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Farmer-lender mediation bill passes House

By Janet Kubat Willette

Date Modified: 04/11/2013 9:04 AM

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ST. PAUL — A bill extending the sunset date of farmer-lender mediation passed the House Thursday and is on its way to the Senate.

HF251, authored by Rep. Jeanne Poppe, DFL-Austin, had hearings in the Agriculture Policy and Ways and Means committees.

The bill extends the sunset date for the farmer-lender mediation program from June 30, 2013, to June 30, 2017. No other language is changed.

The bill passed out of Ways and Means on Feb. 11 following discussion about the qualifying limit for entrance into the farmer-lender mediation program and funding.

Rep. Greg Davids, R-Preston, said he finds it interesting that a farmer can be in mediation with debt of $5,000. That's about half an acre of farmland, he said.

Poppe said discussion has occurred about the $5,000 threshold and it was left at that level because of the number of new farmers entering agriculture who are doing a different kind of farming.

The way farmer-lender mediation works is a creditor with a secured debt of more than $5,000 against an agricultural property must offer mediation before proceeding with foreclosure, repossession, cancellation of contract or collection of judgment, said Dick Senese, University of Minnesota senior associate dean, in a phone interview.

In order to qualify, the debtor must have at least 60 acres or generate at least $20,000 in gross income from sales of agricultural products.

It's up to the debtor to decide to participate in mediation. By statue, debtors have 14 days to elect mediation, Senese said. Mediation must conclude within 90 days. In rare cases, both the creditor and debtor can elect to continue mediation. Eighty-one percent of cases result in agreement after 90 days. If no agreement is reached in 90 days, both parties are free to walk away and pursue every option available to them, Senese said.

In the federal fiscal year ended Sept. 30, Minnesota's farmer-lender mediation program received 2,919 notices from creditors, said Todd Iverson, U of M assistant director for state relations, in the Ways and Means committee meeting. The program handed a total of 1,087 agricultural operations.

Often, they get more than one notice about one operation, Senese said. The volume for the recently ended fiscal year was the fourth highest volume in the past 10 years.

People who elected mediation cited crops as their primary enterprise in 55 percent of the cases, he said.

About half of the debtors waive mediation, he said. Of those who enter mediation, their initial debt is less than $45,000. They are typically smaller, newer, beginning or niche operations.

Any number of things can cause a farm enterprise to enter mediation, Senese said. An off-farm job may be lost or hours decreased, a medical emergency could rack up bills or a farmer could quickly fall behind in today's volatile marketplace.

Last year, the state's farmer-lender mediation program mediated $172 million worth of debt. Over the past four fiscal years, the total debt mediated surpassed $1.3 billion, Senese said.

About 15 people provide mediation across the state. There is only one full-time employee, Mary Nell Preisler, the program director. The other mediators work when there is a case to mediate. The costs vary with use, Senese said.

Several legislators asked about the program's cost during the Feb. 11 Ways and Means hearing.

Rep. Sarah Anderson, R-Plymouth, asked what percentage of the Extension budget was spent on mediation.

The program's budget is $462,000 per fiscal year, Senese said. The state special provides $178,000 and the remaining dollars are from a USDA grant. There is uncertainty regarding the federal funds because of the sequester and also the amount of federal funds is decreasing as more states start farmer-lender mediation programs. The amount allocated to the program hasn't increased at the federal level, he said.

The bill is scheduled to have its introduction and first reading in the Senate on Feb. 18. Sen. Dan Sparks, DFL-Austin, is also carrying companion legislation, SF253.