Lending a Helping Hand
Mike Lynch - December 29, 2011
With endless reminders of our nation’s struggling economy, it seems that success stories on the financial front such as business creation, job retention and creation and community development are seldom heard.
But don’t tell that to residents in the De Smet, S.D., area.
For nearly 15 years, De Smet has invested in infrastructure and businesses development with assistance from the Rural Electric Economic Develop-ment, Inc., or REED Fund.
Originated in 1996, REED is a collaborative effort of 21 consumer-owned electric cooperatives that have actively supported both community development and economic growth.
Beginning in 1997 with financial assistance from REED, De Smet was able to secure a portion of necessary financing for construction of the De Smet Rural Health Clinic through the United States Department of Agriculture’s Rural Economic Development Grant and Loan program.
REED also provided financial assistance with the Ingalls Drive street project in 2006 after the city
annexed an area near the country club.
In 2010, De Smet made street upgrades for seven more of its city’s blocks. With REED’s help, they were able to secure a $300,000 USDA loan and an additional $150,000 REED loan.
“Low interest financing options are few and far between these days so you really have to look for other options and this is definitely a good one that’s worked exceptionally well for us,” explains City of De Smet Finance Officer Eileen Wolkow.
De Smet has also benefitted from REED funding by the purchase of fire trucks, renovation and expansion of a warehouse and industrial facility for lease, expansion of an existing business and construction of a convenience store and hotel.
REED covers up to 50 percent of financing needed with local co-ops initiating the application. Applicants need to provide a business plan and financial projections as well as any historical information if they’re an existing business.
Linda Salmonson, economic development manager for East River Electric, says that the REED Fund is different in several ways from a traditional lender. “We are considered a project or “gap” lender, helping them to complete their proposed projects and do not provide any traditional banking services, counseling or ongoing banking relationship.”
In addition, REED only lends for commercial, industrial or community purposes and does not provide personal loans.
De Smet-based Kingsbury Electric General Manager Garr Hintz states one of the challenges that a small cooperative such as Kingsbury Electric would have is financial limitation. “The power of bringing all the East River cooperatives together through REED gives us a stronger base and more resources to draw from which would otherwise make it difficult if it were just Kingsbury or De Smet alone.”
Though no approved De Smet REED loans are on Kingsbury Electric’s lines, Hintz says the benefits are far reaching. “This partnership is a benefit to our members because it’s a long-term relationship with neither the rural area nor urban area being able to exist on its own.”
Wolkow stresses that the city offers many amenities that rural residents utilize including the swimming pool, summer recreation program, library, park, streets, hospital and clinic.
Rita Anderson, De Smet’s economic development director, adds that many employees from the six major industries in De Smet, as well as those employed by the hospital and school, live in rural areas and they are appreciative for Kingsbury Electric’s role in providing funding. “Kingsbury Electric has always been so community-minded and this just gives us more opportunities to help with these important projects.”
De Smet is but one success story of many throughout co-op service territories in eastern South Dakota and western Minnesota. Providing financing for communities and rural areas to make a difference in the region, REED loans have led to more than $357 million in project investment, by helping to launch 64 businesses, expand 85 companies, assist 93 community facility and infrastructure projects as well as to retain and create nearly 6,300 jobs.
Beyond each of these impressive numbers are lives that have been positively impacted, which according to Salmonson, is the most rewarding aspect of the REED Fund. “What is so gratifying is seeing communities prosper, businesses grow and needed facilities put in place. In tying this back to our outcomes, 95 percent of REED-financed projects have local ownership.”
With 88 percent of REED’s lending established in communities of less than 4,000 people, its mission serves a very essential role. As a result, Salmonson says that the money stays locally, the owner becomes an active community participant and profits create jobs for others. “These are the communities that sometimes struggle because they may not have full-time city finance officers, lawyers or certified public accountants to assist with acquiring funding for projects.”
Dave Eide, REED board president and Watertown, S.D.-based Codington-Clark Electric manager, sees the REED Fund being beneficial in many ways for his cooperative’s members. “It’s a great program available for new or expanding businesses and community projects. It not only helps the individuals directly involved, but is a benefit to all co-op members by way of growth in the rural areas we serve.”
Eide adds that among the most rewarding aspects about REED is seeing people succeed and ideas becoming a reality. “Be it a community project such as a fire hall or a privately owned business, it’s rewarding to know we have the ability to help make things happen and bring projects to fruition through the revolving loan fund.”
For more information, visit the REED website: www.eastriver.coop/programs/reed
