HBA-JRA, RBT H.B. 3050 76(R)BILL ANALYSIS


Office of House Bill AnalysisH.B. 3050
By: Counts
Agriculture & Livestock
7/26/1999
Enrolled



BACKGROUND AND PURPOSE 

The Texas Department of Agriculture currently administers several programs
to aid, assist, and promote the agriculture industry. H.B. 3050 amends the
agricultural diversification program and microenterprise support program to
allow refinancing of disaster loans and clarifies the approval process for
linked deposit applications, amends the Young Farmer Loan Program to allow
funding of projects of agriculture-related businesses and increase funding,
establishes the Agriculture Technology Program to develop, maintain, and
administer the agri-tech program to support research on agricultural
crises, and moves the young farmer loan guarantee account into the Texas
Agricultural Fund. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority previously delegated to the board of directors of the Texas
Agricultural Finance Authority is modified in SECTION 4 (Section 44.007,
Agriculture Code) and is expressly delegated to the board of directors of
the Texas Agricultural Finance Authority in SECTIONS 5 and 13 (Sections
44.010 and 58.052, Agriculture Code) and to the commissioner of agriculture
in SECTION 7 (Section 46.002, Agriculture Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Section 44.001, Agriculture Code, to delete the
definition of "small business incubator" and redefine "eligible borrower,"
"linked deposit," and "microenterprise."  Redesignates existing
Subdivisions (2)-(8) to Subdivisions (1)-(7). 

SECTION 2.  Amends Section 44.002, Agriculture Code, as follows:

Sec.  44.002.  New title: CREATION OF MICROENTERPRISE PROGRAMS.  Requires
the board of directors of the Texas Agricultural Finance Authority (board)
to create a microenterprise support program to provide financial assistance
to microenterprises in rural areas.  Deletes language referring to an
agricultural diversification program. 

SECTION 3.  Amends Section 44.0045, Agriculture Code, to authorize an
applicant applying on behalf of a proposed microenterprise to receive a
loan of up to $25,000, rather than $15,000, to begin operation of the
microenterprise.  Authorizes an applicant applying on behalf of an
established microenterprise to receive a loan of up to $50,000, rather than
$30,000, to expand, modernize, or otherwise improve an established
operation.  Authorizes the board of directors of the Texas Agricultural
Finance Authority, rather than the board of the microenterprise support
program, to reserve a portion of the total fund for use in cooperative loan
programs established with the participation of other public or private
lenders.  Deletes the prohibition against using a loan to refinance an
existing debt of a proposed or existing microenterprise. 

SECTION 4.  Amends Section 44.007, Agriculture Code, to require the board
to approve or disapprove any and all applications under this chapter,
provided that the board is authorized to delegate this authority to the
commissioner of agriculture (commissioner).  Provides additional factors
which the board must take into consideration when promulgating rules for
the loan portion of the linked deposit program.  Requires the board and the
commissioner, after reviewing each  application, to make recommendations to
the Comptroller of Public Accounts (comptroller). Provides that a lending
institution is not ineligible to participate in the linked deposit program
solely because a member of the board is also an officer, director, or
employee of the lending institution, provided that such a board member be
disqualified from any action taken by the board on an application involving
that lending institution.  Redesignates existing Subsections (b)-(k) to
Subsections (c)-(l).  Makes conforming and nonsubstantive changes. 

SECTION 5.  Amends Section 44.010, Agriculture Code, to increase to $25
million the maximum amount that is authorized to be placed in linked
deposits under this chapter.  Provides that the maximum amount of a loan
under this chapter to finance production of a crop on land declared
eligible for natural disaster relief, as defined by board rule, is
$250,000.  Authorizes a loan granted under this chapter to be used for any
agriculture-related operating expenses, including the purchase or lease of
land, the acquisition of fixed assets, or the making of improvements, as
identified in the loan application.  Authorizes any loan granted under this
chapter to be applied to existing debt, rather than only that debt
resulting from the financing of eligible water conservation projects or
equipment. Makes conforming and nonsubstantive changes. 

