By: Lucio, West, Rosson S.B. No. 225
A BILL TO BE ENTITLED
AN ACT
1-1 relating to a capital growth and start-up fund for historically
1-2 underutilized businesses; providing for the issuance of bonds.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. The heading of Subchapter G, Chapter 481,
1-5 Government Code, is amended to read as follows:
1-6 SUBCHAPTER G. <SMALL BUSINESS> ASSISTANCE FOR HISTORICALLY
1-7 UNDERUTILIZED BUSINESSES AND SMALL BUSINESSES
1-8 SECTION 2. Section 481.101, Government Code, is amended by
1-9 amending Subdivisions (1) and (3) and adding Subdivisions (4), (5),
1-10 and (6) to read as follows:
1-11 (1) "Historically underutilized business"
1-12 <"Disadvantaged business"> means:
1-13 (A) a corporation formed for the purpose of
1-14 making a profit in which at least 51 percent of all classes of the
1-15 shares of stock or other equitable securities is owned by one or
1-16 more persons who are socially disadvantaged because of their
1-17 identification as members of certain groups, including black
1-18 Americans, Hispanic Americans, women, Asian Pacific Americans, and
1-19 American Indians, who have suffered the effects of discriminatory
1-20 practices or similar insidious circumstances over which they have
1-21 no control. Those persons must have proportionate interest and
1-22 demonstrate active participation in the control, operation, and
1-23 management of the corporation's affairs;
1-24 (B) a sole proprietorship formed for the purpose
2-1 of making a profit that is 100 percent owned, operated, and
2-2 controlled by a person described by Paragraph (A) of this
2-3 subdivision;
2-4 (C) a partnership formed for the purpose of
2-5 making a profit in which 51 percent of the assets and interest in
2-6 the partnership is owned by one or more persons described by
2-7 Paragraph (A) of this subdivision. Those persons must have
2-8 proportionate interest and demonstrate active participation in the
2-9 control, operation, and management of the partnership's affairs; or
2-10 (D) a joint venture in which each entity in the
2-11 joint venture is a historically underutilized <disadvantaged>
2-12 business under this subdivision<; or>
2-13 <(E) a supplier contract between a disadvantaged
2-14 business under this subdivision and a prime contractor under which
2-15 the disadvantaged business is directly involved in the manufacture
2-16 or distribution of the supplies or materials or otherwise
2-17 warehouses and ships the supplies>.
2-18 (3) "Small business" means a corporation, partnership,
2-19 sole proprietorship, or other legal entity that:
2-20 (A) is formed for the purpose of making a
2-21 profit,<;>
2-22 <(B)> is independently owned and operated,<;>
2-23 and
2-24 <(C)> has fewer than 100 employees or less than
2-25 $1 million in annual gross receipts; or
2-26 (B) otherwise qualifies as a small business
2-27 under the standards of the United States Small Business
3-1 Administration.
3-2 (4) "Capital growth fund" means the Texas historically
3-3 underutilized business capital growth and start-up fund.
3-4 (5) "Private lender" means a bank, savings bank,
3-5 savings and loan association, trust company, or insurance company,
3-6 a nonprofit corporation or other entity created by a municipality
3-7 as authorized by law that has the authority to make loans, or an
3-8 individual that the office determines is an experienced and
3-9 sophisticated investor.
3-10 (6) "Qualified application" means a completed
3-11 application, including all documents and information required by
3-12 the office and submitted by:
3-13 (A) a private lender for a business; or
3-14 (B) a historically underutilized business.
3-15 SECTION 3. Subchapter G, Chapter 481, Government Code, is
3-16 amended by adding Section 481.1011 to read as follows:
3-17 Sec. 481.1011. EXCLUSION AS HISTORICALLY UNDERUTILIZED
3-18 BUSINESS. A business is not a historically underutilized business
3-19 if an owner of the business has a personal net worth of more than
3-20 $750,000, unless the office determines that the person has
3-21 demonstrated that the person is a socially disadvantaged individual
3-22 described by Section 481.101(1)(A). For the purposes of this
3-23 section, "personal net worth" has the meaning assigned by the
3-24 regulations of the United States Small Business Administration in
3-25 13 C.F.R. Section 124.106.
