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, 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.


 5-5     (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