The Rural Calibration Framework: Defensible Multipliers for USDA B&I Economic Impact Analysis

On February 20, 2026, USDA Rural Business-Cooperative Service Administrator J.R. Claeys sent an open letter to the more than seven hundred and seventy-five lenders in the OneRD guarantee program, the consolidated guaranteed-loan initiative codified at 7 CFR Part 5001. The numbers in that letter were the kind of numbers that don't usually appear in a friendly cover note. Active guaranteed balance in excess of twelve billion dollars. Delinquent loans in excess of one billion. Roughly three hundred million dollars in repurchases and losses over the prior twelve months. The letter cited 7 CFR 5001.132, the lender removal authority, and articulated ten loan-committee-review expectations. Three months later, on May 12, 2026, the agency exercised that authority and removed ten lenders from program participation. Those ten institutions held approximately six hundred and twenty million dollars in delinquent loans, roughly forty-seven percent of the total delinquent stock.

That was the moment the economic impact requirement stopped being theoretical.

For most of the OneRD era, the five-pillar feasibility standard at 7 CFR 5001.3 and Appendix A to Subpart D has been treated by the lender community as a procedural exercise. Market feasibility. Technical feasibility. Financial feasibility. Management feasibility. Economic impact. The first four show up in every loan committee package, get scrutinized by the lender's credit team, occasionally get challenged by the State Office. The fifth, economic impact, has historically been handled as a paragraph or two of multiplier estimates from whatever software the consultant happens to own, with no real expectation that anything in those paragraphs will determine whether the loan funds. The market has spent five years training itself to expect that economic impact analysis is regulatory boilerplate.

That training is now obsolete. This article explains why, and what to do about it.

The Regulatory Architecture

The consolidated rule at 7 CFR Part 5001 became effective on October 1, 2020, replacing the multi-program patchwork of 7 CFR Parts 4279, 4280, 4287, and 1942 that had governed USDA Rural Development guaranteed lending for the prior generation. The 2020 consolidation collapsed four guaranteed loan programs (Business and Industry, Community Facilities, Rural Energy for America Program, and Water and Waste Disposal) into a single regulatory architecture with shared eligibility, application, processing, and servicing provisions. The September 30, 2024 final rule at 89 FR 79698 refined definitions and capital requirements. The December 11, 2025 technical correction at 90 FR 57351 reinstated the definition of "commercially available" that had been erroneously removed in the 2024 rulemaking and refined the affiliate cross-reference to 13 CFR 121.103. None of these subsequent amendments touched the substantive economic impact provisions.

The operative tests are unchanged from their statutory origins. The §5001.3 definition of "feasibility study" enumerates five pillars (market, technical, financial, management, economic), and Appendix A to Subpart D specifies the content of each. The specific provision that does the analytical work is 7 CFR 5001.118(b), which is the ineligibility gate for B&I projects above one million dollars that would either transfer jobs from one rural area to another with a net increase in direct employment of more than fifty employees, or increase direct employment by more than fifty employees in a market where the proposed project would oversupply incumbent capacity without sufficient demand to absorb it.

The provision is statutorily anchored. Section 310B of the Consolidated Farm and Rural Development Act, codified at 7 U.S.C. 1932, traces to Pub. L. 92-419, §118(a), enacted August 30, 1972. The "transfer from one area to another" and "efficient capacity of existing competitive commercial or industrial enterprises" formulations are the original 1972 statutory text. They have not been amended at the U.S. Code level for over thirty years.

Two features of the regulatory architecture matter for everything that follows. First, the statutory test is operationalized through a separate Department of Labor / Employment and Training Administration certification process under 29 CFR Part 75, executed via Form RD 4279-2 ("Certification of Non-Relocation and Market Capacity Information Report"). The form is OMB-cleared at 0570-0069. Without DOL/ETA certification within thirty days of USDA referral, the guarantee cannot fund. Second, no successor RD Instruction 5001 has been published as of May 2026. The agency continues to operate under the pre-OneRD RD Instruction 4279-B, with the Part 5001 text controlling where conflicting. This means there is no consolidated internal procedure manual for the §5001.118(b) test; State Office practice and DOL/ETA clearance practice are the operative rulebook.

The Measurement Problem

The most common failure mode in B&I feasibility submissions is not the regulatory framework. It is the measurement framework that sits underneath the regulatory framework. Specifically: most submissions apply state-level multipliers to county-level projects and treat the resulting estimates as economic impact.

