SRC-PNG S.B. 1430 76(R)   BILL ANALYSIS


Senate Research Center   S.B. 1430
By: Duncan
Agriculture
3/24/1999
As Filed


DIGEST 

Currently, the regulation of the administration of certain loan programs by
the Texas Agricultural Finance Authority is codified in Chapter 44 and
Chapter 58 of the Texas Agriculture Code, and Chapter 502, Transportation
Code.  This bill would revise the regulations of the administration of
certain loan programs by the Texas Agricultural Finance Authority and would
promote the development of agriculture-related rural businesses. 

PURPOSE

As proposed, S.B. 1430 revises the regulations of the administration of
certain loan programs by the Texas Agricultural Finance Authority and
promotes the development of agriculture-related rural businesses. 

RULEMAKING AUTHORITY

Rulemaking authority is granted to the board of directors of the Texas
Agricultural Finance Authority in SECTION 13 (Section 58.052(e),
Agriculture Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 44.001, Agriculture Code, to redefine "eligible
borrower," "linked deposit," "microenterprise," and "board."  Deletes the
definition of "small business incubator." Makes conforming changes. 

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

Sec.  44.002.  New heading: CREATION OF MICROENTERPRISE PROGRAMS.  Deletes
text requiring the board of directors of the Texas Agricultural Finance
Authority (board) to create an agricultural diversification program.  Makes
a conforming change.  

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.  Authorizes
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.   Deletes text prohibiting financial assistance in the form of a
loan from being used to refinance an existing debt of a microenterprise.
Makes conforming changes. 

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 may delegate this authority to the commissioner of
agriculture (commissioner).  Requires the rules promulgated by the board
for the loan portion of the linked deposit program to include a list of the
categories of crops customarily grown in Texas, with consideration given to
the Texas Agricultural Statistics Service information available and
relevant to this determination, and identification of criteria for a
project eligible for natural disaster assistance.  Requires the
commissioner or the board to recommend to the comptroller of public
accounts the acceptance or rejection of the application, after reviewing
each linked deposit loan application.  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 a board member shall recuse himself
or herself  from any action taken by the board on an application involving
a lending institution by which the board member is employed or for which
the board member serves as an officer or director.  Deletes text providing
for the representation of the eligible lending institution and the state by
the board;  text requiring the rules to include a list of crops the
production of which has declined markedly because of natural disasters; and
text requiring the eligible lending institution to send the application for
a linked deposit loan to the board, after reviewing an application and
determining that the applicant is eligible and creditworthy.  Makes
conforming and nonsubstantive changes. 

SECTION 5.  Amends Section 44.010, Agriculture Code, to authorize, at any
one time, not more than $25 million, rather than $15 million, of which $10
million may only be used to finance water conservation projects, to be
placed in linked deposits.  Provides that the maximum amount of a loan
under this chapter to finance production of a crop declared eligible for
natural disaster relief, as defined by board rule, is $250,000.  Authorizes
a loan granted pursuant to this chapter to be used for any
agriculture-related operating expense as identified in the application.
Deletes text requiring a loan granted pursuant to this chapter to be
applied to the purchase or lease of certain items or services; and text
providing restrictions on the use of a loan granted pursuant to this
chapter used to finance eligible water conservation projects or equipment. 

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

Sec.  44.012.  New heading: MONEY FOR LOANS.  Deletes text authorizing the
board to accept gifts and grants of money from certain entities or persons
for the use of making grants under 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 general
revenue fund, rather than the state treasury.  Requires certain money
appropriated to the board, rather than the Agricultural Diversification
Board, to be deposited to the credit of the fund. 

SECTION 7. Amends Section 58.002, Agriculture Code, by amending
Subdivisions (1) and (7) and adding Subdivision (9), to redefine
"agricultural business" and "eligible agricultural business,"   and to
define "rural area." 

SECTION 8.  Amends Section 58.016(b), Agriculture Code, to make a
conforming change. 

SECTION 9. Amends Section 58.0172, Agriculture Code, by adding Subsection
(e), to make conforming changes. 