SECTION 6.  Amends Sections 44.012 and 44.013, Agriculture Code, as follows:

Sec.  44.012.  New title: MONEY FOR LOANS.  Deletes references to the board
making grants and to the agricultural diversification program.  Makes
conforming changes. 

Sec.  44.013.  RURAL MICROENTERPRISE DEVELOPMENT FUND.  Provides that the
rural microenterprise development fund (fund) is a fund in the
comptroller's office, rather than the state treasury.  Requires money
appropriated to the board of the Texas Agricultural Finance Authority,
rather than the Agricultural Diversification Board, to be deposited to the
credit of the fund. 

SECTION 7.  Amends Title 3, Agriculture Code, by adding Chapter 46, as
follows: 

CHAPTER 46.  AGRICULTURAL TECHNOLOGY PROGRAM

Sec. 46.001.  DEFINITIONS.  Defines "agricultural crisis," "agri-tech
program," "applied research,"  and "eligible institution." 

Sec. 46.002.  ADMINISTRATION; GUIDELINES AND PROCEDURES.  (a)  Requires the
Texas Department of Agriculture (department) to develop, maintain, and
administer the agri-tech program to provide support for eligible
institutions to conduct research projects on methods to address
agricultural crises in this state.  

(b)  Requires the department, in awarding funds to support projects under
this chapter, to give priority to applied research projects that the
commissioner determines to be necessary to address an immediate
agricultural crisis and consider the recommendations of the Commodity
Crisis Council for specific projects.  

(c)  Requires the department to award funds to support projects as needed
to address agricultural crises in this state.  

(d)  Requires the department to develop and maintain guidelines and
procedures to provide awards under this chapter for specific projects at
eligible institutions on a competitive, peer-review basis.  

(e)  Requires the department to determine whether an institution of higher
education qualifies as an eligible institution for the purposes of this
chapter.  Provides that, to be designated as an eligible institution, an
institution of higher education must demonstrate an exceptional capability
to attract federal, state, and private funding for scientific and technical
research and have an exceptionally strong research staff and the necessary
equipment and facilities.  

 (f)  Requires the commissioner, in considering projects for selection, to
give special consideration to projects that leverage funds from other
sources and propose innovative, collaborative efforts across academic
disciplines involving two or more eligible institutions, or involving
eligible institutions, private industry, and the federal government.  


(g)  Authorizes the commissioner to adopt rules necessary to accomplish the
purposes of this chapter.  

Sec. 46.003.  AGRICULTURAL TECHNOLOGY ACCOUNT.  Provides that the
agricultural technology account is an account in the general revenue fund
consisting of legislative appropriations, gifts and grants and other money
required by law to be deposited in the account.  Authorizes the department
to solicit and accept gifts in kind and grants of money from the federal
government, local governments, private corporations, or other persons to be
used for the purposes of this chapter.  Authorizes the funds in the
agricultural technology account to be used only as provided by this
chapter.  Exempts the account from the application of Section 403.095,
Government Code.  Requires income from money in the account to be credited
to the account.  

Sec. 46.004.  USE OF FUNDS IN AGRICULTURAL TECHNOLOGY ACCOUNT. Requires the
comptroller to issue warrants to each eligible institution in the amount
certified by the department to the comptroller from funds appropriated for
the agri-tech program. Authorizes funds awarded from the agricultural
technology account to be expended to support the particular research
project for which the award is made and prohibits such funds to be expended
for the general support of research and instruction at the institution
conducting or sponsoring the project or for the construction or remodeling
of a facility. Requires funds in the agricultural technology account to be
used, when practicable within the purposes of this chapter, to match grants
provided by the federal government or private industry for specific
collaborative research projects at eligible institutions.  Provides that
supplies, materials, services, and equipment purchased with funds obtained
under this section are not subject to General Services Commission
authority.  