This is not a small error. It is the dominant analytical failure in the market.

The size-of-region effect on input-output multipliers is not contested in regional science. It is definitional. The Type II or SAM multiplier for an industry equals one plus the sum of indirect (interindustry) and induced (household) rounds of spending that occur inside the modeled region. As the region narrows, each round's "stay in" share falls, because intermediate inputs, household consumption, and labor are increasingly sourced or paid outside the boundary. The mathematical identity (Miller and Blair, Input-Output Analysis; Hewings 1985, Regional Input-Output Analysis) is that the regional Leontief inverse has smaller off-diagonal entries than the national or state-aggregate inverse, because the regional direct-requirements matrix incorporates Regional Purchase Coefficients less than one.

The empirical evidence on the magnitude of the discount is unusually consistent. National Renewable Energy Laboratory researcher Stefek and colleagues (NREL/TP-5000-73659, 2019) analyzed the Rush Creek wind farm in eastern Colorado and found that the four-county area surrounding the project captured only 13.7 percent of the construction-phase output that the same project generated statewide. The construction-phase GDP ratio was 13.1 percent. The construction-phase jobs ratio was 20.9 percent. Operations-phase ratios ran higher, 27.3 percent for output and 26.1 percent for jobs, but still far below the implicit assumption that a project's local economic impact is some large fraction of its state economic impact.

The Bagi study (USDA ERS Rural America 17(4), 2002) compared rural and urban Economic Development Administration water and sewer projects of similar construction cost. Urban projects produced 1.3 times more permanent jobs saved, 1.9 times more permanent jobs created, 2.8 times more private investment, 2.5 times more public funds leveraged, and 2.9 times more property-tax base. The canonical "2:1 to 3:1" urban-to-rural impact ratio originates here.

The Doeksen, St. Clair, and Eilrich Critical Access Hospital analysis (National Center for Rural Health Works, 2016) covered ninety-one CAHs in eighteen states. Average rural service-area Type SAM employment multiplier: 1.34. Oklahoma state-level hospital multipliers in the same period ran 1.87 to 1.91. Implied rural-to-state ratio: approximately 0.72.

Three independent studies, three different methodologies, three different sectors, three different decades. The same finding: rural-county multipliers run roughly 0.15 to 0.85 of state-aggregate equivalents for the same sector, with the discount widening as Rural-Urban Continuum Code rises, industry concentration falls, and metro adjacency declines.

A feasibility study that applies a state Type II output multiplier of 2.15 to a project in a RUCC 8 county and reports the result as the project's economic impact is delivering, on the empirical evidence, an impact estimate that is overstated by twenty to seventy percent in core rural cases and materially more in frontier and reservation contexts. The State Office reviewer doing the file knows this. The calibration framework that follows is the defensible response.

The Methodology Stack

Three modeling systems anchor the credible quantitative work in USDA feasibility analysis. Each does something the others cannot do. The competent feasibility study uses them in combination, not in isolation.

IMPLAN is the practitioner standard. The 2023 data year, 528-industry scheme, ZIP-code-through-state geographic flexibility, and explicit Regional Purchase Coefficient estimation through a double-constrained gravity model make IMPLAN the right primary tool for service-sector, agricultural-processing, and community-facility analyses. The model also distinguishes Type I (indirect only), Type II (indirect plus induced via household spending), and Type SAM (indirect plus induced via the full social accounting matrix including transfer payments and savings). The differences across the three closures matter at the second decimal place; reviewers expect to see which closure is being reported.

RIMS II is the Bureau of Economic Analysis public anchor. The April 2025 release uses the 2017 national benchmark with 2023 regional data, covers 372 industries, and is licensed at five hundred dollars per region and one hundred fifty dollars per industry effective August 15, 2025. RIMS II is the right cross-check for manufacturing and infrastructure projects, the right anchor when a State Office reviewer requests a federal-source verification, and the right citation when the feasibility study needs to defend an IMPLAN result against a competing consultant's number. RIMS II is not the right primary tool for sub-state geographies smaller than a county or for sectors with high regional supply-chain variability.

