By Romo, Cuellar of Hidalgo, Giddings                 H.B. No. 1018
       74R2628 DWS-D
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to the provision by the state of surety bonds for
    1-3  historically 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)  "Surety bond fund" means the Texas historically
   2-14  underutilized business surety bond 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 481.118-481.120, 481.1201, 481.1202,
   2-26  481.1203, 481.1204, and 481.1205 to read as follows:
   2-27        Sec. 481.118.  Texas Historically Underutilized Business
    3-1  Surety Bond Fund.  (a)  The Texas historically underutilized
    3-2  business surety bond fund is a revolving fund in the state
    3-3  treasury.  The surety bond fund consists of money appropriated to
    3-4  the department, proceeds of general obligation bonds issued to
    3-5  provide surety bonds under this subchapter, bonding fees, and other
    3-6  amounts received by the state from the provision of surety bonds
    3-7  under this subchapter and money acquired from federal grants or
    3-8  other sources and required by resolution of the board to be
    3-9  deposited in the surety bond fund.  The surety bond fund contains a
   3-10  program account, an interest and sinking account, and other
   3-11  accounts that the board authorizes to be created and maintained.
   3-12  Money in the surety bond fund is available for use by the office
   3-13  for the surety bond program provided by this subchapter.  Sections
   3-14  403.094 and 403.095 do not apply to the surety bond fund.
   3-15        (b)  Money in the program account, minus the costs of
   3-16  issuance of general obligation bonds to provide surety bonds under
   3-17  this subchapter and necessary costs of administering the surety
   3-18  bond fund, may be used only to provide surety bonds to historically
   3-19  underutilized businesses.  The office may provide a surety bond for
   3-20  a historically underutilized business to ensure the performance of
   3-21  the historically underutilized business under a contract.  The
   3-22  office shall provide surety bonds from the surety bond fund on the
   3-23  terms and conditions that the office determines to be reasonable,
   3-24  appropriate, and consistent with the purposes and objectives of the
   3-25  surety bond fund and this subchapter.
   3-26        (c)  Surety bonds provided from the surety bond fund must be
   3-27  evenly distributed among the north, south, east, west, and central
    4-1  regions of the state.  Each region is entitled to one-fifth of the
    4-2  proceeds of the surety bond fund to be used to provide surety bonds
    4-3  to historically underutilized businesses whose principal place of
    4-4  business is in that region.
    4-5        Sec. 481.119.  SURETY BONDS.  (a)  The office may not provide
    4-6  a surety bond for a business unless the business is a historically
    4-7  underutilized business.
    4-8        (b)  For each surety bond the office shall determine:
    4-9              (1)  the cost of the surety bond and the fees charged
   4-10  by the office;
   4-11              (2)  the ability of the business to complete the
   4-12  contract for which the surety bond is provided; and
   4-13              (3)  any other terms or conditions relating to the
   4-14  provision of the surety bond.
   4-15        Sec. 481.120.  SURETY BOND:  APPLICATION AND APPROVAL.  (a)
   4-16  The office may not provide a surety bond except on submission of a
   4-17  qualified application by a  historically underutilized business.
   4-18        (b)  A qualified application may not be approved unless the
   4-19  business has a contract with another person conditioned on the
   4-20  provision of a surety bond.
   4-21        (c)  On approval of the qualified application, the office may
   4-22  provide the surety bond.
   4-23        (d)  This subchapter does not prohibit the use of money in
   4-24  the surety bond fund  in conjunction with any other money available
   4-25  for the purposes of providing surety bonds under this subchapter.
   4-26        Sec. 481.1201.  PAYMENT ON SURETY BOND.  (a)  If a
   4-27  historically underutilized business does not perform on a contract
    5-1  for which a surety bond has been provided under this subchapter and
    5-2  the office is required to honor the surety bond, the office,
    5-3  through its representative, shall bring suit against the business
    5-4  as soon as practicable.  The suit may be brought in the county in
    5-5  which the principal office of the business is located or in Travis
    5-6  County.
    5-7        (b)  The office shall report to the comptroller of public
    5-8  accounts the name of a business in which the office has made
    5-9  payment on a surety bond provided under Section 481.120.  The
   5-10  comptroller of public accounts may not issue a warrant to the
   5-11  business until the business pays the amount it owes to the office.
   5-12        Sec. 481.1202.  FALSE INFORMATION ON SURETY BOND APPLICATION.
   5-13  An applicant who knowingly or negligently provides material false
   5-14  information on an application under Section 481.120:
   5-15              (1)  may not submit an application under Section
   5-16  481.120 before the second anniversary of the date that the
   5-17  application containing the false information was submitted; and
   5-18              (2)  is liable to the state for any expense incurred by
   5-19  the state that would not have been incurred if the applicant had
   5-20  not provided the false information.
   5-21        Sec. 481.1203.  ADMINISTRATION OF SURETY BOND FUND.  The
   5-22  office shall administer the surety bond fund under this subchapter
   5-23  and shall act as liaison among businesses and state agencies whose
   5-24  services are useful to the office in providing surety bonds under
   5-25  this subchapter.
   5-26        Sec. 481.1204.  ADDITIONAL POWERS AND DUTIES:  SURETY BONDS.
   5-27  The board shall adopt rules necessary to carry out the purposes of
    6-1  the surety bond fund.
    6-2        Sec. 481.1205.  SURETY BOND FUND:  GENERAL OBLIGATION BONDS.
