73R11273 DWS-F
          By Lucio, West, Rosson                                 S.B. No. 225
          Substitute the following for S.B. No. 225:
          By Danburg                                         C.S.S.B. No. 225
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to a capital growth and start-up fund for historically
    1-3  underutilized businesses; authorizing the issuance of bonds.
    1-5        SECTION 1.  The heading of Subchapter G, Chapter 481,
    1-6  Government Code, is amended to read as follows:
    1-9        SECTION 2.  Section 481.101, Government Code, is amended by
   1-10  amending Subdivisions (1) and (3) and adding Subdivisions (4), (5),
   1-11  and (6) 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.  Those persons must have proportionate interest and
   1-23  demonstrate active participation in the control, operation, and
   1-24  management of the corporation's affairs;
    2-1                    (B)  a sole proprietorship formed for the purpose
    2-2  of making a profit that is 100 percent owned, operated, and
    2-3  controlled by a person described by Paragraph (A) of this
    2-4  subdivision;
    2-5                    (C)  a partnership formed for the purpose of
    2-6  making a profit in which 51 percent of the assets and interest in
    2-7  the partnership is owned by one or more persons described by
    2-8  Paragraph (A) of this subdivision.  Those persons must have
    2-9  proportionate interest and demonstrate active participation in the
   2-10  control, operation, and management of the partnership's affairs; or
   2-11                    (D)  a joint venture in which each entity in the
   2-12  joint venture is a historically underutilized <disadvantaged>
   2-13  business under this subdivision<; or>
   2-14                    <(E)  a supplier contract between a disadvantaged
   2-15  business under this subdivision and a prime contractor under which
   2-16  the disadvantaged business is directly involved in the manufacture
   2-17  or distribution of the supplies or materials or otherwise
   2-18  warehouses and ships the supplies>.
   2-19              (3)  "Small business" means a corporation, partnership,
   2-20  sole proprietorship, or other legal entity that:
   2-21                    (A)  is formed for the purpose of making a
   2-22  profit,<;>
   2-23                    <(B)>  is independently owned and operated,<;>
   2-24  and
   2-25                    <(C)>  has fewer than 100 employees or less than
   2-26  $1 million in annual gross receipts; or
   2-27                    (B)  otherwise qualifies as a small business
    3-1  under the standards of the United States Small Business
    3-2  Administration.
    3-3              (4)  "Capital growth fund" means the Texas historically
    3-4  underutilized business capital growth and start-up fund.
    3-5              (5)  "Private lender" means a bank, savings bank,
    3-6  savings and loan association, trust company, or insurance company,
    3-7  a nonprofit corporation or other entity that is created by a
    3-8  municipality as authorized by law and that has the authority to
    3-9  make loans, or an individual that the office determines is an
   3-10  experienced and sophisticated investor.
   3-11              (6)  "Qualified application" means a completed
   3-12  application, including all documents and information required by
   3-13  the office and submitted by:
   3-14                    (A)  a private lender for a business; or
   3-15                    (B)  a historically underutilized business.
   3-16        SECTION 3.  Subchapter G, Chapter 481, Government Code, is
   3-17  amended by adding Section 481.1011 to read as follows:
   3-19  BUSINESS.  A business is not a historically underutilized business
   3-20  if an owner of the business has a personal net worth of more than
   3-21  $750,000, unless the office determines that the person has
   3-22  demonstrated that the person is a socially disadvantaged individual
   3-23  described by Section 481.101(1)(A).  For the purposes of this
   3-24  section, "personal net worth" has the meaning assigned by the
   3-25  regulations of the United States Small Business Administration in
   3-26  13 C.F.R.  Section 124.106.
