By Oliveira H.B. No. 618
75R1524 CLG-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the establishment of a program in the Texas Department
1-3 of Commerce to secure certain loans made to small and medium-sized
1-4 businesses and nonprofit organizations.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Chapter 481, Government Code, is amended by
1-7 adding Subchapter BB to read as follows:
1-8 SUBCHAPTER BB. CAPITAL ACCESS PROGRAM
1-9 Sec. 481.401. DEFINITIONS. In this subchapter:
1-10 (1) "Capital access loan" means a loan that is
1-11 entitled to be secured by the fund.
1-12 (2) "Fund" means the capital access fund.
1-13 (3) "Medium-sized business" means a corporation,
1-14 partnership, sole proprietorship, or other legal entity that:
1-15 (A) is domiciled in this state or has at least
1-16 51 percent of its employees located in this state;
1-17 (B) is formed to make a profit; and
1-18 (C) employs 100 or more but fewer than 500
1-19 full-time employees.
1-20 (4) "Participating financial institution" means a
1-21 financial institution participating in the program.
1-22 (5) "Program" means the capital access program.
1-23 (6) "Small business" means a corporation, partnership,
1-24 sole proprietorship, or other legal entity that:
2-1 (A) is domiciled in this state or has at least
2-2 51 percent of its employees located in this state;
2-3 (B) is formed to make a profit;
2-4 (C) is independently owned and operated; and
2-5 (D) employs fewer than 100 full-time employees.
2-6 Sec. 481.402. CAPITAL ACCESS FUND. (a) The capital access
2-7 fund is a special account in the state treasury.
2-8 (b) Appropriations for the implementation and administration
2-9 of this subchapter, investment earnings, fees charged under this
2-10 subchapter, and any other amounts received by the state under this
2-11 subchapter shall be deposited in the fund.
2-12 (c) Money in the fund may be appropriated only to the
2-13 department for use in carrying out the purposes of this subchapter.
2-14 Sec. 481.403. TRANSFER OF MONEY FROM OTHER FUNDS TO THE
2-15 CAPITAL ACCESS FUND. (a) At the beginning of each fiscal year,
2-16 the department shall compute for the Texas exporters loan fund
2-17 established under Subchapter D and the Texas rural economic
2-18 development fund established under Subchapter F:
2-19 (1) the amount sufficient for that fiscal year to
2-20 cover loan guarantees made under Subchapter D or F, as applicable
2-21 to each fund;
2-22 (2) the amount sufficient for the fiscal year to repay
2-23 bonds issued under Subchapter D, to carry out the purposes of
2-24 Section 481.059, or for projects that are eligible under Subchapter
2-25 F, as applicable to each fund; and
2-26 (3) the amount of loan repayments for loans made under
2-27 Subchapter D or F that will be expected to be received during the
3-1 fiscal year, as applicable to each fund.
3-2 (b) At the beginning of each fiscal year, the comptroller
3-3 for each fund described by Subsection (a) shall subtract the sum of
3-4 the amount computed by the department under Subsection (a)(1) and
3-5 (a)(2) for the respective fund from the amount in the fund at the
3-6 beginning of the fiscal year.
3-7 (c) If a positive amount results from a computation made
3-8 under Subsection (b), the comptroller shall transfer an amount
3-9 equal to the computed amount from the fund to which the computation
3-10 relates to the capital access fund.
3-11 (d) As loan repayments are received for each fund described
3-12 by Subsection (a), the comptroller shall transfer the payments to
3-13 the capital access fund.
3-14 Sec. 481.404. POWERS OF DEPARTMENT IN ADMINISTERING CAPITAL
3-15 ACCESS FUND. In administering the fund, the department has the
3-16 powers necessary to carry out the purposes of this chapter,
3-17 including the power to:
3-18 (1) make, execute, and deliver contracts, conveyances,
3-19 and other instruments necessary to the exercise of its powers;
3-20 (2) invest money at the department's discretion in
3-21 obligations determined proper by the department, and select and use
3-22 depositories for its money;
3-23 (3) employ personnel and counsel and pay the persons
3-24 from money in the fund legally available for this purpose; and
3-25 (4) impose and collect fees and charges in connection
3-26 with any transaction and provide for reasonable penalties for
3-27 delinquent payment of fees or charges.
