Southern Tobacco Communities Roundtable 
 

Hosted by the Commodity Growers Cooperative
Tuesday, March 3, 1998
Berry Hill Mansion, Frankfort, Kentucky

WELCOME AND INTRODUCTIONS
Participants were welcomed to Kentucky by Lt. Governor Steven Henry and Rod Kuegel, President of the Burley Tobacco Growers Cooperative and the Commodity Growers Cooperative. Kuegel noted that the meeting was an opportunity to define more clearly how the tobacco legislation could help tobacco farmers have a smoother transition; while current legislative proposals earmark only 20% of the settlement for assisting agriculture, the main impact of the settlement will be on agriculture. Many participants expressed hope that the meeting would help define more clearly how any funds for community economic development should be used, specifically how they can help make tobacco farmers whole and in turn help make the farming communities whole.

Karen Armstrong-Cummings, director of the Commodity Growers Cooperative, dedicated the meeting to John Berry, who could not attend the meeting. For many years, John Berry has been working to create a viable future for farming, and she hoped that his vision would serve as a guide for the meeting.

Desired outcomes for the meeting included:

General guidelines for the Roundtable discussion, outlined by facilitator Frank Dukes of the Institute for Environmental Negotiation, University of Virginia, were that participants be candid and honest about their views, be respectful of each other's views and interests, keep comments to the point, and be aware of the need for discretion and sensitivity about the day's discussions.

PRINCIPLES AGREED UPON AT THE OCTOBER, 1997 CHAPEL HILL MEETING
Danny McKinney, CEO of the Burley Tobacco Growers Cooperative, summarized the major points of agreement reach at an October, 1997 meeting of North Carolina and Kentucky farm and community development organizations. It was agreed then that the first priority of the financial assistance to tobacco growing states should be to provide direct support for tobacco farmers. The second priority should be to provide assistance for rural economic development, of which funds should first be directed toward agriculture-based development and secondarily to other forms of community development. The Chapel Hill group also identified loans and/or cost-share grants to tobacco cooperatives as the preferred primary method of providing assistance for agriculture-based development, while direct loans to farmers themselves would be secondary form of assistance. McKinney explained that the Chapel Hill group felt the key to a successful program would be to get to the "most people with the most money." It was felt that this strategy would channel funds through organizations already accustomed to handling large amounts of money and therefore most prepared to manage new incoming assistance funds.

REVIEW OF NATIONAL LEGISLATIVE PROPOSALS FOR TOBACCO COMMUNITY DEVELOPMENT
Dr. Will Snell of the University of Kentucky handed out information on Kentucky's tobacco production as well as a summary of the key points of national legislative proposals concerning community economic development in tobacco producing regions. He noted that tobacco production is extremely important in Kentucky, as tobacco receipts directly account for between 3 to 10% of personal income. While some might consider these percentages to be an indication that Kentucky growers are not too dependent on tobacco for their income, Snell noted that few industries can claim that they account directly for that percentage of personal income.

With regard to the reactions of Kentucky farmers to the various legislative proposals, Snell said most are fearful of the future and how national legislation will affect their farm investments. There is little interest in the concept of rural development assistance, but much more interest in how individual farmers will be provided assistance. There is common concern that much of any community development money will disappear in the administration of programs, and much skepticism about how much of the federal assistance funds will actually make it to farmers. Another concern relates to the impact on rural communities of any program for quota compensation: would farmers spend what some might consider a "windfall" in their local communities or on big-ticket items that can usually only be purchased in larger cities.

In response to a question as to whether it would be possible to link any quota compensation to some form of re-investment in the rural communities, Snell said that the farmers with whom he has talked are not interested in having restrictions placed on those funds. A participant noted that farmers in Georgia were not likely to view funds for quota compensation as a luxury windfall, as they are struggling simply to make it through each year; and would be most likely to spend that money in their local community. Another participant suggested that it is not fair or reasonable to stipulate that farmers would spend their money in their home town; that would be the equivalent of requiring anyone to spend a percentage of their regular salary in their home town. Another participant noted that you cannot control how farmers will spend their money, but that in today's system most of the quota income is already retirement income by retirees who lease their quota. Snell said that current estimates of how buy-out money would be used are that 40% would be spent on paying debt services, and 40% would be put into retirement funds.

Rod Kuegel noted that there already is agreement that farmers will need some form of direct quota compensation. Today's focus should be on developing agreement on what any economic development package should contain, if there is a program which would be channeling funding into such a package.

