By Romo H.B. No. 1017
74R2627 DWS-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. Section 481.101, Government Code, is amended by
1-6 amending Subdivision (1) and adding Subdivisions (4), (5), and (6)
1-7 to read as follows:
1-8 (1) "Historically underutilized business" means:
1-9 (A) a corporation formed for the purpose of
1-10 making a profit in which at least 51 percent of all classes of the
1-11 shares of stock or other equitable securities is owned by one or
1-12 more persons who are socially disadvantaged because of their
1-13 identification as members of certain groups, including black
1-14 Americans, Hispanic Americans, women, Asian Pacific Americans, and
1-15 American Indians, who have suffered the effects of discriminatory
1-16 practices or similar insidious circumstances over which they have
1-17 no control;
1-18 (B) a sole proprietorship formed for the purpose
1-19 of making a profit that is 100 percent owned, operated, and
1-20 controlled by a person described by Paragraph (A);
1-21 (C) a partnership formed for the purpose of
1-22 making a profit in which 51 percent of the assets and interest in
1-23 the partnership is owned by one or more persons described by
1-24 Paragraph (A). Those persons must have proportionate interest in
2-1 the control, operation, and management of the partnership's
2-2 affairs;
2-3 (D) a joint venture in which each entity in the
2-4 joint venture is a historically underutilized business under this
2-5 subdivision; <or>
2-6 (E) a supplier contract between a historically
2-7 underutilized business under this subdivision and a prime
2-8 contractor under which the historically underutilized business is
2-9 directly involved in the manufacture or distribution of the
2-10 supplies or materials or otherwise warehouses and ships the
2-11 supplies; or
2-12 (F) a small business.
2-13 (4) "Capital growth fund" means the Texas historically
2-14 underutilized business capital growth and start-up fund.
2-15 (5) "Private lender" means a bank, savings bank,
2-16 savings and loan association, trust company, or insurance company,
2-17 or an individual that the office determines is an experienced and
2-18 sophisticated investor.
2-19 (6) "Qualified application" means a completed
2-20 application, including all documents and information required by
2-21 the office and submitted by:
2-22 (A) a private lender for a business; or
2-23 (B) a historically underutilized business.
2-24 SECTION 2. Subchapter G, Chapter 481, Government Code, is
2-25 amended by adding Sections 481.109-481.117 to read as follows:
2-26 Sec. 481.109. Texas Historically Underutilized Business
2-27 Capital Growth And Start-Up Fund. (a) The Texas historically
3-1 underutilized business capital growth and start-up fund is a
3-2 revolving fund in the state treasury. The capital growth fund
3-3 consists of money appropriated to the office, proceeds of general
3-4 obligation bonds issued to provide loan guarantees under this
3-5 subchapter, application fees, guarantee fees, and other amounts
3-6 received by the state from loan guarantees made under this
3-7 subchapter and money acquired from federal grants or other sources
3-8 and required by resolution of the board to be deposited in the
3-9 capital growth fund. The capital growth fund contains a program
3-10 account, an interest and sinking account, and other accounts that
3-11 the board authorizes to be created and maintained. Money in the
3-12 capital growth fund is available for use by the office for the loan
3-13 guarantee program provided by this subchapter. Sections 403.094
3-14 and 403.095 do not apply to the capital growth fund.
3-15 (b) Money in the program account, minus the costs of
3-16 issuance of general obligation bonds to provide loan guarantees
3-17 under this subchapter and necessary costs of administering the
3-18 capital growth fund, may be used only to provide loan guarantees to
3-19 aid in the start-up costs of historically underutilized businesses.
3-20 The office may provide loan guarantees from the capital growth fund
3-21 to assist a historically underutilized business in obtaining a loan
3-22 from a private lender to construct new facilities, renovate
3-23 existing facilities, acquire any interest in real or personal
3-24 property, and provide initial working capital to pay the cost of
3-25 salaries, rents, supplies, inventories, mortgage payments, legal
3-26 services, and utilities and telephone, travel, and other incidental
3-27 costs normally classified as working capital according to standard
4-1 accounting principles. The office shall provide loan guarantees
4-2 from the capital growth fund on the terms and conditions that the
4-3 office determines to be reasonable, appropriate, and consistent
4-4 with the purposes and objectives of the capital growth fund and
4-5 this subchapter. The office may provide a loan guarantee only if
4-6 financing for the historically underutilized business may not be
4-7 obtained without the guarantee.
4-8 Sec. 481.110. LOAN GUARANTEES. (a) The office may not
4-9 guarantee more than 95 percent of a loan.
4-10 (b) For each guarantee the office shall determine:
4-11 (1) the fees charged by the office, including
4-12 guarantee fees, application fees, annual fees, and any other costs
4-13 associated with the loan guarantee necessary for the administration
4-14 of the capital growth fund;
4-15 (2) the permissible interest rates and amortization
4-16 requirements for a guaranteed loan, as agreed on by the private
4-17 lender, the business, and the office;
4-18 (3) the acceptable security for the office's
4-19 participation in the business;
4-20 (4) the financial responsibility of the business to
4-21 repay the loan; and
4-22 (5) any other terms or conditions relating to a
4-23 guarantee.
