be at the Institute,
3654 S. Grand Blvd., St. Louis.
For information, call Linda
Callanan at the Institute, (314)
773-9090, ext. 131.
Illinois Offers Grants of $5,000
to Residential Developers
The Illinois Housing Development Authority will give
developers $5,000 for each wheelchair-accessible, single-family
home they build, with a limit of
$30,000 for each developer.
The homes must have at least
one exterior door with a width
of 36 or more inches and no
steps. Interior doors must be
32 inches wide, electrical
switches must be low on the
walls, electrical outlets must be
at least 15 inches from the floor
and bathroom walls must be
reinforced for grab bars.

Grants from
the $1 million
Accessible Housing
Demonstration Grant
Program will be distributed
on a first-come, first-served
basis until December 2003.
Townhouses and condominiums
are eligible, but not rental units.
Builders interested in receiving application packets for the
accessibility demonstration
program should call (312)
836-5230.
In Memphis Area, Seedco
Combats Predatory Lending
About 60 low- to moderateincome residents of Shelby
County, Tenn., are expected to
benefit from a new anti-predatory lending initiative started
recently by Seedco, a national
nonprofit organization.
Seedco has committed a loan
of $250,000 to United Housing
Inc., a Memphis-based nonprofit
organization that offers lowinterest mortgages to low- and
moderate-income homebuyers,
creates affordable housing and
provides homebuyer and financial literacy training. The financing will help capitalize a start-up
loan fund for a three-year pilot
program that will focus on providing home repair loans and on
refinancing mortgages.
United Housing will administer the program and provide
homeownership counseling.

LINKING

LENDERS

S t. L o u i s e n c o m pa s s e s a l l o f A r k a n s a s a n d pa rt s o f M i s s o u r i ,
I l l i n o i s , I n d i a n a , K e n t u c k y, T e n n e s s e e a n d M i s s i s s i p p i .

In addition, the organization will
underwrite, close, monitor and
service the home improvement
loans. Participating Fannie Mae
lenders will directly service the
refinanced loans.
Missouri Seeks Donors
For Financial Literacy Study
Missouri Gov. Bob Holden
signed an order in April to commission a study to improve the
financial and economic literacy
of Missouri’s schoolchildren. The
study will recommend ways to
teach the principles of economics
and personal finance to everyone from kindergarten through
the 12th grade. The lessons
would be incorporated into
math, reading, writing, social
studies, business, and family
and consumer science courses.
The Missouri Council on Economic Education, the Missouri
Bankers Association and the
state treasurer will conduct the
study, which must be submitted
to the governor and members of
the General Assembly by Jan. 1.
No state money will be used for
the study.
A total of $100,000 is needed
for the study; so far, $33,000
has been committed. The
Missouri Coalition for Economic
and Financial Literacy is seeking

10

AND

COMMUNITIES

additional donors to help pay
for the study. For more information, call Stan Mengel at
(816) 235-2654 or e-mail him
at mengel@umkc.edu.
Evansville Police, Firefighters
Get Home-Buying Break
Police officers and firefighters
interested in buying a home in
downtown Evansville, Ind., are
eligible for a $5,000 boost from
the city.
A new mortgage program
developed by the city in partnership with Fannie Mae and
First Federal Savings Bank helps
police and firefighters who buy
an existing residence in the
downtown area. The goal is to
revitalize downtown and keep
public servants in the city. The
$5,000 “soft mortgage” can be
used toward a down payment or
for repairs. The forgivable loan
will credit the homebuyer for 20
percent of the value of the mortgage for each year he lives in
the home.
For information, contact the
Department of Metropolitan
Development, (812) 436-7823,
and ask for Debbie Spaulding
or Susan Kirk.
Public-Private Partnership

CALENDAR

JULY
11-14

cont.
15

SEPTEMBER
16-18

NAHRO Summer Conference—New York
Sponsor: National Association of Housing
and Redevelopment Officials
www.nahro.org

St. Louis Community/Lender Luncheon
Resource Fair—St. Louis
Sponsor: Federal Reserve Bank of St. Louis
(314) 444-8891

Kentucky Housing Association Annual
Convention—Bowling Green
Sponsor: Kentucky Housing Association
(270) 843-6071

16

22

22-27

Smart Business Alternatives
for Lenders—St. Louis
Sponsors: Small Business Administration and
Eastern Missouri Association of Government
Guaranteed Lenders
(314) 615-2357

Community Investment Roundtable—Memphis
Sponsor: Federal Reserve Bank of St. Louis,
FDIC, OCC, OTS, HUD and Metropolitan
Community Development Partnership
(901) 579-2421

Community Development Academy,
Course 3—Excelsior Springs, Mo.
Topic: Creating Capacity for
Dynamic Communities
Sponsor: University of Missouri-Columbia,
Community Development Extension Program
(573) 882-8320
(This program will be repeated
Sept. 28-Oct. 3 in St. Louis.)

