BILL ANALYSIS



C.S.H.B. 1167
By: Patterson
04-05-95
Committee Report (Substituted)


BACKGROUND

In 1993 legislation was passed that moved the administration of
the Farm and Ranch Finance Program from the Veterans Land Board,
where the program was idle, to the Texas Department of
Agriculture. The purpose of the program is to provide affordable
financing to eligible farmers and ranchers in order to purchase
land for a base of operation. The program is funded by general
obligation bonds and is self supporting. Borrowers are required
to make a downpayment of at least five percent, which is a more
favorable loan term than is available with commercial loans.
Borrowers may not have a net worth of greater than $250,000.
These two factors make the program available to young farmers who
have a few years experience.  The downside of this is that these
producers may be a higher credit risk than other producers with
more experience and accumulated capital.

The current program requires a borrower to have earned at least
25 percent of gross income from farming/ranching for the past
three years. This provision is intended to restrict the program
to individuals who have experience and who are not "dabblers" or
in "tax shelters." Unfortunately, the 25 percent of gross income
implies that only individuals who have three years of income from
an owned agricultural operation will be able to qualify. Also,
the  calculations required to determine this are complicated and
vary with each individual situation.  One other facet of the
current legislation that does not meet with legislative intent is
the loan amount limit requirement. The loan limit is $150,000
however, the down payment language inadvertently does not allow a
loan to exceed $142,500, and actually decreases the loan amount
allowed as a tract purchase price increases. 


PURPOSE

The purpose of this legislation is to clarify that a Farm and
Ranch Finance loan may be made for an amount up to $150,000.  It
states that an applicant must provide evidence that he has three
years of pertinent experience, and must not have a net worth
exceeding $300,000.


RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 59.022(c), Agriculture Code.  Sets
forth that fees collected to cover administrative expenses be
deposited in the farm and ranch finance program fund.  Sets forth
that costs not covered by fees shall be paid from the farm and
ranch administrative expense fund.

SECTION 2.  Amends Section 59.024, Agriculture Code to read as
follows:

     Section 59.024.  APPLICATION; ELIGIBILITY.

           (a) Requires a person to submit to the lender an
application outlining an           agricultural business plan for
the land to be purchased.  Sets forth that the         primary
purpose of the land should be for farming or ranching.

           (b) Requires the applicant to provide evidence at the
time of        application that he has had three years prior
experience pertinent to the        applicant's plans for the
land.  Removes the requirement that the applicant           derived at least 25% of his gross income from a farm or ranch. 
Increases the       limit of an applicant's net worth to
$300,000. 

SECTION 3.  Amends Section 59.025, Agriculture Code. Changes
current language, which inadvertently allows for a loan of only
$142,500, to allow for a loan of $150,000.

SECTION 4.  Sets forth that farm and ranch finance loans made
prior to the effective date of this act would not be affected by
this act. Also establishes that down payments paid to the Texas
Agriculture Finance Authority prior to the effective date of this
bill will be refunded to the borrower if the sale of land has not
been consummated.

SECTION 5.  Effective Date: September 1, 1995.

SECTION 6.  Emergency clause.


COMPARISON OF ORIGINAL TO SUBSTITUTE

The original legislation required that the fees collected to
cover administrative expenses be deposited in the farm and ranch
administrative expense fund instead of the farm and ranch finance
program fund.  Also, it required an applicant to use the land for
farming and ranching in order to be eligible for the loan.  H.B.
1167 removed the existing limit of $250,000 for an applicant's
net worth, whereas the substitute sets a higher net worth limit
of $300,000.


SUMMARY OF COMMITTEE ACTION

H.B. 1167 was considered by the committee in a public hearing on
Tuesday, March 7, 1995.

The following person testified neutrally on the bill:

     Mr. Robert Kennedy representing the Texas Department of
Agriculture.

The bill was left pending.

H.B. 1167 was considered by the committee in a public hearing on
Tuesday, March 14, 1995.

The bill was left pending.

H.B. 1167 was considered by the committee in a public hearing on
Tuesday, March 21, 1995.

The committee considered a complete substitute for the bill. 

The substitute was adopted without objection.

The bill was reported favorably as substituted with the
recommendation that it do pass and be printed, by a record vote
of 6 ayes, 0 nays, 0 pnv, 3 absent.