   3-27        SECTION 4.  Sections 481.103 and 481.107, Government Code,
    4-1  are amended to read as follows:
    4-2        Sec. 481.103.  Duties.  (a)  The office shall:
    4-3              (1)  examine the role of small and historically
    4-4  underutilized <disadvantaged> businesses in the state's economy and
    4-5  the contribution of small and historically underutilized
    4-6  <disadvantaged> businesses in generating economic activity,
    4-7  expanding employment opportunities, promoting exports, stimulating
    4-8  innovation and entrepreneurship, and bringing new and untested
    4-9  products and services to the marketplace;
   4-10              (2)  serve as the principal advocate in the state on
   4-11  behalf of small and historically underutilized <disadvantaged>
   4-12  businesses and provide advice in the consideration of
   4-13  administrative requirements and legislation that affect small and
   4-14  historically underutilized <disadvantaged> businesses;
   4-15              (3)  evaluate the effectiveness of efforts of state
   4-16  agencies and other entities to assist small and historically
   4-17  underutilized <disadvantaged> businesses and make appropriate
   4-18  recommendations to assist the development and strengthening of
   4-19  small and historically underutilized <disadvantaged> business
   4-20  enterprise;
   4-21              (4)  identify specific instances in which regulations
   4-22  inhibit small and historically underutilized <disadvantaged>
   4-23  business development and to the extent possible identify
   4-24  conflicting state policy goals;
   4-25              (5)  determine the availability of financial and other
   4-26  resources to small and historically underutilized <disadvantaged>
   4-27  businesses and recommend methods for:
    5-1                    (A)  increasing the availability of equity
    5-2  capital and other forms of financial assistance to small and
    5-3  historically underutilized <disadvantaged> businesses;
    5-4                    (B)  generating markets for the goods and
    5-5  services of small and historically underutilized <disadvantaged>
    5-6  businesses;
    5-7                    (C)  providing more effective education,
    5-8  training, and management and technical assistance to small and
    5-9  historically underutilized <disadvantaged> businesses; and
   5-10                    (D)  providing assistance to small and
   5-11  historically underutilized <disadvantaged> businesses in complying
   5-12  with federal, state, and local laws;
   5-13              (6)  describe the reasons for small and historically
   5-14  underutilized <disadvantaged> business successes and failures,
   5-15  ascertain the related factors that are particularly important in
   5-16  this state, and recommend actions for increasing the success rate
   5-17  of small and historically underutilized <disadvantaged> businesses;
   5-18              (7)  serve as a focal point for receiving complaints
   5-19  and suggestions concerning state government policies and activities
   5-20  that affect small and historically underutilized <disadvantaged>
   5-21  businesses;
   5-22              (8)  assist with the resolution of problems among state
   5-23  agencies and small and historically underutilized <disadvantaged>
   5-24  businesses;
   5-25              (9)  develop and advocate proposals for changes in
   5-26  state policies and activities that adversely affect small and
   5-27  historically underutilized <disadvantaged> businesses;
    6-1              (10)  provide to legislative committees and state
    6-2  agencies information on the effects of proposed policies or actions
    6-3  that affect small and historically underutilized <disadvantaged>
    6-4  businesses;
    6-5              (11)  enlist the assistance of public and private
    6-6  agencies, businesses, and other organizations in disseminating
    6-7  information about state programs and services that benefit small
    6-8  and historically underutilized <disadvantaged> businesses and
    6-9  information regarding means by which small and historically
   6-10  underutilized <disadvantaged> businesses can use those programs and
   6-11  services;
   6-12              (12)  provide information and assistance relating to
   6-13  establishing, operating, or expanding small and historically
   6-14  underutilized <disadvantaged> businesses;
   6-15              (13)  establish and operate a statewide toll-free
   6-16  telephone service providing small and historically underutilized
   6-17  <disadvantaged> businesses with ready access to the services
   6-18  offered by the office;
   6-19              (14)  identify sources of financial assistance for
   6-20  small and historically underutilized <disadvantaged> businesses,
   6-21  match small and historically underutilized <disadvantaged>
   6-22  businesses with sources of financial assistance, and assist small
   6-23  and historically underutilized <disadvantaged> businesses with the
   6-24  preparation of applications for loans from governmental or private
   6-25  sources;
