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									                                                                      Kim Bristol, Ashley Watson
                                                                    Lydee Jo Brown, Amber Holl,
                                                                 Amy Ryan, Jed Moon, Nick Jindra
                                                                                          3/27/04
                                                                                      AECN 376
                                                                                 Team Project #1

                                New Homestead Act of 2003
Objectives and Purpose

       The purpose of the New Homestead Act of 2003 is to provide incentives and rewards to

people who choose to live in and preserve the fate of America’s rural communities. The reason

for this is to bring more individuals and business owners into small rural towns. There are three

main objectives listed in the act: 1. Provide new homestead opportunities 2. Give incentives for

main street businesses 3. Implement the new homestead venture capital fund.

       New homestead opportunities focus on four main areas: giving loans for leadership

initiative, giving credit for certain rural homebuyers, allow for capital loss deduction, and to

establish individual homestead accounts. Some good examples would be to repay college loans,

provide tax credit for new home buyers, having home value losses be deducted from federal

income taxes, the government would match some retirement savings, and also building savings

and increase access to credit. This area focuses mainly on the individual person who is either

living in the small rural town or those who may be moving to the town.

       New incentives for main street businesses focus on three areas: providing rural

investment tax credit, investment credit for rural small businesses, and accelerated depreciation

for investment property. This area is focusing mainly on small businesses, not only trying to get

new businesses to come to rural areas but to also keep those businesses already there.

       New homestead venture capital fund mainly consists of establishing a $3 billion fund to

invest in businesses in those communities who are losing their businesses to surrounding towns.


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This would also create loan guarantees for small business. This area focuses on the capital

needed to keep a business running.

       In simple terms this piece of legislation is going to provide more incentives for people

and businesses to move to small rural towns, and also give those living in rural towns a reason to

stay. The most important statement in this entire proposed act is that it would only be applied to

those people and businesses that live or locate in rural counties in which more than 10 percent of

the population has moved away over the last 20 years.

Implementation History

       One hundred forty-two years ago the Homestead Act of 1862 sent settlers across the

Great Plains, taking claims of land 160 acres in size. The government of the late 1800’s wanted

to help populate the country, traded public lands and promise of opportunity for an individual’s

hard work and commitment to improve the land for 5 years. There were about 2 million people

that claimed more than 270 million acres.

       From North Dakota to Texas, and from the Rocky Mountains to the Missouri River,

nearly 70 percent of rural counties on the Great Plains have seen their population shrink by about

a third. Family farms and main street businesses have decreased from the Heartland and so have

many of the people who once lived in the area. Many of these rural towns have good schools,

high levels of civic involvement and very low rates of crime and violence, yet they are suffering

from a population decline.

       Congress is proposing a New Homestead Act that would attempt to revive the dying

towns. Year after year, family farms shrink and small businesses disappear from rural

communities across the Mid West. The New Homestead Act’s focus would be on people that are

willing to live and work or start and grow a business in a rural area fighting against out




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migration. Beginning farmers, entrepreneurs, and community developers would be able to

undergo opportunities otherwise thought impossible. The bill provides added incentives to buy

a home, pay for college, tax credits, tax-free savings plans, and get the financing you need to

start or expand a business. The Homestead Act is a motivational tool for the future generation of

rural America; the incentive to locate in rural communities and populate America’s Heartland is

now greater than ever.

Significance and Evolution of Program Effectiveness

         The effectiveness of the New Homestead Act of 2003 is very significant to the success

of rural communities. The objectives of this act work to solve the major problems that are

facing many rural communities today. If this program is implemented we may see a turnaround

in the out migration of rural community populations.

         The first title of the act, which is New Homestead Opportunities, offers student loan

repayment of tuition and also gives credit to qualifying homebuyers. This title is significant

because it will encourage more young people to return to rural communities. Often times, many

rural college students have to take out many loans to pay for their tuition. If this act can ease the

financial burden on these students they may be less influenced to take a higher paying city job.

Many young people are overwhelmed when it comes to buying their first home so with the help

of the Homestead Act, they may be more likely to buy instead of rent.

         The second title gives incentives for main street businesses. This title is important for

the local economy because it gives businesses tax incentives to stay in the community. This also

provides incentives for businesses that move to or expand within the rural communities. Title II

also provides bigger tax write-offs through accelerated depreciation. These types of incentives




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can promote development through expanding retail services and other business ventures, which

in turn can increase the trade area captured, and the retail pull factor for the community.

          Title III, the New Homestead Venture Capital Fund, is a critical component of the act

that encourages investment in new business enterprises as well as existing businesses. With the

promotion of new business investments, people bear less risk through this fund. People will be

more willing to invest when they see others succeeding in their business endeavors. As this fund

increases the number of businesses in the community, there will be more job opportunities for

the young people returning to rural America.

