Legislative Action News, February 7, 2012

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USDA CRP General Sign-up
By Stephen Frerichs

Acting Under Secretary for Farm and Foreign Agricultural Services (FFAS) Michael Scuse announced last week that the USDA will conduct a four-week Conservation Reserve Program (CRP) general signup, beginning on March 12 and ending on April 6. About 30 million acres are enrolled in CRP; and contracts on an estimated 6.5 million acres will expire on Sept. 30, 2012. Contract duration is between 10 and 15 years. Producers with expiring contracts and producers with environmentally sensitive land are encouraged to evaluate their options under CRP. Producers also are encouraged to look into CRP’s other enrollment opportunities offered on a continuous, non-competitive, signup basis.

Senate Agriculture Committee Announces Farm Bill Hearing Schedule
By Stephen Frerichs

Senator Debbie Stabenow (D-MI), Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, announced the Committee’s Farm Bill hearing schedule for February and March, noting that the Committee will continue examining Farm Bill principles and evaluating policy solutions to develop a 2012 Farm Bill. Below are the details of the next series of hearings (dates and topics are subject to change). The House Agriculture Committee has not announced a schedule yet.

Wednesday, February 15
Title: Energy and Economic Growth for Rural America
A hearing to evaluate policies that make investments in jobs and opportunities for farmers and rural businesses through new markets, entrepreneurship, regional strategies and energy innovation.

Wednesday, February 29
Title: Strengthening Conservation through the 2012 Farm Bill
A hearing to explore the Conservation title’s important investment in America – the nation’s fundamental resources of our water, soils and other natural resource infrastructure – through policies that help farmers maintain soil health, keep our water clean and available, our food abundant and safe and our wildlife plentiful so as to protect the basic principles of farming and our way of life for future generations.

Wednesday, March 14
Title: Healthy Food Initiatives, Local Production and Nutrition
A hearing to explore innovative opportunities in agriculture through policies that assist the development of local markets for farmers – connecting them to the growing consumer demand for locally-produced, healthy food options.

Wednesday, March 21
Title: Risk Management and Commodities in the 2012 Farm Bill
A hearing to evaluate the need for and cost effectiveness of risk management tools available to farmers who continue to face increasingly volatile crop prices, input costs and the threat of natural disasters; and how the federal government can provide appropriate risk-management tools while making the best use of limited resources.

Farm Groups Release Statement on Farm Bill
By Stephen Frerichs

Following a two day meeting last week to explore common ground among farm groups, the joint statement below was released.

“Over the past two days, producer leaders have met to discuss policy priorities, to hear the perspectives of key policymakers and to work toward consensus on the future of U.S. farm policy. What was confirmed in our meeting is that we are committed to work together to come up with a viable farm policy.

“Also confirmed is our common belief that Congress should pass and the President should sign a strong new farm bill into law this year. The law expires at the end of this year and producers – like all job creators – need certainty from Washington.
“American agriculture has a solid record that we are proud of.

“The people we represent ensure that American consumers spend less of their paycheck at the grocery than anyone else in the world.

“American agriculture stands out as one of the few sectors of the economy that has, throughout the economic downturn, still contributed positively to our nation’s balance of trade while helping to create jobs and put this country back on its economic feet.

“And we have accomplished these things with a farm policy that also stands out as consistently under budget over the past 10 years and for leading the way on deficit reduction, contributing disproportionately and in some cases even alone in the effort to get our nation’s fiscal house in order.

“The economy is fragile, unemployment is high, and Americans are worried. Given the need for economic growth and deficit reduction, for our part we have offered to do more with less. If Washington provides America’s farmers and ranchers with some certainty, we can continue to help lead our nation’s economic recovery.”

