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.