SECTION 10. Amends Section 58.021, Agriculture Code, to require the Texas
Agricultural Finance Authority (authority) to design and implement certain
programs to promote the development of agriculture-related rural
businesses.  Requires the authority's programs to be designed and
implemented to provide financial assistance to enable eligible agricultural
businesses to finance or refinance costs incurred in connection with the
development, increase, improvement, or expansion of production, processing,
marketing, or export of Texas agricultural products, including the costs of
insect eradication and suppression programs.   Authorizes the authority to
make, guarantee, insure, coinsure, or reinsure loans to the entity
designated to carry out boll weevil eradication in an amount approved by
the board to enable that entity to execute Chapter 74D.  Makes conforming
and nonsubstantive changes. 

SECTION 11.  Amends Section 58.023(a), Agriculture Code, to delete text
requiring the board's rules to state that the policy of the authority is to
provide programs for providing financial assistance to eligible businesses
that otherwise would not be made. 

SECTION 12. Amends Chapter 58C, Agriculture Code, by adding Section 58.026,
as follows: 

Sec.  58.026.  LIMITATION OF LIABILITY FOR CERTAIN RECREATIONAL ACTIVITIES.
Provides that the provisions of Chapter 75, Civil Practice and Remedies
Code, apply to eligible recreational activities which are funded under this
chapter. 

 SECTION 13. Amends Chapter 58, Agriculture Code, by adding Subchapter E,
as follows: 

SUBCHAPTER E.  YOUNG FARMER LOAN GUARANTEE PROGRAM

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

Sec.  58.052.  YOUNG FARMER LOAN GUARANTEE PROGRAM.  Requires the board to
administer a loan guarantee program that benefits eligible applicants who
desire to establish a farming or ranching operation or an
agriculture-related business.  Authorizes the board to grant to an eligible
applicant a guarantee of a loan made by a commercial lender for the
purposes prescribed by this subchapter.  Prohibits the guarantee amount
from exceeding the lesser of $250,000 or 90 percent of the loan amount.
Prohibits the aggregate amount guaranteed under this subchapter from
exceeding twice the amount contained in the young farmer loan guarantee
account (account) within the Texas agricultural fund.  Authorizes a loan
guarantee recipient to use proceeds from the loan for working capital for
operating a farm or ranch, or for any agriculture-related business as
identified by the plan.  Provides that a loan guarantee is voidable by the
board if the recipient uses loan proceeds for any other purposes than the
identified purposes in the plan.  Requires the board to include this
restriction as a condition in each loan guarantee instrument executed under
this subchapter. 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 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 from exceeding three
percentage points. 

Sec.  58.053.  APPLICATION FOR LOAN GUARANTEE.  Sets forth the requirements
for an application for a loan guarantee for the board's review.  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. Sets
forth the factors the board is required to consider in deciding whether to
approve an application for a loan guarantee.   

Sec.  58.055.  DEFAULT.  Authorizes the authority, through its
representative, to bring suit against a defaulting party, if a recipient of
a loan guarantee defaults on a loan that is guaranteed and the authority is
required to honor its guarantee.  Provides that any suit brought by the
authority under this section may have venue in Travis County. 

Sec.  58.056.  MONEY FOR LOAN GUARANTEE PROGRAM.  Authorizes the authority
to accept gifts and grants of money from certain entities or persons for
use in the young farmer guarantee program.  Authorizes the legislature to
appropriate money for the program. 

Sec.  58.057.  YOUNG FARMER LOAN GUARANTEE ACCOUNT.  Provides that the
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.  Provides that the
account consists of certain funds, transfers, grants, donations, income
earned, and other money received under this subchapter.  Requires income
and interest earned on money in the account to be deposited to the credit
of the account, notwithstanding Section 404.071, Government Code.  Provides
that the account is exempt from the application of Section 403.095,
Government Code.  Authorizes the board to spend not 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
administrative costs of the program.  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.  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 14. Amends Section 502.174(b), Transportation Code, to require the
county assessorcollector to send an assessment collected under this section
to the comptroller, at a certain time and in a certain manner, for deposit
in the Texas agricultural fund, rather than the general revenue fund. 

SECTION 15. Repealers: Section 44.004, Agriculture Code (Research and
Innovation); Section 44.005, Agriculture Code (Business Assistance);
Section 44.006, Agriculture Code (Small Business Incubators); Section
44.011, Agriculture Code Criteria for all Grants); and  Chapter 253,
Agriculture Code (Young Farmer Loan Guarantee Program). 

SECTION 16.Emergency clause.
Effective date: upon passage.