By: West S.B. No. 382
A BILL TO BE ENTITLED
AN ACT
1-1 relating to a capital growth and start-up fund for historically
1-2 underutilized businesses; authorizing the issuance of bonds.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. The heading of Subchapter G, Chapter 481,
1-5 Government Code, is amended to read as follows:
1-6 SUBCHAPTER G. <SMALL BUSINESS> ASSISTANCE FOR HISTORICALLY
1-7 UNDERUTILIZED BUSINESSES AND SMALL BUSINESSES
1-8 SECTION 2. Section 481.101, Government Code, is amended to
1-9 read as follows:
1-10 Sec. 481.101. DEFINITIONS. In this subchapter:
1-11 (1) "Capital growth fund" means the Texas historically
1-12 underutilized business capital growth and start-up fund.
1-13 (2) "Historically underutilized business" means:
1-14 (A) a corporation formed for the purpose of
1-15 making a profit in which at least 51 percent of all classes of the
1-16 shares of stock or other equitable securities is owned by one or
1-17 more persons who are socially disadvantaged because of their
1-18 identification as members of certain groups, including black
1-19 Americans, Hispanic Americans, women, Asian Pacific Americans, and
1-20 American Indians, who have suffered the effects of discriminatory
1-21 practices or similar insidious circumstances over which they have
1-22 no control. Those persons must have proportionate interest and
1-23 demonstrate active participation in the control, operation, and
2-1 management of the corporation's affairs;
2-2 (B) a sole proprietorship formed for the purpose
2-3 of making a profit that is 100 percent owned, operated, and
2-4 controlled by a person described by Paragraph (A);
2-5 (C) a partnership formed for the purpose of
2-6 making a profit in which 51 percent of the assets and interest in
2-7 the partnership is owned by one or more persons described by
2-8 Paragraph (A). Those persons must have proportionate interest and
2-9 demonstrate active participation in the control, operation, and
2-10 management of the partnership's affairs; or
2-11 (D) a joint venture in which each entity in the
2-12 joint venture is a historically underutilized business under this
2-13 subdivision<; or>
2-14 <(E) a supplier contract between a historically
2-15 underutilized business under this subdivision and a prime
2-16 contractor under which the historically underutilized business is
2-17 directly involved in the manufacture or distribution of the
2-18 supplies or materials or otherwise warehouses and ships the
2-19 supplies>.
2-20 (3) <(2)> "Office" means the Office of Small Business
2-21 Assistance.
2-22 (4) "Private lender" means a bank, savings bank,
2-23 savings and loan association, trust company, or insurance company,
2-24 a nonprofit corporation or other entity that is created by a
2-25 municipality as authorized by law and that has the authority to
3-1 make loans, or an individual that the office determines is an
3-2 experienced and sophisticated investor.
3-3 (5) "Qualified application" means a completed
3-4 application, including all documents and information required by
3-5 the office and submitted by:
3-6 (A) a private lender for a business; or
3-7 (B) a historically underutilized business.
3-8 (6) <(3)> "Small business" means a corporation,
3-9 partnership, sole proprietorship, or other legal entity that:
3-10 (A) is formed for the purpose of making a
3-11 profit,<;>
3-12 <(B)> is independently owned and operated,<;>
3-13 and
3-14 <(C)> has fewer than 100 employees or less than
3-15 $1 million in annual gross receipts; or
3-16 (B) otherwise qualifies as a small business
3-17 under the standards of the United States Small Business
3-18 Administration.
3-19 SECTION 3. Subchapter G, Chapter 481, Government Code, is
3-20 amended by adding Section 481.1011 to read as follows:
3-21 Sec. 481.1011. EXCLUSION AS HISTORICALLY UNDERUTILIZED
3-22 BUSINESS. A business is not a historically underutilized business
3-23 if an owner of the business has a personal net worth of more than
3-24 $750,000, unless the office determines that the person has
3-25 demonstrated that the person is a socially disadvantaged individual
4-1 described by Section 481.101(2)(A). For the purposes of this
4-2 section, "personal net worth" has the meaning assigned by the
4-3 regulations of the United States Small Business Administration in
4-4 13 C.F.R. Section 124.106.