SMALL GROUP DISCUSSIONS OF KEY QUESTIONS
The Roundtable then worked in small groups to address four key questions concerning any such economic development program. Participants were offered several "votes" for each of the four key questions to indicate their preferences. The results of these "votes" would then be used to see where agreement exists about such a program and where there is disagreement. (NOTE: The notes from the small group discussions are at the end of this summary).

LESSONS LEARNED FROM OTHER STATES/REGIONS
Presentation by Barbara Meister, Assistant Coordinator for the National Commission on Small Farms

Barbara Meister urged the Roundtable to consider questions suggested by Wendell Berry at the prior evening's reception: what is it that should be conserved, and what is it that needs to be developed or newly created? Participants should think in terms of their vision for their communities, and the structures that would be needed to realize that vision.

She said there are many examples of badly executed economic development, which would justify skepticism about economic assistance to tobacco communities, and described a couple of projects that did not accomplish the envisioned objectives. Nevertheless, she stressed that it is important for Roundtable participants to identify what kind of economic development they would like to see, because there are some helpful models that could be used.

Meister said that change in agricultural communities is occurring everywhere; different examples can be found in the sugar cane plantations of Hawaii, fishing communities of the Northeast, and timber communities of the Pacific Northwest. These changes are being handled in different innovative ways, although it is too soon to determine their long-term effectiveness. Economic assistance is provided in Hawaii, for example, to "community entrepreneurs" for the purpose of creating new businesses that will, it is hoped, employ dislocated sugar cane workers.

Two models of structures for providing economic assistance were offered for consideration. The first model is that of the Pacific Northwest Economic Adjustment Timber Initiative, a "top-down" model in which the federal government is in the driver's seat. At the federal level a "Multi-Agency Command" facilitates the process of economic assistance, removes legislative and appropriations barriers, and also resolves application conflicts. At the regional level a "Regional CERT" comprised of the three state Governors and regional offices of federal agencies (EPA, Forest Service, and DOL) provides regional oversight. At the state level a "State CERT" is established to coordinate all existing resources for community development and assistance, as well as to apply new funds through these same channels. All resources includes everything from Small Business Administration loans, Department of Labor re-training programs, HUD housing programs, Agricultural loans and grants, to assistance provided by private foundations and nonprofit organizations. For the coordination to occur, all of these various federal and state agencies and organizations providing different forms of community assistance are represented on the State CERT. Each State CERTs developed a single application for communities to obtain assistance; each community would develop a comprehensive plan that would cover all of these various components of its development, so that all parts of the community would be working together toward the common goal. Using this structure, which uses existing channels in a new, collaborative way, about an additional $250-300 million per year have been provided to Pacific Northwest timber communities for economic development assistance.

The second non-governmental model offered is a "bottom-up" structure in which any community has the opportunity and right to organize to apply for assistance, in which dollars flows to the point where decisions need to be made, and in which decisions are made at the point closest to the point of concern. In this model, the following key components are first defined: Purpose; Principle; People; Concept; Structure; and Practice. Meister offered the following as illustrations of how these components might be defined:

One participant noted that top government officials appear to be developing plans for how they would like to spend these economic assistance dollars. Meister suggested one way to address this issue could be to make government a part of the process, much like the non-governmental model built government representation into the Community Alliance structure.

COMMUNITY INVESTMENT AT WORK: TWO PILOT PROGRAMS
Karen Armstrong-Cummings summarized the Commodity Growers Cooperative new program of grant assistance to farmers to develop on-farm value-added processes. The Cooperative established an Advisory Board that is responsible for developing the guidelines for the grants, the priorities for grants, and reviewing and approving grants. The grants are provided on a reimbursable basis, in order to ensure a level of accountability by the farmer. They have just approved their first round of grants.

Michael Sligh of the Rural Advancement Foundation International summarized the lessons learned from its North Carolina pilot Tobacco Community Reinvestment Program, which is being conducted to demonstrate how an industry and/or publicly supported reinvestment fund might work. Their pilot has five parameters:

(1) to learn from other programs;
(2) to increase the farmers' share of food dollars;
(3) to take a systems approach, as opposed to just tackling production or marketing;
(4) to use an open process; and
(5) to provide funds at a critical time.
The Reinvestment Fund is overseen by a Board, which is composed of seven farmers, who are selected by qualities of existing leadership and experience in agriculture, as well as seven other members representing land grant universities, health, banking, nonprofits, church, and other community leaders. Farmers serving on the Board may not apply for grants.

Two criteria for projects are that the dollars must stay in the community and that the use of teams is encouraged. There are two tiers of cost-share grants: the individual producer cost-share grants range from $5-10,000, and the community cost-share grants range from $10-30,000. The latter typically are given to organizations to help them build on existing structures, such as Main Street programs. Project leadership encourages individuals and communities to collaborate together on a project, to improve their chances for success.

