By:  Wentworth, West                                  S.B. No. 1877

         Line and page numbers may not match official copy.

         Bill not drafted by TLC or Senate E&E.

                                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     loans to businesses that employ low and moderate income persons by

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

1-12     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.  (a)  The

1-16     department shall establish a community investment program in which

1-17     the department awards grants to or makes stock purchases in certain

1-18     multi-bank community development corporations for use in making

1-19     loans to or investing in businesses in distressed areas of the

1-20     state that cannot qualify for conventional bank loans.

1-21           (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 make

2-14     a stock purchase in the multi-bank community development

2-15     corporation.

2-16           Sec. 2306.623.  RULE-MAKING AUTHORITY.  (a)  The department

2-17     shall adopt rules relating to the implementation of the program and

2-18     any other rules necessary to accomplish the purposes of this

2-19     subchapter.

2-20           Sec. 2306.624.  GRANT APPLICATION.  (a)  An eligible

2-21     multi-bank community development corporation may file a grant

2-22     application with the department in a form approved by the board.

2-23     The application must include a plan of investment that includes the

2-24     type and number of businesses to which the multi-bank community

2-25     development corporation plans to make a community investment loan

 3-1     or in which the corporation plans to invest using money from the

 3-2     program.

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

 3-4     later than the 30th day after the date on which the application is

 3-5     filed with the department.

 3-6           Sec. 2306.625.  PROVISIONS RELATING TO GRANTS.  (a)  A grant

 3-7     awarded to a multi-bank community development corporation through a

 3-8     grant under the program must be used or committed for approved

 3-9     loans or investments not later than the 18th month after the date

3-10     on which the grant is received.

3-11           (b)  A multi-bank community development corporation shall

3-12     return to the department any amount not invested or committed for

3-13     investment within the period prescribed by Subsection (a) not later

3-14     than the 10th day after the expiration of that period.

3-15           (c)  If a multi-bank community development corporation

3-16     experiences losses of more than 25 percent on loans or investments

3-17     made with grants awarded to the corporation under the program, the

3-18     multi-bank community development corporation shall:

3-19                 (1)  return all unencumbered money to the department;

3-20                 (2)  deliver to the director all of the documentation

3-21     and related instruments concerning investments made with funds

3-22     awarded under the program.

3-23           Sec. 2306.626.  ELIGIBLE LOANS.  (a)  The multi-bank CDCs

3-24     awarded the funds shall establish an investment committee to

3-25     approve loan requests made by businesses.  The membership of the

 4-1     investment committee must be comprised of at least 50 percent of

 4-2     whom must be bankers and at least 30 percent of whom must be

 4-3     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)  A

4-11     multi-bank community development corporation shall invest at least

4-12     60 percent of the amounts received under the program in businesses

4-13     that have been in existence for at least one year before the date

4-14     on which 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 the multi-bank

4-21     CDC 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 from 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 loan or investment.

5-16           Sec. 2306.632.  SEMI-ANNUAL 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 the multi-bank community development

 6-4     corporation and the department must provide for an annual audit of

 6-5     all amounts awarded to the multi-bank community development

 6-6     corporation under the program.  The board shall adopt rules

 6-7     relating to the format of 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.