The USDA Economic Research Service technical bulletin series provides the third leg. ERR-103 documents the Food Assistance National Input-Output Multiplier (FANIOM) model, with a SNAP GDP multiplier of 1.79. ERR-265 introduces an updated SNAP multiplier via the FEDS-SAM social accounting matrix model. TB-1968 documents the agricultural exports total-output multiplier at approximately 2.06 per dollar of exports. The NREL Jobs and Economic Development Impact (JEDI) models provide parallel federal-source multiplier anchors for renewable energy; the JEDI wind model anchors the Rush Creek 0.137 ratio.

The competent methodology stack works as follows. IMPLAN as primary for service-sector, agricultural processing, community facility, and REAP projects. RIMS II as primary for manufacturing and infrastructure, with IMPLAN as cross-check. Both run with explicit displacement adjustment. Both reported with the regional purchase coefficient for the top five intermediate-input commodities disclosed. Both anchored to the federal-source ERS or NREL sector multiplier where one exists.

The displacement adjustment is the analytical step most often skipped. A project that captures market share from incumbent competitors does not produce its gross multiplier as net impact; it produces gross impact minus the impact lost at the displaced competitors. For a hotel adding 120 rooms in a market operating at 65 percent occupancy, the displacement adjustment may reduce the net employment impact by half. For a food processor entering an export market with no domestic incumbent, displacement may be zero. The State Office reviewer expects the feasibility study to make this distinction explicitly.

The Rural Multiplier Exhibit

The empirical core of this article is a tiered calibration framework for adjusting state-aggregate multipliers down to rural-county scale. The framework is anchored in peer-reviewed regional science, federal-source data, and USDA Cooperative Extension empirical work. It is built to be defensible in State Office credit review.

The framework has four tiers, applied as multiplicative haircuts on state-aggregate Type II / SAM multipliers, sector by sector, not flat on the project total.

Tier 1, metro-adjacent diversified rural (haircut 0.70 to 0.85). Counties classified RUCC 4, 6, or 8 (nonmetro, metro-adjacent, with at least 5,000 urban population in RUCC 4 and 6, or under 5,000 in RUCC 8) with ERS Economic Dependence classification of Unspecialized or Manufacturing and no Persistent Poverty overlay. Empirical anchors: Impact DataSource Texas furniture manufacturing analysis showing Dallas County employment multiplier 2.05 against the Texas statewide value of 2.73 (ratio 0.75), which establishes that even a major metropolitan core captures only roughly three-quarters of the statewide effect for a tradeable-goods sector; metro-adjacent rural counties operate at or below this benchmark depending on commuting density and supply-chain integration. Bagi 2002 upper range.

Tier 2, non-adjacent rural (haircut 0.60 to 0.75). Counties classified RUCC 5 or 7 (nonmetro, not adjacent to metro, with at least 5,000 urban population in RUCC 5 or under 5,000 in RUCC 7) with any ERS Economic Dependence classification. Empirical anchor: Doeksen 2016 CAH employment multiplier 1.34 against Oklahoma state-level 1.87 to 1.91, implied ratio 0.72; Oklahoma State University Extension manufacturing labor income ratio 1.48 against statewide 2.227, implied ratio 0.66.

Tier 3, frontier and persistent poverty (haircut 0.40 to 0.60). Counties classified RUCC 9 (nonmetro, not adjacent to metro, under 5,000 urban population) or any RUCC tier with Persistent Poverty overlay or Population Loss overlay or Mining Economic Dependence. Empirical anchor: Bagi 2002 lower range, where rural counties captured only one-third of urban-equivalent property-tax-base impact and roughly half of private investment leverage in EDA water and sewer projects.

Tier 4, extreme leakage (haircut 0.15 to 0.40). Reservation-economy projects on or adjacent to federally recognized Indian Tribe lands, single-employer towns, specialized-equipment manufacturing in sparse multi-county regions, or sub-county and ZIP-code analysis zones falling below the functional economic area threshold identified in IMPLAN documentation ("most often, a county is the smallest advisable Region for impact Analysis"). Empirical anchor: NREL Stefek 2019 Rush Creek wind-farm analysis, where the four-county area surrounding the project captured 13.7 percent of statewide construction-phase output and 20.9 percent of statewide jobs, establishing that specialized-input projects in sparse rural settings can fall below 0.20 of state-aggregate effect.

