1-1 By: West S.B. No. 382
1-2 (In the Senate - Filed January 30, 1995; January 31, 1995,
1-3 read first time and referred to Committee on State Affairs;
1-4 March 3, 1995, reported favorably by the following vote: Yeas 8,
1-5 Nays 5; March 3, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to a capital growth and start-up fund for historically
1-9 underutilized businesses; authorizing the issuance of bonds.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. The heading of Subchapter G, Chapter 481,
1-12 Government Code, is amended to read as follows:
1-13 SUBCHAPTER G. <SMALL BUSINESS> ASSISTANCE FOR HISTORICALLY
1-14 UNDERUTILIZED BUSINESSES AND SMALL BUSINESSES
1-15 SECTION 2. Section 481.101, Government Code, is amended to
1-16 read as follows:
1-17 Sec. 481.101. DEFINITIONS. In this subchapter:
1-18 (1) "Capital growth fund" means the Texas historically
1-19 underutilized business capital growth and start-up fund.
1-20 (2) "Historically underutilized business" means:
1-21 (A) a corporation formed for the purpose of
1-22 making a profit in which at least 51 percent of all classes of the
1-23 shares of stock or other equitable securities is owned by one or
1-24 more persons who are socially disadvantaged because of their
1-25 identification as members of certain groups, including black
1-26 Americans, Hispanic Americans, women, Asian Pacific Americans, and
1-27 American Indians, who have suffered the effects of discriminatory
1-28 practices or similar insidious circumstances over which they have
1-29 no control. Those persons must have proportionate interest and
1-30 demonstrate active participation in the control, operation, and
1-31 management of the corporation's affairs;
1-32 (B) a sole proprietorship formed for the purpose
1-33 of making a profit that is 100 percent owned, operated, and
1-34 controlled by a person described by Paragraph (A);
1-35 (C) a partnership formed for the purpose of
1-36 making a profit in which 51 percent of the assets and interest in
1-37 the partnership is owned by one or more persons described by
1-38 Paragraph (A). Those persons must have proportionate interest and
1-39 demonstrate active participation in the control, operation, and
1-40 management of the partnership's affairs; or
1-41 (D) a joint venture in which each entity in the
1-42 joint venture is a historically underutilized business under this
1-43 subdivision<; or>
1-44 <(E) a supplier contract between a historically
1-45 underutilized business under this subdivision and a prime
1-46 contractor under which the historically underutilized business is
1-47 directly involved in the manufacture or distribution of the
1-48 supplies or materials or otherwise warehouses and ships the
1-49 supplies>.
1-50 (3) <(2)> "Office" means the Office of Small Business
1-51 Assistance.
1-52 (4) "Private lender" means a bank, savings bank,
1-53 savings and loan association, trust company, or insurance company,
1-54 a nonprofit corporation or other entity that is created by a
1-55 municipality as authorized by law and that has the authority to
1-56 make loans, or an individual that the office determines is an
1-57 experienced and sophisticated investor.
1-58 (5) "Qualified application" means a completed
1-59 application, including all documents and information required by
1-60 the office and submitted by:
1-61 (A) a private lender for a business; or
1-62 (B) a historically underutilized business.
1-63 (6) <(3)> "Small business" means a corporation,
1-64 partnership, sole proprietorship, or other legal entity that:
1-65 (A) is formed for the purpose of making a
1-66 profit,<;>
1-67 <(B)> is independently owned and operated,<;>
1-68 and
2-1 <(C)> has fewer than 100 employees or less than
2-2 $1 million in annual gross receipts; or
2-3 (B) otherwise qualifies as a small business
2-4 under the standards of the United States Small Business
2-5 Administration.
2-6 SECTION 3. Subchapter G, Chapter 481, Government Code, is
2-7 amended by adding Section 481.1011 to read as follows:
2-8 Sec. 481.1011. EXCLUSION AS HISTORICALLY UNDERUTILIZED
2-9 BUSINESS. A business is not a historically underutilized business
2-10 if an owner of the business has a personal net worth of more than
2-11 $750,000, unless the office determines that the person has
2-12 demonstrated that the person is a socially disadvantaged individual
2-13 described by Section 481.101(2)(A). For the purposes of this
2-14 section, "personal net worth" has the meaning assigned by the
2-15 regulations of the United States Small Business Administration in
2-16 13 C.F.R. Section 124.106.
