PDA Celebrates First Use Of Next Generation Loan Program
(Continued from Page A 1)
of small business loan. This type of
loan has been available for years to
non-agricultural businesses.
For years, many farm families
have been more or less forced out
of passing their farm onto the next
generation because of high startup
capital needs, low margins of pro
fit, reluctance of lenders to invest
in unpredictable operations, and
heavy inheritance taxes.
In other words, farm families
often haven’t been able to afford to
sell or give their farm to their
children, especially since the
1970 s when land prices began to
rise dramatically in response to
urban sprawl, demand for recrea
tional properties, and demand for
investment protection of assets.
Meanwhile, property taxes have
increased and costs of production
have increased, while agricultural
profits per acre have not made such
strides.
The system has worked against
farm families passing on the land
for farming, instead making it
much easier through several
channels for family farms to be
sold and ultimately converted into
real estate development or other
use that yields high profits on the
short-term, but ultimately destroys
the agricultural value of the land.
However, for years small “main street”
businesses in Pennsylvania with industrial deve
lopment authorities or commissions have been
able to benefit from a special loan program admi
nistered through the state Department of Eco
nomic Development, whereby a lender could
avoid paying federal income taxes on certain
loans to small businesses made through an
industrial development authority.
Now that program has been expanded to
agriculture.
The removal of federal taxes on loan profits to
the bank provides an incentive to lenders to make
lower interest loans.
In actuality, the loans are made through a local
industrial development authority (IDA) which
acts as a third-party non-lien interest in the loan.
The secretary of the state Dept, of Economic
Development must sign off on each loan. The
bank essentially makes the loan only after the
local IDA approves it and the DC ED approves its
tax-exempt status.
There is a $250,000 maximum limit on this
type of lending, and it is somewhat restricted in
the purchases that can be made with the loan.
The program itself has at least a $lO million
cap in tax-exempt loans that could be made every
year. That means that, theoretically, up to 40
farm families could each loan the $250,000 max
imum each year.
According to state officials, more farms than
that transfer ownership every year.
Those involved with the state’s agricultural
community have in the past often questioned the
logic in not extending the tax-exempt business
loan program to farmers.
State Secretary of Agriculture Samuel E. Hay
es Jr. on Monday said that during his years as a
representative in the state House of Representa
tives, he often wondered why the program wasn’t
made available to farmers. He said that as agri
culture secretary he has had an opportunity to do
something about it.
The result is a collaborative program between
the state departments of Agriculture (PDA), and
Community and Economic Development
(DC ED).
On Monday, Secretary Hayes presented a
plaque and congratulations to Michael Kemus Jr.
and his family upon being the first participants in
the Next Generation Farmer Loan Program.
The presentation was made during a late
morning ceremony on the loft floor of a bank
bam on 175-acre farm being purchased by
Michael from his two aunts, Florence and Susan
Haag.
In addition to Secrctaiy Hayes, about 50 peo
ple attended the event, including Deputy Agri
culture Secretary Russell Redding in charge, of
the program for PDA, several regional PDA
directors, a representative of the bank making the
loan, the president and leadership of the state
FFA, state Alternate Dairy Princess Lacey Jean
Zakostelecky, a couple of local
state representatives, friends of the
Kennis family, and several diffe
rent people involved with the Ken
nis dairy farm operation.
The bank involved in making
the loan is the Savings and Trust
Bank of Dußois. The lender’s
knowledge of the tax-exempt lend
ing program, of agriculture, the
dairy industry, and the Kennis
family, helped make the first loan
possible.
The Clearfield County Indust
rial Development Authority is the
catalyst for making the loan oppor
tunity. Its d’rector, Linda Thom
son, said she was glad the CCIDA
was able to help make the loan pos
sible for the Kennis family, and
she also said the bank had to be
credited with making the loan.
Michael’s aunts, and his parents
Michael and Linda, are responsi
ble for making it possible to take
advantage of the opportunity. The
aunts, Florence and Susan Haag,
have agreed to sell the farm for a
portion of its assessed value,
which is enabling Kennis to be
able to use the bulk of the loan to
purchase farm equipment, milking
(Turn to Page A 76)
State Secretary of Agriculture Samuel Hayes Jr. presents a plaque documenting
the first loan through the new Next Generation Farmer Loan Program. From the left are
loan recipient Michael Kennis Jr., his aunts Florence and Susan Haag from whom he is
buying a farm, and Secretary Hayes.
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Lancaster Farming, Saturday, December 19, 1998-A23
Tam Ridge
G 3v/ernor