By:  Wentworth, et al.                                S.B. No. 1877

                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to creating a Texas community investment program to assist

 1-2     certain businesses in distressed areas of the state.


 1-4           SECTION 1.  Chapter 2306, Government Code, is amended by

 1-5     adding Subchapter AA to read as follows:


 1-7           Sec. 2306.621.  DEFINITIONS.  In this subchapter:

 1-8                 (1)  "Multi-bank community development corporation"

 1-9     means a corporation organized to provide community development

1-10     funds to businesses that employ low and moderate income persons by

1-11     investing in and making loans to disadvantaged businesses located

1-12     in distressed areas of the state.

1-13                 (2)  "Program" means the community investment program

1-14     established under this subchapter.

1-15           Sec. 2306.622.  COMMUNITY INVESTMENT PROGRAM.

1-16     (a)  Notwithstanding any other law, the department shall establish

1-17     a community investment program in which the department awards

1-18     grants to or purchases stock of 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

 2-1     program and may set a limit on the number of eligible multi-bank

 2-2     community development corporations that may participate in the

 2-3     program.

 2-4           (c)  A multi-bank community development corporation is

 2-5     eligible to participate in the program if the multi-bank community

 2-6     development corporation has raised a minimum of $500,000 in private

 2-7     investments to make loans to or investments in businesses described

 2-8     by Subsection (a).

 2-9           (d)  To participate in the program, an eligible multi-bank

2-10     community development corporation must enter into a participation

2-11     agreement with the department that sets out the terms and

2-12     conditions under which the department will award a grant to or

2-13     purchase stock of the multi-bank community development corporation.

2-14           Sec. 2306.623.  RULE-MAKING AUTHORITY.  The department shall

2-15     adopt rules relating to the implementation of the program and any

2-16     other rules necessary to accomplish the purposes of this

2-17     subchapter.

2-18           Sec. 2306.624.  GRANT APPLICATION.  (a)  An eligible

2-19     multi-bank community development corporation may file a grant

2-20     application with the department in a form approved by the board.

2-21     The application must include a plan of investment that includes the

2-22     type and number of businesses to which the multi-bank community

2-23     development corporation plans to make a community investment loan

2-24     or in which the corporation plans to invest using money from the

2-25     program.

 3-1           (b)  The director shall act on a completed application not

 3-2     later than the 30th day after the date on which the application is

 3-3     filed with the department.

 3-4           Sec. 2306.625.  PROVISIONS RELATING TO GRANTS.  (a)  A grant

 3-5     awarded to a multi-bank community development corporation through a

 3-6     grant under the program must be used or committed for approved

 3-7     loans or investments not later than the 18th month after the date

 3-8     on which the grant is received.

 3-9           (b)  A multi-bank community development corporation shall

3-10     return to the department any amount not invested or committed for

3-11     investment within the period prescribed by Subsection (a) not later

3-12     than the 10th day after the expiration of that period.

3-13           (c)  If a multi-bank community development corporation

3-14     experiences losses of more than 25 percent on loans or investments

3-15     made with grants awarded to the corporation under the program, the

3-16     multi-bank community development corporation shall:

3-17                 (1)  return all unencumbered money to the department;

3-18     and

3-19                 (2)  deliver to the director all of the documentation

3-20     and related instruments concerning investments made with money

3-21     awarded under the program.

3-22           Sec. 2306.626.  ELIGIBLE LOANS.  (a)  Each multi-bank

3-23     community development corporation participating in the program

3-24     shall establish an investment committee to approve loan requests

3-25     made by businesses.  Each investment committee must have at least

 4-1     five members at least 50 percent of whom must be bankers and at

 4-2     least 30 percent of whom must be representatives of the community.

 4-3           (b)  A multi-bank community development corporation may use

 4-4     money awarded under the program to make a community investment loan

 4-5     only if the loan is approved by the appropriate investment

 4-6     committee.

 4-7           (c)  A community investment loan may be in the form of debt,

 4-8     subordinated debt, or an equity investment.

 4-9           Sec. 2306.627.  LIMITATION ON USE OF GRANT.  A multi-bank

4-10     community development corporation shall invest at least 60 percent

4-11     of the amounts received under the program in businesses that have

4-12     been in existence for at least one year before the date on which

4-13     the investment is made.

4-14           Sec. 2306.628.  COLLABORATIVE EFFORT.  A multi-bank community

4-15     development corporation may make a loan or investment under the

4-16     program in conjunction with one or more financial institutions

4-17     through partnerships or joint investments.

4-18           Sec. 2306.629.  PROVISIONS RELATING TO LOANS.  (a)  The

4-19     maximum amount that may be loaned to a business by a multi-bank

4-20     community development corporation under the program is:

4-21                 (1)  $200,000 if all of the loan to the business is

4-22     direct; or

4-23                 (2)  $100,000 if any of the business's debt to the

4-24     multi-bank community development corporation is subordinated to a

4-25     bank or other entity.

 5-1           (b)  The maximum term of a loan made using amounts awarded

 5-2     under the program is 15 years.


 5-4     (a)  The maximum equity investment that may be made by a multi-bank

 5-5     community development corporation in one business using amounts

 5-6     awarded under the program is $50,000 for a maximum term of seven

 5-7     years.

 5-8           (b)  The maximum amount of ownership that a multi-bank

 5-9     community development corporation may acquire in a business is 50

5-10     percent of the business's equity.

5-11           Sec. 2306.631.  INTEREST INCOME.  All income received on an

5-12     investment or loan made with amounts awarded under the program is

5-13     the property of the multi-bank community development corporation

5-14     that makes the investment or loan.

5-15           Sec. 2306.632.  SEMIANNUAL REPORT.  (a)  Not later than the

5-16     30th day after the expiration of each six-month period for which

5-17     there is a participation agreement in effect between the department

5-18     and a multi-bank community development corporation, the multi-bank

5-19     community development corporation shall submit a report to the

5-20     director that details the status of each investment or loan made

5-21     under the program.

5-22           (b)  The report must be in a form prescribed by the board and

5-23     must contain all information required by the department as part of

5-24     the multi-bank community development corporation's participation

5-25     agreement.

 6-1           Sec. 2306.633.  ANNUAL AUDIT.  The participation agreement

 6-2     entered into between a multi-bank community development corporation

 6-3     and the department must provide for an annual audit of all amounts

 6-4     awarded to the multi-bank community development corporation under

 6-5     the program.  The board shall adopt rules relating to the format of

 6-6     the audit.

 6-7           SECTION 2.  This Act takes effect September 1, 1997.

 6-8           SECTION 3.  The importance of this legislation and the

 6-9     crowded condition of the calendars in both houses create an

6-10     emergency and an imperative public necessity that the

6-11     constitutional rule requiring bills to be read on three several

6-12     days in each house be suspended, and this rule is hereby suspended.