repayment of the bonds. The tax-exempt status of the 

 bonds enable the lender to offer a lower interest rate 

 to the agricultural borrower. 



Since its inception in 1983, the Beginning Farm 

 Loan Program has been plagued with problems that 

 continue to hamper its operation. The main problem is 

 that the program is dependent upon the use of federal 

 tax-exempt industrial revenue development bonds. During 

 the first year of the program, federal legislation 

 placed restrictions on the use of the tax-exempt bonds. 

 Because of this, bond counsel would not offer a clean 

 opinion on the state's issuance of bonds, and the 

 program was delayed until certain program changes could 

 be made to comply with the federal requirements. 



During 1984-1985, two loans were approved and bonds 

 were issued totaling $193,000. Following issuance of 

 these bonds, new problems were created with partial 

 passage of federal legislation to eliminate the 

 tax-exempt status of bonds used for the program. This 

 legislation cast uncertainty over the Beginning Farm 

 Loan Program. ^^ 



As a consequence of these problems, the Beginning 

 Farm Loan Program has been unable to generate revenue, 

 and the program has sustained large operating losses. 

 According to a recent legislative audit, the program has 

 incurred a net loss of $31,203 for the fiscal period 

 ending June 30, 1986.^° In addition, the audit revealed 

 that total program liabilities exceed total assets by 

 $128,618.^' Furthermore, because of the problems 

 associated with the program, the Beginning Farm Loan 

 Program has borrowed $197,294 from the state general 

 fund. However, no repayment has been made for these 



34 



