By Patterson H.B. No. 1684 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the farm and ranch finance program; granting the 1-3 authority to issue bonds; providing penalties. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Title 4, Agriculture Code, is amended by adding 1-6 Chapter 59 to read as follows: 1-7 CHAPTER 59. FARM AND RANCH FINANCE PROGRAM 1-8 SUBCHAPTER A. GENERAL PROVISIONS 1-9 Sec. 59.001. DEFINITIONS. In this chapter: 1-10 (1) "Authority" means the Texas Agricultural Finance 1-11 Authority created by Chapter 58 of this code. 1-12 (2) "Board" means the Veterans Land Board. 1-13 (3) "Bond" means a general obligation bond, 1-14 certificate, note, or other obligation issued or incurred by the 1-15 authority under this chapter as provided by Article III, Section 1-16 49-f, of the Texas Constitution. 1-17 (4) "Commissioner" means the commissioner of 1-18 agriculture. 1-19 (5) "Fund" means the farm and ranch finance program 1-20 fund. 1-21 (6) "Program" means the farm and ranch finance 1-22 program. 1-23 Sec. 59.002. DUTIES. (a) The authority shall administer 1-24 the program. 2-1 (b) The board shall administer the fund. At the request of 2-2 the authority, the board shall make available to the authority 2-3 money from the fund to pay debt service on the program's bonds and 2-4 to provide financial assistance to borrowers to purchase farm or 2-5 ranch land as provided by this chapter. 2-6 Sec. 59.003. LIMITED IMMUNITY FROM SUIT OR LIABILITY. The 2-7 authority or a member of the board may be sued and held personally 2-8 liable for damages that result from an official act or omission 2-9 only if the act or omission is corrupt or malicious. 2-10 (Sections 59.004-59.010 reserved for expansion 2-11 SUBCHAPTER B. BONDS 2-12 Sec. 59.011. BONDS. (a) The authority may provide by order 2-13 or resolution for the issuance and sale of negotiable bonds 2-14 authorized by Article III, Section 49-f, of the Texas Constitution. 2-15 The proceeds from the sale of the bonds constitute the fund. 2-16 (b) Subchapter D, Chapter 58, Agriculture Code, as it 2-17 relates to the issuance, sale, and refunding of bonds, applies to 2-18 the authority's issuance, sale, and refunding of bonds under this 2-19 chapter to finance the fund. 2-20 Sec. 59.012. DISPOSITION OF BOND PROCEEDS. (a) Except as 2-21 provided by Subsections (b) and (c) of this section, proceeds from 2-22 the sale of the bonds, other than refunding bonds, shall be 2-23 deposited in the state treasury to the credit of the fund. 2-24 (b) The board may provide for transferring to the interest 2-25 and sinking account from the proceeds of the sale of bonds or from 2-26 the available money in the fund directly an amount that, together 2-27 with the accrued interest received, is sufficient to pay interest 3-1 becoming due during the fiscal year in which the bonds are sold and 3-2 to establish appropriate reserves. 3-3 (c) At the timely request of the authority, the board shall 3-4 provide for transferring from the proceeds of the sale of bonds or 3-5 from available money in the fund directly an amount certified by 3-6 the authority as reasonable and necessary to cover the costs of 3-7 administering the program. That amount shall be deposited in the 3-8 state treasury to the credit of a special fund to be known as the 3-9 farm and ranch administrative expense fund. 3-10 Sec. 59.013. PAYMENT OF PRINCIPAL AND INTEREST. The 3-11 authority shall arrange for payment of the principal of bonds as 3-12 they mature and the interest on the bonds as it becomes payable. 3-13 Sec. 59.014. APPROVAL BY ATTORNEY GENERAL. Before the bonds 3-14 are delivered to the purchasers, the attorney general shall examine 3-15 the record relating to the bonds. If the record demonstrates that 3-16 the bonds have been issued in accordance with the Texas 3-17 Constitution and this chapter, the attorney general shall approve 3-18 the bonds. 