    6-3  (a)  The board may issue up to $50 million of general obligation
    6-4  bonds and may use the proceeds to provide surety bonds under this
    6-5  subchapter.  The board shall deposit the proceeds of the general
    6-6  obligation bonds in the surety bond fund and apply them in
    6-7  accordance with the resolutions authorizing those bonds.  The
    6-8  surety bond fund and any accounts established in the fund shall be
    6-9  held in trust by the state treasurer for and on behalf of the
   6-10  office and the owners of the general obligation bonds issued in
   6-11  accordance with this section and may be used only as provided by
   6-12  this section.  Pending use, the treasurer may invest and reinvest
   6-13  money in the surety bond fund in investments authorized by law for
   6-14  state funds that the treasurer, consistent with the board's
   6-15  resolutions authorizing the general obligation bonds, considers
   6-16  appropriate.  Payment for the provision of a surety bond provided
   6-17  under this subchapter shall be deposited, first, in the interest
   6-18  and sinking account as prescribed by the board's resolutions
   6-19  authorizing general obligation bonds under this subchapter and,
   6-20  second, in any reserve account established by the board until that
   6-21  account is fully funded as prescribed by the board's resolutions.
   6-22  If, during the time any general obligation bonds are payable from
   6-23  the interest and sinking account, the board determines that there
   6-24  will not be sufficient money in the interest and sinking account
   6-25  during the following fiscal year to pay the principal of or
   6-26  interest on the general obligation bonds or both the principal and
   6-27  interest that are to come due during the following fiscal year, the
    7-1  comptroller of public accounts shall transfer to the fund the first
    7-2  money coming into the state treasury not otherwise appropriated by
    7-3  the constitution in an amount sufficient to pay the obligations.
    7-4        (b)  The general obligation bonds may be issued from time to
    7-5  time in one or more series or issues, in bearer, registered, or any
    7-6  other form, which may include registered uncertificated obligations
    7-7  not represented by written instruments and commonly known as
    7-8  book-entry obligations, the registration of ownership and transfer
    7-9  of which shall be provided for by the board under a system of books
   7-10  and records maintained by the office or by an agent appointed by
   7-11  the board in a resolution providing for issuance of its general
   7-12  obligation bonds.  General obligation bonds may mature serially or
   7-13  otherwise not more than 40 years from their date.  General
   7-14  obligation bonds may bear no interest or may bear interest at any
   7-15  rate or rates, fixed, variable, floating, or otherwise, determined
   7-16  by the board or determined pursuant to any contractual arrangements
   7-17  approved by the board, not to exceed the maximum net effective
   7-18  interest rate allowed by Chapter 3, Acts of the 61st Legislature,
   7-19  Regular Session, 1969 (Article 717k-2, Vernon's Texas Civil
   7-20  Statutes).  Interest on the general obligation bonds may be payable
   7-21  at any time, and the rate of interest on the general obligation
   7-22  bonds may be adjusted at any time determined by the board pursuant
   7-23  to the resolutions authorizing the bonds or determined pursuant to
   7-24  any contractual arrangement approved by the board.  In connection
   7-25  with the issuance of its general obligation bonds, the board may
   7-26  exercise the powers granted to the governing body of an issuer in
   7-27  connection with the issuance of obligations under Chapter 656, Acts
    8-1  of the 68th Legislature, Regular Session, 1983 (Article 717q,
    8-2  Vernon's Texas Civil Statutes), to the extent not inconsistent with
    8-3  this section.  The general obligation bonds may be issued in the
    8-4  form and denominations and executed in the manner and under the
    8-5  terms, conditions, and details determined by the board in the
    8-6  resolution authorizing their issuance.  If any officer whose manual
    8-7  or facsimile signature appears on the general obligation bonds
    8-8  ceases to be an officer, the signature remains valid and sufficient
    8-9  for all purposes as if the officer had remained in office.
   8-10        (c)  All general obligation bonds issued by the board under
   8-11  this section are subject to review and approval by the attorney
   8-12  general in the same manner and with the same effect as is provided
   8-13  by Chapter 656, Acts of the 68th Legislature, Regular Session, 1983
   8-14  (Article 717q, Vernon's Texas Civil Statutes).
   8-15        (d)  The general obligation bonds are a legal and authorized
   8-16  investment for a bank, trust company, savings and loan association,
   8-17  insurance company, fiduciary, trustee, or guardian or a sinking
   8-18  fund of a municipality, county, school district, or political
   8-19  subdivision of the state.  The general obligation bonds may secure
   8-20  deposits of public funds of the state or a municipality, county,
   8-21  school district, or another political corporation or subdivision of
   8-22  the state.  The board may issue bonds to refund all or part of its
   8-23  outstanding general obligation bonds, including accrued but unpaid
   8-24  interest.  The general obligation bonds, a transaction relating to
   8-25  those bonds, or a profit made in the sale of those bonds is exempt
   8-26  from taxation by the state, an agency or subdivision of the state,
   8-27  a municipality, or a special district.
    9-1        SECTION 3.  This Act takes effect on the date on which the
    9-2  constitutional amendment proposed by ___ J.R. ___, Acts of the 74th
    9-3  Legislature, Regular Session, 1995, takes effect.  If that proposed
    9-4  constitutional amendment is not approved by the voters, this Act
    9-5  has no effect.
    9-6        SECTION 4.  The importance of this legislation and the
    9-7  crowded condition of the calendars in both houses create an
    9-8  emergency   and   an   imperative   public   necessity   that   the
    9-9  constitutional rule requiring bills to be read on three several
   9-10  days in each house be suspended, and this rule is hereby suspended.