The statement was signed by the following groups:

  • American Farm Bureau Federation
  • American Soybean Association
  • National Association of Wheat Growers
  • National Barley Growers Association
  • National Corn Growers Association
  • National Cotton Council
  • National Farmers Union
  • National Sorghum Producers
  • National Sunflower Association
  • Southern Peanut Farmers Federation
  • US Canola Association
  • USA Dry Pea & Lentil Council
  • USA Rice Federation

CBO Releases Budget Forecast
By Stephen Frerichs

Each January, the Congressional Budget Office (CBO) prepares “baseline” budget projections spanning the next 10 years. This is the first look at the Federal budget.  CBO revises this initial baseline projection in March and that baseline forms the benchmark against which potential policy changes are measured.  The baseline projections are not a forecast of future events but simply a benchmark to score the cost of policy changes. You can find the report at http://www.cbo.gov/ftpdocs/126xx/doc12699/01-31-2012_Outlook.pdf

CBO projects a $1.1 trillion federal budget deficit for fiscal year 2012 if current laws remain unchanged. Measured as a share of the nation’s output (gross domestic product), that shortfall of 7.0 percent is nearly 2 percentage points below the deficit recorded in 2011, but still higher than any deficit between 1947 and 2008. Over the next few years, projected deficits in CBO’s baseline decline markedly, dropping to under $200 billion and averaging 1.5 percent of GDP over the 2013–2022 period. 

The overall projection of agriculture spending is not changed significantly in the aggregate. The previous baseline projected spending around $15 billion annually for mandatory farm programs (commodity title, crop insurance and conservation). The January 2012 baseline projects spending for these programs is at roughly $16 billion annually.

Appraisal and AMC Fees Separated on Revised Settlement Forms
By Bill Garber

The Consumer Financial Protection Bureau released the second proposed version of a new Consumer Disclosure Form Feb. 1 that includes clear disclosure of any fee paid to a “Local Appraisal Company” and to an “Appraisal Management Company.”

ASFMRA and the Appraisal Institute reported last month that the CFPB is in the midst of developing a new form that would replace the existing HUD-1 settlement statement. In December 2011, Appraisal Institute representatives met with CFPB officials about the new form.

The CFPB has indicated that several versions of the proposed form will be developed and tested with consumers by focus groups, with a proposed rule to be released this summer.

No final decision has been made as to whether to require separation of fees, to allow for them, or to continue bundling the fees. The most recent draft gives an indication of what full disclosure would look like. ASFMRA and the Appraisal Institute intends to offer suggestions to the CFPB.

Click here (http://www.consumerfinance.gov/knowbeforeyouowe/) to view the two versions that have been tested in the Philadelphia market during the past month.  The CFPB is not taking public comment at this time, but it is expected to issue a Notice of Proposed Rulemaking this summer and will seek input at that juncture.

Additionally, the CFPB is concurrently developing a new Good Faith Estimate (Loan Estimate) form.  The latest version (http://www.appraisalinstitute.org/newsadvocacy/key_documents.aspx) released Feb. 2 also includes separate lines for Appraisal and Appraisal Management Company fees.

ASFMRA-AI Support Intent of Bank Examiner Bill in Congress
By Bill Garber

ASFMRA and the Appraisal Institute last week expressed support of the goals of House Resolution 3461, the Financial Institutions Examination Fairness and Reform Act (bank examiner bill).

The two appraisal organizations submitted a statement for the official record of the Feb. 1 House Financial Services Committee hearing on H.R. 3461, The Appraisal Institute and ASFMRA promoted consistency of bank examinations and due process, and any efforts that would enhance consistency in the interpretation and understanding of the guidelines and regulations.

Bank appraisal departments and individual appraisers have often faced inconsistent interpretations of the Interagency Appraisal and Evaluation Guidelines and other applicable guidelines, such as the Policy Statement on Prudent Commercial Real Estate Loan Workouts. The Appraisal Institute also supports due process and an administrative appeals program in connection with disputes regarding valuation or appraisal methodology.

