CHAPTER 57
VALUE-ADDED AGRICULTURAL PRODUCTS AND PROCESSES
FINANCIAL ASSISTANCE PROGRAM (VAAPFAP)
[Prior to 7/19/95, see 261—Ch 29]
261—57.1(15E) Purpose and administrative procedures.
	57.1(1) Purpose. The purpose of this program is to encourage the increased utilization of agricultural commodities produced in this state. The program shall assist in efforts to revitalize rural regions of this state by committing resources to provide financial assistance to new or existing value-added production facilities.
	57.1(2) Administrative procedures. The VAAPFAP program is subject to the requirements of the department’s rules located in 261—Part VII, additional application requirements and procedures, and 261—Part VIII, legal and compliance.
261—57.2(15E) Definitions. In addition to the standard definitions located in 261—Chapter 173, the following definitions apply to the VAAPFAP program:
“Agricultural biomass industry” means businesses that utilize agricultural commodity crops, agricultural by-products, or animal feedstock in the production of chemicals, protein products, or other high-value products.
“Agricultural biotechnology industry” means businesses that utilize scientifically enhanced plants or animals that can be raised by producers and used in the production of high-value products.
“Agriculture” means the science, art, and business of cultivating the soil, producing crops and raising livestock.
“Alternative energy industry” includes businesses involved in the production of ethanol, including gasoline with a mixture of 70 percent or more ethanol, biodiesel, biomass, hydrogen, or in the production of wind energy.
“Committee” means the renewable fuels and coproducts advisory committee established pursuant to Iowa Code section 159A.4.
“Coordinator” means the administrative head of the office of renewable fuels and coproducts appointed by the department of agriculture and land stewardship as provided in Iowa Code section 159A.3.
“Coproduct” means a product other than a renewable fuel which at least in part is derived from the processing of agricultural commodities and which may include corn gluten feed, distillers grain, solubles, a feed supplement, or can be used as livestock feed.
“Farming” means the cultivation of land for the production of agricultural crops, the raising of poultry, the production of eggs, the production of milk, the production of fruit or other horticultural crops, grazing or the production of livestock. Farming shall not include the production of timber, forest products, nursery products, or sod; and farming shall not include a contract where a processor or distributor of farm products or supplies provides spraying, harvesting or other farm services.
“Fund” means the renewable fuels and coproducts fund established pursuant to Iowa Code section 159A.7.
“Innovative” means a new or different agricultural product or a method of processing agricultural products which is an improvement over traditional methods in a new, different, or unusual way.
“Livestock production operations” means the production, feeding and marketing of livestock, poultry and aquaculture. This includes, but is not limited to, beef and dairy cattle, swine, sheep, goat, poultry, turkey and equine operations. It also includes nontraditional agricultural operations such as ostrich, fallow deer, rabbit, fish and other aquaculture.
“Office” means the office of renewable fuels and coproducts created pursuant to Iowa Code section 159A.3.
“Organic products” means Iowa-grown or Iowa-raised agricultural products as defined by 21—Chapter 47, Iowa Organic Program.
“Person” means individual, corporation, limited liability company, government or governmental subdivision or agency, business trust, estate, trust, partnership or association, or any other legal entity.
“Producer-owned, value-added business” means a person who holds an equity interest in the agricultural business and is personally involved in the production of crops or livestock on a regular, continuous, and substantial basis.
“Renewable fuel” means an energy source at least in part derived from an organic compound, capable of powering machinery, including an engine or power plant. A renewable fuel includes but is not limited to ethanol-blended or soydiesel fuel.
“Renewable fuels and coproducts activities” means either of the following:
	1.	The research, development, production, promotion, marketing, or consumption of renewable fuels and coproducts.
	2.	The research, development, transfer, or use of technologies which directly or indirectly increases the supply or demand of renewable fuels and coproducts.
“Rural region” means any geographic area which is predominantly rural in nature, that is, having a relatively low population density and where agriculture is the predominant economic activity.
