HBA-DMD H.B. 1687 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1687 By: Hunter State, Federal, & International Relations 3/18/1999 Introduced BACKGROUND AND PURPOSE Texas does not currently offer a reliable ongoing financial infrastructure for the film industry. Without such, the state's ability to develop its film industry may be limited. H.B. 1687 establishes the Texas film industry development loan guarantee fund. This bill requires the Texas Department of Economic Development to establish a loan guarantee program which guarantees loans for Texas films made by Texas film producers. This bill also establishes a guarantee fee that the producer must pay the department before the issuance of a loan guarantee. Additionally, this bill requires the department to require the film producer to provide an indemnity insurance policy worth at least 80 percent of the loan guarantee. H.B. 1687 prohibits more than $50 million of guarantees from being outstanding at any one time. This bill also subjects the Texas film industry development loan guarantee program to the Texas Sunset Act. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Department of Economic Development in SECTION 1 (Section 481.611, Government Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 481, Government Code, by adding Subchapter CC, as follows: SUBCHAPTER CC. TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE PROGRAM Sec. 481.601. DEFINITIONS. Defines "eligible Texas film," "filmed entertainment," "production costs," "program," "Texas derivation," "Texas film," "Texas film producer," and "Texas lender." Sec. 481.602. LIBERAL CONSTRUCTION. Requires this subchapter to be liberally construed to accomplish the purposes stated in this subchapter. Sec. 481.603. TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE FUND. Establishes the Texas film industry development loan guarantee fund (fund) as a dedicated account in the general revenue fund. Specifies amounts to be deposited in the fund. Authorizes money in the fund to be used only for the purposes of this subchapter. Provides that Section 403.095 (Use of Dedicated Revenue), Government Code, does not apply to the fund. Sec. 481.604. TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE PROGRAM. Requires the Texas Department of Economic Development (department) to establish a loan guarantee program (program) to guarantee a certain amount of one or more qualified Texas film production loans as a means to facilitate access to capital for the production of filmed entertainment in this state. Authorizes the department to guarantee a qualified Texas film production loan or loans for the production of more than one Texas film by a single Texas film producer. (b) Prohibits the department from making a Texas film industry loan guarantee (loan guarantee) unless a Texas lender has approved a qualified application submitted by a Texas film producer to make a qualified Texas film production loan to the producer. (c) Requires the department, for each guarantee, to determine the maximum guarantee amounts, the terms and conditions relating to a guarantee, and specifically provide that an action or claim under the guarantee must be brought no later than the third anniversary of the date on which the department issues the guarantee. (d) Prohibits the guarantee amount provided by the department under this subchapter from exceeding 80 percent of the total amount of the Texas film production loan, or $2.4 million, whichever is less. Sec. 481.605. QUALIFIED TEXAS FILM PRODUCTION LOAN. Sets qualifications for a Texas film production loan. Sec. 481.606. APPLICATION FOR LOAN GUARANTEE. (a) Sets guidelines for a loan guarantee application (application). (b) Requires the department to charge a reasonable application fee not to exceed $100 in order to cover the cost of processing the application. (c) Requires the department, upon receiving an application, to verify the information contained in the application. Authorizes the department to conduct investigations as necessary to make a determination regarding information provided in the application. (d) Authorizes the department to contract with a private company to verify the information in the application by conducting an investigation and to submit a written report of the company's findings to the department. (e) Prohibits the department from approving an application unless it is complete and meets the requirements of this section. Sec. 481.607. GUARANTEE FEE. Requires the producer of a film, for each film to be produced with the proceeds acquired with the assistance of a loan guarantee, to pay to the department a guarantee fee in an amount equal to two percent of the budget for the total cost to produce the Texas film. Provides that the fee must be paid in full before the date on which the department issues the loan guarantee. Sec. 481.608. INDEMNITY POLICY. Requires the department, for each film to be produced with the proceeds acquired with the assistance of a loan guarantee, to require the producer of the film to provide an indemnity insurance policy worth at least 80 percent of the loan guarantee. Provides that the insurance policy must be issued to the department as the insured party by an insurance company authorized to do business in this state. Sec. 481.609. SURETY BOND FOR COMPLETION OF FILM. Requires the department, as a condition of receiving a loan guarantee, to require an applicant to file a surety bond indemnifying this state, the lender, and the insurance company providing indemnity insurance under Section 481.608 against loss that results from the film not being completed by the date and for the budget certified to the state in the application required by Section 481.606. Sec. 481.610. ISSUANCE OF LOAN GUARANTEE. Prohibits the department from issuing a loan guarantee unless the loan guarantee meets certain criteria. Sec. 481.611. RULEMAKING AUTHORITY. Requires the department to adopt rules relating to the implementation of the program and any other rules necessary to accomplish the purposes of this subchapter. Provides that the rules must include: (1) terms and conditions for a security interest or other pledge of collateral to be provided to a lender or this state as security for any default of a loan guaranteed under the program; and (2) procedures for the enforcement of obligations owed and pledge of collateral provided to the department under the program. Sec. 481.612. OFFENSE. Provides that a person commits a third degree felony offense if the person signs an application or submits to the department a document the person knows is false in any material respect with the intent of causing the department to issue a loan guarantee under the program. Sec. 481.613. LIMITATIONS IN PROGRAM. Prohibits more than $50 million of guarantees issued from being outstanding at any one time. Sec. 481.614. QUARTERLY REPORT. Requires the department, at least quarterly, to provide to the comptroller, the director of the Legislative Budget Board, the presiding officer of the Senate Finance Committee, and the presiding officer of the House Appropriations Committee a report that contains: (1) the names and addresses of the Texas film producers that have applied to the department for, and the Texas lenders that would benefit from, a loan guarantee under the program; (2) the names and addresses of the Texas film producers and their respective Texas lenders that have been approved to receive a loan guarantee under the program; (3) the amount of the loan guarantee issued by the department to each applicant described by Subdivision (2); and (4) any other information relating to the program that may be requested to be included in the report. Sec. 481.615. GIFTS AND GRANTS. Authorizes the department to solicit and accept gifts, grants, and donations from any source for the purposes of this subchapter. Sec. 481.616. APPLICATION OF SUNSET ACT TO PROGRAM. (a) Subjects the program to Chapter 325 (Texas Sunset Act), Government Code, as if it were a state agency subject to review under that chapter. Provides that this program is abolished and this subchapter expires on September 1, 2005, if it is not continued in existence in accordance with that chapter. (b) Requires the department, to the extent that Chapter 325 (Texas Sunset Act), Government Code, places a duty on a state agency subject to review under that chapter, to perform the duty as it relates to the program. SECTION 2. Subchapter B, Chapter 481, Government Code, is amended by adding Section 481.030, as follows: Sec. 481.030. TRANSFER OF CERTAIN MONEY TO GENERAL REVENUE FUND. Sets forth that on the expiration of Subchapter CC: (1) the department is required to compute the amount sufficient to cover loan guarantees or other obligations of the department that remain outstanding under the program; and (2) authorizes any amount in the fund that exceeds the amount computed under Subdivision (1) to be used only by the Music, Film, Television, and Multimedia Office in the governor's office for the purpose of promoting the film industry in this state. SECTION 3. Requires the department to adopt rules required by Section 481.611, Government Code, as added by this Act, no later than December 1, 1999. SECTION 4.Effective date: September 1, 1999. SECTION 5.Emergency clause.