By: Lucio S.B. No. 223
73R2369 CAE-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the provision by the state of surety bonds for
1-3 historically underutilized businesses.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. The heading of Subchapter G, Chapter 481,
1-6 Government Code, is amended to read as follows:
1-7 SUBCHAPTER G. <SMALL BUSINESS> ASSISTANCE FOR HISTORICALLY
1-8 UNDERUTILIZED BUSINESSES
1-9 SECTION 2. Section 481.101, Government Code, is amended by
1-10 amending Subdivision (1) and adding Subdivisions (4), (5), and (6)
1-11 to read as follows:
1-12 (1) "Historically underutilized business"
1-13 <"Disadvantaged business"> means:
1-14 (A) a corporation formed for the purpose of
1-15 making a profit in which at least 51 percent of all classes of the
1-16 shares of stock or other equitable securities is owned by one or
1-17 more persons who are socially disadvantaged because of their
1-18 identification as members of certain groups, including black
1-19 Americans, Hispanic Americans, women, Asian Pacific Americans, and
1-20 American Indians, who have suffered the effects of discriminatory
1-21 practices or similar insidious circumstances over which they have
1-22 no control;
1-23 (B) a sole proprietorship formed for the purpose
1-24 of making a profit that is 100 percent owned, operated, and
2-1 controlled by a person described by Paragraph (A) of this
2-2 subdivision;
2-3 (C) a partnership formed for the purpose of
2-4 making a profit in which 51 percent of the assets and interest in
2-5 the partnership is owned by one or more persons described by
2-6 Paragraph (A) of this subdivision. Those persons must have
2-7 proportionate interest in the control, operation, and management of
2-8 the partnership's affairs;
2-9 (D) a joint venture in which each entity in the
2-10 joint venture is a historically underutilized <disadvantaged>
2-11 business under this subdivision; <or>
2-12 (E) a supplier contract between a historically
2-13 underutilized <disadvantaged> business under this subdivision and a
2-14 prime contractor under which the historically underutilized
2-15 <disadvantaged> business is directly involved in the manufacture or
2-16 distribution of the supplies or materials or otherwise warehouses
2-17 and ships the supplies; or
2-18 (F) a small business.
2-19 (4) "Surety bond fund" means the Texas historically
2-20 underutilized business surety bond fund.
2-21 (5) "Private lender" means a bank, savings bank,
2-22 savings and loan association, trust company, or insurance company,
2-23 or an individual that the office determines is an experienced and
2-24 sophisticated investor.
2-25 (6) "Qualified application" means a completed
2-26 application, including all documents and information required by
2-27 the office and submitted by:
3-1 (A) a private lender for a business; or
3-2 (B) a historically underutilized business.
3-3 SECTION 3. Sections 481.103 and 481.107, Government Code,
3-4 are amended to read as follows:
3-5 Sec. 481.103. Duties. (a) The office shall:
3-6 (1) examine the role of small and historically
3-7 underutilized <disadvantaged> businesses in the state's economy and
3-8 the contribution of small and historically underutilized
3-9 <disadvantaged> businesses in generating economic activity,
3-10 expanding employment opportunities, promoting exports, stimulating
3-11 innovation and entrepreneurship, and bringing new and untested
3-12 products and services to the marketplace;
3-13 (2) serve as the principal advocate in the state on
3-14 behalf of small and historically underutilized <disadvantaged>
3-15 businesses and provide advice in the consideration of
3-16 administrative requirements and legislation that affect small and
3-17 historically underutilized <disadvantaged> businesses;
3-18 (3) evaluate the effectiveness of efforts of state
3-19 agencies and other entities to assist small and historically
3-20 underutilized <disadvantaged> businesses and make appropriate
3-21 recommendations to assist the development and strengthening of
3-22 small and historically underutilized <disadvantaged> business
3-23 enterprise;
3-24 (4) identify specific instances in which regulations
3-25 inhibit small and historically underutilized <disadvantaged>
3-26 business development and to the extent possible identify
3-27 conflicting state policy goals;
4-1 (5) determine the availability of financial and other
4-2 resources to small and historically underutilized <disadvantaged>
4-3 businesses and recommend methods for:
4-4 (A) increasing the availability of equity
4-5 capital and other forms of financial assistance to small and
4-6 historically underutilized <disadvantaged> businesses;
4-7 (B) generating markets for the goods and
4-8 services of small and historically underutilized <disadvantaged>
4-9 businesses;
4-10 (C) providing more effective education,
4-11 training, and management and technical assistance to small and
4-12 historically underutilized <disadvantaged> businesses; and