                When considering how we could modify this act to enhance it, we looked at what

we would want to be offered in order to return to our rural communities. One idea is to offer

educational opportunities for the established members of the community regarding investment

and business decisions. This could be through the form of classes, or assistance to attend classes

at a college. Another idea would be to improve the amenities offered in the community (such as

recreation and technology). A final suggestion we have is to make sure that the incentives of this

act are well known. Many times people do not utilize the opportunities available to them simply

because they are not aware of them. There could be a statewide or national campaign promoting

this act if it is implemented. With a lot of promotion, rural communities could embrace this act

and utilize its full benefits.

Examples of Effectiveness

        How effective could this legislation be? That is a very good question that can’t be easily

answered without thorough consideration. In our own research of this bill, the conclusions we

came to were mixed. With basically 4 major financial features for individuals, this new

legislation would provide substantial economic aid, but we’re uncertain if those basic incentives




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would be enough to make a difference. Five years of financial help will unlikely keep individuals

in small towns.

       Therefore, we feel that the business promotion part of this bill is most important. Tax

credits and capital funds will definitely help pull some business into out migration counties, but

we have to consider the economics of it. In the short run it would be much cheaper for

consumers to allow businesses to produce where they can decrease costs, without special

government aid. So the real question becomes, ‘Will these special start-up programs and

government incentives pay for themselves in the long run?’ Results may vary, but in the

meantime what do we have to lose? Our rural communities are dying and action needs to be

taken. This legislation is bound to make a difference in at least some communities, and that’s

better than just watching them expire.

        In our research we discovered 2 Nebraska Communities where programs such as those

promoted by the New Homestead Act of 2003 have already been successful. According to an

NPR article, “The New Homestead Act,” Ord, Nebraska is a town where many of the kinds of

incentives proposed by Congress have already been put into effect. Ord has begun a program that

has helped to provide incentives for new businesses to locate in the town and has helped to keep

the local businesses there. These businesses include a pharmaceutical lab makes drug

combinations and dosages for patients, a seafood distribution business, and a call center for a

cable TV company that services people all over the United States.

       The majority of Ord’s success has come from the initiate of local leaders. One tool of

progress is the access to up-to-date technology. Ord’s leaders convinced the regional telephone

company to provide high-speed internet access to many businesses in the area which helps them

to expand their customer base. They were able to obtain $750,000 in city, state and private




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incentives for the center. Through many financial incentives, they have encouraged Ord’s

residents and prospective inhabitants to invest in the future of their community.

        "What's exciting about Ord is that one can see the local leadership emerging to go out and

challenge people in the community to take control of the future, to invest in entrepreneurship,

small business," says Chuck Hassebrook of the Center for Rural Affairs in Walthill, Nebraska.

"Successful community revitalization can't happen without effective local leadership. That really

is a key."

        Ord is still suffering from a population loss though. The town hopes to turnaround this

loss because it has some basic building blocks that serve as a foundation for their community.

Ord has many basic services for their citizens such as the regional center for government,

banking, shopping, entertainment and health care. Ord is a good model to for advocates of the

Homestead Act to base their predictions on. The leaders of the community are helping to bring a

new era of development and progress to the community.

        In the southwest Nebraska town of Stratton, population 423, people feel confident enough

to leave their cars running when they stop by the grocery store. It is in towns like Stratton that

programs like the New Homestead Act could make all the difference.

        Stratton reached its highest population in the1930s and has had the most out migration in

the U.S. in the past 10 years. After losing a major employer in the town, Stratton has had some

morale rebuilding to do. The leaders of the community took action through committees to attract

new businesses, preserve old ones, and clean up the town.

        Through financial incentives and perceived community stability the morale and

community rebuilding paid off when Timber Creek Homes, which makes manufactured houses,

decided to build in the town. Timber Creek has helped to establish growth in the community.




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Another example is Dairy King, which plans to expand its employee base by 20 jobs throughout

the next year.

       Stratton is an example of what programs like the Homestead Act will be able to

accomplish. "It will provide the incentives, and also strengthen the economy in the area," says

John Stencel, president of the Rocky Mountain Farmers Union in Denver.

Web Addresses for more information

- Reversing the Great Plains Drain, Christian Science Monitor, Jillian Lloyd, 10/27/03

http://www.memphismanifesto.com/news/archives/000142.php

- Washington Round-up, statement of Rep.Tom Osborne (NE-03), 7/14/03

http://www.house.gov/apps/list/speech/ne03_osborne/071403RevitalizeNebr.html

- The New Homestead Act, National Public Radio, Howard Berkes, 7/27/03

http://discover.npr.org/features/feature.jhtml?wfId=1342240

http://www.realtor.org/

http://www.cfra.org/newsletter/2003_07.htm

(http://thomas.loc.gov/)




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