   6-26              (15)  sponsor meetings, to the extent practicable in
   6-27  cooperation with public and private educational institutions, to
    7-1  provide training and disseminate information beneficial to small
    7-2  and historically underutilized <disadvantaged> businesses;
    7-3              (16)  assist small and historically underutilized
    7-4  <disadvantaged> businesses in their dealings with federal, state,
    7-5  and local governmental agencies and provide information regarding
    7-6  governmental requirements affecting small and historically
    7-7  underutilized <disadvantaged> businesses;
    7-8              (17)  perform research, studies, and analyses of
    7-9  matters affecting the interests of small and historically
   7-10  underutilized <disadvantaged> businesses;
   7-11              (18)  develop and implement programs to encourage
   7-12  governmental agencies, public sector business associations, and
   7-13  other organizations to provide useful services to small and
   7-14  historically underutilized <disadvantaged> businesses;
   7-15              (19)  use available resources within the state, such as
   7-16  small business development centers, educational institutions, and
   7-17  nonprofit associations, to coordinate the provision of management
   7-18  and technical assistance to small and historically underutilized
   7-19  <disadvantaged> businesses in a systematic manner;
   7-20              (20)  publish newsletters, brochures, and other
   7-21  documents containing information useful to small and historically
   7-22  underutilized <disadvantaged> businesses;
   7-23              (21)  identify successful small and historically
   7-24  underutilized <disadvantaged> business assistance programs provided
   7-25  by other states and determine the feasibility of adapting those
   7-26  programs for implementation in this state;
   7-27              (22)  establish an outreach program to make the
    8-1  existence of the office known to small and historically
    8-2  underutilized <disadvantaged> businesses and potential clients
    8-3  throughout the state;
    8-4              (23)  adopt rules necessary to carry out this
    8-5  subchapter;
    8-6              (24)  identify potential business opportunities for
    8-7  small and historically underutilized <disadvantaged> businesses in
    8-8  the border region and develop programs to maximize those
    8-9  opportunities;
   8-10              (25)  identify potential business opportunities for
   8-11  small and historically underutilized <disadvantaged> businesses in
   8-12  rural areas of this state and develop programs to maximize those
   8-13  opportunities; and
   8-14              (26)  perform any other functions necessary to carry
   8-15  out the purposes of this subchapter.
   8-16        (b)  The department may provide community-based services to
   8-17  carry out its duties under this chapter, including the creation of
   8-18  a pilot program to evaluate the merits of locating full-time
   8-19  personnel outside the Austin headquarters.  This pilot program will
   8-20  give first preference to serving economically distressed areas,
   8-21  rural areas, or historically underutilized <disadvantaged>
   8-22  businesses or assisting development of specific industries.  The
   8-23  department may require areas served by these personnel to provide
   8-24  in-kind or cash contributions as necessary to support these
   8-25  personnel.  A report will be submitted to the legislature
   8-26  describing the effectiveness of this method for delivering services
   8-27  from the department to address specific economic needs.
    9-2  UNDERUTILIZED <DISADVANTAGED> BUSINESSES.  Each state agency shall
    9-3  keep statistical data and other records on the number of contracts
    9-4  awarded by the agency to small or historically underutilized
    9-5  <disadvantaged> businesses.
    9-6        SECTION 5.  Subchapter G, Chapter 481, Government Code, is
    9-7  amended by adding Sections 481.109 through 481.117 to read as
    9-8  follows:
    9-9        Sec. 481.109.  Texas Historically Underutilized Business
   9-10  Capital Growth And Start-Up Fund.  (a)  The Texas historically
   9-11  underutilized business capital growth and start-up fund is a
   9-12  revolving fund in the state treasury.  The capital growth fund
   9-13  consists of money appropriated to the office, proceeds of general
   9-14  obligation bonds issued to provide loan guarantees under this
   9-15  subchapter, application fees, guarantee fees, and other amounts
   9-16  received by the state from loans or loan guarantees made under this
   9-17  subchapter and money acquired from federal grants or other sources
   9-18  and required by resolution of the policy board to be deposited in
   9-19  the capital growth fund.  The capital growth fund contains a
   9-20  program account, an interest and sinking account, and other
   9-21  accounts that the policy board authorizes to be created and
   9-22  maintained.  Money in the capital growth fund is available for use
   9-23  by the office for the loan and loan guarantee program provided by
   9-24  this subchapter.