4-13 (D) providing assistance to small and
4-14 historically underutilized <disadvantaged> businesses in complying
4-15 with federal, state, and local laws;
4-16 (6) describe the reasons for small and historically
4-17 underutilized <disadvantaged> business successes and failures,
4-18 ascertain the related factors that are particularly important in
4-19 this state, and recommend actions for increasing the success rate
4-20 of small and historically underutilized <disadvantaged> businesses;
4-21 (7) serve as a focal point for receiving complaints
4-22 and suggestions concerning state government policies and activities
4-23 that affect small and historically underutilized <disadvantaged>
4-24 businesses;
4-25 (8) assist with the resolution of problems among state
4-26 agencies and small and historically underutilized <disadvantaged>
4-27 businesses;
5-1 (9) develop and advocate proposals for changes in
5-2 state policies and activities that adversely affect small and
5-3 historically underutilized <disadvantaged> businesses;
5-4 (10) provide to legislative committees and state
5-5 agencies information on the effects of proposed policies or actions
5-6 that affect small and historically underutilized <disadvantaged>
5-7 businesses;
5-8 (11) enlist the assistance of public and private
5-9 agencies, businesses, and other organizations in disseminating
5-10 information about state programs and services that benefit small
5-11 and historically underutilized <disadvantaged> businesses and
5-12 information regarding means by which small and historically
5-13 underutilized <disadvantaged> businesses can use those programs and
5-14 services;
5-15 (12) provide information and assistance relating to
5-16 establishing, operating, or expanding small and historically
5-17 underutilized <disadvantaged> businesses;
5-18 (13) establish and operate a statewide toll-free
5-19 telephone service providing small and historically underutilized
5-20 <disadvantaged> businesses with ready access to the services
5-21 offered by the office;
5-22 (14) identify sources of financial assistance for
5-23 small and historically underutilized <disadvantaged> businesses,
5-24 match small and historically underutilized <disadvantaged>
5-25 businesses with sources of financial assistance, and assist small
5-26 and historically underutilized <disadvantaged> businesses with the
5-27 preparation of applications for loans from governmental or private
6-1 sources;
6-2 (15) sponsor meetings, to the extent practicable in
6-3 cooperation with public and private educational institutions, to
6-4 provide training and disseminate information beneficial to small
6-5 and historically underutilized <disadvantaged> businesses;
6-6 (16) assist small and historically underutilized
6-7 <disadvantaged> businesses in their dealings with federal, state,
6-8 and local governmental agencies and provide information regarding
6-9 governmental requirements affecting small and historically
6-10 underutilized <disadvantaged> businesses;
6-11 (17) perform research, studies, and analyses of
6-12 matters affecting the interests of small and historically
6-13 underutilized <disadvantaged> businesses;
6-14 (18) develop and implement programs to encourage
6-15 governmental agencies, public sector business associations, and
6-16 other organizations to provide useful services to small and
6-17 historically underutilized <disadvantaged> businesses;
6-18 (19) use available resources within the state, such as
6-19 small business development centers, educational institutions, and
6-20 nonprofit associations, to coordinate the provision of management
6-21 and technical assistance to small and historically underutilized
6-22 <disadvantaged> businesses in a systematic manner;
6-23 (20) publish newsletters, brochures, and other
6-24 documents containing information useful to small and historically
6-25 underutilized <disadvantaged> businesses;
6-26 (21) identify successful small and historically
6-27 underutilized <disadvantaged> business assistance programs provided
7-1 by other states and determine the feasibility of adapting those
7-2 programs for implementation in this state;
7-3 (22) establish an outreach program to make the
7-4 existence of the office known to small and historically
7-5 underutilized <disadvantaged> businesses and potential clients
7-6 throughout the state;
7-7 (23) adopt rules necessary to carry out this
7-8 subchapter;
7-9 (24) identify potential business opportunities for
7-10 small and historically underutilized <disadvantaged> businesses in
7-11 the border region and develop programs to maximize those
7-12 opportunities;
7-13 (25) identify potential business opportunities for
7-14 small and historically underutilized <disadvantaged> businesses in
7-15 rural areas of this state and develop programs to maximize those
7-16 opportunities; and
7-17 (26) perform any other functions necessary to carry
7-18 out the purposes of this subchapter.
