By:  Lucio                                             S.B. No. 225
       73R2368 CAE-D
                                 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.
    1-5        SECTION 1.  The heading of Subchapter G, Chapter 481,
    1-6  Government Code, is amended to read as follows:
    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)  "Capital growth fund" means the Texas historically
   2-20  underutilized business capital growth and start-up 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.
    8-5  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 481.109-481.117 to read as follows:
   8-11        Sec. 481.109.  Texas Historically Underutilized Business
   8-12  Capital Growth And Start-Up Fund.  (a)  The Texas historically
   8-13  underutilized business capital growth and start-up fund is a
   8-14  revolving fund in the state treasury.  The capital growth fund
   8-15  consists of money appropriated to the office, proceeds of general
   8-16  obligation bonds issued to provide loan guarantees under this
   8-17  subchapter, application fees, guarantee fees, and other amounts
   8-18  received by the state from loan guarantees made under this
   8-19  subchapter and money acquired from federal grants or other sources
   8-20  and required by resolution of the board to be deposited in the
   8-21  capital growth fund.  The capital growth fund contains a program
   8-22  account, an interest and sinking account, and other accounts that
   8-23  the board authorizes to be created and maintained.  Money in the
   8-24  capital growth fund is available for use by the office for the loan
   8-25  guarantee 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 loan guarantees
    9-1  under this subchapter and necessary costs of administering the
    9-2  capital growth fund, may be used only to provide loan guarantees to
    9-3  aid in the start-up costs of historically underutilized businesses.
    9-4  The office may provide loan guarantees from the capital growth fund
    9-5  to assist a historically underutilized business in obtaining a loan
    9-6  from a private lender to construct new facilities, renovate
    9-7  existing facilities, acquire any interest in real or personal
    9-8  property, and provide initial working capital to pay the cost of
    9-9  salaries, rents, supplies, inventories, mortgage payments, legal
   9-10  services, and utilities and telephone, travel, and other incidental
   9-11  costs normally classified as working capital according to standard
   9-12  accounting principles.  The office shall provide loan guarantees
   9-13  from the capital growth fund on the terms and conditions that the
   9-14  office determines to be reasonable, appropriate, and consistent
   9-15  with the purposes and objectives of the capital growth fund and
   9-16  this subchapter.  The office may provide a loan guarantee only if
   9-17  financing for the historically underutilized business may not be
   9-18  obtained without the guarantee.
   9-19        Sec. 481.110.  LOAN GUARANTEES.  (a)  The office may not
   9-20  guarantee more than 95 percent of a loan.
   9-21        (b)  For each guarantee the office shall determine:
   9-22              (1)  the fees charged by the office, including
   9-23  guarantee fees, application fees, annual fees, and any other costs
   9-24  associated with the loan guarantee necessary for the administration
   9-25  of the capital growth fund;
   9-26              (2)  the permissible interest rates and amortization
   9-27  requirements for a guaranteed loan, as agreed on by the private
   10-1  lender, the business, and the office;
   10-2              (3)  the acceptable security for the office's
   10-3  participation in the business;
   10-4              (4)  the financial responsibility of the business to
   10-5  repay the loan; and
   10-6              (5)  any other terms or conditions relating to a
   10-7  guarantee.
   10-8        (c)  The minimum amount of a loan that may be guaranteed by
   10-9  the office is $10,000.
  10-10        (d)  The maximum amount of a loan that may be guaranteed by
  10-11  the office is $500,000.
  10-12        Sec. 481.111.  LOAN GUARANTEE:  APPLICATION AND APPROVAL.
  10-13  (a)  The office may not make a loan guarantee except on submission
  10-14  of a qualified application by a historically underutilized business
  10-15  or private lender.
  10-16        (b)  A qualified application may not be approved unless the
  10-17  business holds funds or property in an amount or value equal to not
  10-18  less than five percent of the start-up cost of the business, the
  10-19  funds or property are pledged to the business, and the business has
  10-20  obtained from other financial sources a firm commitment for funds
  10-21  in excess of the loan guaranteed by the office.
  10-22        (c)  On approval of the qualified application, the office may
  10-23  provide a loan guarantee of not more than 95 percent of the loan to
  10-24  a business by a participating lender for purposes authorized by
  10-25  Section 481.112.
  10-26        (d)  This subchapter does not prohibit the use of money in
  10-27  the capital growth fund in conjunction with any other money
   11-1  available for the purposes of the loan guarantees provided by this
   11-2  subchapter.