4-1 Sec. 481.405. CAPITAL ACCESS PROGRAM. (a) The department
4-2 shall establish a capital access program to provide additional
4-3 capital for investment in commercial and industrial enterprises.
4-4 (b) The department shall use money in the fund to make a
4-5 deposit in a participating financial institution's reserve account
4-6 in an amount specified by this subchapter to secure the principal
4-7 of and interest on each capital access loan made by the
4-8 institution.
4-9 (c) The department shall determine the eligibility of a
4-10 financial institution to participate in the program and may set a
4-11 limit on the number of eligible financial institutions that may
4-12 participate in the program.
4-13 (d) To participate in the program, an eligible financial
4-14 institution must enter into a participation agreement with the
4-15 department that sets out the terms and conditions under which the
4-16 department will make contributions to the institution's reserve
4-17 account and specifies the criteria for a loan to qualify as a
4-18 capital access loan.
4-19 (e) To qualify as a capital access loan, a loan:
4-20 (1) must be made to a small or medium-sized business
4-21 or to a nonprofit organization that is domiciled in this state;
4-22 (2) must be used by the business or nonprofit
4-23 organization for any project, activity, or enterprise in this state
4-24 that fosters economic development; and
4-25 (3) must meet any other criteria provided by this
4-26 subchapter.
4-27 Sec. 481.406. RULEMAKING AUTHORITY. The policy board shall
5-1 adopt rules relating to the implementation of the program and any
5-2 other rules necessary to accomplish the purposes of this
5-3 subchapter. The rules:
5-4 (1) must include provisions governing capital access
5-5 loan repayment terms; and
5-6 (2) may provide for an application fee or other
5-7 reasonable fees necessary for the operation of this subchapter.
5-8 Sec. 481.407. PROVISIONS RELATING TO CAPITAL ACCESS LOAN.
5-9 (a) Except as otherwise provided by this subchapter, the
5-10 department may not determine the recipient, amount, or interest
5-11 rate of a capital access loan or the fees or other requirements
5-12 related to the loan.
5-13 (b) A loan is not eligible to be secured under this
5-14 subchapter if the loan is for:
5-15 (1) construction or purchase of residential housing;
5-16 (2) simple real estate investments, excluding the
5-17 development or improvement of commercial real estate or real estate
5-18 business operations;
5-19 (3) refinancing of existing loans not originally
5-20 secured under this subchapter; or
5-21 (4) inside bank transactions, as defined by the policy
5-22 board.
5-23 (c) The borrower of a capital access loan must apply the
5-24 loan to working capital or to the purchase, construction, or lease
5-25 of capital assets, including buildings and equipment.
5-26 (d) A capital access loan may be sold on the secondary
5-27 market under conditions as may be determined by the department.
6-1 Sec. 481.408. RESERVE ACCOUNT. (a) On approval by the
6-2 department and after entering into a participation agreement with
6-3 the department, a participating financial institution making a
6-4 capital access loan shall establish a reserve account. The reserve
6-5 account shall be used by the institution only to cover any losses
6-6 arising from a default of a capital access loan made by the
6-7 institution under this subchapter or as otherwise provided by this
6-8 subchapter.
6-9 (b) When a participating financial institution makes a
6-10 capital access loan, the institution shall deposit in the reserve
6-11 account an amount that is not less than three percent of the amount
6-12 of the loan. The institution may obtain the amount directly from
6-13 the borrower or may advance the amount to the borrower as part of
6-14 the loan.
6-15 (c) For each capital access loan made by a financial
6-16 institution, the institution shall certify to the department that
6-17 the institution has made a capital access loan, the amount the
6-18 institution has deposited in the reserve account, and, if
6-19 applicable, that the borrower is located in or financing a project,
6-20 activity, or enterprise in an area designated as an enterprise zone
6-21 under Chapter 2303.
6-22 (d) On receipt of a certification made under Subsection (c)
6-23 and subject to Section 481.409, the department shall deposit in the
6-24 institution's reserve account for each capital access loan made by
6-25 the institution:
6-26 (1) an amount equal to the amount deposited by the
6-27 institution for each loan if the institution:
7-1 (A) has assets of more than $1 billion; or
7-2 (B) has previously enrolled loans in the program
7-3 that in the aggregate are more than $2 million;
7-4 (2) an amount equal to 150 percent of the amount
7-5 deposited by the institution for each loan if the institution is
7-6 not described by Subdivision (1); or
7-7 (3) notwithstanding Subdivisions (1) and (2), an
7-8 amount equal to twice the amount deposited by the institution for
7-9 each loan if the borrower is located in or financing a project,
7-10 activity, or enterprise in an area designated as an enterprise zone
7-11 under Chapter 2303.