3-26 SECTION 4. Sections 481.103 and 481.107, Government Code,
3-27 are amended to read as follows:
4-1 Sec. 481.103. Duties. (a) The office shall:
4-2 (1) examine the role of small and historically
4-3 underutilized <disadvantaged> businesses in the state's economy and
4-4 the contribution of small and historically underutilized
4-5 <disadvantaged> businesses in generating economic activity,
4-6 expanding employment opportunities, promoting exports, stimulating
4-7 innovation and entrepreneurship, and bringing new and untested
4-8 products and services to the marketplace;
4-9 (2) serve as the principal advocate in the state on
4-10 behalf of small and historically underutilized <disadvantaged>
4-11 businesses and provide advice in the consideration of
4-12 administrative requirements and legislation that affect small and
4-13 historically underutilized <disadvantaged> businesses;
4-14 (3) evaluate the effectiveness of efforts of state
4-15 agencies and other entities to assist small and historically
4-16 underutilized <disadvantaged> businesses and make appropriate
4-17 recommendations to assist the development and strengthening of
4-18 small and historically underutilized <disadvantaged> business
4-19 enterprise;
4-20 (4) identify specific instances in which regulations
4-21 inhibit small and historically underutilized <disadvantaged>
4-22 business development and to the extent possible identify
4-23 conflicting state policy goals;
4-24 (5) determine the availability of financial and other
4-25 resources to small and historically underutilized <disadvantaged>
4-26 businesses and recommend methods for:
4-27 (A) increasing the availability of equity
5-1 capital and other forms of financial assistance to small and
5-2 historically underutilized <disadvantaged> businesses;
5-3 (B) generating markets for the goods and
5-4 services of small and historically underutilized <disadvantaged>
5-5 businesses;
5-6 (C) providing more effective education,
5-7 training, and management and technical assistance to small and
5-8 historically underutilized <disadvantaged> businesses; and
5-9 (D) providing assistance to small and
5-10 historically underutilized <disadvantaged> businesses in complying
5-11 with federal, state, and local laws;
5-12 (6) describe the reasons for small and historically
5-13 underutilized <disadvantaged> business successes and failures,
5-14 ascertain the related factors that are particularly important in
5-15 this state, and recommend actions for increasing the success rate
5-16 of small and historically underutilized <disadvantaged> businesses;
5-17 (7) serve as a focal point for receiving complaints
5-18 and suggestions concerning state government policies and activities
5-19 that affect small and historically underutilized <disadvantaged>
5-20 businesses;
5-21 (8) assist with the resolution of problems among state
5-22 agencies and small and historically underutilized <disadvantaged>
5-23 businesses;
5-24 (9) develop and advocate proposals for changes in
5-25 state policies and activities that adversely affect small and
5-26 historically underutilized <disadvantaged> businesses;
5-27 (10) provide to legislative committees and state
6-1 agencies information on the effects of proposed policies or actions
6-2 that affect small and historically underutilized <disadvantaged>
6-3 businesses;
6-4 (11) enlist the assistance of public and private
6-5 agencies, businesses, and other organizations in disseminating
6-6 information about state programs and services that benefit small
6-7 and historically underutilized <disadvantaged> businesses and
6-8 information regarding means by which small and historically
6-9 underutilized <disadvantaged> businesses can use those programs and
6-10 services;
6-11 (12) provide information and assistance relating to
6-12 establishing, operating, or expanding small and historically
6-13 underutilized <disadvantaged> businesses;
6-14 (13) establish and operate a statewide toll-free
6-15 telephone service providing small and historically underutilized
6-16 <disadvantaged> businesses with ready access to the services
6-17 offered by the office;
6-18 (14) identify sources of financial assistance for
6-19 small and historically underutilized <disadvantaged> businesses,
6-20 match small and historically underutilized <disadvantaged>
6-21 businesses with sources of financial assistance, and assist small
6-22 and historically underutilized <disadvantaged> businesses with the
6-23 preparation of applications for loans from governmental or private
6-24 sources;
6-25 (15) sponsor meetings, to the extent practicable in
6-26 cooperation with public and private educational institutions, to