   9-25        (b)  Money in the program account, minus the costs of
   9-26  issuance of general obligation bonds to provide loans and loan
   9-27  guarantees  under this subchapter and necessary costs of
   10-1  administering the capital growth fund, may be used only to provide
   10-2  loans and loan guarantees to aid in the start-up costs of
   10-3  historically underutilized businesses.  The office may provide a
   10-4  loan or loan guarantee from the capital growth fund to assist a
   10-5  historically underutilized business to construct new facilities,
   10-6  renovate existing facilities, acquire any interest in real or
   10-7  personal property, and provide initial working capital to pay the
   10-8  cost of salaries, rents, supplies, inventories, mortgage payments,
   10-9  legal services, and utilities and telephone, travel, and other
  10-10  incidental costs normally classified as working capital according
  10-11  to standard accounting principles.  The office shall provide loans
  10-12  and loan guarantees from the capital growth fund on the terms and
  10-13  conditions that the office determines to be reasonable,
  10-14  appropriate, and consistent with the purposes and objectives of the
  10-15  capital growth fund and this subchapter.  The office may provide a
  10-16  loan or loan guarantee only if financing for the historically
  10-17  underutilized business may not be otherwise obtained.
  10-18        Sec. 481.110.  LOANS AND LOAN GUARANTEES.  (a)  The office
  10-19  may not guarantee more than 90 percent of a loan or provide a loan
  10-20  in an amount in excess of 90 percent of the cost of the undertaking
  10-21  to be financed.
  10-22        (b)  For each loan or loan guarantee the office shall
  10-23  determine:
  10-24              (1)  the fees charged by the office, including loan
  10-25  fees, guarantee fees, application fees, annual fees, and any other
  10-26  costs associated with the loan or loan guarantee necessary for the
  10-27  administration of the capital growth fund;
   11-1              (2)  the permissible interest rates and amortization
   11-2  requirements for a loan made or guaranteed, as agreed on by the
   11-3  private lender, if any, the business, and the office;
   11-4              (3)  the acceptable security for the loan or the
   11-5  office's participation in the business;
   11-6              (4)  the financial responsibility of the business to
   11-7  repay the loan; and
   11-8              (5)  any other terms or conditions relating to a loan
   11-9  or loan guarantee.
  11-10        (c)  The minimum amount of a loan that may be made or
  11-11  guaranteed by the office is $10,000.
  11-12        (d)  The maximum amount of a loan that may be made or
  11-13  guaranteed by the office is $500,000.
  11-14        Sec. 481.111.  APPLICATION AND APPROVAL.  (a)  The office may
  11-15  not make a loan or loan guarantee except on submission of a
  11-16  qualified application by a historically underutilized business or
  11-17  private lender.
  11-18        (b)  A qualified application may not be approved unless the
  11-19  business holds funds or property in an amount or value equal to not
  11-20  less than 10 percent of the start-up cost of the business, the
  11-21  funds or property are pledged to the business, and the business has
  11-22  obtained from other financial sources a firm commitment for funds
  11-23  in excess of the loan made or guaranteed by the office.
  11-24        (c)  On approval of the qualified application, the office may
  11-25  provide a loan or loan guarantee to a business for purposes
  11-26  authorized by Section 481.112.
  11-27        (d)  This subchapter does not prohibit the use of money in
   12-1  the capital growth fund in conjunction with any other money
   12-2  available for the purposes of the loans or loan guarantees provided
   12-3  by this subchapter.
   12-4        Sec. 481.112.  USE OF LOAN.  The money received from a loan
   12-5  made or guaranteed under Section 481.110 may be used only for the
   12-6  initial costs of starting a business as described by Section
   12-7  481.109.
   12-8        Sec. 481.113.  DEFAULT ON LOAN.  (a)  If a historically
   12-9  underutilized business defaults on a loan made under Section
  12-10  481.110, or defaults on a loan guaranteed under Section 481.110 and
  12-11  the office is required to honor its guarantee, the office through
  12-12  its representative shall bring suit against the business as soon as
  12-13  practicable.  The suit may be brought in the county in which the
  12-14  principal office of the business is located, in which the private
  12-15  lender, if any, is located, or in Travis County.
  12-16        (b)  The office may take title by foreclosure to any property
  12-17  of the business if an acquisition is necessary to protect a loan or
  12-18  loan guarantee made for the business by the office and may sell any
  12-19  property of the business.  If the office cannot make a sale
  12-20  promptly, it may lease any property of the business to another
  12-21  person to minimize financial losses and sustain employment.