3-19 Sec. 59.015. USE OF FUND TO PAY COSTS OF ISSUANCE AND DEBT 3-20 SERVICE. (a) The authority may use money in the fund attributable 3-21 to the issuance and sale of bonds to pay: 3-22 (1) legal fees and fees for financial advice the 3-23 authority finds necessary for the sale of bonds; 3-24 (2) the expense of publishing notice of sale of an 3-25 installment of bonds; 3-26 (3) the expense of printing the bonds; 3-27 (4) the expense of issuing the bonds, including the 4-1 actual costs of travel, lodging, and meals of officers, members, or 4-2 employees of the board, directors or employees of the authority, 4-3 the comptroller, the state treasurer, or the attorney general that 4-4 the authority finds necessary to implement the issuance, rating, or 4-5 delivery of the bonds; 4-6 (5) the cost of manually signing the bonds; 4-7 (6) remuneration to any agent employed by the 4-8 authority to pay the principal of and interest on the bonds; 4-9 (7) any amount required to be paid to maintain the 4-10 federal tax exemption of interest on the bonds; or 4-11 (8) any other cost, fee, or expense relating to the 4-12 issuance of the bonds. 4-13 (b) If, during the existence of the fund or during the 4-14 period any bonds are payable from the fund, the authority 4-15 determines that there will not be sufficient money in the fund 4-16 during the following fiscal year to pay the principal of or 4-17 interest on the bonds that is to come due during the following 4-18 fiscal year, the comptroller shall transfer to the fund from the 4-19 first money coming into the state treasury not otherwise 4-20 appropriated by the constitution an amount sufficient to pay the 4-21 obligations. 4-22 (c) The money transferred to the fund under Subsection (b) 4-23 of this section shall be used to pay the obligations only if at the 4-24 time the principal or interest becomes due there is not sufficient 4-25 money in the fund to pay the amount due. 4-26 Sec. 59.016. INVESTMENTS. (a) The authority shall give 4-27 timely instruction to the board of the dates on which principal on 5-1 bonds matures and interest becomes payable. The board shall 5-2 administer the fund accordingly. 5-3 (b) Except as provided by Subsection (c) of this section, 5-4 money in the fund that is not immediately committed to paying 5-5 principal of and interest on the bonds or to paying expenses as 5-6 provided by Section 59.015 of this code may be invested by the 5-7 board in: 5-8 (1) a direct security repurchase agreement or reverse 5-9 security repurchase agreement made with a state or national bank 5-10 domiciled in this state or with a primary dealer approved by the 5-11 federal reserve system; 5-12 (2) a direct obligation of or obligation the principal 5-13 and interest of which are guaranteed by the United States 5-14 government; 5-15 (3) a direct obligation of or obligation guaranteed by 5-16 the Federal Home Loan Banks, the Federal National Mortgage 5-17 Association, the Federal Farm Credit System, the Student Loan 5-18 Marketing Association, the Federal Home Loan Mortgage Corporation, 5-19 or a successor to one of those organizations; 5-20 (4) a bankers' acceptance that: 5-21 (A) is eligible for purchase by a member of the 5-22 federal reserve system; 5-23 (B) matures in 270 days or less; and 5-24 (C) is issued by a bank that has received the 5-25 highest short-term credit rating by a nationally recognized 5-26 investment rating firm; 5-27 (5) commercial paper that: 6-1 (A) matures in 270 days or less; and 6-2 (B) has received the highest short-term credit 6-3 rating by a nationally recognized investment rating firm; 6-4 (6) a contract that is written by the board in which 6-5 the board grants the purchaser the right to purchase securities in 6-6 the board's marketable securities portfolio at a specified price 6-7 over a specified period and for which the board is paid a fee and 6-8 that specifically prohibits naked-option or uncovered option 6-9 trading; 6-10 (7) an obligation of a state or of an agency, county, 6-11 city, or other political subdivision of a state or a mutual fund 6-12 composed of those obligations; 6-13 (8) an investment instrument, obligation, or other 6-14 evidence of indebtedness the payment of which is directly or 6-15 indirectly guaranteed by the full faith and credit of the United 6-16 States government; 6-17 (9) an investment, account, depository receipt, or 6-18 deposit that is fully: 6-19 (A) insured by the Federal Deposit Insurance 6-20 Corporation or a successor to that organization; or 6-21 (B) secured by a security described by 6-22 Subdivision (2), (3), or (8) of this subsection; 6-23 (10) a collateralized mortgage obligation fully 6-24 secured by securities or mortgages issued or guaranteed by the 6-25 Government National Mortgage Association (GNMA) or any entity 6-26 identified by Subdivision (3) of this subsection; 6-27 (11) a security or evidence of indebtedness issued by 7-1 the Farm Credit System Financial Assistance