New Public-Private Partnership Supports Rural Communities

Loans address predevelopment costs that are difficult for small communities to finance

by Lisa Urias

How can rural communities get the support they need for infrastructure and development projects? Small communities have long struggled with the prohibitive costs of upgrading and maintaining their water systems and expanding or building the new schools, housing, firehouses and parks that are critical to the well-being of residents.

Take the community of Bouse, located in La Paz County in Western Arizona and home to just under 1,000 people. The Bouse Domestic Water Improvement District’s board and committee members have been working for years to bring upgrades to the area’s water system to meet Arizona Department of Environmental Quality standards. Substantial projects like this are costly and not always easily funded in rural areas. Available funding may have restrictions or requirements for predevelopment expenses that may not be within the borrower’s ability to execute. A new public-private partnership between the Arizona Community Foundation and the U.S. Department of Agriculture Rural Development plans to change that.

The Rural Development Investment Fund was formed in January this year to address pressing needs in rural communities. Its approach is creative: ACF provides $5 million in a revolving line of below-market rate financing to help rural communities access approximately $40 million annually in USDA funding for needed infrastructure and development projects. Thanks to a loan from ACF and the larger investment by USDA, the Bouse Domestic Water Improvement District can begin to replace the water system’s undersized lines and install drive-by meters. In addition, new construction will include a treatment system for arsenic removal, operations building, a new well and a 70,000-gallon water storage tank. 

Similar in design to ACF’s highly recognized Affordable Housing Loan Fund, the Rural Development Investment Fund will provide low-interest, short-term financing to infrastructure and development projects that the USDA has made a firm commitment to fund. These loans are offered between 12 and 18 months to address predevelopment costs that are difficult for small communities to finance. The funding covers expenses related to planning, site testing, architectural renderings, engineering, legal preparation and other work required for projects to get off the ground. Once planning is completed, projects then qualify for full funding from the USDA, with some receiving several million dollars to improve community infrastructure. Loans for predevelopment expenses are repaid when the USDA releases funds for the development effort.

Bouse is a great example of how the public-private partnership creates value. With the first $400,000 loan executed for the Bouse Domestic Water Improvement District project, an additional $2.9 million in funding through the USDA will be leveraged: $800,000 in an USDA agency grant, $2.1 million in an Agency Colonia Grant and $30,000 in an Agency SEARCH Grant. 

This first project opens the doors for many more to come. In general, towns and cities with fewer than 20,000 residents are unable to finance predevelopment requirements from other commercial financing sources. There are median household income factors that will be considered to qualify for any grant dollars. USDA has a model it uses for determining project affordability and other system cost comparisons. Initially, ACF and USDA have identified more than six projects that would benefit from this partnership, including some that address the statewide crisis surrounding housing insecurity. 

By combining their investments to address many of the projects that need the support of multiple funding sources, ACF and USDA can serve as a case study for other states across the country. This partnership is a great example of what can be done when public and philanthropic entities work together to support communities that are often overlooked by other institutional funders. Neither ACF nor USDA could get these projects off the ground on their own. By collaborating and leveraging each of the organizations’ individual skills, this partnership will help address issues in rural Arizona that have needed attention for many years.  

USDA-funded Water, Wastewater Infrastructure Improvements Transform Communities

In addition to its partnership with the Arizona Community Foundation through the Rural Development Investment Fund, the U.S. Department of Agriculture Rural Development has committed to investing more than $5.4 million to modernize wastewater infrastructures across the state. These projects do more than just service, upgrade and replace water and wastewater systems; they also include hands-on training, workshops and technical assistance to members of the community to improve management, operation and maintenance.

Lisa Urias is the chief program and community engagement officer at the Arizona Community Foundation, a statewide family of charitable funds supported by thousands of Arizonans. Its six affiliate offices serve rural communities across the state; ACF and its affiliates seek to address local challenges by listening to the expertise of each community. 

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