“Soydiesel fuel” means a fuel made of processed soybean oil which is mixed with diesel fuel, the mixture being a minimum of 20 percent processed soybean oil.
“VAAPFAP” means the value-added agricultural products and processes financial assistance program.
“Value-added product” means a product, which through a series of activities or processes, can be sold at a higher price than its original purchase price.
261—57.3(15E) General eligibility. A person is eligible to apply for assistance under this program if the following requirements are met:
	1.	The existing or proposed facility is located in this state.
	2.	The person applies to the department of economic development in a manner and according to procedures required by the department.
	3.	The person submits a business plan which demonstrates managerial and technical expertise.
261—57.4(15E) Program components and eligibility requirements. There will be six components to the VAAPFAP program. For program components described in subrules 57.4(1) through 57.4(4), the department shall prefer producer-owned, value-added businesses, education of producers and management boards in value-added businesses, and other activities that would support the infrastructure in the development of value-added agriculture, and public and private joint ventures involving an institution of higher learning under the control of the state board of regents or a private college or university to acquire assets, research facilities, and leverage moneys in a manner that meets the goals of the grow Iowa values fund. The component(s) include the following:
	57.4(1) Innovative agricultural products and processes component. An application based on this component shall be considered if either of the following applies:
	a. 	The business will produce a product derived from an agricultural commodity, if the product is not commonly produced in Iowa from an agricultural commodity; or
	b. 	The business will utilize a process to produce a product derived from an agricultural commodity, if the process is not commonly used in Iowa to produce the product.
For purposes of this subrule, a product is “not commonly produced” and a process is “not commonly used” if the product or process is not usually, generally, or ordinarily produced or processed in Iowa.
	57.4(2) Renewable fuel component. Applications for renewable fuel and ethanol production shall be considered by the department for funding. Applications based on ethanol fuel production must meet the following criteria to be considered for funding:
	a. 	All fermentation, distillation, and dehydration of the ethanol occurs at the proposed facility.
	b. 	The ethanol produced at the proposed facility is at least 190 proof and is denatured. However, if the facility markets the ethanol for further refining, the facility must demonstrate that the refiner produces at least 190 proof ethanol from the ethanol purchased from the facility.
	57.4(3) Agricultural biotechnology, biomass and alternative energy component. Agricultural business facilities in the agricultural biotechnology industry, agricultural biomass industry, and alternative energy industry are eligible to submit applications.
	57.4(4) Organic and emerging markets component. Facilities that add value to Iowa agricultural commodities through further processing and development of organic products and emerging markets are eligible for program assistance.
	57.4(5) Project development assistance. The department, at its discretion, may also provide funding for project development related to proposed projects under this program. Project development assistance could be for the purpose of assisting in departmental evaluation of proposals, or could be one of the proposed activities in a funding request whose further project development could reasonably be expected to lead to a VAAPFAP-eligible commercial enterprise. Feasibility studies and basic research are not eligible for assistance under this program.
	57.4(6) Project creation assistance. This component is for projects that eventually could be eligible for funding within the other VAAPFAP components. Periodically, a request for proposal (RFP) will be issued based on strategic initiatives developed by the department in consultation with relevant agricultural groups and advisors. The RFP will describe the desired outcome of the proposed effort. The desired outcome could be a new and innovative product, new processing or marketing techniques, or new forms of business operation or collaboration. These efforts could include:
	a. 	Projects that can show need for special financial assistance to engage participation of expertise needed from sources external to the business sponsor of the project.
	b. 	Endeavors where there is a need for financial assistance to plan and organize business consortia or joint ventures among firms or to support costs of special services to be acquired from university or other sources.
	c. 	Situations where there is a need to provide matching funds to businesses to enter competition for federal research and development grants.
261—57.5(15E) Ineligible projects.