  12-22        (c)  The office shall report to the comptroller the name of a
  12-23  business that is in default on a loan made under Section 481.110 or
  12-24  a loan guaranteed under Section 481.110 on which the office has
  12-25  been required to honor a guarantee.  The comptroller may not issue
  12-26  a warrant to the business while the business is in default.
  12-27        (d)  The instruments evidencing a loan made by the office or
   13-1  a guarantee of a loan made by a private lender must provide that in
   13-2  the event of a default in the payment of the principal of or
   13-3  interest on the obligation or in the performance of a mortgage,
   13-4  instrument, or other agreement relating to the loan or loan
   13-5  guarantee, the payment and performance may be enforced by mandamus
   13-6  or by the appointment of a receiver in equity with power to apply
   13-7  the revenues from the business as provided by the mortgage,
   13-8  instrument, or other agreement.
   13-9        Sec. 481.114.  FALSE INFORMATION ON APPLICATION.  An
  13-10  applicant who knowingly or negligently provides material false
  13-11  information on an application under Section 481.111:
  13-12              (1)  may not submit another application under Section
  13-13  481.111; and
  13-14              (2)  is liable to the state and a private lender for
  13-15  any expense incurred by the state or private lender that would not
  13-16  have been incurred if the applicant had not provided the false
  13-17  information.
  13-18        Sec. 481.115.  ADMINISTRATION OF CAPITAL GROWTH FUND.  The
  13-19  office shall administer the capital growth fund and shall act as
  13-20  liaison among businesses, private lenders, and state agencies whose
  13-21  services are useful to the  office in carrying out the loan and
  13-22  loan guarantee program provided by this subchapter.
  13-23        Sec. 481.116.  ADDITIONAL POWERS AND DUTIES.  The policy
  13-24  board shall adopt rules necessary to carry out the purposes of the
  13-25  capital growth fund.  The policy board shall establish procedures
  13-26  to minimize the number of defaults on loans made or guaranteed from
  13-27  the capital growth fund.  Those procedures may include the purchase
   14-1  of insurance coverage against loss.
   14-2        Sec. 481.117.  CAPITAL GROWTH FUND:  GENERAL OBLIGATION
   14-3  BONDS.  (a)  The policy board may issue up to $50 million of
   14-4  general obligation bonds and may use the proceeds of those bonds to
   14-5  provide loans or loan guarantees under this subchapter.  The policy
   14-6  board shall deposit the proceeds of the general obligation bonds in
   14-7  the capital growth fund and apply them in accordance with the
   14-8  resolutions authorizing the bonds.  The capital growth fund and any
   14-9  accounts established in the fund shall be held in trust by the
  14-10  state treasurer for and on behalf of the office and the owners of
  14-11  the general obligation bonds issued in accordance with this section
  14-12  and may be used only as provided by this section.  Pending use, the
  14-13  treasurer may invest and reinvest money in the capital growth fund
  14-14  in investments authorized by law for state funds that the
  14-15  treasurer, consistent with the policy board's resolutions
  14-16  authorizing the general obligation bonds, considers appropriate.
  14-17  Payment for the provision of a loan or loan guarantee provided
  14-18  under this subchapter shall be deposited, first, in the interest
  14-19  and sinking account as prescribed by the policy board's resolutions
  14-20  authorizing general obligation bonds under this subchapter and,
  14-21  second, in any reserve account established by the policy board
  14-22  until that account is fully funded as prescribed by the policy
  14-23  board's resolutions.  If, during the time any general obligation
  14-24  bonds are payable from the interest and sinking account, the policy
  14-25  board determines that there will not be sufficient money in the
  14-26  interest and sinking account during the following fiscal year to
  14-27  pay the principal of or interest on the general obligation bonds or
   15-1  both the principal and interest that are to come due during the
   15-2  following fiscal year, the comptroller shall transfer to the fund
   15-3  the first money coming into the state treasury not otherwise
   15-4  appropriated by the constitution in an amount sufficient to pay the
   15-5  obligations.