2-17 SECTION 4. Subsection (b), Section 481.103, Government Code,
2-18 is amended to read as follows:
2-19 (b) The department may provide community-based services to
2-20 carry out its duties under this chapter, including the creation of
2-21 a pilot program to evaluate the merits of locating full-time
2-22 personnel outside the Austin headquarters. This pilot program will
2-23 give first preference to serving economically distressed areas,
2-24 rural areas, or historically underutilized <disadvantaged>
2-25 businesses or assisting development of specific industries. The
2-26 department may require areas served by these personnel to provide
2-27 in-kind or cash contributions as necessary to support these
2-28 personnel. A report will be submitted to the legislature
2-29 describing the effectiveness of this method for delivering services
2-30 from the department to address specific economic needs.
2-31 SECTION 5. Subchapter G, Chapter 481, Government Code, is
2-32 amended by adding Sections 481.109 through 481.117 to read as
2-33 follows:
2-34 Sec. 481.109. Texas Historically Underutilized Business
2-35 Capital Growth And Start-Up Fund. (a) The Texas historically
2-36 underutilized business capital growth and start-up fund is a
2-37 revolving fund in the state treasury. The capital growth fund
2-38 consists of money appropriated to the office, proceeds of general
2-39 obligation bonds issued to provide loan guarantees under this
2-40 subchapter, application fees, guarantee fees, other amounts
2-41 received by the state from loans or loan guarantees made under this
2-42 subchapter, and money acquired from federal grants or other sources
2-43 and required by resolution of the policy board to be deposited in
2-44 the capital growth fund. The capital growth fund contains a
2-45 program account, an interest and sinking account, and other
2-46 accounts that the policy board authorizes to be created and
2-47 maintained. Money in the capital growth fund is available for use
2-48 by the office for the loan and loan guarantee program provided by
2-49 this subchapter.
2-50 (b) Money in the program account, minus the costs of
2-51 issuance of general obligation bonds to provide loans and loan
2-52 guarantees under this subchapter and necessary costs of
2-53 administering the capital growth fund, may be used only to provide
2-54 loans and loan guarantees to aid in the start-up costs of
2-55 historically underutilized businesses. The office may provide a
2-56 loan or loan guarantee from the capital growth fund to assist a
2-57 historically underutilized business to construct new facilities,
2-58 renovate existing facilities, acquire any interest in real or
2-59 personal property, and provide initial working capital to pay the
2-60 costs of salaries, rents, supplies, inventories, mortgage payments,
2-61 legal services, and utilities and telephone, travel, and other
2-62 incidental costs normally classified as working capital according
2-63 to standard accounting principles. The office shall provide loans
2-64 and loan guarantees from the capital growth fund on the terms and
2-65 conditions that the office determines to be reasonable,
2-66 appropriate, and consistent with the purposes and objectives of the
2-67 capital growth fund and this subchapter. The office may provide a
2-68 loan or loan guarantee only if financing for the historically
2-69 underutilized business cannot be otherwise obtained.
2-70 Sec. 481.110. LOANS AND LOAN GUARANTEES. (a) The office
3-1 may not guarantee more than 90 percent of a loan or provide a loan
3-2 in an amount in excess of 90 percent of the cost of the undertaking
3-3 to be financed.
3-4 (b) For each loan or loan guarantee the office shall
3-5 determine:
3-6 (1) the fees charged by the office, including loan
3-7 fees, guarantee fees, application fees, annual fees, and any other
3-8 costs associated with the loan or loan guarantee necessary for the
3-9 administration of the capital growth fund;
3-10 (2) the permissible interest rates and amortization
3-11 requirements for a loan made or guaranteed, as agreed on by the
3-12 private lender, if any, the business, and the office;
3-13 (3) the acceptable security for the loan or the
3-14 office's participation in the business;
3-15 (4) the financial responsibility of the business to
3-16 repay the loan; and
3-17 (5) any other terms or conditions relating to a loan
3-18 or loan guarantee.
