AN ACT

 1-1     relating to the linked deposit program.

 1-2           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-3           SECTION 1.  The heading to Subchapter N, Chapter 481,

 1-4     Government Code, is amended to read as follows:

 1-5             SUBCHAPTER N.  [HISTORICALLY UNDERUTILIZED BUSINESS

 1-6                 AND SMALL BUSINESS] LINKED DEPOSIT PROGRAM

 1-7           SECTION 2.  Section 481.191, Government Code, is amended to

 1-8     read as follows:

 1-9           Sec. 481.191.  DEFINITIONS.  In this subchapter:

1-10                 (1)  "Child-care provider" means a small business that

1-11     operates or proposes to operate a day-care center or group day-care

1-12     home, as those terms are defined by Section 42.002, Human Resources

1-13     Code.

1-14                 (2)  "Eligible borrower" means:

1-15                       (A)  a person who proposes to begin operating a

1-16     small business in an enterprise zone, as defined by Section

1-17     2303.003, [a distressed community] or a historically underutilized

1-18     business;

1-19                       (B)  a nonprofit corporation; or

1-20                       (C)  a child-care provider.

1-21                 (3) [(2)]  "Eligible lending institution" means a

1-22     financial institution that makes commercial loans, is a depository

1-23     of state funds, and agrees to participate in the linked deposit

 2-1     program established by this subchapter and to provide collateral

 2-2     equal to the amount of linked deposits placed with it.

 2-3                 (4) [(3)]  "Historically underutilized business" means:

 2-4                       (A)  a corporation formed for the purpose of

 2-5     making a profit in which at least 51 percent of all classes of the

 2-6     shares of stock or other equitable securities is owned by one or

 2-7     more persons who are members of certain groups, including black

 2-8     Americans, Hispanic Americans, women, Asian Pacific Americans, and

 2-9     American Indians;

2-10                       (B)  a sole proprietorship formed for the purpose

2-11     of making a profit that is 100 percent owned, operated, and

2-12     controlled by a person described by Paragraph (A) of this

2-13     subdivision;

2-14                       (C)  a partnership formed for the purpose of

2-15     making a profit in which 51 percent of the assets and interest in

2-16     the partnership is owned by one or more persons described by

2-17     Paragraph (A) of this subdivision.  Those persons must have

2-18     proportionate interest and demonstrate active participation in the

2-19     control, operation, and management of the partnership's affairs; or

2-20                       (D)  a joint venture in which each entity in the

2-21     joint venture is a historically underutilized business under this

2-22     subdivision.

2-23                 (5)  "Nonprofit corporation" means a not for profit

2-24     corporation organized under the Texas Non-Profit Corporation Act

2-25     (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes).

 3-1                 (6) [(4)]  "Small business" means a corporation,

 3-2     partnership, sole proprietorship, or other legal entity that:

 3-3                       (A)  is domiciled in this state;

 3-4                       (B)  is formed to make a profit;

 3-5                       (C)  is independently owned and operated; and

 3-6                       (D)  employs fewer than 100 full-time employees.

 3-7           SECTION 3.  Subsections (a) and (g), Section 481.193,

 3-8     Government Code, are amended to read as follows:

 3-9           (a)  The department shall establish a linked deposit program

3-10     to encourage commercial lending for the development of:

3-11                 (1)  small businesses in enterprise zones;

3-12                 (2)  [distressed communities and] historically

3-13     underutilized businesses;

3-14                 (3)  child-care services provided by and activities

3-15     engaged in this state by nonprofit organizations; and

3-16                 (4)  quality, affordable child-care services in this

3-17     state.

3-18           (g)  After the comptroller's [state treasurer's] acceptance

3-19     of the application and the lending institution originates a loan to

3-20     an eligible borrower, the comptroller [state treasurer] shall place

3-21     a linked deposit with the applicable eligible lending institution

3-22     for the period of the loan, subject to Subsections (h) and (i).

3-23     The comptroller is not required to maintain the deposit with the

3-24     lending institution if the loan is extended, renewed, or

3-25     renegotiated unless the comptroller accepts a new linked deposit

 4-1     loan application under this section for the loan as modified [the

 4-2     treasurer considers appropriate.  The state treasurer may not place

 4-3     a deposit for a period extending beyond the state fiscal biennium

 4-4     in which it is placed].  Subject to the limitation described by

 4-5     Section 481.197, the comptroller [treasurer] may place a time

 4-6     deposit [deposits] at an interest rate described by Section 481.192

 4-7     and may modify the interest rate during the period of the loan,

 4-8     notwithstanding any order of the State Depository Board to the

 4-9     contrary.

4-10           SECTION 4.  Subsection (b), Section 481.197, Government Code,

4-11     is amended to read as follows:

4-12           (b)  The maximum amount of a loan under the linked deposit

4-13     program is $250,000 [$100,000].

4-14           SECTION 5.  Subchapter N, Chapter 481, Government Code, is

4-15     amended by adding Section 481.198 to read as follows:

4-16           Sec. 481.198.  MARKETING.  (a)  The department shall promote

4-17     the linked deposit program established by this subchapter to

4-18     eligible borrowers and financial institutions that make commercial

4-19     loans and are depositories of state funds.

4-20           (b)  Not later than January 1 of each odd-numbered year, the

4-21     department shall prepare and deliver to the governor, lieutenant

4-22     governor, speaker of the house of representatives, and clerks of

4-23     the standing committees of the senate and house of representatives

4-24     with primary jurisdiction over commerce and economic development a

4-25     report concerning the department's efforts in promoting the linked

 5-1     deposit program during the preceding two years.

 5-2           SECTION 6.  Section 481.195, Government Code, is repealed.

 5-3           SECTION 7.  This Act does not apply to a linked deposit

 5-4     governed by a written deposit agreement executed before the

 5-5     effective date of this Act.  A linked deposit governed by a written

 5-6     deposit agreement executed before the effective date of this Act is

 5-7     governed by the law in effect at the time the agreement was

 5-8     executed, and that law is continued in effect for that purpose.

 5-9           SECTION 8.  This Act takes effect September 1, 1997.

5-10           SECTION 9.  The importance of this legislation and the

5-11     crowded condition of the calendars in both houses create an

5-12     emergency and an imperative public necessity that the

5-13     constitutional rule requiring bills to be read on three several

5-14     days in each house be suspended, and this rule is hereby suspended.

         _______________________________     _______________________________

             President of the Senate              Speaker of the House

               I hereby certify that S.B. No. 265 passed the Senate on

         April 16, 1997, by a viva-voce vote.

                                             _______________________________

                                                 Secretary of the Senate

               I hereby certify that S.B. No. 265 passed the House on

         May 25, 1997, by a non-record vote.

                                             _______________________________

                                                 Chief Clerk of the House

         Approved:

         _______________________________

                     Date

         _______________________________

                   Governor