Sec. 46.005.  PROGRESS REPORTS.  Requires an institution receiving funds
under this chapter to report on the progress of the funded research to the
department by September 1 of each year.  

Sec. 46.006.  MERIT REVIEW.  Requires the commissioner to appoint a
committee consisting of representatives of the agricultural industry and of
private enterprise advanced technology research organizations to evaluate
the agri-tech program's effectiveness.  Requires the committee to report
its findings to the department by September 1 of the second year of each
biennium. 

SECTION 8.  Amends Section 58.002, Agriculture Code, to redefine
"agricultural business" and define "rural area." 

SECTION 9.  Amends Section 58.016(b), Agriculture Code, make a conforming
change. 

SECTION 10.  Amends Section 58.0172, Agriculture Code, to provide that a
lending institution is not ineligible to participate in the programs
administered by the board solely because a member of the board is also an
officer, director, or employee of the lending institution, provided that
such a board member be disqualified from any action taken by the board on
an application involving that lending institution. 

SECTION 11.  Amends Section 58.021, Agriculture Code, to include promotion
of the development of rural agricultural businesses under the auspices of
this chapter.  Includes development, increase,  improvement, or expansion
of production, possessing, marketing or export among the activities to be
financed by the Texas Agricultural Finance Authority's (authority)
programs.  Includes the development of rural agricultural businesses among
the projects to receive financial assistance. Includes the costs of insect
eradication and suppression programs among those costs to be financed.
Authorizes the authority to make, guarantee, insure, coinsure, or reinsure
loans to the entity designated under Section 74.1011 (Designation of Entity
to Carry Out Boll Weevil Eradication) to enable that entity to execute
Subchapter D (Official Cotton Grower's Boll Weevil Eradication Foundation),
Chapter 74.  Authorizes the authority to issue an obligation on behalf of,
or make, guarantee, participate in, insure, coinsure, or reinsure loans to,
a state agency or an institution of higher education for the purposes
outlined in this chapter, in an amount determined by the board. Authorizes
the authority to make, guarantee, participate in, insure, coinsure, or
reinsure loans to an eligible agricultural business from the proceeds of
revenue bonds issued in accordance with Section 58.033 in an amount
approved by the board. 

SECTION 12.  Amends Section 58.023(a), Agriculture Code, to make a
conforming change. 

SECTION 13.  Amends Subchapter C, Chapter  58, Agriculture Code, by adding
Section 58.026, as follows: 

Sec. 58.026.  LIMITATION OF LIABILITY FOR CERTAIN RECREATIONAL ACTIVITIES.
Makes the provisions of Chapter 75 (Limitation of Landowners' Liability),
Civil Practice and Remedies Code, applicable to eligible recreational
activities which are funded under this chapter. 

SECTION 14.  Amends Chapter 58, Agriculture Code, by adding Subchapter E,
as follows: 

SUBCHAPTER E.  YOUNG FARMER LOAN GUARANTEE PROGRAM

Sec. 58.051.  DEFINITIONS.  Defines "eligible applicant," "commercial
lender," and "plan" in this subchapter. 

Sec. 58.052.  YOUNG FARMER LOAN GUARANTEE PROGRAM.  (a)  Requires the board
to administer a loan guarantee program that benefits eligible applicants
who desire to establish or enhance a farming or ranching operation or an
agriculture-related business. 

(b)  Authorizes the board to grant an eligible applicant a guarantee of a
loan directly or through the authority granted to the commissioner.
Prohibits the guarantee amount from exceeding the lesser of $250,000,
rather than $100,000, or 90 percent of the total loan amount. 

(c)  Prohibits the aggregate amount guaranteed under this subchapter from
exceeding twice the amount contained in the young farmer loan guarantee
account within the Texas agricultural fund. 