6-27 provide training and disseminate information beneficial to small
7-1 and historically underutilized <disadvantaged> businesses;
7-2 (16) assist small and historically underutilized
7-3 <disadvantaged> businesses in their dealings with federal, state,
7-4 and local governmental agencies and provide information regarding
7-5 governmental requirements affecting small and historically
7-6 underutilized <disadvantaged> businesses;
7-7 (17) perform research, studies, and analyses of
7-8 matters affecting the interests of small and historically
7-9 underutilized <disadvantaged> businesses;
7-10 (18) develop and implement programs to encourage
7-11 governmental agencies, public sector business associations, and
7-12 other organizations to provide useful services to small and
7-13 historically underutilized <disadvantaged> businesses;
7-14 (19) use available resources within the state, such as
7-15 small business development centers, educational institutions, and
7-16 nonprofit associations, to coordinate the provision of management
7-17 and technical assistance to small and historically underutilized
7-18 <disadvantaged> businesses in a systematic manner;
7-19 (20) publish newsletters, brochures, and other
7-20 documents containing information useful to small and historically
7-21 underutilized <disadvantaged> businesses;
7-22 (21) identify successful small and historically
7-23 underutilized <disadvantaged> business assistance programs provided
7-24 by other states and determine the feasibility of adapting those
7-25 programs for implementation in this state;
7-26 (22) establish an outreach program to make the
7-27 existence of the office known to small and historically
8-1 underutilized <disadvantaged> businesses and potential clients
8-2 throughout the state;
8-3 (23) adopt rules necessary to carry out this
8-4 subchapter;
8-5 (24) identify potential business opportunities for
8-6 small and historically underutilized <disadvantaged> businesses in
8-7 the border region and develop programs to maximize those
8-8 opportunities;
8-9 (25) identify potential business opportunities for
8-10 small and historically underutilized <disadvantaged> businesses in
8-11 rural areas of this state and develop programs to maximize those
8-12 opportunities; and
8-13 (26) perform any other functions necessary to carry
8-14 out the purposes of this subchapter.
8-15 (b) The department may provide community-based services to
8-16 carry out its duties under this chapter, including the creation of
8-17 a pilot program to evaluate the merits of locating full-time
8-18 personnel outside the Austin headquarters. This pilot program will
8-19 give first preference to serving economically distressed areas,
8-20 rural areas, or historically underutilized <disadvantaged>
8-21 businesses or assisting development of specific industries. The
8-22 department may require areas served by these personnel to provide
8-23 in-kind or cash contributions as necessary to support these
8-24 personnel. A report will be submitted to the legislature
8-25 describing the effectiveness of this method for delivering services
8-26 from the department to address specific economic needs.
8-27 Sec. 481.107. CONTRACTS AWARDED TO SMALL OR HISTORICALLY
9-1 UNDERUTILIZED <DISADVANTAGED> BUSINESSES. Each state agency shall
9-2 keep statistical data and other records on the number of contracts
9-3 awarded by the agency to small or historically underutilized
9-4 <disadvantaged> businesses.
9-5 SECTION 5. Subchapter G, Chapter 481, Government Code, is
9-6 amended by adding Sections 481.109 through 481.117 to read as
9-7 follows:
9-8 Sec. 481.109. Texas Historically Underutilized Business
9-9 Capital Growth And Start-Up Fund. (a) The Texas historically
9-10 underutilized business capital growth and start-up fund is a
9-11 revolving fund in the state treasury. The capital growth fund
9-12 consists of money appropriated to the office, proceeds of general
9-13 obligation bonds issued to provide loan guarantees under this
9-14 subchapter, application fees, guarantee fees, and other amounts
9-15 received by the state from loans or loan guarantees made under this
9-16 subchapter and money acquired from federal grants or other sources
9-17 and required by resolution of the policy board to be deposited in
9-18 the capital growth fund. The capital growth fund contains a
9-19 program account, an interest and sinking account, and other
9-20 accounts that the policy board authorizes to be created and
9-21 maintained. Money in the capital growth fund is available for use
9-22 by the office for the loan and loan guarantee program provided by
9-23 this subchapter.