The calibration applies sector by sector. Construction-phase RPCs are relatively high in rural counties (local concrete, gravel, lumber, and labor) and rarely require deeper haircuts than the baseline tier. Manufacturing of specialized equipment collapses to the Tier 4 floor (Rush Creek pattern). Healthcare anchors to the Doeksen finding and rarely exceeds 0.75 of state hospital multipliers. Agricultural processing sustains stronger rural RPCs than other manufacturing because of the upstream commodity-supply linkage. Retail and consumer services apply the deepest haircuts in Tier 3 and 4 due to e-commerce and big-box leakage; Kenneth Stone's longitudinal Iowa research (Iowa State / Farm Foundation 1997) found that towns of 500 to 1,000 population lost 46.5 percent of total retail sales over 1983 to 1996. Accommodation and food services in recreation-dependent counties apply an additional 20 to 35 percent haircut to capture tourism leakage and absentee-ownership royalty leakage.

Cost Per Job: What Approvals Actually Look Like

The cost-per-job question has two answers, and both belong in a defensible feasibility study.

The first answer is the federal-subsidy cost. The Summit/Brand Economic Assessment, submitted as exhibit testimony to the House Agriculture Subcommittee on September 18, 2025, reports that the B&I program created 757,800 jobs from 2012 to 2022 at a federal cost of $331,552,052, yielding a federal subsidy cost of $438 per job. That figure is the program-level federal cost, the subsidy cost of the guarantee, not the project cost, and it is the only published federal-cost-per-job figure for B&I. It is the right citation when the question is whether the program as a whole is cost-effective from a federal-budget perspective.

The second answer is the project cost per direct full-time-equivalent job. USDA does not publish this metric directly. The defensible operational benchmark, drawn from approved-loan patterns, runs roughly thirty thousand to eighty thousand dollars per direct FTE for new-development B&I deals across most sectors, with sector-specific ranges that widen materially for capital-intensive projects.

Food and beverage manufacturing: eighty thousand to two hundred thousand dollars per direct FTE, with State Office pressure above one hundred fifty thousand. Hospitality and lodging: one hundred fifty thousand to four hundred thousand dollars per direct FTE, offset by indirect retail and food-service multipliers that improve the total-impact number. Healthcare (CAH, SNF, clinic): two hundred thousand to five hundred thousand dollars per direct FTE, with reviewer tolerance much higher because of the essential-community-service framing under §5001.121(a). Renewable energy projects under REAP: three hundred thousand to over one million five hundred thousand dollars per direct FTE, reflecting very low direct labor intensity. Forest products and sawmills: eighty thousand to two hundred thousand. Light manufacturing: fifty thousand to one hundred fifty thousand. Value-added agriculture: forty thousand to one hundred twenty thousand.

The defensibility anchor is the HUD Community Development Block Grant statutory ceiling. Basically CDBG Chapter 8 (HUD, May 2014), codified at 24 CFR 570.209, states that "an activity is considered by HUD to provide insufficient public benefit and cannot be assisted with CDBG funds if: The amount of CDBG assistance exceeds $50,000 per full-time equivalent (FTE), permanent job (created or retained)." No analog ceiling exists in 7 CFR Part 5001, but State Office reviewers know the CDBG figure and use it operationally as their soft anchor.

The defensibility rule that flows from this: feasibility studies presenting project cost at or below fifty thousand dollars per direct FTE are presumptively defensible. Studies between fifty thousand and one hundred fifty thousand require explicit justification by sector (capital intensity, indirect job multiplier, essential service framing). Studies above one hundred fifty thousand per direct FTE should expect substantive challenge and require both an indirect/induced job multiplier analysis on the rural-calibrated framework and an explicit §5001.118(b) compliance narrative.

The empirical literature provides one additional anchor. Rupasingha, Crown, and Pender (2019), published in the Journal of Regional Science 59(4): 701-722, used a difference-in-differences design on the National Establishment Time-Series database and found that B&I loan receipt led to a statistically significant increase in firm-level employment growth: 0.518 jobs added at two years, 0.608 jobs at three years, and 0.592 jobs at four years. The U.S. Department of Labor's CLEAR clearinghouse rates the study as "Moderate Causal Evidence," meaning the agency is "somewhat confident that the estimated effects are attributable to the Business and Industry (B&I) Guaranteed Loan Program, and not to other factors." This is the single citation that anchors firm-level employment claims in a defensible feasibility study.

Negative Economic Impact: The Rejection Pattern Nobody Talks About

This is the section where most B&I feasibility studies fail, and where the market's training is most actively obsolete.