While the organizations support the overall goals of H.R. 3461, one area of concern relates to Sec. 1013(a)(3) of the legislation, which is likely to unnecessarily tie the hands of bank examiners in protecting safety and soundness. Section 1013(a)(3) is inconsistent with Real Estate Lending regulations, the Interagency Appraisal and Evaluation Guidelines and the Policy Statement as introduced in that it would prohibit any reappraisal of a performing loan, even if examiners identified safety and soundness concerns.

One set of issues that deserves consideration are definitions of value used by federal bank regulatory agencies. Bank risk assessment of troubled loans would be enhanced greatly by obtaining both market value and liquidation value; definition of disposition value may also be beneficial.

While market value is essential to understand the position of the credit, liquidation value can enhance the decision making of banks during loan workouts. This is essential to making determinations on whether it is better to foreclose or conduct a loan workout. Such appraisal assignments are common today, but not recognized in regulations. An additional recommendation that would help enhance consistency in regulations, and protect safety and soundness, would be to define “performing loan.”

View the full statement here: http://www.appraisalinstitute.org/newsadvocacy/downloads/ltrs_tstmny/2012/AI-ASFMRA-Statement-HR3461.pdf

South Dakota
Senate Endorses Measure to Raise Cap
On Increases in Taxable  Value  of Farmland
By Mark Wolski, BNA Tax

ST. PAUL, Minn.—The South Dakota Senate Feb. 1 voted 30-5 to raise the cap on increases in the taxable  value  of farmland in the state.

The vote came just days after the House overwhelmingly approved the same measure. H.B. 1003, sponsored by Rep. Paul H. Dennert (R), will now be forwarded to Republican Gov. Dennis Daugaard.

Once Daugaard receives the bill, he will have five days to either sign or veto the measure.

David Wiest, deputy secretary of the South Dakota Department of Revenue, earlier told Bloomberg BNA that the 2009 South Dakota Legislature approved a bill that changed the way the state calculated taxable  values  for farmland, moving from a market-based system to one based on the income produced by the land.

The legislation included language that limited increases and decreases in farmland  value  to 10 percent per year. Wiest said the language was included so that farmers in the state did not have to face drastic changes in the  value  of their land. The language provided that the 10 percent cap would only remain in effect through 2017.

New  Valuation  System Raised Commodity Prices
He said the state faced an unexpected problem with the  valuation  change. Once the change took effect, commodity prices increased significantly, he said. As such, he said,  valuations  are also increasing. Because of the law’s cap on increases, however, taxable  valuations  are not keeping pace with the increases, he said. He said H.B. 1003 was proposed because commodity prices are strong enough that when caps expire in 2018, farmers and ranchers could be facing significant  valuation  shock.

Another reason for addressing the  valuation  formula now, he said, is that  valuations  are done on a county-by-county basis. Some counties started with lower  valuations  than others, he said, while some were hamstrung by a lack of data on commodity prices. For the state to have consistent  valuations , he said, some counties may need to increase their  valuation  levels at a rate faster than 10 percent per year.

Under H.B. 1003,  valuations  for farmland  valued  within 30 percent of its actual ability to produce income could be increased by as much as 15 percent per year between now and 2019.  Valuations  between 30 and 50 percent of the land’s ability to produce income could be increased by as much as 20 percent per year, while those that are less than half of the actual ability to produce income could be increased by as much as 25 percent per year.

The bill also provides that  valuations  for non-cropland could also be increased by the same percentages based on the same production formula each year. It also places the same percentage caps on  valuation  decreases for farmland.

Testifying on the bill, Dennert said H.B. 1003 also extends the date caps can be used through 2019. He said the extension is also aimed at preventing  valuation  shock when the caps expire.

He added that the legislation, while focused on agricultural land  valuations , will likely affect the taxes that owner-occupied and commercial properties pay. As farmland  valuations  increase, he said, the mill rate levies for owner-occupied and commercial properties are likely to drop.

For More Information

H.B. 1003 can be found on the South Dakota Legislature’s website at http://legis.state.sd.us/sessions/2012/Bill.aspx?File=HB1003ENR.htm.

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