3-19 (c) The minimum amount of a loan that may be made or
3-20 guaranteed by the office is $10,000.
3-21 (d) The maximum amount of a loan that may be made or
3-22 guaranteed by the office is $500,000.
3-23 Sec. 481.111. APPLICATION AND APPROVAL. (a) The office may
3-24 not make a loan or loan guarantee except on submission of a
3-25 qualified application by a historically underutilized business or
3-26 private lender.
3-27 (b) A qualified application may not be approved unless the
3-28 business holds funds or property in an amount or value equal to not
3-29 less than 10 percent of the start-up cost of the business, the
3-30 funds or property are pledged to the business, and the business has
3-31 obtained from other financial sources a firm commitment for funds
3-32 in excess of the loan made or guaranteed by the office.
3-33 (c) On approval of the qualified application, the office may
3-34 provide a loan or loan guarantee to a business for purposes
3-35 authorized by Section 481.112.
3-36 (d) This subchapter does not prohibit the use of money in
3-37 the capital growth fund in conjunction with any other money
3-38 available for the purposes of the loans or loan guarantees provided
3-39 by this subchapter.
3-40 Sec. 481.112. USE OF LOAN. The money received from a loan
3-41 made or guaranteed under Section 481.110 may be used only for the
3-42 initial costs of starting a business as described by Section
3-43 481.109.
3-44 Sec. 481.113. DEFAULT ON LOAN. (a) If a historically
3-45 underutilized business defaults on a loan made under Section
3-46 481.110 or defaults on a loan guaranteed under Section 481.110 and
3-47 the office is required to honor its guarantee, the office through
3-48 its representative shall bring suit against the business as soon as
3-49 practicable. The suit may be brought in the county in which the
3-50 principal office of the business is located, in which the private
3-51 lender, if any, is located, or in Travis County.
3-52 (b) The office may take title by foreclosure to any property
3-53 of the business if an acquisition is necessary to protect a loan or
3-54 loan guarantee made for the business by the office and may sell any
3-55 property of the business. If the office cannot make a sale
3-56 promptly, it may lease any property of the business to another
3-57 person to minimize financial losses and sustain employment.
3-58 (c) The office shall report to the comptroller the name of a
3-59 business that is in default on a loan made under Section 481.110 or
3-60 a loan guaranteed under Section 481.110 on which the office has
3-61 been required to honor a guarantee. The comptroller may not issue
3-62 a warrant to the business while the business is in default.
3-63 (d) The instruments evidencing a loan made by the office or
3-64 a guarantee of a loan made by a private lender must provide that in
3-65 the event of a default in the payment of the principal of or
3-66 interest on the obligation or in the performance of a mortgage,
3-67 instrument, or other agreement relating to the loan or loan
3-68 guarantee, the payment and performance may be enforced by mandamus
3-69 or by the appointment of a receiver in equity with power to apply
3-70 the revenues from the business as provided by the mortgage,
4-1 instrument, or other agreement.
4-2 Sec. 481.114. FALSE INFORMATION ON APPLICATION. An
4-3 applicant who knowingly or negligently provides material false
4-4 information on an application under Section 481.111:
4-5 (1) may not submit another application under Section
4-6 481.111; and
4-7 (2) is liable to the state and to a private lender for
4-8 any expense incurred by the state or private lender that would not
4-9 have been incurred if the applicant had not provided the false
4-10 information.
4-11 Sec. 481.115. ADMINISTRATION OF CAPITAL GROWTH FUND. The
4-12 office shall administer the capital growth fund and shall act as
4-13 liaison among businesses, private lenders, and state agencies whose
4-14 services are useful to the office in carrying out the loan and loan
4-15 guarantee program provided by this subchapter.