	57.5(1) The department shall not provide financial assistance to support a value-added production facility if the facility or a person owning a controlling interest in the facility has demonstrated a continuous and flagrant disregard for the health and safety of its employees or the quality of the environment as more fully described in 261—Chapter 172.
	57.5(2) The department shall not approve an application for assistance under this program to refinance an existing loan.
	57.5(3) The department shall not directly award financial assistance to support an activity directly related to farming as defined in Iowa Code section 9H.1, including the establishment or operation of a livestock production operation, regardless of whether the activity is related to a renewable fuel production facility.
	57.5(4) An applicant may not receive more than one award under this program for a single project. However, previously funded projects may receive an additional award(s) if the applicant demonstrates that the funding is to be used for a significant expansion of the project, a new project, or a project which results from previous project development assistance.
	57.5(5) The department shall not approve an application for assistance in which VAAPFAP funding would constitute more than 50 percent of the total project costs.
261—57.6(15E) Awards.
	57.6(1) Form. Financial assistance awarded under this program may be in the form of a loan, forgivable loan, deferred loan, grant, or a combination thereof. The department shall not award more than 25 percent of the amount allocated to the value-added agricultural products and processes financial assistance fund during any state fiscal year to support a single person. The department may finance any size of facility. However, the department may reserve up to 50 percent of the total amount allocated to the fund for purposes of assisting persons requiring $500,000 or less in financial assistance. The amount shall be reserved until the end of the third quarter of the state fiscal year and may then become available for other projects.
	57.6(2) Amount.
	a. 	Grants, forgivable loans, and loans shall be awarded on the basis of the impact of the project and the degree to which the project meets the goals of the program.
	b. 	The department reserves the right to negotiate the amount, term payback amount, and other conditions of an award.
261—57.7(15E) Application procedure. Application materials are available on line at www.iowalifechanging.com or from IDED, Business Finance, 200 East Grand Avenue, Des Moines, Iowa 50309, telephone (515)242-4819. A comprehensive business plan must accompany the application and shall include at least the following:
	1.	Marketing plan for the project;
	2.	Project budget and status of alternative financing (if applicable);
	3.	Production operations;
	4.	Management structure;
	5.	Personnel needs;
	6.	Description of product, process or practice;
	7.	Status of product/service development; and
	8.	Patent status (if applicable).
261—57.8(15E) Review process. Subject to availability of funds, applications are reviewed and rated by IDED staff on an ongoing basis. Applications will be reviewed by staff for completeness and eligibility. If additional information is required, the applicant shall be provided with notice, in writing, to submit additional information. If the applicant had previously consulted with the coordinator in completion of the application, the department may refer the application to the coordinator for further feasibility studies if deemed necessary. Applications will be reviewed as described in 261—Chapter 175.
The department may consult with other state agencies regarding any possible future environmental, health, or safety issues linked to technology related to the biotechnology industry.
The department reserves the right to informally consult with external resources to assist in the evaluation of projects or to contract with outside consultants, in an amount not to exceed $20,000 per project, for the same purpose.
261—57.9(15E) Deferral process. Rescinded IAB 7/4/07, effective 6/15/07.
261—57.10(15E) Evaluation and rating criteria. The IDED staff shall evaluate and rank applications based on the following criteria:
	57.10(1) For the innovative products and processes component:
	a. 	Feasibility (0-25 points). The feasibility of the existing or proposed facility, process, or operation to remain a viable enterprise. Rating factors for this criterion include, but are not limited to, the following: initial capitalization, project budget, financial projections, marketing analysis, marketing plan, management team, and production plan. In order to be eligible for funding, proposals must score at least 15 points on this rating factor.
	b. 	Priority components (0-25 points). The degree to which the proposed project meets one of the four primary program components which include:
	1.	Innovative agricultural products and processes.
	2.	Renewable fuels.
	3.	Agricultural biotechnology, agricultural biomass, and alternative energy.
	4.	Organic products and emerging markets.
In order to be eligible for funding, proposals must score at least 15 points in the program component under which the applicant is eligible.