   11-3        Sec. 481.112.  USE OF LOAN.  The money received from a loan
   11-4  guaranteed under Section 481.110 may be used only for the initial
   11-5  costs of starting a business as described by Section 481.109.
   11-6        Sec. 481.113.  DEFAULT ON GUARANTEED LOAN.  (a)  If a
   11-7  historically underutilized business defaults on a loan guaranteed
   11-8  under Section 481.110 and the office is required to honor its
   11-9  guarantee, the office, through its representative, shall bring suit
  11-10  against the business as soon as practicable.  The suit may be
  11-11  brought in the county in which the principal office of the business
  11-12  is located, in which the private lender is located, or in Travis
  11-13  County.
  11-14        (b)  The office may take title by foreclosure to any property
  11-15  of the business if an acquisition is necessary to protect a loan
  11-16  guarantee made for the business by the office and may sell any
  11-17  property of the business.   If the office cannot make a sale
  11-18  promptly, it may lease any property of the business to another
  11-19  person to minimize financial losses and sustain employment.
  11-20        (c)  The office shall report to the comptroller of public
  11-21  accounts the name of a business that is in default on a loan
  11-22  guaranteed under Section 481.110 and that the office has been
  11-23  required to honor a guarantee.  The comptroller of public accounts
  11-24  may not issue a warrant to the business while the business is in
  11-25  default.
  11-26        (d)  The instruments evidencing a guarantee of a loan made by
  11-27  a private lender must provide that in the event of a default in the
   12-1  payment of the principal of or interest on the obligation or in the
   12-2  performance of an agreement contained in the guarantee or a
   12-3  mortgage or instrument relating to the guarantee, the payment and
   12-4  performance may be enforced by mandamus or by the appointment of a
   12-5  receiver in equity with power to apply the revenues from the
   12-6  business as provided by the mortgage or instrument.
   12-7        Sec. 481.114.  FALSE INFORMATION ON LOAN GUARANTEE
   12-8  APPLICATION.  An applicant who knowingly or negligently provides
   12-9  material false information on an application under Section 481.111:
  12-10              (1)  may not submit an application under Section
  12-11  481.111 before the second anniversary of the date that the
  12-12  application containing the false information was submitted; and
  12-13              (2)  is liable to the state and a private lender for
  12-14  any expense incurred by the state or private lender that would not
  12-15  have been incurred if the applicant had not provided the false
  12-16  information.
  12-17        Sec. 481.115.  ADMINISTRATION OF CAPITAL GROWTH FUND.  The
  12-18  office shall administer the capital growth fund and shall act as
  12-19  liaison among businesses, private lenders, and state agencies whose
  12-20  services are useful to the  office in carrying out the loan
  12-21  guarantee program provided by this subchapter.
  12-22        Sec. 481.116.  ADDITIONAL POWERS AND DUTIES:  LOAN
  12-23  GUARANTEES.  The board shall adopt rules necessary to carry out the
  12-24  purposes of the capital growth fund.  The board shall establish
  12-25  procedures to minimize the number of defaults on loans guaranteed
  12-26  from the capital growth fund.  Those procedures may include the
  12-27  purchase of insurance coverage against loss.
   13-1        Sec. 481.117.  CAPITAL GROWTH FUND:  GENERAL OBLIGATION
   13-2  BONDS.  (a)  The board may issue up to $50 million of general
   13-3  obligation bonds and may use the proceeds of those bonds to provide
   13-4  loan guarantees under this subchapter.  The board shall deposit the
   13-5  proceeds of the general obligation bonds in the capital growth fund
   13-6  and apply them in accordance with the resolutions authorizing the
   13-7  bonds.   The capital growth fund and any accounts established in
   13-8  the fund shall be held in trust by the state treasurer for and on
   13-9  behalf of the office and the owners of the general obligation bonds
  13-10  issued in accordance with this section and may be used only as
  13-11  provided by this section.  Pending use, the treasurer may invest
  13-12  and reinvest money in the capital growth fund in investments
  13-13  authorized by law for state funds that the treasurer, consistent
  13-14  with the board's resolutions authorizing the general obligation
  13-15  bonds, considers appropriate.  Payment for the provision of a loan
  13-16  guarantee provided under this subchapter shall be deposited, first,
  13-17  in the interest and sinking account as prescribed by the board's
  13-18  resolutions authorizing general obligation bonds under this
  13-19  subchapter and, second, in any reserve account established by the
  13-20  board until that account is fully funded as prescribed by the
  13-21  board's resolutions.  If, during the time any general obligation
  13-22  bonds are payable from the interest and sinking account, the board
  13-23  determines that there will not be sufficient money in the interest
  13-24  and sinking account during the following fiscal year to pay the
  13-25  principal of or interest on the general obligation bonds or both
  13-26  the principal and interest that are to come due during the
  13-27  following fiscal year, the comptroller of public accounts shall
   14-1  transfer to the fund the first money coming into the state treasury
   14-2  not otherwise appropriated by the constitution in an amount
   14-3  sufficient to pay the obligations.