4-24 (c) The minimum amount of a loan that may be guaranteed by
4-25 the office is $10,000.
4-26 (d) The maximum amount of a loan that may be guaranteed by
4-27 the office is $500,000.
5-1 Sec. 481.111. LOAN GUARANTEE: APPLICATION AND APPROVAL.
5-2 (a) The office may not make a loan guarantee except on submission
5-3 of a qualified application by a historically underutilized business
5-4 or private lender.
5-5 (b) A qualified application may not be approved unless the
5-6 business holds funds or property in an amount or value equal to not
5-7 less than five percent of the start-up cost of the business, the
5-8 funds or property are pledged to the business, and the business has
5-9 obtained from other financial sources a firm commitment for funds
5-10 in excess of the loan guaranteed by the office.
5-11 (c) On approval of the qualified application, the office may
5-12 provide a loan guarantee of not more than 95 percent of the loan to
5-13 a business by a participating lender for purposes authorized by
5-14 Section 481.112.
5-15 (d) This subchapter does not prohibit the use of money in
5-16 the capital growth fund in conjunction with any other money
5-17 available for the purposes of the loan guarantees provided by this
5-18 subchapter.
5-19 Sec. 481.112. USE OF LOAN. The money received from a loan
5-20 guaranteed under Section 481.110 may be used only for the initial
5-21 costs of starting a business as described by Section 481.109.
5-22 Sec. 481.113. DEFAULT ON GUARANTEED LOAN. (a) If a
5-23 historically underutilized business defaults on a loan guaranteed
5-24 under Section 481.110 and the office is required to honor its
5-25 guarantee, the office, through its representative, shall bring suit
5-26 against the business as soon as practicable. The suit may be
5-27 brought in the county in which the principal office of the business
6-1 is located, in which the private lender is located, or in Travis
6-2 County.
6-3 (b) The office may take title by foreclosure to any property
6-4 of the business if an acquisition is necessary to protect a loan
6-5 guarantee made for the business by the office and may sell any
6-6 property of the business. If the office cannot make a sale
6-7 promptly, it may lease any property of the business to another
6-8 person to minimize financial losses and sustain employment.
6-9 (c) The office shall report to the comptroller of public
6-10 accounts the name of a business that is in default on a loan
6-11 guaranteed under Section 481.110 and that the office has been
6-12 required to honor a guarantee. The comptroller of public accounts
6-13 may not issue a warrant to the business while the business is in
6-14 default.
6-15 (d) The instruments evidencing a guarantee of a loan made by
6-16 a private lender must provide that in the event of a default in the
6-17 payment of the principal of or interest on the obligation or in the
6-18 performance of an agreement contained in the guarantee or a
6-19 mortgage or instrument relating to the guarantee, the payment and
6-20 performance may be enforced by mandamus or by the appointment of a
6-21 receiver in equity with power to apply the revenues from the
6-22 business as provided by the mortgage or instrument.
6-23 Sec. 481.114. FALSE INFORMATION ON LOAN GUARANTEE
6-24 APPLICATION. An applicant who knowingly or negligently provides
6-25 material false information on an application under Section 481.111:
6-26 (1) may not submit an application under Section
6-27 481.111 before the second anniversary of the date that the
7-1 application containing the false information was submitted; and
7-2 (2) is liable to the state and a private lender for
7-3 any expense incurred by the state or private lender that would not
7-4 have been incurred if the applicant had not provided the false
7-5 information.
7-6 Sec. 481.115. ADMINISTRATION OF CAPITAL GROWTH FUND. The
7-7 office shall administer the capital growth fund and shall act as
7-8 liaison among businesses, private lenders, and state agencies whose
7-9 services are useful to the office in carrying out the loan
7-10 guarantee program provided by this subchapter.
7-11 Sec. 481.116. ADDITIONAL POWERS AND DUTIES: LOAN
7-12 GUARANTEES. The board shall adopt rules necessary to carry out the
7-13 purposes of the capital growth fund. The board shall establish
7-14 procedures to minimize the number of defaults on loans guaranteed
7-15 from the capital growth fund. Those procedures may include the
7-16 purchase of insurance coverage against loss.