21-24
Building Peace: Community
and Diversity—Cleveland, Miss.
Sponsor: Community Development Society
(614) 221-1900, ext. 217

AUGUST
5-9

RESOURCES

Neighborhood Reinvestment Training
Institute—San Francisco
Sponsor: Neighborhood Reinvestment Corp.
www.nw.org/training
1-800-438-5547

When Is Your Check Not a Check? Electronic
Check Conversion—A guide to inform consumers about their rights and responsibilities
regarding electronic check conversions is available online from the Federal Reserve Board.
The guide describes what an electronic check
conversion is and what to do if there are problems with it. The information, which can be
accessed at www.federalreserve.gov/pubs/
checkconv/, includes a checklist of what to
do before and after an electronic check
conversion transaction.
Innovative Designs for Nontraditional
Households in Rural Areas—Housing developers in rural areas are devising creative,
affordable housing solutions for nontraditional
households, according to the Housing
Assistance Council. A recent report by the
council focuses on elderly people, people
with disabilities, unaccompanied farmworkers
and single working mothers. The report
is available free of charge online at

22-28
National Rural Development
Partnership Annual Leadership
Conference—French Lick, Ind.
Sponsor: Indiana Rural Development Council
(317) 232-8776

27-28
12th Annual Indiana Affordable Housing
Conference—Indianapolis
Sponsor: Indiana Housing Finance Authority
1-800-872-0371 (Indiana only)
or (317) 232-7777

29-October 1
NADO 35th Annual Training
Conference—Reno, Nev.
Sponsor: National Association
of Development Organizations
(202) 624-7806

BRIDGES
Bridges is a publication of the Community
Affairs department of the Federal Reserve
Bank of St. Louis. It is intended to inform
bankers, community development organizations, representatives of state and local
government agencies and others in the
Eighth District about current issues and
initiatives in community and economic
development. The Eighth District includes
the state of Arkansas and parts of Illinois,
Indiana, Kentucky, Mississippi, Missouri
and Tennessee.
Contributors:
Glenda Wilson
Community Affairs Officer
Editor
Linda Fischer
Assistant Editor
Ellen Eubank
Community Affairs Manager
Matthew Ashby
Community Affairs Specialist
Lyn Haralson
Community Affairs Analyst
Faith Weekly
Community Affairs Analyst

www.ruralhome.org/pubs/index.htm or can be
ordered for $4, including shipping and handling, by calling (202) 842-8600.

tional Migration, it is available for downloading at www.fanniemaefoundation.org/
programs/papers.shtml.

SBA Loan Prequalification Program—The
new brochure outlines eligibility requirements
for business loan programs. The brochure is
the Small Business Administration’s most
recent effort to reach rural business owners
who are minorities, women or veterans. The
free brochure is available at SBA district
offices. For information, contact the SBA
at 1-800-827-5722 or visit its web site,
www.sba.gov.

Before You Make The Loan—The Bar
Association of Metropolitan St. Louis has
compiled a list of questions to ask lenders
before taking out a real estate loan. The list,
which is designed to help people understand
the terms of proposed loans, is available
online at www.bamsl.org/public/checklist.htm.

THE

INTERNET

AT

11

If you have an interesting community
development program or idea, we would
like to consider publishing an article by or
about you. Please contact:
Linda Fischer
Assistant Editor
Bridges
Federal Reserve Bank of St. Louis
P.O. Box 442
St. Louis, MO 63166
The views expressed in Bridges are not necessarily those of the Federal Reserve Bank
of St. Louis or of the Federal Reserve
System. Material herein may be reprinted
or abstracted as long as Bridges is credited.
Please provide the assistant editor with a
copy of any publication in which such
material is reprinted.

Reaching the Immigrant Market: Creating
Homeownership Opportunities for New
Americans—Based on research from 20 financial institutions, the new handbook provides
case studies of strategies that have been effective in tapping immigrant markets. Published
by the Fannie Mae Foundation and Georgetown
University’s Institute for the Study of Interna-

ON

Diana Zahner
Community Affairs Analyst

Free subscriptions and additional copies
are available on request by contacting
Linda Aubuchon at (314) 444-8646 or by
e-mail to linda.a.aubuchon@stls.frb.org.

WWW.STLS.FRB.ORG

East St. Louis To Be Site of Community Development Conference
The Community Affairs
department at the Federal
Reserve Bank of St. Louis
is planning a community
development conference
Oct. 22-23 at the Jackie
Joyner-Kersee Center in
East St. Louis, Ill. The
University of Illinois’ East

St. Louis Action Research
Project is the cosponsor.
Rays of Hope: A New
Day for America’s Distressed Urban Areas is
intended for a national
audience of bankers,
investors and community
development organiza-

tions working in highly
distressed areas.
Speakers include Federal
Reserve Board Gov. Mark
Olson, St. Louis Federal
Reserve Bank President
William Poole, National
Neighborhood Enterprise
founder Robert Woodson,

Save the Date
Location
Cincinnati, Ohio

Reception
Wednesday, November 6 6–7:30 p.m.
Conference
Thursday, November 7 8 a.m.–5 p.m.

REGISTRATION MATERIALS
AVAILABLE IN SEPTEMBER

Olympian Jackie JoynerKersee and Cornell
University Professor
Ken Reardon.
For information, call
Matt Ashby at (314) 4448891 or e-mail him at
Matthew.W.Ashby@
stls.frb.org.

Sponsored By
Local Initiatives Support Corporation (LISC)
National Neighborhood Coalition
Federal Reserve Bank of Cleveland
With Support From
Federal Reserve Bank of St. Louis
Federal Reserve Bank of Chicago