The conventional treatment of 7 CFR 5001.118(b) is a one-paragraph compliance note stating that the project does not transfer jobs from one rural area to another and will not have an adverse effect on existing competitive enterprises. That treatment is structurally inadequate for any project above one million dollars and fifty net new full-time equivalents. It is also the treatment most consultants are still delivering in 2026.

The structural reality is that §5001.118(b) is a two-pronged ineligibility test routed through a separate Department of Labor / Employment and Training Administration certification process. Subsection (b)(1) is the rural-to-rural relocation prohibition with a branch / affiliate / subsidiary safe harbor. Subsection (b)(2) is the market-saturation test. Both prongs require, first, project size in excess of one million dollars, and second, increased direct employment by more than fifty employees. Below either threshold, the test is not formally invoked, though State Offices retain discretion under the broader §5001.102 framework.

The mechanical filing trigger is Form RD 4279-2, "Certification of Non-Relocation and Market Capacity Information Report" (OMB control number 0570-0069). RD Instruction 4279-B directs the State Office to transmit the completed Form RD 4279-2 to the National Office Program Processing Division to begin the Department of Labor clearance process. The National Office refers the file to DOL/ETA under 29 CFR Part 75. DOL/ETA publishes a Federal Register notice describing the applicant, the NAICS code, and the project purpose, and solicits adverse public comments, typically a fourteen-day window. DOL/ETA must certify or refuse to certify within thirty days of USDA referral. Without certification, USDA cannot approve the guarantee.

Two named examples surfaced in federal-record research. Prima Bella Produce, Inc., Brawley, California, NAICS 115114, comment-solicitation notice at 72 FR 64325 (November 15, 2007). Elm City Food Cooperative, Inc., New Haven, Connecticut, NAICS 445110, comment-solicitation notice at 76 FR 21041 (April 14, 2011). Both are referrals, not denials. Both are evidence that the federal interagency adverse-impact review process is real, dated, and procedural.

The contrarian finding is what is not in the federal record. Diligent open-source research across NAD published determinations, federal district court APA opinions, USDA OIG audit reports from 2015 through 2026, and the practitioner commentary of every USDA-active law firm identified no published National Appeals Division decision turning on §4279.117(c) or §5001.118(b). No OIG audit examining adverse-impact, rural-to-rural relocation, or market-saturation controls in B&I surfaced. No banking trade press analysis of the operational application of the test was located.

The absence is itself the finding. Adverse-impact-driven outcomes manifest as withdrawal, restructuring, or DOL/ETA non-certification rather than as appealable Agency denials. Lender-level denials are not appealable to NAD; only Agency adverse decisions are. Many adverse-impact-driven outcomes are State Office-induced lender withdrawals before any formal denial ever issues. The deal dies quietly. The file disappears from the State Office queue. The lender moves on. There is no published decision because the regulatory mechanism is designed to produce restructuring before it produces denial.

This is the rejection pattern the market has not learned to see.

The operational implication for senior feasibility consultants is that any B&I project above one million dollars and fifty net new FTE requires a dedicated §5001.118(b) compliance section, not a paragraph. The section should run six to twelve pages with attached competitor capacity tables and a Form RD 4279-2 cross-walk. It should address threshold determination, (b)(1) rural-to-rural analysis, (b)(2) market-saturation analysis, the Form RD 4279-2 attachment with section-by-section cross-reference, and a procedural acknowledgment of the DOL/ETA clearance window with anticipated commenter identification.

The market-saturation analysis under (b)(2) is the harder section to write defensibly. "The area" is not defined in the regulation; State Office practice typically treats trade area at the level of the relevant NAICS sector. "Efficient capacity of existing competitive commercial or industrial enterprises" requires the feasibility study to identify the competitive set, estimate each competitor's installed capacity, estimate aggregate market utilization, and demonstrate that aggregate utilization is at or near a level constituting efficient capacity. "Sufficient demand" requires the affirmative demonstration that projected market demand exceeds aggregate efficient capacity. "Adverse effect" requires the safety-valve demonstration that even if demand is insufficient relative to aggregate efficient capacity, the project occupies a distinct segment, serves a distinct geography, or substitutes import-displacement for incumbent-displacement.