(d)  Authorizes a loan guarantee recipient to use  proceeds from the loan
for working capital for operating a farm or ranch, including the lease of
facilities, the purchase of machinery and equipment, or for any
agriculture-related business purpose, including the purchase of real
estate, as identified in the plan.  Provides that a loan guarantee is
voidable by the board if the recipient uses loan proceeds for any purposes
other than those identified in the plan.  Requires the board to include
this restriction as a condition in each loan guarantee instrument executed
under this subchapter. 

(e)  Requires the board to adopt an agreement, to be used between a
commercial lender and an approved eligible applicant, under which the
program provides a payment from money in the young farmer loan guarantee
account for the purpose of providing a reduced interest rate on a loan
guaranteed to a borrower under this subchapter.  Requires the board to
adopt rules to implement this subsection.  Prohibits the maximum rate
reduction under this subsection from exceeding three percentage points. 


Sec. 58.053.  APPLICATION FOR LOAN GUARANTEE.  (a)  Requires an eligible
applicant's documentation submitted for the board's review to include the
plan for the applicant's proposed farm or ranch operation or
agriculture-related business to be financed that includes a budget, a
completed loan application from a commercial lender on which the  applicant
has indicated how the loan proceeds will be used to implement the
applicant's plan, and the signed statement of a loan officer of the
commercial lender that a loan guarantee is required for approval of the
application. 

(b)  Authorizes the board to charge a reasonable application fee for
processing an application filed under this section. 

Sec. 58.054.  BOARD CONSIDERATION OF LOAN GUARANTEE APPLICATION. Requires
the board, in deciding whether to approve an application for a loan
guarantee to consider, the anticipated benefits from granting a loan
guarantee to the applicant, including both potential job creation and
commercial benefits to the agricultural industry; the applicant's
qualifications; the feasibility of the applicant's plan; and other
repayment sources available to the applicant. 

Sec. 58.055.  DEFAULT.  Authorizes the authority, through its
representative, to bring suit against a recipient of a loan guarantee that
defaults on a loan that is guaranteed under this subchapter and on which
the authority is required to honor its guarantee.  Authorizes any such suit
to have venue in Travis County. 

Sec. 58.056.  MONEY FOR LOAN GUARANTEE PROGRAM.  Authorizes the authority
to accept gifts and grants of money from the federal government, local
governments, private corporations, or other persons for use in the young
farmer loan guarantee program. Authorizes the legislature to appropriate
money for the program. 

Sec. 58.057.  YOUNG FARMER LOAN GUARANTEE ACCOUNT.  (a)  Provides that the
young farmer loan guarantee account is an account in the Texas agricultural
fund. Authorizes money in the account to be used only by the authority for
the purpose of making or administering loan guarantees under this
subchapter. 

(b)  Sets forth the sources of account revenues.  Provides that the account
is exempt from the application of Section 403.095 (Use of Dedicated
Revenue), Government Code. 

(c)  Prohibits the board from spending more than $100,000 during each
fiscal year from income earned on the account and from application fees
collected by the authority under Section 58.053 to pay the costs of
administering the program. 

(d)  Requires the board to attempt to administer the fund in a manner that
makes private donations to the fund an eligible itemized deduction for
federal income taxation purposes. 

(e)  Provides that the board has the same authority in administering the
young farmer loan guarantee program as it has in administering other
programs established by this chapter. 

SECTION 15.  Amends Section 502.174(b), Transportation Code, to make a
conforming change. 

SECTION 16.  Repealer:  Sections 44.004 (Research and Innovation), 44.005
(Business Assistance), 44.006 (Small Business Incubators), 44.011 (Criteria
for all Grants), and Chapter 253 (Young Farmer Loan Guarantee Program),
Agriculture Code. 

SECTION 17.  Provides that Section 7 of this Act, adding Chapter 46,
Agriculture Code, takes effect only if a specific appropriation for the
implementation of this Act is provided in H.B. 1 (General Appropriations
Act), Acts of the 76th Legislature, Regular Session, 1999. 

SECTION 18.  Emergency clause.