9-24 (b) Money in the program account, minus the costs of
9-25 issuance of general obligation bonds to provide loans and loan
9-26 guarantees under this subchapter and necessary costs of
9-27 administering the capital growth fund, may be used only to provide
10-1 loans and loan guarantees to aid in the start-up costs of
10-2 historically underutilized businesses. The office may provide a
10-3 loan or loan guarantee from the capital growth fund to assist a
10-4 historically underutilized business to construct new facilities,
10-5 renovate existing facilities, acquire any interest in real or
10-6 personal property, and provide initial working capital to pay the
10-7 cost of salaries, rents, supplies, inventories, mortgage payments,
10-8 legal services, and utilities and telephone, travel, and other
10-9 incidental costs normally classified as working capital according
10-10 to standard accounting principles. The office shall provide loans
10-11 and loan guarantees from the capital growth fund on the terms and
10-12 conditions that the office determines to be reasonable,
10-13 appropriate, and consistent with the purposes and objectives of the
10-14 capital growth fund and this subchapter. The office may provide a
10-15 loan or loan guarantee only if financing for the historically
10-16 underutilized business may not be otherwise obtained.
10-17 Sec. 481.110. LOANS AND LOAN GUARANTEES. (a) The office
10-18 may not guarantee more than 90 percent of a loan or provide a loan
10-19 in an amount in excess of 90 percent of the cost of the undertaking
10-20 to be financed.
10-21 (b) For each loan or loan guarantee the office shall
10-22 determine:
10-23 (1) the fees charged by the office, including loan
10-24 fees, guarantee fees, application fees, annual fees, and any other
10-25 costs associated with the loan or loan guarantee necessary for the
10-26 administration of the capital growth fund;
10-27 (2) the permissible interest rates and amortization
11-1 requirements for a loan made or guaranteed, as agreed on by the
11-2 private lender, if any, the business, and the office;
11-3 (3) the acceptable security for the loan or the
11-4 office's participation in the business;
11-5 (4) the financial responsibility of the business to
11-6 repay the loan; and
11-7 (5) any other terms or conditions relating to a loan
11-8 or loan guarantee.
11-9 (c) The minimum amount of a loan that may be made or
11-10 guaranteed by the office is $10,000.
11-11 (d) The maximum amount of a loan that may be made or
11-12 guaranteed by the office is $500,000.
11-13 Sec. 481.111. APPLICATION AND APPROVAL. (a) The office may
11-14 not make a loan or loan guarantee except on submission of a
11-15 qualified application by a historically underutilized business or
11-16 private lender.
11-17 (b) A qualified application may not be approved unless the
11-18 business holds funds or property in an amount or value equal to not
11-19 less than 10 percent of the start-up cost of the business, the
11-20 funds or property are pledged to the business, and the business has
11-21 obtained from other financial sources a firm commitment for funds
11-22 in excess of the loan made or guaranteed by the office.
11-23 (c) On approval of the qualified application, the office may
11-24 provide a loan or loan guarantee to a business for purposes
11-25 authorized by Section 481.112.
11-26 (d) This subchapter does not prohibit the use of money in
11-27 the capital growth fund in conjunction with any other money
12-1 available for the purposes of the loans or loan guarantees provided
12-2 by this subchapter.
12-3 Sec. 481.112. USE OF LOAN. The money received from a loan
12-4 made or guaranteed under Section 481.110 may be used only for the
12-5 initial costs of starting a business as described by Section
12-6 481.109.
12-7 Sec. 481.113. DEFAULT ON LOAN. (a) If a historically
12-8 underutilized business defaults on a loan made under Section
12-9 481.110, or defaults on a loan guaranteed under Section 481.110 and
12-10 the office is required to honor its guarantee, the office through
12-11 its representative shall bring suit against the business as soon as
12-12 practicable. The suit may be brought in the county in which the
12-13 principal office of the business is located, in which the private
12-14 lender, if any, is located, or in Travis County.
