1-1 By: Giddings (Senate Sponsor - West) H.B. No. 259
1-2 (In the Senate - Received from the House April 26, 1993;
1-3 April 27, 1993, read first time and referred to Committee on
1-4 Economic Development; May 4, 1993, reported favorably, as amended,
1-5 by the following vote: Yeas 10, Nays 0; May 4, 1993, sent to
1-6 printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Parker x
1-10 Lucio x
1-11 Ellis x
1-12 Haley x
1-13 Harris of Dallas x
1-14 Harris of Tarrant x
1-15 Leedom x
1-16 Madla x
1-17 Rosson x
1-18 Shapiro x
1-19 Wentworth x
1-20 COMMITTEE AMENDMENT NO. 1 By: Haley
1-21 Amend H.B. 259 as follows:
1-22 Page 1, line 57, after the word "interest" add "and
1-23 demonstrate active participation"
1-24 A BILL TO BE ENTITLED
1-25 AN ACT
1-26 relating to the creation and administration of a linked deposit
1-27 program to encourage lending to historically underutilized
1-28 businesses and small businesses in distressed communities.
1-29 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-30 SECTION 1. Chapter 481, Government Code, is amended by
1-31 adding Subchapter N to read as follows:
1-32 SUBCHAPTER N. HISTORICALLY UNDERUTILIZED BUSINESS AND
1-33 SMALL BUSINESS LINKED DEPOSIT PROGRAM
1-34 Sec. 481.191. DEFINITIONS. In this subchapter:
1-35 (1) "Eligible borrower" means a person who proposes to
1-36 begin operating a small business in a distressed community.
1-37 (2) "Eligible lending institution" means a financial
1-38 institution that makes commercial loans, is a depository of state
1-39 funds, and agrees to participate in the linked deposit program
1-40 established by this subchapter and to provide collateral equal to
1-41 the amount of linked deposits placed with it.
1-42 (3) "Historically underutilized business" means:
1-43 (A) a corporation formed for the purpose of
1-44 making a profit in which at least 51 percent of all classes of the
1-45 shares of stock or other equitable securities is owned by one or
1-46 more persons who are members of certain groups, including black
1-47 Americans, Hispanic Americans, women, Asian Pacific Americans, and
1-48 American Indians;
1-49 (B) a sole proprietorship formed for the purpose
1-50 of making a profit that is 100 percent owned, operated, and
1-51 controlled by a person described by Paragraph (A) of this
1-52 subdivision;
1-53 (C) a partnership formed for the purpose of
1-54 making a profit in which 51 percent of the assets and interest in
1-55 the partnership is owned by one or more persons described by
1-56 Paragraph (A) of this subdivision. Those persons must have
1-57 proportionate interest in the control, operation, and management of
1-58 the partnership's affairs; or
1-59 (D) a joint venture in which each entity in the
1-60 joint venture is a historically underutilized business under this
1-61 subdivision.
1-62 (4) "Small business" means a corporation, partnership,
1-63 sole proprietorship, or other legal entity that:
1-64 (A) is domiciled in this state;
1-65 (B) is formed to make a profit;
1-66 (C) is independently owned and operated; and
1-67 (D) employs fewer than 100 full-time employees.
1-68 Sec. 481.192. LINKED DEPOSIT. A linked deposit is a time
2-1 deposit governed by a written deposit agreement between the state
2-2 and an eligible lending institution that provides:
2-3 (1) that the eligible lending institution pay interest
2-4 on the deposit at a rate that is not less than the greater of:
2-5 (A) the current market rate of a United States
2-6 treasury bill or note of comparable maturity minus two percent; or
2-7 (B) 1.5 percent; and
2-8 (2) that the eligible lending institution agree to
2-9 lend the value of the deposit to an eligible borrower at a maximum
2-10 rate that is the current market rate of a United States treasury
2-11 bill or note of comparable maturity plus four percent.
2-12 Sec. 481.193. LINKED DEPOSIT PROGRAM. (a) The department
2-13 shall establish a linked deposit program to encourage commercial
2-14 lending for the development of historically underutilized
2-15 businesses and small businesses in distressed communities.
2-16 (b) The policy board shall adopt rules for the loan portion
2-17 of the linked deposit program.
2-18 (c) In order to participate in the linked deposit program,
2-19 an eligible lending institution may solicit loan applications from
2-20 eligible borrowers.
2-21 (d) After reviewing an application and determining that the
2-22 applicant is an eligible borrower and is creditworthy, the eligible
2-23 lending institution shall send the application for a linked deposit
2-24 loan to the department.
2-25 (e) The eligible lending institution shall certify the
2-26 interest rate applicable to the specific eligible borrower and
2-27 attach it to the application sent to the department.
2-28 (f) After reviewing each linked deposit loan application,
2-29 the executive director of the department shall recommend to the
2-30 state treasurer the acceptance or rejection of the application.
2-31 (g) After the state treasurer's acceptance of the
2-32 application and the lending institution originates a loan to an
2-33 eligible borrower, the state treasurer shall place a linked deposit
2-34 with the applicable eligible lending institution for the period the
2-35 treasurer considers appropriate. The state treasurer may not place
2-36 a deposit for a period extending beyond the state fiscal biennium
2-37 in which it is placed. Subject to the limitation described by
2-38 Section 481.197, the treasurer may place time deposits at an
2-39 interest rate described by Section 481.192, notwithstanding any
2-40 order of the State Depository Board to the contrary.
