By: West S.B. No. 803
73R1072 LJD-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the creation and administration of a linked deposit
1-3 program to encourage lending to small businesses in distressed
1-4 communities.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 481, Government Code, is amended by
1-7 adding Subchapter J to read as follows:
1-8 SUBCHAPTER J. SMALL BUSINESS LINKED DEPOSIT PROGRAM
1-9 Sec. 481.151. DEFINITIONS. In this subchapter:
1-10 (1) "Eligible borrower" means a person who proposes to
1-11 begin operating a small business in a distressed community.
1-12 (2) "Eligible lending institution" means a financial
1-13 institution that makes commercial loans, is a depository of state
1-14 funds, and agrees to participate in the linked deposit program
1-15 established by this subchapter and to provide collateral equal to
1-16 the amount of linked deposits placed with it.
1-17 (3) "Small business" means a corporation, partnership,
1-18 sole proprietorship, or other legal entity that:
1-19 (A) is domiciled in this state;
1-20 (B) is formed to make a profit;
1-21 (C) is independently owned and operated; and
1-22 (D) employs fewer than 100 full-time employees.
1-23 Sec. 481.152. LINKED DEPOSIT. A linked deposit is a time
1-24 deposit governed by a written deposit agreement between the state
2-1 and an eligible lending institution that provides:
2-2 (1) that the eligible lending institution pay interest
2-3 on the deposit at a rate that is not less than the current market
2-4 rate of a United States treasury bill or note of comparable
2-5 maturity minus two percent;
2-6 (2) that the state not withdraw any part of the
2-7 deposit before the expiration of a period set by a written advance
2-8 notice of the intention to withdraw; and
2-9 (3) that the eligible lending institution agree to
2-10 lend the value of the deposit to an eligible borrower at a maximum
2-11 rate that is the current market rate of a United States treasury
2-12 bill or note of comparable maturity plus four percent.
2-13 Sec. 481.153. LINKED DEPOSIT PROGRAM. (a) The department
2-14 shall establish a linked deposit program to encourage commercial
2-15 lending for the development of small businesses in distressed
2-16 communities.
2-17 (b) The policy board shall adopt rules for the loan portion
2-18 of the linked deposit program.
2-19 (c) In order to participate in the linked deposit program,
2-20 an eligible lending institution may solicit loan applications from
2-21 eligible borrowers.
2-22 (d) After reviewing an application and determining that the
2-23 applicant is an eligible borrower and is creditworthy, the eligible
2-24 lending institution shall send the application for a linked deposit
2-25 loan to the department.
2-26 (e) The eligible lending institution shall certify the
2-27 interest rate applicable to the specific eligible borrower and
3-1 attach it to the application sent to the department.
3-2 (f) After reviewing each linked deposit loan application,
3-3 the executive director of the department shall recommend to the
3-4 state treasurer the acceptance or rejection of the application.
3-5 (g) After acceptance of the application, the state treasurer
3-6 shall place a linked deposit with the applicable eligible lending
3-7 institution for the period the treasurer considers appropriate.
3-8 The state treasurer may not place a deposit for a period extending
3-9 beyond the state fiscal biennium in which it is placed. Subject to
3-10 the limitation described by Section 481.157, the treasurer may
3-11 place time deposits at an interest rate described by Section
3-12 481.152, notwithstanding any order of the State Depository Board to
3-13 the contrary.
3-14 (h) Before the placing of a linked deposit, the eligible
3-15 lending institution and the state, represented by the state
3-16 treasurer and the department, shall enter into a written deposit
3-17 agreement containing the conditions on which the linked deposit is
3-18 made.
3-19 (i) If a lending institution holding linked deposits ceases
3-20 to be a state depository, the state treasurer may withdraw the
3-21 linked deposits.
3-22 Sec. 481.154. COMPLIANCE. (a) On accepting a linked
3-23 deposit, an eligible lending institution shall loan money to
3-24 eligible borrowers in accordance with the deposit agreement and
3-25 this subchapter. The eligible lending institution shall forward a
3-26 compliance report to the department.
3-27 (b) The department shall monitor compliance with this
4-1 subchapter and inform the state treasurer of noncompliance on the
4-2 part of an eligible lending institution.
4-3 Sec. 481.155. DESIGNATION AS DISTRESSED COMMUNITY. (a) A
4-4 municipality may apply to the policy board for designation of a
4-5 subarea of the municipality as a distressed community.
4-6 (b) The application must:
4-7 (1) provide evidence that the subarea of the
4-8 municipality for which the application is being made has been
4-9 traditionally recognized by custom or by previous governmental
4-10 designation as a subarea; and
4-11 (2) certify that:
4-12 (A) the per capita income in the subarea is 80
4-13 percent or less of the median income of the entire municipality
4-14 filing the application;
4-15 (B) the unemployment rate in the subarea is
4-16 three percent higher than the average unemployment rate of the
4-17 entire municipality; and
4-18 (C) 10 percent or more of all individuals and
4-19 families in the subarea are in poverty.
4-20 (c) The policy board shall designate the subarea for which
4-21 an application is filed as a distressed community if it determines
4-22 that the evidence required under Subsection (b)(1) is sufficient
4-23 and that the requirements of Subsection (b)(2) have been satisfied.
4-24 Sec. 481.156. STATE LIABILITY PROHIBITED. The state is not
4-25 liable to an eligible lending institution for payment of the
4-26 principal, interest, or any late charges on a loan made to an
4-27 eligible borrower. A delay in payment or default on a loan by an
5-1 eligible borrower does not affect the validity of the deposit
5-2 agreement. Linked deposits are not an extension of the state's
5-3 credit within the meaning of any state constitutional prohibition.
5-4 Sec. 481.157. LIMITATIONS IN PROGRAM. (a) The maximum
5-5 amount of a loan under the linked deposit program is $1,000,000.
5-6 (b) The borrower shall apply a loan granted under this
5-7 subchapter to the purchase, construction, or lease of capital
5-8 assets, including land, buildings, and equipment.
5-9 SECTION 2. The importance of this legislation and the
5-10 crowded condition of the calendars in both houses create an
5-11 emergency and an imperative public necessity that the
5-12 constitutional rule requiring bills to be read on three several
5-13 days in each house be suspended, and this rule is hereby suspended,
5-14 and that this Act take effect and be in force from and after its
5-15 passage, and it is so enacted.