12-15 (b) The office may take title by foreclosure to any property
12-16 of the business if an acquisition is necessary to protect a loan or
12-17 loan guarantee made for the business by the office and may sell any
12-18 property of the business. If the office cannot make a sale
12-19 promptly, it may lease any property of the business to another
12-20 person to minimize financial losses and sustain employment.
12-21 (c) The office shall report to the comptroller the name of a
12-22 business that is in default on a loan made under Section 481.110 or
12-23 a loan guaranteed under Section 481.110 on which the office has
12-24 been required to honor a guarantee. The comptroller may not issue
12-25 a warrant to the business while the business is in default.
12-26 (d) The instruments evidencing a loan made by the office or
12-27 a guarantee of a loan made by a private lender must provide that in
13-1 the event of a default in the payment of the principal of or
13-2 interest on the obligation or in the performance of a mortgage,
13-3 instrument, or other agreement relating to the loan or loan
13-4 guarantee, the payment and performance may be enforced by mandamus
13-5 or by the appointment of a receiver in equity with power to apply
13-6 the revenues from the business as provided by the mortgage,
13-7 instrument, or other agreement.
13-8 Sec. 481.114. FALSE INFORMATION ON APPLICATION. An
13-9 applicant who knowingly or negligently provides material false
13-10 information on an application under Section 481.111:
13-11 (1) may not submit another application under Section
13-12 481.111; and
13-13 (2) is liable to the state and a private lender for
13-14 any expense incurred by the state or private lender that would not
13-15 have been incurred if the applicant had not provided the false
13-16 information.
13-17 Sec. 481.115. ADMINISTRATION OF CAPITAL GROWTH FUND. The
13-18 office shall administer the capital growth fund and shall act as
13-19 liaison among businesses, private lenders, and state agencies whose
13-20 services are useful to the office in carrying out the loan and
13-21 loan guarantee program provided by this subchapter.
13-22 Sec. 481.116. ADDITIONAL POWERS AND DUTIES. The policy
13-23 board shall adopt rules necessary to carry out the purposes of the
13-24 capital growth fund. The policy board shall establish procedures
13-25 to minimize the number of defaults on loans made or guaranteed from
13-26 the capital growth fund. Those procedures may include the purchase
13-27 of insurance coverage against loss.
14-1 Sec. 481.117. CAPITAL GROWTH FUND: GENERAL OBLIGATION
14-2 BONDS. (a) The policy board may issue up to $50 million of
14-3 general obligation bonds and may use the proceeds of those bonds to
14-4 provide loans or loan guarantees under this subchapter. The policy
14-5 board shall deposit the proceeds of the general obligation bonds in
14-6 the capital growth fund and apply them in accordance with the
14-7 resolutions authorizing the bonds. The capital growth fund and any
14-8 accounts established in the fund shall be held in trust by the
14-9 state treasurer for and on behalf of the office and the owners of
14-10 the general obligation bonds issued in accordance with this section
14-11 and may be used only as provided by this section. Pending use, the
14-12 treasurer may invest and reinvest money in the capital growth fund
14-13 in investments authorized by law for state funds that the
14-14 treasurer, consistent with the policy board's resolutions
14-15 authorizing the general obligation bonds, considers appropriate.
14-16 Payment for the provision of a loan or loan guarantee provided
14-17 under this subchapter shall be deposited, first, in the interest
14-18 and sinking account as prescribed by the policy board's resolutions
14-19 authorizing general obligation bonds under this subchapter and,
14-20 second, in any reserve account established by the policy board
14-21 until that account is fully funded as prescribed by the policy
14-22 board's resolutions. If, during the time any general obligation
14-23 bonds are payable from the interest and sinking account, the policy
14-24 board determines that there will not be sufficient money in the
14-25 interest and sinking account during the following fiscal year to
14-26 pay the principal of or interest on the general obligation bonds or
14-27 both the principal and interest that are to come due during the
15-1 following fiscal year, the comptroller shall transfer to the fund
15-2 the first money coming into the state treasury not otherwise
15-3 appropriated by the constitution in an amount sufficient to pay the
15-4 obligations.