2-41 (h) Before the placing of a linked deposit, the eligible
2-42 lending institution and the state, represented by the state
2-43 treasurer and the department, shall enter into a written deposit
2-44 agreement containing the conditions on which the linked deposit is
2-45 made. The deposit agreement must provide that:
2-46 (1) the lending institution notify the state treasurer
2-47 if the borrower to which the deposit is linked defaults on the
2-48 loan; and
2-49 (2) in the event of a default the state treasurer may
2-50 withdraw the linked deposit.
2-51 (i) If a lending institution holding linked deposits ceases
2-52 to be a state depository, the state treasurer may withdraw the
2-53 linked deposits.
2-54 Sec. 481.194. COMPLIANCE. (a) On acceptance of its
2-55 application to receive linked deposits, an eligible lending
2-56 institution shall loan money to an eligible borrower in accordance
2-57 with the deposit agreement and this subchapter. The eligible
2-58 lending institution shall forward a compliance report to the
2-59 department.
2-60 (b) The department shall monitor compliance with this
2-61 subchapter and inform the state treasurer of noncompliance on the
2-62 part of an eligible lending institution.
2-63 Sec. 481.195. DESIGNATION AS DISTRESSED COMMUNITY. (a) A
2-64 municipality may apply to the policy board for designation of a
2-65 subarea of the municipality as a distressed community.
2-66 (b) The application must:
2-67 (1) provide evidence that the subarea of the
2-68 municipality for which the application is being made has been
2-69 traditionally recognized by custom or by previous governmental
2-70 designation as a subarea and certify that:
3-1 (A) the per capita income in the subarea is 80
3-2 percent or less of the median income of the entire municipality
3-3 filing the application;
3-4 (B) the unemployment rate in the subarea is 1.5
3-5 times higher than the average unemployment rate of the entire
3-6 municipality; and
3-7 (C) 10 percent or more of all individuals and
3-8 families in the subarea are in poverty; or
3-9 (2) certify that the subarea is part of an enterprise
3-10 zone designated under the Texas Enterprise Zone Act (Article
3-11 5190.7, Vernon's Texas Civil Statutes).
3-12 (c) The policy board shall designate the subarea for which
3-13 an application is filed as a distressed community if it determines
3-14 that the requirements of Subsection (b) have been satisfied and
3-15 that the evidence required under Subsection (b)(1), if applicable,
3-16 is sufficient.
3-17 Sec. 481.196. STATE LIABILITY PROHIBITED. The state is not
3-18 liable to an eligible lending institution for payment of the
3-19 principal, interest, or any late charges on a loan made to an
3-20 eligible borrower. Linked deposits are not an extension of the
3-21 state's credit within the meaning of any state constitutional
3-22 prohibition.
3-23 Sec. 481.197. LIMITATIONS IN PROGRAM. (a) At any one time,
3-24 not more than $3 million may be placed in linked deposits under
3-25 this chapter.
3-26 (b) The maximum amount of a loan under the linked deposit
3-27 program is $100,000.
3-28 (c) The borrower shall apply a loan granted under this
3-29 subchapter to the purchase, construction, or lease of capital
3-30 assets, including land, buildings, and equipment.
3-31 (d) Notwithstanding Subsection (a), at any one time before
3-32 September 1, 1995, not more than $1 million may be placed in linked
3-33 deposits under this chapter. This subsection expires September 2,
3-34 1995.
3-35 SECTION 2. The importance of this legislation and the
3-36 crowded condition of the calendars in both houses create an
3-37 emergency and an imperative public necessity that the
3-38 constitutional rule requiring bills to be read on three several
3-39 days in each house be suspended, and this rule is hereby suspended,
3-40 and that this Act take effect and be in force from and after its
3-41 passage, and it is so enacted.
3-42 * * * * *
3-43 Austin,
3-44 Texas
3-45 May 4, 1993
3-46 Hon. Bob Bullock
3-47 President of the Senate
3-48 Sir:
3-49 We, your Committee on Economic Development to which was referred
3-50 H.B. No. 259, have had the same under consideration, and I am
3-51 instructed to report it back to the Senate with the recommendation
3-52 that it do pass, as amended, and be printed.
3-53 Parker,
3-54 Chairman
3-55 * * * * *
3-56 WITNESSES
3-57 FOR AGAINST ON
3-58 ___________________________________________________________________
3-59 Name: Rob Norcross x
3-60 Representing: Texas Bankers Association
3-61 City: Austin
3-62 -------------------------------------------------------------------
3-63 Name: Pamela Brown x
3-64 Representing: Consumers Union
3-65 City: Austin
3-66 -------------------------------------------------------------------
3-67 Name: Dan McNeil x
3-68 Representing: Texas Dept. of Commerce
3-69 City: Austin
3-70 -------------------------------------------------------------------
4-1 Name: Karen Neeley x
4-2 Representing: Ind. Bankers Assn. of Texas
4-3 City: Austin
4-4 -------------------------------------------------------------------
4-5 Name: Angelo P. Zottarelli x
4-6 Representing: Ind. Bankers Assn. of Texas
4-7 City: Austin
4-8 -------------------------------------------------------------------
4-9 Name: Robert Kennedy x
4-10 Representing: Tex. Dept. of Agriculture
4-11 City: Austin
4-12 -------------------------------------------------------------------
4-13 Name: John Bell x
4-14 Representing: Texas Treasury
4-15 City: Austin
4-16 -------------------------------------------------------------------