4-5 SECTION 4. Subsection (b), Section 481.103, Government Code,
4-6 is amended to read as follows:
4-7 (b) The department may provide community-based services to
4-8 carry out its duties under this chapter, including the creation of
4-9 a pilot program to evaluate the merits of locating full-time
4-10 personnel outside the Austin headquarters. This pilot program will
4-11 give first preference to serving economically distressed areas,
4-12 rural areas, or historically underutilized <disadvantaged>
4-13 businesses or assisting development of specific industries. The
4-14 department may require areas served by these personnel to provide
4-15 in-kind or cash contributions as necessary to support these
4-16 personnel. A report will be submitted to the legislature
4-17 describing the effectiveness of this method for delivering services
4-18 from the department to address specific economic needs.
4-19 SECTION 5. Subchapter G, Chapter 481, Government Code, is
4-20 amended by adding Sections 481.109 through 481.117 to read as
4-21 follows:
4-22 Sec. 481.109. Texas Historically Underutilized Business
4-23 Capital Growth And Start-Up Fund. (a) The Texas historically
4-24 underutilized business capital growth and start-up fund is a
4-25 revolving fund in the state treasury. The capital growth fund
5-1 consists of money appropriated to the office, proceeds of general
5-2 obligation bonds issued to provide loan guarantees under this
5-3 subchapter, application fees, guarantee fees, other amounts
5-4 received by the state from loans or loan guarantees made under this
5-5 subchapter, and money acquired from federal grants or other sources
5-6 and required by resolution of the policy board to be deposited in
5-7 the capital growth fund. The capital growth fund contains a
5-8 program account, an interest and sinking account, and other
5-9 accounts that the policy board authorizes to be created and
5-10 maintained. Money in the capital growth fund is available for use
5-11 by the office for the loan and loan guarantee program provided by
5-12 this subchapter.
5-13 (b) Money in the program account, minus the costs of
5-14 issuance of general obligation bonds to provide loans and loan
5-15 guarantees under this subchapter and necessary costs of
5-16 administering the capital growth fund, may be used only to provide
5-17 loans and loan guarantees to aid in the start-up costs of
5-18 historically underutilized businesses. The office may provide a
5-19 loan or loan guarantee from the capital growth fund to assist a
5-20 historically underutilized business to construct new facilities,
5-21 renovate existing facilities, acquire any interest in real or
5-22 personal property, and provide initial working capital to pay the
5-23 costs of salaries, rents, supplies, inventories, mortgage payments,
5-24 legal services, and utilities and telephone, travel, and other
5-25 incidental costs normally classified as working capital according
6-1 to standard accounting principles. The office shall provide loans
6-2 and loan guarantees from the capital growth fund on the terms and
6-3 conditions that the office determines to be reasonable,
6-4 appropriate, and consistent with the purposes and objectives of the
6-5 capital growth fund and this subchapter. The office may provide a
6-6 loan or loan guarantee only if financing for the historically
6-7 underutilized business cannot be otherwise obtained.
6-8 Sec. 481.110. LOANS AND LOAN GUARANTEES. (a) The office
6-9 may not guarantee more than 90 percent of a loan or provide a loan
6-10 in an amount in excess of 90 percent of the cost of the undertaking
6-11 to be financed.
6-12 (b) For each loan or loan guarantee the office shall
6-13 determine:
6-14 (1) the fees charged by the office, including loan
6-15 fees, guarantee fees, application fees, annual fees, and any other
6-16 costs associated with the loan or loan guarantee necessary for the
6-17 administration of the capital growth fund;
6-18 (2) the permissible interest rates and amortization
6-19 requirements for a loan made or guaranteed, as agreed on by the
6-20 private lender, if any, the business, and the office;
6-21 (3) the acceptable security for the loan or the
6-22 office's participation in the business;
6-23 (4) the financial responsibility of the business to
6-24 repay the loan; and
6-25 (5) any other terms or conditions relating to a loan
7-1 or loan guarantee.