7-19 (b) The department may provide community-based services to
7-20 carry out its duties under this chapter, including the creation of
7-21 a pilot program to evaluate the merits of locating full-time
7-22 personnel outside the Austin headquarters. This pilot program will
7-23 give first preference to serving economically distressed areas,
7-24 rural areas, or historically underutilized <disadvantaged>
7-25 businesses or assisting development of specific industries. The
7-26 department may require areas served by these personnel to provide
7-27 in-kind or cash contributions as necessary to support these
8-1 personnel. A report will be submitted to the legislature
8-2 describing the effectiveness of this method for delivering services
8-3 from the department to address specific economic needs.
8-4 Sec. 481.107. CONTRACTS AWARDED TO SMALL OR HISTORICALLY
8-5 UNDERUTILIZED <DISADVANTAGED> BUSINESSES. Each state agency shall
8-6 keep statistical data and other records on the number of contracts
8-7 awarded by the agency to small or historically underutilized
8-8 <disadvantaged> businesses.
8-9 SECTION 4. Subchapter G, Chapter 481, Government Code, is
8-10 amended by adding Sections 481.118-481.120, 481.1201, 481.1202,
8-11 481.1203, 481.1204, and 481.1205 to read as follows:
8-12 Sec. 481.118. Texas Historically Underutilized Business
8-13 Surety Bond Fund. (a) The Texas historically underutilized
8-14 business surety bond fund is a revolving fund in the state
8-15 treasury. The surety bond fund consists of money appropriated to
8-16 the department, proceeds of general obligation bonds issued to
8-17 provide surety bonds under this subchapter, bonding fees, and other
8-18 amounts received by the state from the provision of surety bonds
8-19 under this subchapter and money acquired from federal grants or
8-20 other sources and required by resolution of the board to be
8-21 deposited in the surety bond fund. The surety bond fund contains a
8-22 program account, an interest and sinking account, and other
8-23 accounts that the board authorizes to be created and maintained.
8-24 Money in the surety bond fund is available for use by the office
8-25 for the surety bond program provided by this subchapter.
8-26 (b) Money in the program account, minus the costs of
8-27 issuance of general obligation bonds to provide surety bonds under
9-1 this subchapter and necessary costs of administering the surety
9-2 bond fund, may be used only to provide surety bonds to historically
9-3 underutilized businesses. The office may provide a surety bond for
9-4 a historically underutilized business to ensure the performance of
9-5 the historically underutilized business under a contract. The
9-6 office shall provide surety bonds from the surety bond fund on the
9-7 terms and conditions that the office determines to be reasonable,
9-8 appropriate, and consistent with the purposes and objectives of the
9-9 surety bond fund and this subchapter.
9-10 (c) Surety bonds provided from the surety bond fund must be
9-11 evenly distributed among the north, south, east, west, and central
9-12 regions of the state. Each region is entitled to one-fifth of the
9-13 proceeds of the surety bond fund to be used to provide surety bonds
9-14 to historically underutilized businesses whose principal place of
9-15 business is in that region.
9-16 Sec. 481.119. SURETY BONDS. (a) The office may not provide
9-17 a surety bond for a business unless the business is a historically
9-18 underutilized business.