7-12 Sec. 481.409. LIMITATIONS ON STATE CONTRIBUTION TO RESERVE
7-13 ACCOUNT. (a) The amount deposited by the department into a
7-14 participating financial institution's reserve account for any
7-15 single loan recipient may not exceed $150,000 during a three-year
7-16 period.
7-17 (b) The maximum amount the department may deposit into a
7-18 reserve account for each capital access loan made under this
7-19 subchapter is the lesser of $35,000 or an amount equal to:
7-20 (1) eight percent of the loan amount if the borrower
7-21 is located in or financing a project, activity, or enterprise in an
7-22 area designated as an enterprise zone under Chapter 2303; or
7-23 (2) six percent of the loan amount for any other
7-24 borrower.
7-25 Sec. 481.410. STATE'S RIGHTS WITH RESPECT TO RESERVE
7-26 ACCOUNT. (a) All of the money in a reserve account established
7-27 under this subchapter is property of the state.
8-1 (b) The state is entitled to earn interest on the amount of
8-2 contributions made by the department to a reserve account under
8-3 this subchapter. The comptroller may withdraw quarterly from a
8-4 reserve account the amount of the interest earned by the state.
8-5 The department may use the amount withdrawn under this subsection
8-6 to defray the costs of promoting and administering the program.
8-7 (c) If the amount in a reserve account exceeds the greater
8-8 of $200,000 or an amount equal to 33 percent of the balance of the
8-9 financial institution's outstanding capital access loans, the
8-10 comptroller may withdraw the excess amount and deposit the amount
8-11 in the fund.
8-12 (d) On the date a financial institution is no longer
8-13 eligible to participate in the program or on the expiration date of
8-14 a participation agreement entered into under this subchapter that
8-15 is not renewed by the department or institution, the comptroller
8-16 shall withdraw from the institution's reserve account the amount of
8-17 any state contribution in the account and any interest earned on
8-18 that amount and deposit the amounts in the fund.
8-19 Sec. 481.411. ANNUAL REPORT. A participating financial
8-20 institution shall submit an annual report to the department. The
8-21 report must:
8-22 (1) provide information regarding outstanding capital
8-23 access loans, delinquent capital access loans, and any other
8-24 information on capital access loans the department considers
8-25 appropriate;
8-26 (2) state the total amount of loans for which the
8-27 department has made a contribution from the fund under this
9-1 subchapter; and
9-2 (3) include a copy of the institution's most recent
9-3 financial statement.
9-4 Sec. 481.412. REPORTS; AUDITS. (a) The department shall
9-5 submit to the legislature an annual status report on the program's
9-6 activities.
9-7 (b) The financial transactions of the fund are subject to
9-8 audit by the state auditor as provided by Chapter 321.
9-9 Sec. 481.413. STATE LIABILITY PROHIBITED. The state is not
9-10 liable to a participating financial institution for payment of the
9-11 principal, interest, or any late charges on a capital access loan
9-12 made under this subchapter.
9-13 Sec. 481.414. GIFTS AND GRANTS. The department may accept
9-14 gifts, grants, and donations from any source for the purposes of
9-15 this subchapter.
9-16 SECTION 2. Section 481.059, Government Code, is amended by
9-17 adding Subsection (h) to read as follows:
9-18 (h) The department may not guarantee or make a loan under
9-19 this section after August 31, 1997.
9-20 SECTION 3. Section 481.084, Government Code, is amended by
9-21 adding Subsection (g) to read as follows:
9-22 (g) The department may not guarantee or make a loan under
9-23 this section after August 31, 1997.
9-24 SECTION 4. The policy board to the Texas Department of
9-25 Commerce shall adopt rules required by Section 481.406, Government
9-26 Code, as added by this Act, not later than December 1, 1997.
9-27 SECTION 5. This Act takes effect September 1, 1997.
10-1 SECTION 6. The importance of this legislation and the
10-2 crowded condition of the calendars in both houses create an
10-3 emergency and an imperative public necessity that the
10-4 constitutional rule requiring bills to be read on three several
10-5 days in each house be suspended, and this rule is hereby suspended.