Corporation, the 7-2 Private Export Funding Corporation, or the Export-Import Bank; and 7-3 (12) any other investment authorized for investment of 7-4 state funds by the state treasurer under Section 404.024, 7-5 Government Code. 7-6 (c) The board may not invest in or purchase obligations of a 7-7 private corporation or other private business entity doing business 7-8 in the Republic of South Africa unless the corporation or other 7-9 entity: 7-10 (1) has: 7-11 (A) adopted the Statement of Principles for 7-12 South Africa as they existed in 1987, as described in the Report on 7-13 the Signatory Companies to the Statement of Principles for South 7-14 Africa published by Arthur D. Little, Inc., Cambridge, 7-15 Massachusetts, and has obtained a performance rating in Category 1 7-16 or 2 of the Statement of Principles for South Africa rating system 7-17 as determined by Arthur D. Little, Inc.; or 7-18 (B) agreed to the Code of Conduct that is 7-19 enforced by the United States Department of State under Section 7-20 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440) 7-21 and has received a rating of "Making Satisfactory Progress"; and 7-22 (2) does not supply strategic products or services for 7-23 use by the government, military, or police of the Republic of South 7-24 Africa. 7-25 (d) In this section: 7-26 (1) "Direct security repurchase agreement" means an 7-27 agreement under which the board buys, holds for a specified time, 8-1 and then sells back any of the following securities, obligations, 8-2 or participation certificates: 8-3 (A) a United States government security; 8-4 (B) a direct obligation of or an obligation the 8-5 principal and interest of which are guaranteed by the United States 8-6 government; 8-7 (C) a direct obligation of or an obligation 8-8 guaranteed by the Federal Home Loan Banks, the Federal National 8-9 Mortgage Association, the Federal Farm Credit System, the Student 8-10 Loan Marketing Association, the Federal Home Loan Mortgage 8-11 Corporation, or a successor to one of those organizations; or 8-12 (D) any other investment instrument, obligation, 8-13 or other evidence of indebtedness the payment of which is directly 8-14 or indirectly guaranteed by the full faith and credit of the United 8-15 States government. 8-16 (2) "Doing business in the Republic of South Africa" 8-17 means conducting or performing manufacturing, assembly, or 8-18 warehousing operations in the Republic of South Africa or, in the 8-19 case of a bank or other financial institution, lending money to the 8-20 government of the Republic of South Africa or any of its agencies 8-21 or instrumentalities. 8-22 (3) "Market value" means the fair and reasonable 8-23 prevailing price at which a security is being sold on the open 8-24 market at the time of the appraisement of the security by the 8-25 board. 8-26 (4) "Reverse security repurchase agreement" means an 8-27 agreement under which the board sells and after a specified time 9-1 buys back any of the securities, obligations, or participation 9-2 certificates listed by Subdivision (1) of this subsection. 9-3 (5) "Strategic products or services" means articles 9-4 designated as arms, ammunition, or implements of war as provided by 9-5 22 C.F.R. Part 121 or data processing equipment or computers sold 9-6 for military or police use or for use in connection with 9-7 restriction on travel in the Republic of South Africa by residents 9-8 of that country. 9-9 (Sections 59.017-59.020 reserved for expansion 9-10 SUBCHAPTER C. ADMINISTRATION 9-11 Sec. 59.021. FUND. (a) The farm and ranch finance program 9-12 fund is a fund in the state treasury. 9-13 (b) At the direction of the authority, money received from 9-14 the state or federal government or from any other person, in 9-15 addition to proceeds from bonds issued under this chapter, may be 9-16 deposited to the credit of the fund. 9-17 (c) The authority may provide for establishing and 9-18 maintaining separate accounts in the fund, including program 9-19 accounts, an interest and sinking account, a reserve account, and 9-20 any other accounts provided for by resolution of the authority. 9-21 (d) Money received as repayment of financial assistance 9-22 shall be deposited first in the interest and sinking account as 9-23 provided by resolution of the authority authorizing its bonds until 9-24 that account is fully funded as provided by resolution of the 9-25 authority. 