7-2 (c) The minimum amount of a loan that may be made or
7-3 guaranteed by the office is $10,000.
7-4 (d) The maximum amount of a loan that may be made or
7-5 guaranteed by the office is $500,000.
7-6 Sec. 481.111. APPLICATION AND APPROVAL. (a) The office may
7-7 not make a loan or loan guarantee except on submission of a
7-8 qualified application by a historically underutilized business or
7-9 private lender.
7-10 (b) A qualified application may not be approved unless the
7-11 business holds funds or property in an amount or value equal to not
7-12 less than 10 percent of the start-up cost of the business, the
7-13 funds or property are pledged to the business, and the business has
7-14 obtained from other financial sources a firm commitment for funds
7-15 in excess of the loan made or guaranteed by the office.
7-16 (c) On approval of the qualified application, the office may
7-17 provide a loan or loan guarantee to a business for purposes
7-18 authorized by Section 481.112.
7-19 (d) This subchapter does not prohibit the use of money in
7-20 the capital growth fund in conjunction with any other money
7-21 available for the purposes of the loans or loan guarantees provided
7-22 by this subchapter.
7-23 Sec. 481.112. USE OF LOAN. The money received from a loan
7-24 made or guaranteed under Section 481.110 may be used only for the
7-25 initial costs of starting a business as described by Section
8-1 481.109.
8-2 Sec. 481.113. DEFAULT ON LOAN. (a) If a historically
8-3 underutilized business defaults on a loan made under Section
8-4 481.110 or defaults on a loan guaranteed under Section 481.110 and
8-5 the office is required to honor its guarantee, the office through
8-6 its representative shall bring suit against the business as soon as
8-7 practicable. The suit may be brought in the county in which the
8-8 principal office of the business is located, in which the private
8-9 lender, if any, is located, or in Travis County.
8-10 (b) The office may take title by foreclosure to any property
8-11 of the business if an acquisition is necessary to protect a loan or
8-12 loan guarantee made for the business by the office and may sell any
8-13 property of the business. If the office cannot make a sale
8-14 promptly, it may lease any property of the business to another
8-15 person to minimize financial losses and sustain employment.
8-16 (c) The office shall report to the comptroller the name of a
8-17 business that is in default on a loan made under Section 481.110 or
8-18 a loan guaranteed under Section 481.110 on which the office has
8-19 been required to honor a guarantee. The comptroller may not issue
8-20 a warrant to the business while the business is in default.
8-21 (d) The instruments evidencing a loan made by the office or
8-22 a guarantee of a loan made by a private lender must provide that in
8-23 the event of a default in the payment of the principal of or
8-24 interest on the obligation or in the performance of a mortgage,
8-25 instrument, or other agreement relating to the loan or loan
9-1 guarantee, the payment and performance may be enforced by mandamus
9-2 or by the appointment of a receiver in equity with power to apply
9-3 the revenues from the business as provided by the mortgage,
9-4 instrument, or other agreement.
9-5 Sec. 481.114. FALSE INFORMATION ON APPLICATION. An
9-6 applicant who knowingly or negligently provides material false
9-7 information on an application under Section 481.111:
9-8 (1) may not submit another application under Section
9-9 481.111; and
9-10 (2) is liable to the state and to a private lender for
9-11 any expense incurred by the state or private lender that would not
9-12 have been incurred if the applicant had not provided the false
9-13 information.
9-14 Sec. 481.115. ADMINISTRATION OF CAPITAL GROWTH FUND. The
9-15 office shall administer the capital growth fund and shall act as
9-16 liaison among businesses, private lenders, and state agencies whose
9-17 services are useful to the office in carrying out the loan and loan
9-18 guarantee program provided by this subchapter.
9-19 Sec. 481.116. ADDITIONAL POWERS AND DUTIES. The policy
9-20 board shall adopt rules necessary to carry out the purposes of the
9-21 capital growth fund. The policy board shall establish procedures
9-22 to minimize the number of defaults on loans made or guaranteed from
9-23 the capital growth fund. Those procedures may include the purchase
9-24 of insurance coverage against loss.
