1-1     By:  Wentworth, West, Barrientos, Lucio               S.B. No. 1877

 1-2           (In the Senate - Filed March 14, 1997; March 24, 1997, read

 1-3     first time and referred to Committee on Intergovernmental

 1-4     Relations; April 11, 1997, reported adversely, with favorable

 1-5     Committee Substitute by the following vote:  Yeas 10, Nays 1;

 1-6     April 11, 1997, sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 1877                 By:  Shapiro

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to creating a Texas community investment program to assist

1-11     certain businesses in distressed areas of the state.


1-13           SECTION 1.  Chapter 2306, Government Code, is amended by

1-14     adding Subchapter AA to read as follows:


1-16           Sec. 2306.621.  DEFINITIONS.  In this subchapter:

1-17                 (1)  "Multi-bank community development corporation"

1-18     means a corporation organized to provide community development

1-19     funds to businesses that employ low and moderate income persons by

1-20     investing in and making loans to disadvantaged businesses located

1-21     in distressed areas of the state.

1-22                 (2)  "Program" means the community investment program

1-23     established under this subchapter.

1-24           Sec. 2306.622.  COMMUNITY INVESTMENT PROGRAM.

1-25     (a)  Notwithstanding any other law, the department shall establish

1-26     a community investment program in which the department awards

1-27     grants to or purchases stock of certain multi-bank community

1-28     development corporations for use in making loans to or investing in

1-29     businesses in distressed areas of the state that cannot qualify for

1-30     conventional bank loans.

1-31           (b)  The department shall determine the eligibility of a

1-32     multi-bank community development corporation to participate in the

1-33     program and may set a limit on the number of eligible multi-bank

1-34     community development corporations that may participate in the

1-35     program.

1-36           (c)  A multi-bank community development corporation is

1-37     eligible to participate in the program if the multi-bank community

1-38     development corporation has raised a minimum of $500,000 in private

1-39     investments to make loans to or investments in businesses described

1-40     by Subsection (a).

1-41           (d)  To participate in the program, an eligible multi-bank

1-42     community development corporation must enter into a participation

1-43     agreement with the department that sets out the terms and

1-44     conditions under which the department will award a grant to or

1-45     purchase stock of the multi-bank community development corporation.

1-46           Sec. 2306.623.  RULE-MAKING AUTHORITY.  The department shall

1-47     adopt rules relating to the implementation of the program and any

1-48     other rules necessary to accomplish the purposes of this

1-49     subchapter.

1-50           Sec. 2306.624.  GRANT APPLICATION.  (a)  An eligible

1-51     multi-bank community development corporation may file a grant

1-52     application with the department in a form approved by the board.

1-53     The application must include a plan of investment that includes the

1-54     type and number of businesses to which the multi-bank community

1-55     development corporation plans to make a community investment loan

1-56     or in which the corporation plans to invest using money from the

1-57     program.

1-58           (b)  The director shall act on a completed application not

1-59     later than the 30th day after the date on which the application is

1-60     filed with the department.

1-61           Sec. 2306.625.  PROVISIONS RELATING TO GRANTS.  (a)  A grant

1-62     awarded to a multi-bank community development corporation through a

1-63     grant under the program must be used or committed for approved

1-64     loans or investments not later than the 18th month after the date

 2-1     on which the grant is received.

 2-2           (b)  A multi-bank community development corporation shall

 2-3     return to the department any amount not invested or committed for

 2-4     investment within the period prescribed by Subsection (a) not later

 2-5     than the 10th day after the expiration of that period.

 2-6           (c)  If a multi-bank community development corporation

 2-7     experiences losses of more than 25 percent on loans or investments

 2-8     made with grants awarded to the corporation under the program, the

 2-9     multi-bank community development corporation shall:

2-10                 (1)  return all unencumbered money to the department;

2-11     and

2-12                 (2)  deliver to the director all of the documentation

2-13     and related instruments concerning investments made with money

2-14     awarded under the program.

2-15           Sec. 2306.626.  ELIGIBLE LOANS.  (a)  Each multi-bank

2-16     community development corporation participating in the program

2-17     shall establish an investment committee to approve loan requests

2-18     made by businesses.  Each investment committee must have at least

2-19     five members at least 50 percent of whom must be bankers and at

2-20     least 30 percent of whom must be representatives of the community.

2-21           (b)  A multi-bank community development corporation may use

2-22     money awarded under the program to make a community investment loan

2-23     only if the loan is approved by the appropriate investment

2-24     committee.

2-25           (c)  A community investment loan may be in the form of debt,

2-26     subordinated debt, or an equity investment.

2-27           Sec. 2306.627.  LIMITATION ON USE OF GRANT.  A multi-bank

2-28     community development corporation shall invest at least 60 percent

2-29     of the amounts received under the program in businesses that have

2-30     been in existence for at least one year before the date on which

2-31     the investment is made.

2-32           Sec. 2306.628.  COLLABORATIVE EFFORT.  A multi-bank community

2-33     development corporation may make a loan or investment under the

2-34     program in conjunction with one or more financial institutions

2-35     through partnerships or joint investments.

2-36           Sec. 2306.629.  PROVISIONS RELATING TO LOANS.  (a)  The

2-37     maximum amount that may be loaned to a business by a multi-bank

2-38     community development corporation under the program is:

2-39                 (1)  $200,000 if all of the loan to the business is

2-40     direct; or

2-41                 (2)  $100,000 if any of the business's debt to the

2-42     multi-bank community development corporation is subordinated to a

2-43     bank or other entity.

2-44           (b)  The maximum term of a loan made using amounts awarded

2-45     under the program is 15 years.


2-47     (a)  The maximum equity investment that may be made by a multi-bank

2-48     community development corporation in one business using amounts

2-49     awarded under the program is $50,000 for a maximum term of seven

2-50     years.

2-51           (b)  The maximum amount of ownership that a multi-bank

2-52     community development corporation may acquire in a business is 50

2-53     percent of the business's equity.

2-54           Sec. 2306.631.  INTEREST INCOME.  All income received on an

2-55     investment or loan made with amounts awarded under the program is

2-56     the property of the multi-bank community development corporation

2-57     that makes the investment or loan.

2-58           Sec. 2306.632.  SEMIANNUAL REPORT.  (a)  Not later than the

2-59     30th day after the expiration of each six-month period for which

2-60     there is a participation agreement in effect between the department

2-61     and a multi-bank community development corporation, the multi-bank

2-62     community development corporation shall submit a report to the

2-63     director that details the status of each investment or loan made

2-64     under the program.

2-65           (b)  The report must be in a form prescribed by the board and

2-66     must contain all information required by the department as part of

2-67     the multi-bank community development corporation's participation

2-68     agreement.

2-69           Sec. 2306.633.  ANNUAL AUDIT.  The participation agreement

 3-1     entered into between a multi-bank community development corporation

 3-2     and the department must provide for an annual audit of all amounts

 3-3     awarded to the multi-bank community development corporation under

 3-4     the program.  The board shall adopt rules relating to the format of

 3-5     the audit.

 3-6           SECTION 2.  This Act takes effect September 1, 1997.

 3-7           SECTION 3.  The importance of this legislation and the

 3-8     crowded condition of the calendars in both houses create an

 3-9     emergency and an imperative public necessity that the

3-10     constitutional rule requiring bills to be read on three several

3-11     days in each house be suspended, and this rule is hereby suspended.

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