7-17 Sec. 481.117. CAPITAL GROWTH FUND: GENERAL OBLIGATION
7-18 BONDS. (a) The board may issue up to $50 million of general
7-19 obligation bonds and may use the proceeds of those bonds to provide
7-20 loan guarantees under this subchapter. The board shall deposit the
7-21 proceeds of the general obligation bonds in the capital growth fund
7-22 and apply them in accordance with the resolutions authorizing the
7-23 bonds. The capital growth fund and any accounts established in the
7-24 fund shall be held in trust by the state treasurer for and on
7-25 behalf of the office and the owners of the general obligation bonds
7-26 issued in accordance with this section and may be used only as
7-27 provided by this section. Pending use, the treasurer may invest
8-1 and reinvest money in the capital growth fund in investments
8-2 authorized by law for state funds that the treasurer, consistent
8-3 with the board's resolutions authorizing the general obligation
8-4 bonds, considers appropriate. Payment for the provision of a loan
8-5 guarantee provided under this subchapter shall be deposited, first,
8-6 in the interest and sinking account as prescribed by the board's
8-7 resolutions authorizing general obligation bonds under this
8-8 subchapter and, second, in any reserve account established by the
8-9 board until that account is fully funded as prescribed by the
8-10 board's resolutions. If, during the time any general obligation
8-11 bonds are payable from the interest and sinking account, the board
8-12 determines that there will not be sufficient money in the interest
8-13 and sinking account during the following fiscal year to pay the
8-14 principal of or interest on the general obligation bonds or both
8-15 the principal and interest that are to come due during the
8-16 following fiscal year, the comptroller of public accounts shall
8-17 transfer to the fund the first money coming into the state treasury
8-18 not otherwise appropriated by the constitution in an amount
8-19 sufficient to pay the obligations.
8-20 (b) The general obligation bonds may be issued from time to
8-21 time in one or more series or issues, in bearer, registered, or any
8-22 other form, which may include registered uncertificated obligations
8-23 not represented by written instruments and commonly known as
8-24 book-entry obligations, the registration of ownership and transfer
8-25 of which shall be provided for by the board under a system of books
8-26 and records maintained by the office or by an agent appointed by
8-27 the board in a resolution providing for issuance of its general
9-1 obligation bonds. General obligation bonds may mature serially or
9-2 otherwise not more than 40 years from their date. General
9-3 obligation bonds may bear no interest or may bear interest at any
9-4 rate or rates, fixed, variable, floating, or otherwise, determined
9-5 by the board or determined pursuant to any contractual arrangements
9-6 approved by the board, not to exceed the maximum net effective
9-7 interest rate allowed by Chapter 3, Acts of the 61st Legislature,
9-8 Regular Session, 1969 (Article 717k-2, Vernon's Texas Civil
9-9 Statutes). Interest on the general obligation bonds may be payable
9-10 at any time, and the rate of interest on the general obligation
9-11 bonds may be adjusted at any time determined by the board pursuant
9-12 to the resolutions authorizing the bonds or determined pursuant to
9-13 any contractual arrangement approved by the board. In connection
9-14 with the issuance of its general obligation bonds, the board may
9-15 exercise the powers granted to the governing body of an issuer in
9-16 connection with the issuance of obligations under Chapter 656, Acts
9-17 of the 68th Legislature, Regular Session, 1983 (Article 717q,
9-18 Vernon's Texas Civil Statutes), to the extent not inconsistent with
9-19 this section. The general obligation bonds may be issued in the
9-20 form and denominations and executed in the manner and under the
9-21 terms, conditions, and details determined by the board in the
9-22 resolution authorizing their issuance. If any officer whose manual
9-23 or facsimile signature appears on the general obligation bonds
9-24 ceases to be an officer, the signature remains valid and sufficient
9-25 for all purposes as if the officer had remained in office.
9-26 (c) All general obligation bonds issued by the board under
9-27 this section are subject to review and approval by the attorney
10-1 general in the same manner and with the same effect as is provided
10-2 by Chapter 656, Acts of the 68th Legislature, Regular Session, 1983
10-3 (Article 717q, Vernon's Texas Civil Statutes).
10-4 (d) The general obligation bonds are a legal and authorized
10-5 investment for a bank, trust company, savings and loan association,
10-6 insurance company, fiduciary, trustee, or guardian or a sinking
10-7 fund of a municipality, county, school district, or political
10-8 subdivision of the state. The general obligation bonds may secure
10-9 deposits of public funds of the state or a municipality, county,
10-10 school district, or another political corporation or subdivision of
10-11 the state. The board may issue bonds to refund all or part of its
10-12 outstanding general obligation bonds, including accrued but unpaid
10-13 interest. The general obligation bonds, a transaction relating to
10-14 those bonds, or a profit made in the sale of those bonds is exempt
10-15 from taxation by the state, an agency or subdivision of the state,
10-16 a municipality, or a special district.
10-17 SECTION 3. This Act takes effect on the date on which the
10-18 constitutional amendment proposed by ___ J.R. ___, Acts of the 74th
10-19 Legislature, Regular Session, 1995, takes effect. If that proposed
10-20 constitutional amendment is not approved by the voters, this Act
10-21 has no effect.
10-22 SECTION 4. The importance of this legislation and the
10-23 crowded condition of the calendars in both houses create an
10-24 emergency and an imperative public necessity that the
10-25 constitutional rule requiring bills to be read on three several
10-26 days in each house be suspended, and this rule is hereby suspended.