9-26 (e) The fund and each account in the fund shall be kept and 9-27 maintained at the direction of the authority and held in trust by 10-1 the state treasurer for and on behalf of the authority and the 10-2 owners of the bonds issued under this chapter. 10-3 (f) The fund may be used only as provided by this chapter. 10-4 (g) Pending its use, money in the fund shall be invested as 10-5 provided by the resolution authorizing issuance of the bonds. 10-6 (h) The authority may receive, and shall deposit in the 10-7 fund, appropriations, grants, donations, earned federal funds, and 10-8 the proceeds of any investment pools operated by the state 10-9 treasurer. 10-10 Sec. 59.022. RULES. (a) The authority shall adopt rules 10-11 governing application for financial assistance under this chapter. 10-12 The authority may adopt rules it considers necessary to administer 10-13 the program or considers in the best interest of the program. The 10-14 authority may adopt rules concerning the sale of land acquired by 10-15 the authority under this chapter by default, foreclosure, 10-16 forfeiture, or any other means. The authority shall adopt 10-17 collateral or security requirements to ensure the full repayment of 10-18 financial assistance granted under this chapter. The authority may 10-19 approve any extension of financial assistance under this chapter or 10-20 may delegate that approval authority to the commissioner. 10-21 (b) The board may adopt rules it considers necessary to 10-22 administer the fund or considers in the best interest of the fund, 10-23 including rules on the investment of the fund. 10-24 (c) The authority may set and collect fees the authority 10-25 considers reasonable and necessary to cover the expenses of 10-26 administering the program or considers in the best interest of the 10-27 program. Those fees shall be deposited in the state treasury to 11-1 the credit of the farm and ranch administrative expense fund. An 11-2 applicant for financial assistance participating in the program 11-3 shall pay the costs of applying for, participating in, and 11-4 administering and servicing the program, in amounts the authority 11-5 considers reasonable and necessary. Any cost not paid by an 11-6 applicant shall be paid from the fund. 11-7 Sec. 59.023. POWERS OF AUTHORITY. In addition to the powers 11-8 granted to the authority under Section 58.022 of this code, the 11-9 authority has the power necessary to accomplish the purposes and 11-10 carry out the programs provided by this chapter, including the 11-11 power: 11-12 (1) to adopt and enforce bylaws, rules, and procedures 11-13 necessary to carry out this chapter; 11-14 (2) to establish, charge, and collect a fee, charge, 11-15 or penalty in connection with a program, service, or activity 11-16 provided by the authority under this chapter; 11-17 (3) to issue bonds, provide for and secure the payment 11-18 of the bonds, and provide for the rights of the owners of the 11-19 bonds, in the manner and to the extent permitted by this chapter; 11-20 (4) to purchase, hold, cancel, or resell or otherwise 11-21 dispose of its bonds, subject to any restrictions and any 11-22 resolution authorizing the issuance of its bonds; 11-23 (5) to own, rent, lease, or otherwise acquire, accept, 11-24 or hold any interest in real, personal, or mixed property, by 11-25 purchase, exchange, gift, assignment, transfer, foreclosure, 11-26 mortgage, sale, lease, or otherwise; 11-27 (6) to hold, manage, operate, or improve real, 12-1 personal, or mixed property; 12-2 (7) to sell, lease, encumber, mortgage, exchange, 12-3 donate, convey, or otherwise dispose of any of its property or any 12-4 interest in its property, deed of trust, or mortgage lien owned by 12-5 it, under its control or custody, or in its possession and to 12-6 release or relinquish any right, title, claim, lien, interest, 12-7 easement, or demand, including any equity or right of redemption in 12-8 property foreclosed by it, by public or private sale, with or 12-9 without public bidding; 12-10 (8) to lease or rent any improvement, land, or 12-11 facility from any person; 12-12 (9) to make a secured or unsecured loan to provide 12-13 financial assistance as provided by this chapter, including the 12-14 refunding of an outstanding obligation, mortgage, or advance used 12-15 for those purposes, and to charge and collect interest on those 12-16 loans for loan payments and on terms and conditions the authority 12-17 considers advisable that are not in conflict with this chapter; 12-18 (10) to purchase or acquire, sell, discount, assign, 12-19 negotiate, or otherwise dispose of notes or other evidence of 12-20 indebtedness of eligible applicants as the board determines or 12-21 portions or portfolios of or participations in those evidences of 12-22 indebtedness; and 12-23 (11) to sell and guarantee securities, whether taxable 12-24 or tax exempt under federal law, in primary and secondary markets. 