15-5 (b) The general obligation bonds may be issued from time to
15-6 time in one or more series or issues, in bearer, registered, or any
15-7 other form, which may include registered uncertificated obligations
15-8 not represented by written instruments and commonly known as
15-9 book-entry obligations, the registration of ownership and transfer
15-10 of which shall be provided for by the policy board under a system
15-11 of books and records maintained by the office or by an agent
15-12 appointed by the policy board in a resolution providing for
15-13 issuance of its general obligation bonds. General obligation bonds
15-14 may mature serially or otherwise not more than 40 years from their
15-15 date. General obligation bonds may bear no interest or may bear
15-16 interest at any rate or rates, fixed, variable, floating, or
15-17 otherwise, determined by the policy board or determined pursuant to
15-18 any contractual arrangements approved by the policy board, not to
15-19 exceed the maximum net effective interest rate allowed by Chapter
15-20 3, Acts of the 61st Legislature, Regular Session, 1969 (Article
15-21 717k-2, Vernon's Texas Civil Statutes). Interest on the general
15-22 obligation bonds may be payable at any time, and the rate of
15-23 interest on the general obligation bonds may be adjusted at any
15-24 time determined by the policy board pursuant to the resolutions
15-25 authorizing the bonds or determined pursuant to any contractual
15-26 arrangement approved by the policy board. In connection with the
15-27 issuance of its general obligation bonds, the policy board may
16-1 exercise the powers granted to the governing body of an issuer in
16-2 connection with the issuance of obligations under Chapter 656, Acts
16-3 of the 68th Legislature, Regular Session, 1983 (Article 717q,
16-4 Vernon's Texas Civil Statutes), to the extent not inconsistent with
16-5 this section. The general obligation bonds may be issued in the
16-6 form and denominations and executed in the manner and under the
16-7 terms, conditions, and details determined by the policy board in
16-8 the resolution authorizing their issuance. If any officer whose
16-9 manual or facsimile signature appears on the general obligation
16-10 bonds ceases to be an officer, the signature remains valid and
16-11 sufficient for all purposes as if the officer had remained in
16-12 office.
16-13 (c) All general obligation bonds issued by the policy board
16-14 under this section are subject to review and approval by the
16-15 attorney general in the same manner and with the same effect as is
16-16 provided by Chapter 656, Acts of the 68th Legislature, Regular
16-17 Session, 1983 (Article 717q, Vernon's Texas Civil Statutes).
16-18 (d) The general obligation bonds are a legal and authorized
16-19 investment for a bank, trust company, savings and loan association,
16-20 insurance company, fiduciary, trustee, or guardian or a sinking
16-21 fund of a municipality, county, school district, or political
16-22 subdivision of the state. The general obligation bonds may secure
16-23 deposits of public funds of the state or a municipality, county,
16-24 school district, or another political corporation or subdivision of
16-25 the state. The policy board may issue bonds to refund all or part
16-26 of its outstanding general obligation bonds, including accrued but
16-27 unpaid interest. The general obligation bonds, a transaction
17-1 relating to those bonds, or a profit made in the sale of those
17-2 bonds is exempt from taxation by the state, an agency or
17-3 subdivision of the state, a municipality, or a special district.
17-4 SECTION 6. The policy board of the Texas Department of
17-5 Commerce may not issue more than $25 million of bonds under Section
17-6 481.117, Government Code, as added by this Act, during the state
17-7 fiscal biennium beginning September 1, 1993.
17-8 SECTION 7. This Act takes effect on the date on which the
17-9 constitutional amendment proposed by S.J.R. 9, 73rd Legislature,
17-10 Regular Session, 1993, takes effect. If that proposed
17-11 constitutional amendment is not approved by the voters, this Act
17-12 has no effect.
17-13 SECTION 8. The importance of this legislation and the
17-14 crowded condition of the calendars in both houses create an
17-15 emergency and an imperative public necessity that the
17-16 constitutional rule requiring bills to be read on three several
17-17 days in each house be suspended, and this rule is hereby suspended.