The competent (b)(2) analysis identifies competitors from at least three sources (state business filings, trade association rosters, field reconnaissance), triangulates capacity estimates from public-source data (EPA Title V permits, state department of agriculture inspection rosters, CMS Provider of Services files, county tax records, hospitality comp set data), and addresses planned expansions explicitly. The incompetent (b)(2) analysis asserts a TAM/SAM/SOM construction and stops. State Office reviewers, who often know the incumbent operators in their districts by name, can distinguish between the two within minutes.

State Office Variation

The published B&I data tells a clear story about where activity concentrates. The cumulative FY2015 to FY2024 top ten states by B&I obligations: North Carolina ($957M), Louisiana ($926M), Texas ($838M), Florida ($762M), Oklahoma ($665M), California ($658M), Arizona ($485M), Missouri ($481M), Kentucky ($470M), Oregon ($438M). Per-capita rankings flip the picture: Alaska ($251 per capita), Wyoming ($239), Louisiana ($236) lead; New Jersey ($2), Massachusetts ($3), Connecticut ($10), Maryland ($14), and Indiana ($16) trail badly.

Two patterns explain most of this dispersion, and neither is reviewer discretion.

The first pattern is lender concentration. Live Oak Bank's presence in North Carolina explains most of that state's first-place ranking. Missouri's two hundred sixty-nine loans averaging one million seven hundred ninety thousand dollars each reflect the community-bank density signature of First Bank of the Lake and similar institutional operators. Louisiana's second-place ranking reflects Gulf Coast oil-and-gas services exposure. Where a state lacks specialist B&I lenders, activity is correspondingly thin.

The second pattern is the May 12, 2026 lender removal action. Of the ten lenders removed under §5001.132, two account for most of the delinquency exposure. North Avenue Capital: one hundred sixty-eight million five hundred thousand dollars in 90+ day delinquencies, the highest single-lender exposure in the program. Greater Nevada Credit Union: one hundred sixty-five million nine hundred thousand dollars, representing one-third of its OneRD portfolio. Optus Bank: a fifty-seven percent portfolio delinquency rate on a smaller book. The removal action eliminated approximately forty-seven percent of the total delinquent OneRD dollars from the program in a single day.

The biodigester and Controlled Environment Agriculture pauses are the leading indicator of the same agency tightening that drove the May 12 removal action. The January 16, 2026 Unnumbered Letter paused acceptance of biodigester and CEA applications across all RBCS programs, citing twenty-one biodigester loans totaling three hundred eighty-six million four hundred thousand dollars at twenty-seven percent delinquency and CEA loans of three hundred eleven million nine hundred thousand dollars at forty-three percent delinquency. The April 2, 2026 extension carried the pause through December 31, 2026. The BC Organics Wisconsin biogas project alone accounts for one hundred million one hundred thousand dollars of the one hundred two million six hundred thousand dollars in biodigester delinquencies, a single-project concentration that drives the category-level distress. While these pauses are not formal §5001.118(b)(2) invocations, the reasoning is structurally identical: agency judgment that incremental capacity into a saturated or distressed subsector lacks the demand sufficiency the test requires.

The practical implication is twofold. For lender selection, specialist lenders (Live Oak in North Carolina, First Bank of the Lake in Missouri, United Community Bank in Louisiana) bring institutional pattern recognition that materially reduces denial risk. States with concentration in the removed-lender list face reduced lender capacity through the end of FY2026. For feasibility study positioning, the high-volume State Offices (North Carolina, Louisiana, Texas, Florida, Oklahoma) bring deeper review experience and faster turnarounds, but also more rigorous scrutiny of incumbent capacity claims under §5001.118(b)(2). The State Office reviewer in a top-five state has seen the analytical shortcuts before.

The Scoring Rubric

The five-pillar feasibility standard at §5001.3 and Appendix A to Subpart D is the regulatory framework. The operational framework that flows from it, and that should anchor every B&I feasibility submission above the threshold, has five corresponding analytical dimensions.

Direct employment: the project's net new full-time-equivalent count at full operational capacity, with explicit treatment of seasonal, part-time, and contractor labor, and with the §5001.118(b) fifty-employee threshold analysis if applicable.

Indirect and induced multipliers: the IMPLAN or RIMS II Type II / SAM output, employment, labor income, and value-added impacts, calibrated to the four-tier rural framework, with explicit displacement adjustment and disclosure of RPCs for the top five intermediate-input commodities.

Fiscal impact: the project's net contribution to state and local tax revenue, transfer payments, and federal-program participation, with a 10-year horizon and explicit sensitivity to recession scenarios.