	c. 	Utilization (0-25 points). The degree to which the facility will add value to and increase the utilization of agricultural commodities produced in this state. In order to be eligible for funding, proposals must score at least 15 points on this rating factor.
	d. 	Producer ownership (0-15 points). The level of producer ownership will be given additional consideration.
	e. 	The extent to which the existing or proposed facility is located in a rural region of the state (0-10 points).
	f. 	The proportion of local match to be contributed to the project (0-5 points).
	g. 	The level of need of the region where the existing facility is or the proposed facility is to be located (0-5 points). More points are awarded to those projects which exhibit greater need as measured by factors including, but not limited to, the following: regional unemployment rate, poverty level, or other measures of regional fiscal distress.
	h. 	The degree to which the facility produces a coproduct which is marketed in the same locality as the facility (0-5 points).
A minimum score of 65 points is needed for a project to be recommended for funding.
	57.10(2) For the project creation assistance component:
	a. 	Any person is eligible to apply except educational or research institutions. However, an educational or research institution may be a partner to an eligible applicant.
	b. 	The evaluation process will focus on the application of new technology and knowledge to agricultural processing and will be based upon the degree to which:
	(1)	The resulting business has potential to increase the utilization of agricultural commodities in Iowa; and
	(2)	The resulting business increases value-added economic activities (for example, facilities or employment) within the state of Iowa.
261—57.11(15E) Negotiation and award. Rescinded IAB 7/4/07, effective 6/15/07.
261—57.12(15E) Award process. Rescinded IAB 7/4/07, effective 6/15/07.
261—57.13(15E) Contract. Rescinded IAB 7/4/07, effective 6/15/07.
261—57.14(15E) Administration. Rescinded IAB 7/4/07, effective 6/15/07.
261—57.15(15E) Default. Rescinded IAB 7/4/07, effective 6/15/07.
261—57.16(15E,83GA,SF344) Applicability of VAAPFAP program after July 1, 2009.
	57.16(1) Effective July 1, 2009, the VAAPFAP program is rescinded by 2009 Iowa Acts, Senate File 344, section 9, and replaced with the grow Iowa values financial assistance program. Rules for the grow Iowa values financial assistance program may be found in 261—Chapter 74.
	57.16(2) For awards made prior to July 1, 2009, the rules of 261—Chapter 57 shall govern for purposes of contract administration and closeout of projects. A contract amendment is not allowable if the result of the amendment is to increase the benefits available.
This rule is intended to implement 2009 Iowa Acts, Senate File 344.
[ARC 7970B, IAB 7/15/09, effective 7/1/09; ARC 8145B, IAB 9/23/09, effective 10/28/09]
These rules are intended to implement Iowa Code sections 15E.111 and 15E.112.
[Filed emergency 8/17/90 after Notice 7/11/90—published 9/5/90, effective 8/17/90]
[Filed emergency 8/19/94 after Notice 7/6/94—published 9/14/94, effective 8/19/94]
[Filed 6/26/95, Notice 5/10/95—published 7/19/95, effective 8/23/95]
[Filed 8/21/95, Notice 6/7/95—published 9/13/95, effective 10/18/95]
[Filed 8/23/96, Notice 3/13/96—published 9/11/96, effective 10/16/96]
[Filed 9/25/00, Notice 8/9/00—published 10/18/00, effective 11/22/00]
[Filed 9/11/03, Notice 8/6/03—published 10/1/03, effective 11/5/03]
[Filed emergency 6/15/07—published 7/4/07, effective 6/15/07]
[Filed 8/22/07, Notice 7/4/07—published 9/26/07, effective 10/31/07]
[Filed Emergency ARC 7970B, IAB 7/15/09, effective 7/1/09]
[Filed ARC 8145B (Notice ARC 7971B, IAB 7/15/09), IAB 9/23/09, effective 10/28/09]