9-19 (b) For each surety bond the office shall determine:
9-20 (1) the cost of the surety bond and the fees charged
9-21 by the office;
9-22 (2) the ability of the business to complete the
9-23 contract for which the surety bond is provided; and
9-24 (3) any other terms or conditions relating to the
9-25 provision of the surety bond.
9-26 Sec. 481.120. SURETY BOND: APPLICATION AND APPROVAL. (a)
9-27 The office may not provide a surety bond except on submission of a
10-1 qualified application by a historically underutilized business.
10-2 (b) A qualified application may not be approved unless the
10-3 business has a contract with another person conditioned on the
10-4 provision of a surety bond.
10-5 (c) On approval of the qualified application, the office may
10-6 provide the surety bond.
10-7 (d) This subchapter does not prohibit the use of money in
10-8 the surety bond fund in conjunction with any other money available
10-9 for the purposes of providing surety bonds under this subchapter.
10-10 Sec. 481.1201. PAYMENT ON SURETY BOND. (a) If a
10-11 historically underutilized business does not perform on a contract
10-12 for which a surety bond has been provided under this subchapter and
10-13 the office is required to honor the surety bond, the office,
10-14 through its representative, shall bring suit against the business
10-15 as soon as practicable. The suit may be brought in the county in
10-16 which the principal office of the business is located or in Travis
10-17 County.
10-18 (b) The office shall report to the comptroller of public
10-19 accounts the name of a business in which the office has made
10-20 payment on a surety bond provided under Section 481.120. The
10-21 comptroller of public accounts may not issue a warrant to the
10-22 business until the business pays the amount it owes to the office.
10-23 Sec. 481.1202. FALSE INFORMATION ON SURETY BOND APPLICATION.
10-24 An applicant who knowingly or negligently provides material false
10-25 information on an application under Section 481.120:
10-26 (1) may not submit an application under Section
10-27 481.120 before the second anniversary of the date that the
11-1 application containing the false information was submitted; and
11-2 (2) is liable to the state for any expense incurred by
11-3 the state that would not have been incurred if the applicant had
11-4 not provided the false information.
11-5 Sec. 481.1203. ADMINISTRATION OF SURETY BOND FUND. The
11-6 office shall administer the surety bond fund under this subchapter
11-7 and shall act as liaison among businesses and state agencies whose
11-8 services are useful to the office in providing surety bonds under
11-9 this subchapter.
11-10 Sec. 481.1204. ADDITIONAL POWERS AND DUTIES: SURETY BONDS.
11-11 The board shall adopt rules necessary to carry out the purposes of
11-12 the surety bond fund.
11-13 Sec. 481.1205. SURETY BOND FUND: GENERAL OBLIGATION BONDS.
11-14 (a) The board may issue up to $50 million of general obligation
11-15 bonds and may use the proceeds to provide surety bonds under this
11-16 subchapter. The board shall deposit the proceeds of the general
11-17 obligation bonds in the surety bond fund and apply them in
11-18 accordance with the resolutions authorizing those bonds. The
11-19 surety bond fund and any accounts established in the fund shall be
11-20 held in trust by the state treasurer for and on behalf of the
11-21 office and the owners of the general obligation bonds issued in
11-22 accordance with this section and may be used only as provided by
11-23 this section. Pending use, the treasurer may invest and reinvest
11-24 money in the surety bond fund in investments authorized by law for
11-25 state funds that the treasurer, consistent with the board's
11-26 resolutions authorizing the general obligation bonds, considers
11-27 appropriate. Payment for the provision of a surety bond provided
12-1 under this subchapter shall be deposited, first, in the interest
12-2 and sinking account as prescribed by the board's resolutions
12-3 authorizing general obligation bonds under this subchapter and,
12-4 second, in any reserve account established by the board until that
12-5 account is fully funded as prescribed by the board's resolutions.