4-16 Sec. 481.116. ADDITIONAL POWERS AND DUTIES. The policy
4-17 board shall adopt rules necessary to carry out the purposes of the
4-18 capital growth fund. The policy board shall establish procedures
4-19 to minimize the number of defaults on loans made or guaranteed from
4-20 the capital growth fund. Those procedures may include the purchase
4-21 of insurance coverage against loss.
4-22 Sec. 481.117. CAPITAL GROWTH FUND: GENERAL OBLIGATION
4-23 BONDS. (a) The policy board may issue up to $50 million of
4-24 general obligation bonds and may use the proceeds of those bonds to
4-25 provide loans or loan guarantees under this subchapter. The policy
4-26 board shall deposit the proceeds of the general obligation bonds in
4-27 the capital growth fund and apply them in accordance with the
4-28 resolutions authorizing the bonds. The capital growth fund and any
4-29 accounts established in the fund shall be held in trust by the
4-30 state treasurer for and on behalf of the office and the owners of
4-31 the general obligation bonds issued in accordance with this section
4-32 and may be used only as provided by this section. Pending use, the
4-33 treasurer may invest and reinvest money in the capital growth fund
4-34 in investments authorized by law for state funds that the
4-35 treasurer, consistent with the policy board's resolutions
4-36 authorizing the general obligation bonds, considers appropriate.
4-37 Payment for the provision of a loan or loan guarantee provided
4-38 under this subchapter shall be deposited first in the interest and
4-39 sinking account as prescribed by the policy board's resolutions
4-40 authorizing general obligation bonds under this subchapter and
4-41 second in any reserve account established by the policy board until
4-42 that account is fully funded as prescribed by the policy board's
4-43 resolutions. If during the time any general obligation bonds are
4-44 payable from the interest and sinking account the policy board
4-45 determines that there will not be sufficient money in the interest
4-46 and sinking account during the following fiscal year to pay the
4-47 principal of or interest on the general obligation bonds or both
4-48 the principal and interest that are to come due during the
4-49 following fiscal year, the comptroller shall transfer to the fund
4-50 the first money coming into the state treasury not otherwise
4-51 appropriated by the constitution in an amount sufficient to pay the
4-52 obligations.
4-53 (b) The general obligation bonds may be issued from time to
4-54 time in one or more series or issues, in bearer, registered, or any
4-55 other form, which may include registered uncertificated obligations
4-56 not represented by written instruments and commonly known as
4-57 book-entry obligations, the registration of ownership and transfer
4-58 of which shall be provided for by the policy board under a system
4-59 of books and records maintained by the office or by an agent
4-60 appointed by the policy board in a resolution providing for
4-61 issuance of its general obligation bonds. General obligation bonds
4-62 may mature serially or otherwise not more than 40 years from their
4-63 date. General obligation bonds may bear no interest or may bear
4-64 interest at any rate or rates, fixed, variable, floating, or
4-65 otherwise, determined by the policy board or determined pursuant to
4-66 any contractual arrangements approved by the policy board, not to
4-67 exceed the maximum net effective interest rate allowed by Chapter
4-68 3, Acts of the 61st Legislature, Regular Session, 1969 (Article
4-69 717k-2, Vernon's Texas Civil Statutes). Interest on the general
4-70 obligation bonds may be payable at any time, and the rate of
5-1 interest on the general obligation bonds may be adjusted at any
5-2 time determined by the policy board pursuant to the resolutions
5-3 authorizing the bonds or determined pursuant to any contractual
5-4 arrangement approved by the policy board. In connection with the
5-5 issuance of its general obligation bonds, the policy board may
5-6 exercise the powers granted to the governing body of an issuer in
5-7 connection with the issuance of obligations under Chapter 656, Acts
5-8 of the 68th Legislature, Regular Session, 1983 (Article 717q,
5-9 Vernon's Texas Civil Statutes), to the extent not inconsistent with
5-10 this section. The general obligation bonds may be issued in the
5-11 form and denominations and executed in the manner and under the
5-12 terms, conditions, and details determined by the policy board in
5-13 the resolution authorizing their issuance. If any officer whose
5-14 manual or facsimile signature appears on the general obligation
5-15 bonds ceases to be an officer, the signature remains valid and
5-16 sufficient for all purposes as if the officer had remained in
5-17 office.