A DRAFT PROPOSAL FOR A TOBACCO COMMUNITY INVESTMENT FUND
Hal Hamilton, Center for Sustainable Systems, and Jeff Hall, Ag 2000, outlined a draft proposal for how a tobacco community investment fund might be structured.

A concern raised by a number of members was how the funds for rural economic development would be apportioned. One option suggested is for funds to be allocated by each state's percentage of income from tobacco relative to the national level of income from tobacco, or the actual value of tobacco production. Another option is that funds be allocated according to quota; a variation on that option would be to use base quota. A third option is for funds to be distributed according to the loss of income from tobacco, determined by some percentage or other formula that would reflect the extent of actual dependency on tobacco income. Yet another option is for funds to be distributed according to the numbers of people owning quota, as opposed to the amount of quota.

These options are of great concern to a number of Roundtable participants, as they would yield very different results for different states. In Kentucky, for example, 17 out of 20 counties are considered dependent on tobacco income. Kentucky has a total of 143,696 allotments (people holding quota), which accounts for 44% of the total allotments, and Tennessee's share of allotments accounts for 26%. North Carolina allotments, in contrast, account for 13% of the total. If one were to base the fund disbursement along the actual value of tobacco production, however, Kentucky's share would drop to 28%, Tennessee's share would drop to 8%, while North Carolina's share would rise to 37%. Thus it becomes extremely important to develop a method of dividing the "pie" that would be considered fair to all.

One participant suggested that while small burley tobacco farmers Kentucky are dependent on their tobacco income, because of the percentage of their community income on tobacco, larger flue-cured farmers in North Carolina or Virginia are no less dependent on their tobacco income, because of the large investments they have tied up in their farm equipment, materials and land. He advocated that a fair distribution would be based the actual pounds of tobacco that a community grows.

Some participants suggested that a dual strategy may need to be developed to reflect the different impacts on individuals and communities; an example offered is that 50% could be allocated according to individual tobacco production and the remaining 50% allocated according to community dependence on tobacco production as calculated by, for example, the percentage of its total income directly from tobacco.

Rod Kuegel reminded the Roundtable that its focus for this meeting was how to protect the rural economic development dollars, to ensure that they are actually used for agriculture and not appropriated for other purposes. He suggested that allocation by individual tobacco production would be satisfactory if that was what would work best for flue-cured tobacco growers, and that it was most important that they work together.

The Roundtable was asked whether the structure proposed for the Investment Fund would work. It was generally agreed that any allocation of funds apportioned by state in no way meant that state agencies ought to control the use of those dollars. One participant suggested that the funds could be controlled by some other organization at the state level, such as the flue-cured or burley cooperative organizations. The cooperatives could establish subsidiary Boards responsible for administering these funds, so that the additional responsibilities would not fall on the main Board. There was concern that such a structure would not provide adequate oversight and would be inappropriate for the Boards to handle. There was also discussion and some interest in the need for separate bodies to address the distinct needs of burley and flue-cured growers. It was noted that Senator Robb's proposal for a single Commission includes representation of both. Other participants said there are strong arguments for a unified Board at the highest level, as opposed to two separate Boards.

Ms. Meister suggested that the Roundtable consider this an opportunity to explore new ways of doing things. Funds do not need to be funneled through either the Governor's Office or a state agency. However, there does need to be built-in accountability in any system. She suggested that accountability be built from the ground-up, not the top-down, and be at the community level. For example, the number and types of members of a local body could be specified, and it would then be up to the community or region to form the body.

Some participants expressed a preference for working within existing structures. Some reasons for this included experience of great corruption in the administration of large grant funds, a sense that it would be important politically to involve the governor's Office and even the Council of Governors as one of the most powerful lobbying organizations.

Other members expressed a preference for thinking in new ways, and suggested that public health groups will need to see different structures used than those in the past, in order to be able to support the package.

There seemed to be general agreement that the economic development dollars should make their way back to the grower, and that they should be controlled at a local level as close to the grower as possible.

A question was raised about allocating funds to growers in the form of shares in an investment bank, which would then be able to invest dollars locally in the community. This proposal drew considerable interest, as it would give the growers the keys to the car and would also galvanize community interest and involvement. There was also some skepticism about this proposal, as experience with bankers and insurers indicates has not shown that they have interest in helping growers.

A question was asked whether the tobacco growers wished for continued participation by public health organizations in the formulation of the proposal. Several participants expressed strong views that participation of the public health organizations is desired because they represent key community interests, and because growers and health advocates need to speak with a unified voice in order to be politically effective.