9-25 Sec. 481.117. CAPITAL GROWTH FUND: GENERAL OBLIGATION
10-1 BONDS. (a) The policy board may issue up to $50 million of
10-2 general obligation bonds and may use the proceeds of those bonds to
10-3 provide loans or loan guarantees under this subchapter. The policy
10-4 board shall deposit the proceeds of the general obligation bonds in
10-5 the capital growth fund and apply them in accordance with the
10-6 resolutions authorizing the bonds. The capital growth fund and any
10-7 accounts established in the fund shall be held in trust by the
10-8 state treasurer for and on behalf of the office and the owners of
10-9 the general obligation bonds issued in accordance with this section
10-10 and may be used only as provided by this section. Pending use, the
10-11 treasurer may invest and reinvest money in the capital growth fund
10-12 in investments authorized by law for state funds that the
10-13 treasurer, consistent with the policy board's resolutions
10-14 authorizing the general obligation bonds, considers appropriate.
10-15 Payment for the provision of a loan or loan guarantee provided
10-16 under this subchapter shall be deposited first in the interest and
10-17 sinking account as prescribed by the policy board's resolutions
10-18 authorizing general obligation bonds under this subchapter and
10-19 second in any reserve account established by the policy board until
10-20 that account is fully funded as prescribed by the policy board's
10-21 resolutions. If during the time any general obligation bonds are
10-22 payable from the interest and sinking account the policy board
10-23 determines that there will not be sufficient money in the interest
10-24 and sinking account during the following fiscal year to pay the
10-25 principal of or interest on the general obligation bonds or both
11-1 the principal and interest that are to come due during the
11-2 following fiscal year, the comptroller shall transfer to the fund
11-3 the first money coming into the state treasury not otherwise
11-4 appropriated by the constitution in an amount sufficient to pay the
11-5 obligations.
11-6 (b) The general obligation bonds may be issued from time to
11-7 time in one or more series or issues, in bearer, registered, or any
11-8 other form, which may include registered uncertificated obligations
11-9 not represented by written instruments and commonly known as
11-10 book-entry obligations, the registration of ownership and transfer
11-11 of which shall be provided for by the policy board under a system
11-12 of books and records maintained by the office or by an agent
11-13 appointed by the policy board in a resolution providing for
11-14 issuance of its general obligation bonds. General obligation bonds
11-15 may mature serially or otherwise not more than 40 years from their
11-16 date. General obligation bonds may bear no interest or may bear
11-17 interest at any rate or rates, fixed, variable, floating, or
11-18 otherwise, determined by the policy board or determined pursuant to
11-19 any contractual arrangements approved by the policy board, not to
11-20 exceed the maximum net effective interest rate allowed by Chapter
11-21 3, Acts of the 61st Legislature, Regular Session, 1969 (Article
11-22 717k-2, Vernon's Texas Civil Statutes). Interest on the general
11-23 obligation bonds may be payable at any time, and the rate of
11-24 interest on the general obligation bonds may be adjusted at any
11-25 time determined by the policy board pursuant to the resolutions
12-1 authorizing the bonds or determined pursuant to any contractual
12-2 arrangement approved by the policy board. In connection with the
12-3 issuance of its general obligation bonds, the policy board may
12-4 exercise the powers granted to the governing body of an issuer in
12-5 connection with the issuance of obligations under Chapter 656, Acts
12-6 of the 68th Legislature, Regular Session, 1983 (Article 717q,
12-7 Vernon's Texas Civil Statutes), to the extent not inconsistent with
12-8 this section. The general obligation bonds may be issued in the
12-9 form and denominations and executed in the manner and under the
12-10 terms, conditions, and details determined by the policy board in
12-11 the resolution authorizing their issuance. If any officer whose
12-12 manual or facsimile signature appears on the general obligation
12-13 bonds ceases to be an officer, the signature remains valid and
12-14 sufficient for all purposes as if the officer had remained in
12-15 office.