5-18 (c) All general obligation bonds issued by the policy board
5-19 under this section are subject to review and approval by the
5-20 attorney general in the same manner and with the same effect as is
5-21 provided by Chapter 656, Acts of the 68th Legislature, Regular
5-22 Session, 1983 (Article 717q, Vernon's Texas Civil Statutes).
5-23 (d) The general obligation bonds are a legal and authorized
5-24 investment for a bank, trust company, savings and loan association,
5-25 insurance company, fiduciary, trustee, or guardian or a sinking
5-26 fund of a municipality, county, school district, or political
5-27 subdivision of the state. The general obligation bonds may secure
5-28 deposits of public funds of the state or a municipality, county,
5-29 school district, or another political corporation or subdivision of
5-30 the state. The policy board may issue bonds to refund all or part
5-31 of its outstanding general obligation bonds, including accrued but
5-32 unpaid interest. The general obligation bonds, a transaction
5-33 relating to those bonds, or a profit made in the sale of those
5-34 bonds is exempt from taxation by the state, an agency or
5-35 subdivision of the state, a municipality, or a special district.
5-36 SECTION 6. Subsection (b), Section 481.160, Government Code,
5-37 is amended to read as follows:
5-38 (b) The annual report must include for that fiscal year:
5-39 (1) the number of employers receiving grants under the
5-40 program;
5-41 (2) the total amount of grants awarded;
5-42 (3) the value, expressed in dollars and as a
5-43 percentage of total training expenditures, of matching
5-44 contributions made by employers;
5-45 (4) the number of small businesses, as defined by
5-46 Section 481.101(6) <481.101(3)>, that receive grants under the
5-47 program and the total amount of the grants awarded to those
5-48 businesses;
5-49 (5) the number of businesses located in enterprise
5-50 zones, as that term is defined by Chapter 2303 <the Texas
5-51 Enterprise Zone Act (Article 5190.7, Vernon's Texas Civil
5-52 Statutes)>, that receive grants under the program and the total
5-53 amount of the grants awarded to those businesses;
5-54 (6) the geographical distribution of employers
5-55 receiving grants under the program;
5-56 (7) the total number of jobs created, enhanced, or
5-57 retained under the program, reported by region of the state and by
5-58 occupation;
5-59 (8) the wage levels of trainees entering or returning
5-60 to the work force, broken down by current employees undergoing
5-61 retraining and new hires, at three months, one year, and three
5-62 years after the conclusion of their training;
5-63 (9) the number and percentage of participating
5-64 employers that provide workers' compensation insurance coverage and
5-65 the number and percentage of employees covered;
5-66 (10) the number and percentage of participating
5-67 employers that offer health care insurance coverage and the number
5-68 and percentage of employees covered;
5-69 (11) the number and percentage of women employers and
5-70 minority employers receiving grants under the program and the total
6-1 amount of the grants awarded, broken out by group;
6-2 (12) the number and percentage of women, minority
6-3 group members, and disabled individuals participating as trainees
6-4 in training projects, broken out by group; and
6-5 (13) the number and percentage of women private
6-6 providers and private providers who are minority group members
6-7 utilized by employers in training projects, broken out by group.
6-8 SECTION 7. The policy board of the Texas Department of
6-9 Commerce may not issue more than $25 million of bonds under Section
6-10 481.117, Government Code, as added by this Act, during the state
6-11 fiscal biennium beginning September 1, 1995.
6-12 SECTION 8. This Act takes effect on the date on which the
6-13 constitutional amendment proposed by the 74th Legislature relating
6-14 to a capital growth and start-up fund for historically
6-15 underutilized business takes effect. If that proposed
6-16 constitutional amendment is not approved by the voters, this Act
6-17 has no effect.
6-18 SECTION 9. The importance of this legislation and the
6-19 crowded condition of the calendars in both houses create an
6-20 emergency and an imperative public necessity that the
6-21 constitutional rule requiring bills to be read on three several
6-22 days in each house be suspended, and this rule is hereby suspended.
6-23 * * * * *