It was agreed that a subcommittee would meet the next morning to draft a proposal that would be brought back to the large group, for discussion at a March 9 conference call set up by the Southern Tobacco Communities Project.

The urgency of drafting a proposal was underscored by the need to have it prepared by March 11 in order to have the most influence on the policymaking process.

Small Group Discussions of Key Questions
Question 1: What Proportion of funding should be devoted to quota compensation? To community and farm economic development?

1. (14 votes) Individual quota compensation should have priority over other goals for rural development funding.

2. (10 votes) Funds should be directed at the goal of diversification for the local economies. A high proportion of these community funds should go directly to agriculture.

3. (8 votes) Assistance funds should be tax free, if invested in preferred categories.

4. (7 votes) Agricultural-directed vs. non-agricultural-directed funding are interdependent and should be locally determined.

5. (5 votes) Linking payments to healthy food supply to provide incentives to protect foods from excessive chemicals in the environment.

6. (3 votes) Compensation should go to the Bill Gates of tobacco hope.

7. (3 votes) Foreign tobacco will replace domestic production if compensation doesn't allow lower production costs.

8. (2 votes) Low equity farmers should receive special assistance in obtaining capital funds.

9. (2 votes) Food production and food processing connections might be better coordinated/ encouraged.

10. (1 vote) Compensation should go to quota holders and producers/tenants.

11. Funding for compensation and for rural development is needed.

12. There should be incentives in compensation for local investment.

13. Rural development includes funds for industry, on-farm enterprise, value-added products, and tourism.

14. Compensation to the different categories should vary over time.

Question 2. For any "Community Investment Fund," how much funding should be devoted to agricultural development? What parts of agricultural development? How much to non-agricultural development? What areas?
1. (19 votes) Place limitations on the funds, so that at least 50 percent is focused on agriculture that sustains the family farm based system. The purpose should be to sustain the family farm system, which means there must be profits from the farm.

2. (6 votes) Use Robb's plan as a model, where the $250 million is allocated by regional plans, which are as localized as possible, and market-defined, and not administered by the Governors.

3. (6 votes) Ag-based and market development (such as alternative uses for tobacco), should be a top priority; secondarily should be those that are complimentary to ag.

4. (5 votes) Provide farm based entrepreneurship training. Develop a "whole system" through education.

5. (5 votes) Develop a different approach to markets, with excellence in farm-based development. Look at other operations.

6. (4 votes) Community development should receive 50% of the funds.

7. (1 vote) Money for young people's interests in environmentally friendly agriculture and making a profit.

8. (1 vote) Organic productions and niche markets.

9. (1 vote) Community investments in things like education, in addition to existing state dollars.

10. (1 vote) Funds for developing value-added processes for farm products.
 

11. A different approach to marketing; emphasize excellence in marketing and farm-based development.

12. Build on the work ethic and values of young people.

13. Entrepreneurship development for farmers.

Question 3: What ought to be the governing structures of any "Community Investment Fund?" Who can be trusted? What process should be used?
Key points developed were:

Question 4. Who will be concerned with these decisions? What stakeholders should be involved, and why?

The following list of groups are those who should be represented on any decision-making body:
Primary Decision Makers


The following are other groups that will be interested/ concerned with the decisions made.


General Comments relating to Question 4:
1. (17 votes) Funding priorities should start with the farmers because that will achieve the biggest bang for the buck.

2. (10 votes) Growers should lead decisions; all others should be in a support role.

3. (4 votes) Funding priorities should not be an "either/ or" choice between growers and communities.

4. (3 votes) Create empowerment enterprise zones; locally developed and producer-led.

5. (2 votes) Future families younger generation absolutely need to be involved.

6. (2 votes) The size of the decision-making body must stay manageable.

7. (2 votes) Fund priorities should be for communities, because it is the community that will crumble.

8. (2 votes) The challenge is to find a way to tap stakeholders for creative solutions.

9. (2 votes) Do community visioning: create a "community will" and legacy.

10. (1 vote) Educate people to recognize the other roles of tobacco growers, e.g. their production of non-tobacco crops.

11. (1 vote) Include those who are not the usual suspects.

12. There should be a tiered approach: first tier for farmers and second tier for economic development.

13. Recognize that the economic development process is dynamic, and that any program will need to be continually refined.

14. Find the community bridge builders, look in unusual places (e.g. nurses).

15. Be mindful that as the number of farms decrease, and are perhaps sold, the number of houses built will increase; this will erode the community's economic base, as the tax dollars brought in will not equal the need for more services.