AN ACT
1-1 relating to creating a Texas community investment program to assist
1-2 certain businesses in distressed areas of the state.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 2306, Government Code, is amended by
1-5 adding Subchapter AA to read as follows:
1-6 SUBCHAPTER AA. TEXAS COMMUNITY INVESTMENT PROGRAM
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, with any
1-17 money specifically appropriated to the department for that purpose,
1-18 establish a community investment program in which the department
1-19 awards grants to or purchases stock of certain multi-bank community
1-20 development corporations for use in making loans to or investing in
1-21 businesses in distressed areas of the state that cannot qualify for
1-22 conventional bank loans.
1-23 (b) The department shall determine the eligibility of a
2-1 multi-bank community development corporation to participate in the
2-2 program and may set a limit on the number of eligible multi-bank
2-3 community development corporations that may participate in the
2-4 program.
2-5 (c) A multi-bank community development corporation is
2-6 eligible to participate in the program if the multi-bank community
2-7 development corporation has raised a minimum of $500,000 in private
2-8 investments to make loans to or investments in businesses described
2-9 by Subsection (a).
2-10 (d) To participate in the program, an eligible multi-bank
2-11 community development corporation must enter into a participation
2-12 agreement with the department that sets out the terms and
2-13 conditions under which the department will award a grant to or
2-14 purchase stock of the multi-bank community development corporation.
2-15 Sec. 2306.623. RULE-MAKING AUTHORITY. The department shall
2-16 adopt rules relating to the implementation of the program and any
2-17 other rules necessary to accomplish the purposes of this
2-18 subchapter.
2-19 Sec. 2306.624. GRANT APPLICATION. (a) An eligible
2-20 multi-bank community development corporation may file a grant
2-21 application with the department in a form approved by the board.
2-22 The application must include a plan of investment that includes the
2-23 type and number of businesses to which the multi-bank community
2-24 development corporation plans to make a community investment loan
2-25 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 and
3-20 (2) deliver to the director all of the documentation
3-21 and related instruments concerning investments made with money
3-22 awarded under the program.
3-23 Sec. 2306.626. ELIGIBLE LOANS. (a) Each multi-bank
3-24 community development corporation participating in the program
3-25 shall establish an investment committee to approve loan requests
4-1 made by businesses. Each investment committee must have at least
4-2 five members at least 50 percent of whom must be bankers and at
4-3 least 30 percent of whom must be representatives of the community.
4-4 (b) A multi-bank community development corporation may use
4-5 money awarded under the program to make a community investment loan
4-6 only if the loan is approved by the appropriate investment
4-7 committee.
4-8 (c) A community investment loan may be in the form of debt,
4-9 subordinated debt, or an equity investment.
4-10 Sec. 2306.627. LIMITATION ON USE OF GRANT. A multi-bank
4-11 community development corporation shall invest at least 60 percent
4-12 of the amounts received under the program in businesses that have
4-13 been in existence for at least one year before the date on which
4-14 the investment is made.
4-15 Sec. 2306.628. COLLABORATIVE EFFORT. A multi-bank community
4-16 development corporation may make a loan or investment under the
4-17 program in conjunction with one or more financial institutions
4-18 through partnerships or joint investments.
4-19 Sec. 2306.629. PROVISIONS RELATING TO LOANS. (a) The
4-20 maximum amount that may be loaned to a business by a multi-bank
4-21 community development corporation under the program is:
4-22 (1) $200,000 if all of the loan to the business is
4-23 direct; or
4-24 (2) $100,000 if any of the business's debt to the
4-25 multi-bank community development corporation is subordinated to a
5-1 bank or other entity.
5-2 (b) The maximum term of a loan made using amounts awarded
5-3 under the program is 15 years.
5-4 Sec. 2306.630. PROVISIONS RELATING TO EQUITY INVESTMENTS.
5-5 (a) The maximum equity investment that may be made by a multi-bank
5-6 community development corporation in one business using amounts
5-7 awarded under the program is $50,000 for a maximum term of seven
5-8 years.
5-9 (b) The maximum amount of ownership that a multi-bank
5-10 community development corporation may acquire in a business is 50
5-11 percent of the business's equity.
5-12 Sec. 2306.631. INTEREST INCOME. All income received on an
5-13 investment or loan made with amounts awarded under the program is
5-14 the property of the multi-bank community development corporation
5-15 that makes the investment or loan.
5-16 Sec. 2306.632. SEMIANNUAL REPORT. (a) Not later than the
5-17 30th day after the expiration of each six-month period for which
5-18 there is a participation agreement in effect between the department
5-19 and a multi-bank community development corporation, the multi-bank
5-20 community development corporation shall submit a report to the
5-21 director that details the status of each investment or loan made
5-22 under the program.
5-23 (b) The report must be in a form prescribed by the board and
5-24 must contain all information required by the department as part of
5-25 the multi-bank community development corporation's participation
6-1 agreement.
6-2 Sec. 2306.633. ANNUAL AUDIT. The participation agreement
6-3 entered into between a multi-bank community development corporation
6-4 and the department must provide for an annual audit of all amounts
6-5 awarded to the multi-bank community development corporation under
6-6 the program. The board shall adopt rules relating to the format of
6-7 the audit.
6-8 SECTION 2. This Act takes effect September 1, 1997.
6-9 SECTION 3. The importance of this legislation and the
6-10 crowded condition of the calendars in both houses create an
6-11 emergency and an imperative public necessity that the
6-12 constitutional rule requiring bills to be read on three several
6-13 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. 1877 passed the Senate on
April 16, 1997, by a viva-voce vote; and that the Senate concurred
in House amendment on May 26, 1997, by a viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1877 passed the House, with
amendment, on May 23, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor