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.
1-4 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 AND SMALL BUSINESSES
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:
3-18 Sec. 481.1011. EXCLUSION AS HISTORICALLY UNDERUTILIZED
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.
9-1 Sec. 481.107. CONTRACTS AWARDED TO SMALL OR HISTORICALLY
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.