12-25 Sec. 59.024. ELIGIBILITY. To be eligible to borrow money 12-26 from the fund, a person, at the time of application, must: 12-27 (1) be a member of a household that has derived at 13-1 least 25 percent of its gross income from a farm or ranch for the 13-2 preceding three years; and 13-3 (2) have a net worth of less than $250,000. 13-4 Sec. 59.025. DOWN PAYMENT. (a) A loan under this chapter 13-5 may not exceed $150,000, less the down payment required under this 13-6 subsection. If the purchase price of land purchased with financial 13-7 assistance under this chapter is $150,000 or less, the minimum down 13-8 payment is equal to five percent of the purchase price. If the 13-9 purchase price exceeds $150,000, the minimum down payment is an 13-10 amount equal to the sum of five percent of the purchase price plus 13-11 the amount equal to the difference between the purchase price and 13-12 $150,000. 13-13 (b) The authority shall provide by rule for the period 13-14 during which and the manner in which the down payment provided for 13-15 under Subsection (a) of this section shall be paid to the 13-16 authority. 13-17 (c) If the sale is not consummated, the authority shall 13-18 refund the down payment to the borrower. 13-19 Sec. 59.026. TRANSFER OF BORROWER'S INTEREST. (a) The 13-20 contract for a loan under this chapter must provide that transfer 13-21 of ownership of the land without the authority's express written 13-22 permission before the entire principal and interest due have been 13-23 paid constitutes default under the contract. 13-24 (b) If the borrower dies or becomes financially 13-25 incapacitated or if the borrower's interest in land is 13-26 involuntarily transferred by court order or other proceedings, 13-27 including bankruptcy, sheriff or trustee sale, or divorce, the land 14-1 may be conveyed by the borrower or the borrower's heirs, 14-2 administrators, executors, or successors in interest by complying 14-3 with the rules adopted by the authority and obtaining the 14-4 authority's written permission. 14-5 Sec. 59.027. CHANGES IN USE. (a) Before a borrower may use 14-6 land acquired with financial assistance under this chapter for a 14-7 primary purpose other than farming or ranching, the borrower must 14-8 submit to the authority an application for approval of the change 14-9 of use. 14-10 (b) As soon as practicable after an application for a change 14-11 of use is received, the authority shall approve or deny the 14-12 application and shall notify the borrower of the authority's 14-13 decision. 14-14 (c) The loan contract must provide that using land acquired 14-15 under this chapter for a purpose other than farming or ranching 14-16 without the approval of the authority constitutes default under the 14-17 contract. 14-18 Sec. 59.028. APPRAISAL. (a) Before the authority may loan 14-19 money for the purchase of land under this chapter, the authority 14-20 must have an appraisal of the property made to determine its value. 14-21 (b) An appraiser representing the authority must be 14-22 qualified to give competent appraisals of land. The authority may 14-23 contract with the board to use appraisers employed by the board. 14-24 Sec. 59.029. PAYMENTS TO AUTHORITY UNDER CERTAIN LEASES. 14-25 If, during a period a person is indebted to the authority for land 14-26 purchased with financial assistance under this chapter, the person 14-27 executes or there exists a lease or contract of sale of oil, gas, 15-1 or other minerals, chemicals, hard metals, timber, sand, gravel, or 15-2 other material that covers the land purchased from the authority 15-3 that would result in the depletion of the corpus of the land, not 15-4 less than one-half of all bonus money, delay rentals, or royalties 15-5 received as consideration for or payment under the oil, gas, or 15-6 mineral lease and not less than one-half of all money received 15-7 under a lease or contract of sale of other minerals, chemicals, 15-8 hard metals, timber, sand, gravel, or other material shall be paid 15-9 to the authority by the lessee under the lease or the buyer under 15-10 the contract of sale. The authority shall apply those payments to 15-11 the satisfaction of the indebtedness. 