12-6 If, during the time any general obligation bonds are payable from
12-7 the interest and sinking account, the board determines that there
12-8 will not be sufficient money in the interest and sinking account
12-9 during the following fiscal year to pay the principal of or
12-10 interest on the general obligation bonds or both the principal and
12-11 interest that are to come due during the following fiscal year, the
12-12 comptroller of public accounts shall transfer to the fund the first
12-13 money coming into the state treasury not otherwise appropriated by
12-14 the constitution in an amount sufficient to pay the obligations.
12-15 (b) The general obligation bonds may be issued from time to
12-16 time in one or more series or issues, in bearer, registered, or any
12-17 other form, which may include registered uncertificated obligations
12-18 not represented by written instruments and commonly known as
12-19 book-entry obligations, the registration of ownership and transfer
12-20 of which shall be provided for by the board under a system of books
12-21 and records maintained by the office or by an agent appointed by
12-22 the board in a resolution providing for issuance of its general
12-23 obligation bonds. General obligation bonds may mature serially or
12-24 otherwise not more than 40 years from their date. General
12-25 obligation bonds may bear no interest or may bear interest at any
12-26 rate or rates, fixed, variable, floating, or otherwise, determined
12-27 by the board or determined pursuant to any contractual arrangements
13-1 approved by the board, not to exceed the maximum net effective
13-2 interest rate allowed by Chapter 3, Acts of the 61st Legislature,
13-3 Regular Session, 1969 (Article 717k-2, Vernon's Texas Civil
13-4 Statutes). Interest on the general obligation bonds may be payable
13-5 at any time, and the rate of interest on the general obligation
13-6 bonds may be adjusted at any time determined by the board pursuant
13-7 to the resolutions authorizing the bonds or determined pursuant to
13-8 any contractual arrangement approved by the board. In connection
13-9 with the issuance of its general obligation bonds, the board may
13-10 exercise the powers granted to the governing body of an issuer in
13-11 connection with the issuance of obligations under Chapter 656, Acts
13-12 of the 68th Legislature, Regular Session, 1983 (Article 717q,
13-13 Vernon's Texas Civil Statutes), to the extent not inconsistent with
13-14 this section. The general obligation bonds may be issued in the
13-15 form and denominations and executed in the manner and under the
13-16 terms, conditions, and details determined by the board in the
13-17 resolution authorizing their issuance. If any officer whose manual
13-18 or facsimile signature appears on the general obligation bonds
13-19 ceases to be an officer, the signature remains valid and sufficient
13-20 for all purposes as if the officer had remained in office.
13-21 (c) All general obligation bonds issued by the board under
13-22 this section are subject to review and approval by the attorney
13-23 general in the same manner and with the same effect as is provided
13-24 by Chapter 656, Acts of the 68th Legislature, Regular Session, 1983
13-25 (Article 717q, Vernon's Texas Civil Statutes).
13-26 (d) The general obligation bonds are a legal and authorized
13-27 investment for a bank, trust company, savings and loan association,
14-1 insurance company, fiduciary, trustee, or guardian or a sinking
14-2 fund of a municipality, county, school district, or political
14-3 subdivision of the state. The general obligation bonds may secure
14-4 deposits of public funds of the state or a municipality, county,
14-5 school district, or another political corporation or subdivision of
14-6 the state. The board may issue bonds to refund all or part of its
14-7 outstanding general obligation bonds, including accrued but unpaid
14-8 interest. The general obligation bonds, a transaction relating to
14-9 those bonds, or a profit made in the sale of those bonds is exempt
14-10 from taxation by the state, an agency or subdivision of the state,
14-11 a municipality, or a special district.
14-12 SECTION 5. This Act takes effect on the date on which the
14-13 constitutional amendment proposed by ___ J.R. ___, Acts of the 73rd
14-14 Legislature, Regular Session, 1993, takes effect. If that proposed
14-15 constitutional amendment is not approved by the voters, this Act
14-16 has no effect.
14-17 SECTION 6. The importance of this legislation and the
14-18 crowded condition of the calendars in both houses create an
14-19 emergency and an imperative public necessity that the
14-20 constitutional rule requiring bills to be read on three several
14-21 days in each house be suspended, and this rule is hereby suspended.