Competitive impact: the §5001.118(b)(2) market-saturation analysis, with defined trade area, competitor capacity-utilization estimates, aggregate market demand projection, and adverse-effect determination.

Community benefit: the qualitative case for the project's contribution to the rural community, anchored in the ERS Economic Dependence and Demographic Typology overlays applicable to the project county.

This rubric is the one-page tool that belongs in the lender's credit memo and the consultant's executive summary. It is the framework against which State Office reviewers, increasingly, are reading files.

Outlook and Implications for Lenders

The OneRD program is operating under visible stress but within historical commercial-portfolio norms. The Claeys February 2026 letter and the May 2026 lender removal action are not a crisis. They are the agency tightening its loan-committee-review expectations in a period of elevated delinquency, against a B&I approval rate that has already fallen from 89.1 percent in FY2021 to 52.7 percent in FY2023 per the Office of the Comptroller of the Currency's June 2025 Community Developments Insights tabulation.

What this tightening means for 2026 and 2027 deals is straightforward. Three things will differentiate fundable files from rejected files.

First, the rural multiplier calibration. Files that apply state-aggregate multipliers to rural-county projects will increasingly be flagged. Files that apply a defensible tiered haircut, anchored to ERS classifications and peer-reviewed empirical anchors, will not. The competent feasibility consultant in 2026 cites Bagi 2002 and Doeksen 2016 and Stefek 2019 by name. The competent State Office reviewer has read at least one of the three.

Second, the §5001.118(b) compliance treatment. Files above one million dollars and fifty net new FTE that handle adverse-impact analysis as a paragraph will be conditioned, restructured, or quietly closed. Files that treat the section as a dedicated six-to-twelve-page analysis with Form RD 4279-2 cross-walk and DOL/ETA clearance acknowledgment will fund. The market has not yet caught up to this shift.

Third, the cost-per-job framing. Files that present cost-per-job only at the project level will face pressure on capital-intensive projects. Files that present both project-cost-per-FTE and federal-subsidy-cost-per-FTE, anchored to the Summit/Brand $438 program benchmark and the $50,000 HUD CDBG defensibility ceiling, contextualize the analysis the way the State Office reviewer expects to see it contextualized.

The deeper structural shift is in what the program is rewarding. The FY2024 program obligated $1.798 billion against a $1.83 billion allotment, a 98.24 percent utilization rate that is the highest in program history. Loan count fell from 354 in FY2017 to 176 in FY2024, while average loan size rose from $2.75 million to $8.1 million over the same decade, taking total obligated dollar volume up nearly 85 percent. The program is consolidating around fewer, larger, more carefully prepared deals. The FY2025 record allotment of $3.5 billion confirmed the direction. The FY2026 return to approximately $1.8 billion enacted authority confirms that the size and care of individual files matters more than the total funding envelope.

For lenders building rural credit portfolios in this environment, the operational implication is that the feasibility study is no longer the procedural file artifact it was treated as in the 2017 to 2021 expansion period. It is the analytical asset that determines whether the file funds. Files prepared by consultants who still think of rural-county multipliers as some fraction of state multipliers, who still treat §5001.118(b) as boilerplate, and who still cite the project-cost-per-job number without the federal-subsidy benchmark are at material risk of being among the files that quietly disappear from the State Office queue.

The contrarian thesis of this article is not complicated. The economic impact requirement under 7 CFR 5001.118(b) and the five-pillar standard at §5001.3 are not procedural. They are the operational mechanism by which the agency is now selecting which rural projects fund. The market is not yet calibrated to this reality. The lenders and consultants who calibrate first will fund more deals.

The rest of the market will be looking for their files.

May 13, 2026, by Michal Mohelsky, J.D. Principal of MMCG Invest, LLC, feasibility study consultant serving feasibility studies USDA projects.

Reach out to discuss how our methodology supports your lending decision.

Michal Mohelsky, J.D. | Principal | mmcginvest.com 

Contact: michal@mmcginvest.com

Phone: (628) 225-1125

Disclaimer: This report is provided for informational purposes only and does not constitute investment advice. Data presented herein is derived from proprietary MMCG databases and third-party sources believed to be reliable; however, MMCG Invest makes no representation as to the accuracy or completeness of such information. Figures from third-party industry databases have been independently verified and, where appropriate, adjusted to reflect MMCG's proprietary analytical methodology. Past performance is not indicative of future results.