LEGISLATIVE BUDGET BOARD
                          Austin, Texas

                           FISCAL NOTE
                       74th Regular Session

                          March 1, 1995



 TO:     Honorable Senator Ken Armbrister,      IN RE:  Senate Bill No. 382
         Chair                                          By: West, Royce
         Committee on State Affairs
         Senate
         Austin, Texas







FROM: John Keel, Director

In response to your request for a Fiscal Note on Senate Bill No.
382 (Relating to a capital growth and start-up fund for
historically underutilized businesses; authorizing the issuance
of bonds.) this office has determined the following:

The bill would establish the Texas Historically Underutilized
Business Capital Growth & Start-Up Fund as a revolving fund in
the state treasury.  The fund would be used as a LOAN GUARANTEE 
for HUB's.  The Dept. of Commerce  cannot guarantee more than 90%
of a loan nor can they exceed 90% of the total project costs. The
TDOC policy board would be authorized to issue up to $50 million
of general obligation bonds for this purpose.

The fund would be administered by the Small Business\Community
Economic Development program at the Dept. of Commerce (TDOC). 
The agency would be responsible for enhancing the opportunities
available to start-up new HUB's.  TDOC would administer and
market the program.  The act would be contingent upon adoption of
a constitutional amendment proposed by SJR 29.

Other guidelines of the program specified in the bill include the
following:
1.  the creation of a policy board;
2.  the definitions of a historically underutilized business
3.  the definition of start-up costs;
4.  the exclusion of certain potential participants;
5.  threshold amounts for loans and loan guarantee amounts;
6.  qualification, application and approval criteria;    




7.  loan default recovery procedures;
8.  program, bond and fund administration information; and
 9.  reporting requirements.

The agency will add 3 FTE's to their existing staff.  It is
presumed that the program will be designed to be self-supporting
and not require a draw on general revenue to pay debt service. 
Additional assumptions used in generating debt service estimates
include: 

(1) the bonds will be taxable due to the beneficiaries of the
program being either corporations, sole proprietorships,
partnerships, or joint ventures;
(2) the structure will consist of two bond issues, each with a
term bond that matures and is payable in the twentieth year;
(3) only interest will be paid in years one through nineteen;
(4) the initial and only issuance in the 1996-97 biennium will be
for $25 million and will be issued on February 1, 1996;
(5) the subsequent issuance will be on February 1, 1998 and will
be of the same structure and amount as the first issue;
(6) based on customary terms and conditions, it is assumed that
actual losses due to default will be nominal and be absorbed by
the fund;
(7) it is assumed that surety bond fees will be charged.  Fee
revenues will be lower in early years and will eventually by year
4 be sufficient to cover all costs of administration.

The probable fiscal implication of implementing the provisions of
the bill during each of the first five years following passage is
based upon the following assumptions and is estimated as follows:
     



          Fiscal   Probable Cost Out    Probable Maximum 
          Year          of the          Debt Service out 
                  HUB Capital Growth   of the HUB Capital
                    & Start-Up Fund    Growth & Start-Up 
                                              Fund       
                                                         
          1996               $164,877          $1,312,500
          1997                147,177           2,250,000
                                                         
          1998                147,177           3,562,500
                                                         
          1999                147,177           4,500,000
          2000                147,177           4,500,000
                                                         
                                                         
                                                         

       Similar annual fiscal implications would continue as long as the
provisions of the bill are in effect.    




No significant fiscal implication to units of local government is
anticipated.




Source:   Office of the Attorney General, Comptroller of Public
Accounts,
                       Treasury Department, Texas Public Finance
Authority,
                       Bond Review Board, Department of Commerce
          LBB Staff: JK, VS, DF