   14-4        (b)  The general obligation bonds may be issued from time to
   14-5  time in one or more series or issues, in bearer, registered, or any
   14-6  other form, which may include registered uncertificated obligations
   14-7  not represented by written instruments and commonly known as
   14-8  book-entry obligations, the registration of ownership and transfer
   14-9  of which shall be provided for by the board under a system of books
  14-10  and records maintained by the office or by an agent appointed by
  14-11  the board in a resolution providing for issuance of its general
  14-12  obligation bonds.  General obligation bonds may mature serially or
  14-13  otherwise not more than 40 years from their date.  General
  14-14  obligation bonds may bear no interest or may bear interest at any
  14-15  rate or rates, fixed, variable, floating, or otherwise, determined
  14-16  by the board or determined pursuant to any contractual arrangements
  14-17  approved by the board, not to exceed the maximum net effective
  14-18  interest rate allowed by Chapter 3, Acts of the 61st Legislature,
  14-19  Regular Session, 1969 (Article 717k-2, Vernon's Texas Civil
  14-20  Statutes).  Interest on the general obligation bonds may be payable
  14-21  at any time, and the rate of interest on the general obligation
  14-22  bonds may be adjusted at any time determined by the board pursuant
  14-23  to the resolutions authorizing the bonds or determined pursuant to
  14-24  any contractual arrangement approved by the board.  In connection
  14-25  with the issuance of its general obligation bonds, the board may
  14-26  exercise the powers granted to the governing body of an issuer in
  14-27  connection with the issuance of obligations under Chapter 656, Acts
   15-1  of the 68th Legislature, Regular Session, 1983 (Article 717q,
   15-2  Vernon's Texas Civil Statutes), to the extent not inconsistent with
   15-3  this section.  The general obligation bonds may be issued in the
   15-4  form and denominations and executed in the manner and under the
   15-5  terms, conditions, and details determined by the board in the
   15-6  resolution authorizing their issuance.  If any officer whose manual
   15-7  or facsimile signature appears on the general obligation bonds
   15-8  ceases to be an officer, the signature remains valid and sufficient
   15-9  for all purposes as if the officer had remained in office.
  15-10        (c)  All general obligation bonds issued by the board under
  15-11  this section are subject to review and approval by the attorney
  15-12  general in the same manner and with the same effect as is provided
  15-13  by Chapter 656, Acts of the 68th Legislature, Regular Session, 1983
  15-14  (Article 717q, Vernon's Texas Civil Statutes).
  15-15        (d)  The general obligation bonds are a legal and authorized
  15-16  investment for a bank, trust company, savings and loan association,
  15-17  insurance company, fiduciary, trustee, or guardian or a sinking
  15-18  fund of a municipality, county, school district, or political
  15-19  subdivision of the state.  The general obligation bonds may secure
  15-20  deposits of public funds of the state or a municipality, county,
  15-21  school district, or another political corporation or subdivision of
  15-22  the state.  The board may issue bonds to refund all or part of its
  15-23  outstanding general obligation bonds, including accrued but unpaid
  15-24  interest.  The general obligation bonds, a transaction relating to
  15-25  those bonds, or a profit made in the sale of those bonds is exempt
  15-26  from taxation by the state, an agency or subdivision of the state,
  15-27  a municipality, or a special district.
   16-1        SECTION 5.  This Act takes effect on the date on which the
   16-2  constitutional amendment proposed by ___ J.R. ___, Acts of the 73rd
   16-3  Legislature, Regular Session, 1993, takes effect.  If that proposed
   16-4  constitutional amendment is not approved by the voters, this Act
   16-5  has no effect.
   16-6        SECTION 6.  The importance of this legislation and the
   16-7  crowded condition of the calendars in both houses create an
   16-8  emergency   and   an   imperative   public   necessity   that   the
   16-9  constitutional rule requiring bills to be read on three several
  16-10  days in each house be suspended, and this rule is hereby suspended.