   15-6        (b)  The general obligation bonds may be issued from time to
   15-7  time in one or more series or issues, in bearer, registered, or any
   15-8  other form, which may include registered uncertificated obligations
   15-9  not represented by written instruments and commonly known as
  15-10  book-entry obligations, the registration of ownership and transfer
  15-11  of which shall be provided for by the policy board under a system
  15-12  of books and records maintained by the office or by an agent
  15-13  appointed by the policy board in a resolution providing for
  15-14  issuance of its general obligation bonds.  General obligation bonds
  15-15  may mature serially or otherwise not more than 40 years from their
  15-16  date.  General obligation bonds may bear no interest or may bear
  15-17  interest at any rate or rates, fixed, variable, floating, or
  15-18  otherwise, determined by the policy board or determined pursuant to
  15-19  any contractual arrangements approved by the policy board, not to
  15-20  exceed the maximum net effective interest rate allowed by Chapter
  15-21  3, Acts of the 61st Legislature, Regular Session, 1969 (Article
  15-22  717k-2, Vernon's Texas Civil Statutes).  Interest on the general
  15-23  obligation bonds may be payable at any time, and the rate of
  15-24  interest on the general obligation bonds may be adjusted at any
  15-25  time determined by the policy board pursuant to the resolutions
  15-26  authorizing the bonds or determined pursuant to any contractual
  15-27  arrangement approved by the policy board.  In connection with the
   16-1  issuance of its general obligation bonds, the policy board may
   16-2  exercise the powers granted to the governing body of an issuer in
   16-3  connection with the issuance of obligations under Chapter 656, Acts
   16-4  of the 68th Legislature, Regular Session, 1983 (Article 717q,
   16-5  Vernon's Texas Civil Statutes), to the extent not inconsistent with
   16-6  this section.  The general obligation bonds may be issued in the
   16-7  form and denominations and executed in the manner and under the
   16-8  terms, conditions, and details determined by the policy board in
   16-9  the resolution authorizing their issuance.  If any officer whose
  16-10  manual or facsimile signature appears on the general obligation
  16-11  bonds ceases to be an officer, the signature remains valid and
  16-12  sufficient for all purposes as if the officer had remained in
  16-13  office.
  16-14        (c)  All general obligation bonds issued by the policy board
  16-15  under this section are subject to review and approval by the
  16-16  attorney general in the same manner and with the same effect as is
  16-17  provided by Chapter 656, Acts of the 68th Legislature, Regular
  16-18  Session, 1983 (Article 717q, Vernon's Texas Civil Statutes).
  16-19        (d)  The general obligation bonds are a legal and authorized
  16-20  investment for a bank, trust company, savings and loan association,
  16-21  insurance company, fiduciary, trustee, or guardian or a sinking
  16-22  fund of a municipality, county, school district, or political
  16-23  subdivision of the state.  The general obligation bonds may secure
  16-24  deposits of public funds of the state or a municipality, county,
  16-25  school district, or another political corporation or subdivision of
  16-26  the state.  The policy board may issue bonds to refund all or part
  16-27  of its outstanding general obligation bonds, including accrued but
   17-1  unpaid interest.  The general obligation bonds, a transaction
   17-2  relating to those bonds, or a profit made in the sale of those
   17-3  bonds is exempt from taxation by the state, an agency or
   17-4  subdivision of the state, a municipality, or a special district.
   17-5        SECTION 6.  The policy board of the Texas Department of
   17-6  Commerce may not issue more than $25 million of bonds under Section
   17-7  481.117, Government Code, as added by this Act, during the state
   17-8  fiscal biennium beginning September 1, 1993.
   17-9        SECTION 7.  This Act takes effect on the date on which the
  17-10  constitutional amendment proposed by S.J.R. 9, 73rd Legislature,
  17-11  Regular Session, 1993, takes effect.  If that proposed
  17-12  constitutional amendment is not approved by the voters, this Act
  17-13  has no effect.
  17-14        SECTION 8.  The importance of this legislation and the
  17-15  crowded condition of the calendars in both houses create an
  17-16  emergency and an imperative public necessity that the
  17-17  constitutional rule requiring bills to be read on three several
  17-18  days in each house be suspended, and this rule is hereby suspended.