RURAL ELECTRIFICATION ADMINISTRATION Purpose Statement Rural Electrification Administration The Rural Electrification Administration (REA) was established by Executive Order 7037 on May 11, 1935, to provide loan funds to eligible borrowers for the purpose of extending central station electric service to unserved persons in rural areas. Statutory provision for the agency was made in the Rural Electrification Act of May 20, 1936, and on July 1, 1939, under Reorganization Plan II, REA became a part of the Department of Agriculture. On October 28, 1949, the purpose of REA was expanded by Public Law 423 which amended the Act to authorize loans for furnishing telephone service to rural areas. Public Law 93-32, enacted May 11, 1973, amended the Rural Electrification Act of 1936, as amended, by establishing a "Rural Electrification and Telephone Revolving Fund" (RETRF) for the purpose of making insured loans to REA electric and telephone borrowers. These loans bear either two- or fivepercent interest in accordance with criteria specified in the Act, and have a maturity not to exceed 35 years. The Act also authorized REA to guarantee loans made by other lenders at rates and terms agreed upon between the lender and the borrower. In October 1976, Public Law 94-570 further amended the Act, changing the statutory criteria used in determining eligibility for the special rate (two-percent) insured loans. The change in criteria corrected unintended inequities resulting from P.L. 93-32, bringing the number of borrowers eligible for the special rate more in line with Congressional intent and with borrowers' actual needs for funds at this rate. As of September 30, 1980, REA employed a total of 695 full-time permanent employees. Of this staff, a field staff of 153 was located in various cities throughout the United States and Puerto Rico. The field staff consisted entirely of permanent full-time employees; these employees utilize their homes as their offices since REA maintains no field offices. The Washington staff was composed of 542 permanent full-time employees, 25 part-time and 9 temporary employees. Total employment was 722. Rural Telephone Bank Public Law 92-12, approved May 7, 1971, amended the Rural Electrification Act of 1936, as amended, to establish the Rural Telephone Bank as a supplemental source of financing for the growing capital needs of rural telephone systems. Public Law 92-324, approved June 20, 1972, further amended the Act to permit the Secretary of the Treasury to purchase the Bank's debentures. Public Law 93-32 further amended the Act and provided for Bank borrowing authority of 20 times its paid-in capital and retained earnings. It also provided that the Bank charge a single interest rate, based on the average cost of money to the Bank, but not less than five percent per annum. Bank loans must be fully amortized over a period not to exceed 50 years. Nearly all loans to date have been for a 35-year period. The Rural Telephone Bank is managed by a 13-member board of directors. The Administrator of REA serves as Governor of the Bank until conversion to private ownership, control, and operation, which takes place when 51 percent of the Class A stock issued to the United States and outstanding at any time after September 30, 1985, has been fully redeemed and retired. The Bank board holds at least four regularly scheduled meetings a year. Activities of the Bank are carried out by REA employees and the Office of the General Counsel. Through Fiscal Year 1981 $300 million, the maximum allowed under existing legislation, has been made available for the purchase by the United States of the Rural Telephone Bank's Class A Stock. Legislation is currently pending in the Congress which would permit continued Class A stock purchases in annual amounts not to exceed $30 million plus an amount to compensate for increases in the Consumer Price Index, through Fiscal Year 1991, with total purchases not to exceed $600 million. Rural Communication Development Fund The Rural Development Insurance Fund (RDIF) was established on October 1, 1972, pursuant to section 116 of the Rural Development Act of 1972 (Public Law 92-419) approved August 30, 1972. The Rural Communication Development Fund, a separate account was established pursuant to Secretary's Memorandum No. 1988 approved May 22, 1979, which transferred certain financing authorities under the Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) from the Farmers Home Administration (FmHA) to the Rural Electrification Administration for the purpose of financing and administrating community antenna television services or facilities in rural areas. The account is used to insure or guarantee loans for community antenna television services or facilities. To serve both the cooperatives (not operated for profit) and the commercial borrowers, the program is authorized to utilize the Community Facility authority and the Business and Industrial authorities of the Rural Development Act of 1972. The objective of the Community Facility loan program is to make loans to organizations not operated for profit for the purpose of providing community antenna television service or facilities to rural areas comparable to those in urban areas. These loans are repayable in 35 years and bear interest not in excess of 5 percent. The Business and Industrial development loans or loan guarantees may be made to organizations organized and operated on a profit or nonprofit basis for the purpose of financing community antenna television service or facilities to rural areas comparable to those in urban areas. These loans are repayable in 35 years and bear interest at the cost of Treasury borrowing plus an increment to cover administrative costs. During Fiscal Years 1979 and 1980, loan guarantees and administrative costs were funded from amounts authorized for or originally appropriated to FmHA. In Fiscal Year 1981, all applicable administrative costs are provided for in the REA Salaries and Expenses appropriation. Any loan authority made available would be provided for under the Rural Electrification Administration's separate account, the Rural Communication Development Fund. |