15-12 Sec. 59.030. TERM OF LEASES. (a) A purchaser may not lease 15-13 land purchased with financial assistance under this chapter for a 15-14 term longer than 10 years, except: 15-15 (1) a lease for oil, gas, or other minerals may be for 15-16 a term of not longer than 10 years, and as long thereafter as oil, 15-17 gas, or other minerals are produced from the land in commercial 15-18 quantities; and 15-19 (2) a lease for coal and lignite may be for a term of 15-20 not longer than 40 years, and as long thereafter as coal and 15-21 lignite are produced from the land in commercial quantities. 15-22 (b) A lease or a separate instrument to take effect in the 15-23 future may not contain a provision for option or renewal of the 15-24 lease or re-lease of the property for any term that would result in 15-25 a fixed term of the lease that exceeds the maximum fixed term 15-26 authorized under Subsection (a) of this section. A lease or 15-27 instrument that contains an option renewal or re-lease agreement in 16-1 violation of this section is void. 16-2 Sec. 59.031. DEATH OF A BORROWER. (a) If a borrower 16-3 receiving financial assistance under this chapter dies while 16-4 indebted to the state under a contract, the borrower's rights under 16-5 this chapter and the contract devolve on the borrower's heirs, 16-6 devisees, or personal representatives under the laws of this state, 16-7 subject to all rights, claims, and charges of the authority. 16-8 (b) Default by an heir, devisee, or personal representative 16-9 with respect to a right, claim, or charge of the authority has the 16-10 same effect as default by the borrower before the borrower's death. 16-11 Sec. 59.032. UNENCUMBERED TITLE. The authority may 16-12 establish a procedure by which a borrower acquiring land with a 16-13 loan under this chapter may obtain title to a portion of the tract 16-14 clear of encumbrances. 16-15 (Sections 59.033-59.045 reserved for expansion 16-16 SUBCHAPTER D. OFFENSES; PENALTIES 16-17 Sec. 59.046. FALSE OR FICTITIOUS WRITTEN STATEMENT. (a) A 16-18 person commits an offense if the person knowingly or intentionally 16-19 makes, publishes, passes, files, or uses any false, fictitious, or 16-20 forged paper, document, contract, affidavit, application, 16-21 assignment, or other written instrument relating to the procurement 16-22 of financial assistance under this chapter or to the purchase, 16-23 sale, or resale of land under this chapter or in connection with 16-24 any transaction under this chapter. 16-25 (b) An offense under this section is a felony of the third 16-26 degree. 16-27 Sec. 59.047. FRAUD. (a) A person commits an offense if the 17-1 person defrauds a person of rights or benefits under this chapter 17-2 or uses this chapter to defraud the state by an act of fraud, 17-3 duress, deceit, coercion, or misrepresentation. 17-4 (b) An offense under this section is a felony of the third 17-5 degree. 17-6 SECTION 2. Chapter 163, Natural Resources Code, is repealed. 17-7 SECTION 3. Subchapter D, Chapter 59, Agriculture Code, as 17-8 added by this Act, applies only to an offense committed on or after 17-9 the effective date of this Act. For purposes of this section, an 17-10 offense is committed before the effective date of this Act if any 17-11 element of the offense occurs before the effective date. 17-12 SECTION 4. On the effective date of this Act, the powers, 17-13 duties, and obligations of the Veterans Land Board relating to the 17-14 Farm and Ranch Finance Program, other than administration of the 17-15 farm and ranch finance program fund, are transferred to the Texas 17-16 Agricultural Finance Authority, and the Veterans Land Board shall 17-17 transfer all property and records relating to the program in its 17-18 custody to the Texas Agricultural Finance Authority. 17-19 SECTION 5. This Act takes effect September 1, 1993. 17-20 SECTION 6. The importance of this legislation and the 17-21 crowded condition of the calendars in both houses create an 17-22 emergency and an imperative public necessity that the 17-23 constitutional rule requiring bills to be read on three several 17-24 days in each house be suspended, and this rule is hereby suspended.