By Greenberg H.B. No. 2545
75R4969 BEM-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to creating a Texas community investment program to assist
1-3 certain businesses in distressed areas of the state.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 2306, Government Code, is amended by
1-6 adding Subchapter AA to read as follows:
1-7 SUBCHAPTER AA. TEXAS COMMUNITY INVESTMENT PROGRAM
1-8 Sec. 2306.621. DEFINITIONS. In this subchapter:
1-9 (1) "Multi-bank community development corporation"
1-10 means a corporation organized to provide community development
1-11 funds to businesses that employ low and moderate income persons by
1-12 investing in and making loans to disadvantaged businesses located
1-13 in distressed areas of the state.
1-14 (2) "Program" means the community investment program
1-15 established under this subchapter.
1-16 Sec. 2306.622. COMMUNITY INVESTMENT PROGRAM. (a) The
1-17 department shall establish a community investment program in which
1-18 the department awards grants to certain multi-bank community
1-19 development corporations for use in making loans to or investing in
1-20 businesses in distressed areas of the state that cannot qualify for
1-21 conventional bank loans.
1-22 (b) The department shall determine the eligibility of a
1-23 multi-bank community development corporation to participate in the
1-24 program and may set a limit on the number of eligible multi-bank
2-1 community development corporations that may participate in the
2-2 program.
2-3 (c) A multi-bank community development corporation is
2-4 eligible to participate in the program if the multi-bank community
2-5 development corporation has raised a minimum of $500,000 in private
2-6 investments to make loans to or investments in businesses described
2-7 by Subsection (a).
2-8 (d) To participate in the program, an eligible multi-bank
2-9 community development corporation must enter into a participation
2-10 agreement with the department that sets out the terms and
2-11 conditions under which the department will award a grant to the
2-12 multi-bank community development corporation.
2-13 Sec. 2306.623. RULE-MAKING AUTHORITY. (a) The department
2-14 shall adopt rules relating to the implementation of the program and
2-15 any other rules necessary to accomplish the purposes of this
2-16 subchapter.
2-17 (b) In adopting the rules, the department must determine the
2-18 criteria for a business to be designated a disadvantaged business
2-19 in a distressed area of the state that does not qualify for
2-20 conventional loans for purposes of this subchapter.
2-21 Sec. 2306.624. GRANT APPLICATION. (a) An eligible
2-22 multi-bank community development corporation may file a grant
2-23 application with the department in a form approved by the board.
2-24 The application must include a plan of investment that includes the
2-25 type and number of businesses to which the multi-bank community
2-26 development corporation plans to make a community investment loan
2-27 or in which the corporation plans to invest using money from the
3-1 program.
3-2 (b) The director shall act on a completed application not
3-3 later than the 30th day after the date on which the application is
3-4 filed with the department.
3-5 Sec. 2306.625. PROVISIONS RELATING TO GRANTS. (a) A grant
3-6 awarded to a multi-bank community development corporation through a
3-7 grant under the program must be used or committed for approved
3-8 loans or investments not later than the 18th month after the date
3-9 on which the grant is received.
3-10 (b) A multi-bank community development corporation shall
3-11 return to the department any amount not invested or committed for
3-12 investment within the period prescribed by Subsection (a) not later
3-13 than the 10th day after the expiration of that period.
3-14 (c) If a multi-bank community development corporation
3-15 experiences losses of more than 25 percent on loans or investments
3-16 made with grants awarded to the corporation under the program, the
3-17 multi-bank community development corporation shall:
3-18 (1) return all unencumbered money to the department;
3-19 (2) assign to the department all of the multi-bank
3-20 community development corporation's interest in outstanding
3-21 investments made with grants awarded under the program; and
3-22 (3) deliver to the director all of the documentation
3-23 and related instruments concerning investments made with grants
3-24 awarded under the program.
3-25 Sec. 2306.626. ELIGIBLE LOANS. (a) The department shall
3-26 establish an investment committee in each of the areas of the state
3-27 where a multi-bank community development corporation to which the
4-1 department grants funds under this subchapter is located. Each
4-2 investment committee must have at least five members at least 50
4-3 percent of whom must be bankers and at least 30 percent of whom
4-4 must be representatives of the community.
4-5 (b) A multi-bank community development corporation may use
4-6 money awarded under the program to make a community investment
4-7 loan only if the loan is approved by the appropriate investment
4-8 committee.
4-9 (c) A community investment loan may be in the form of debt,
4-10 subordinated debt, or an equity investment.
4-11 Sec. 2306.627. LIMITATION ON USE OF GRANT. (a) A
4-12 multi-bank community development corporation shall invest at least
4-13 60 percent of the amounts received under the program in businesses
4-14 that have been in existence for at least one year before the date
4-15 on which the investment is made.
4-16 (b) The department shall require that at least 50 percent of
4-17 all amounts awarded under the program are invested in small
4-18 businesses owned primarily by minorities or women.
4-19 Sec. 2306.628. COLLABORATIVE EFFORT. With the approval of
4-20 the department, a multi-bank community development corporation may
4-21 make a loan or investment under the program in conjunction with one
4-22 or more financial institutions through partnerships or joint
4-23 investments.
4-24 Sec. 2306.629. PROVISIONS RELATING TO LOANS. (a) The
4-25 maximum amount that may be loaned to a business under the program
4-26 is:
4-27 (1) $200,000 if all of the debt of the business is
5-1 nonsubordinated; or
5-2 (2) $100,000 if any of the business's debt to the
5-3 multi-bank community development corporation is subordinated.
5-4 (b) The maximum term of a loan made using amounts awarded
5-5 under the program is 15 years.
5-6 Sec. 2306.630. PROVISIONS RELATING TO EQUITY INVESTMENTS.
5-7 (a) The maximum equity investment that may be made by a multi-bank
5-8 community development corporation in one business using amounts
5-9 awarded under the program is $50,000 for a maximum term of seven
5-10 years.
5-11 (b) The maximum amount of ownership that a multi-bank
5-12 community development corporation may acquire in a business is 50
5-13 percent of the business's equity.
5-14 Sec. 2306.631. INTEREST INCOME. All income received on an
5-15 investment or loan made with amounts awarded under the program is
5-16 the property of the multi-bank community development corporation
5-17 that makes the investment except that all income received on an
5-18 investment after the investment is assigned to the department under
5-19 Section 2306.625(c) is the property of the department.
5-20 Sec. 2306.632. SEMI-ANNUAL REPORT. (a) Not later than the
5-21 30th day after the expiration of each six-month period for which
5-22 there is a participation agreement in effect between the department
5-23 and a multi-bank community development corporation, the multi-bank
5-24 community development corporation shall submit a report to the
5-25 director that details the status of each investment or loan made
5-26 under the program.
5-27 (b) The report must be in a form prescribed by the board and
6-1 must contain all information required by the department as part of
6-2 the multi-bank community development corporation's participation
6-3 agreement.
6-4 Sec. 2306.633. ANNUAL AUDIT. The participation agreement
6-5 entered into between the multi-bank community development
6-6 corporation and the department must provide for an annual audit of
6-7 all amounts awarded to the multi-bank community development
6-8 corporation under the program. The board shall adopt rules
6-9 relating to the format of the audit.
6-10 SECTION 2. This Act takes effect September 1, 1997.
6-11 SECTION 3. The importance of this legislation and the
6-12 crowded condition of the calendars in both houses create an
6-13 emergency and an imperative public necessity that the
6-14 constitutional rule requiring bills to be read on three several
6-15 days in each house be suspended, and this rule is hereby suspended.