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.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. The heading of Subchapter G, Chapter 481,
1-6 Government Code, is amended to read as follows:
1-7 SUBCHAPTER G. <SMALL BUSINESS> ASSISTANCE FOR HISTORICALLY
1-8 UNDERUTILIZED BUSINESSES
1-9 SECTION 2. Section 481.101, Government Code, is amended by
1-10 amending Subdivision (1) and adding Subdivisions (4), (5), and (6)
1-11 to read as follows:
1-12 (1) "Historically underutilized business"
1-13 <"Disadvantaged business"> means:
1-14 (A) a corporation formed for the purpose of
1-15 making a profit in which at least 51 percent of all classes of the
1-16 shares of stock or other equitable securities is owned by one or
1-17 more persons who are socially disadvantaged because of their
1-18 identification as members of certain groups, including black
1-19 Americans, Hispanic Americans, women, Asian Pacific Americans, and
1-20 American Indians, who have suffered the effects of discriminatory
1-21 practices or similar insidious circumstances over which they have
1-22 no control;
1-23 (B) a sole proprietorship formed for the purpose
1-24 of making a profit that is 100 percent owned, operated, and
2-1 controlled by a person described by Paragraph (A) of this
2-2 subdivision;
2-3 (C) a partnership formed for the purpose of
2-4 making a profit in which 51 percent of the assets and interest in
2-5 the partnership is owned by one or more persons described by
2-6 Paragraph (A) of this subdivision. Those persons must have
2-7 proportionate interest in the control, operation, and management of
2-8 the partnership's affairs;
2-9 (D) a joint venture in which each entity in the
2-10 joint venture is a historically underutilized <disadvantaged>
2-11 business under this subdivision; <or>
2-12 (E) a supplier contract between a historically
2-13 underutilized <disadvantaged> business under this subdivision and a
2-14 prime contractor under which the historically underutilized
2-15 <disadvantaged> business is directly involved in the manufacture or
2-16 distribution of the supplies or materials or otherwise warehouses
2-17 and ships the supplies; or
2-18 (F) a small business.
2-19 (4) "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.
8-4 Sec. 481.107. CONTRACTS AWARDED TO SMALL OR HISTORICALLY
8-5 UNDERUTILIZED <DISADVANTAGED> BUSINESSES. Each state agency shall
8-6 keep statistical data and other records on the number of contracts
8-7 awarded by the agency to small or historically underutilized
8-8 <disadvantaged> businesses.
8-9 SECTION 4. Subchapter G, Chapter 481, Government Code, is
8-10 amended by adding Sections 481.109-481.117 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.