12-16 (c) All general obligation bonds issued by the policy board
12-17 under this section are subject to review and approval by the
12-18 attorney general in the same manner and with the same effect as is
12-19 provided by Chapter 656, Acts of the 68th Legislature, Regular
12-20 Session, 1983 (Article 717q, Vernon's Texas Civil Statutes).
12-21 (d) The general obligation bonds are a legal and authorized
12-22 investment for a bank, trust company, savings and loan association,
12-23 insurance company, fiduciary, trustee, or guardian or a sinking
12-24 fund of a municipality, county, school district, or political
12-25 subdivision of the state. The general obligation bonds may secure
13-1 deposits of public funds of the state or a municipality, county,
13-2 school district, or another political corporation or subdivision of
13-3 the state. The policy board may issue bonds to refund all or part
13-4 of its outstanding general obligation bonds, including accrued but
13-5 unpaid interest. The general obligation bonds, a transaction
13-6 relating to those bonds, or a profit made in the sale of those
13-7 bonds is exempt from taxation by the state, an agency of
13-8 subdivision of the state, a municipality, or a special district.
13-9 SECTION 6. Subsection (b), Section 481.160, Government Code,
13-10 is amended to read as follows:
13-11 (b) The annual report must include for that fiscal year:
13-12 (1) the number of employers receiving grants under the
13-13 program;
13-14 (2) the total amount of grants awarded;
13-15 (3) the value, expressed in dollars and as a
13-16 percentage of total training expenditures, of matching
13-17 contributions made by employers;
13-18 (4) the number of small businesses, as defined by
13-19 Section 481.101(6) <481.101(3)>, that receive grants under the
13-20 program and the total amount of the grants awarded to those
13-21 businesses;
13-22 (5) the number of businesses located in enterprise
13-23 zones, as that term is defined by Chapter 2303 <the Texas
13-24 Enterprise Zone Act (Article 5190.7, Vernon's Texas Civil
13-25 Statutes)>, that receive grants under the program and the total
14-1 amount of the grants awarded to those businesses;
14-2 (6) the geographical distribution of employers
14-3 receiving grants under the program;
14-4 (7) the total number of jobs created, enhanced, or
14-5 retained under the program, reported by region of the state and by
14-6 occupation;
14-7 (8) the wage levels of trainees entering or returning
14-8 to the work force, broken down by current employees undergoing
14-9 retraining and new hires, at three months, one year, and three
14-10 years after the conclusion of their training;
14-11 (9) the number and percentage of participating
14-12 employers that provide workers' compensation insurance coverage and
14-13 the number and percentage of employees covered;
14-14 (10) the number and percentage of participating
14-15 employers that offer health care insurance coverage and the number
14-16 and percentage of employees covered;
14-17 (11) the number and percentage of women employers and
14-18 minority employers receiving grants under the program and the total
14-19 amount of the grants awarded, broken out by group;
14-20 (12) the number and percentage of women, minority
14-21 group members, and disabled individuals participating as trainees
14-22 in training projects, broken out by group; and
14-23 (13) the number and percentage of women private
14-24 providers and private providers who are minority group members
14-25 utilized by employers in training projects, broken out by group.
15-1 SECTION 7. The policy board of the Texas Department of
15-2 Commerce may not issue more than $25 million of bonds under Section
15-3 481.117, Government Code, as added by this Act, during the state
15-4 fiscal biennium beginning September 1, 1995.
15-5 SECTION 8. This Act takes effect on the date on which the
15-6 constitutional amendment proposed by the 74th Legislature relating
15-7 to a capital growth and start-up fund for historically
15-8 underutilized business takes effect. If that proposed
15-9 constitutional amendment is not approved by the voters, this Act
15-10 has no effect.
15-11 SECTION 9. The importance of this legislation and the
15-12 crowded condition of the calendars in both houses create an
15-13 emergency and an imperative public necessity that the
15-14 constitutional rule requiring bills to be read on three several
15-15 days in each house be suspended, and this rule is hereby suspended.