By Greenberg H.B. No. 64 76R637 DWS-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to a Texas community investment program to assist certain 1-3 businesses in distressed areas of the state. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter 2306, Government Code, is amended by 1-6 adding Subchapter EE to read as follows: 1-7 SUBCHAPTER EE. TEXAS COMMUNITY INVESTMENT PROGRAM 1-8 Sec. 2306.701. DEFINITIONS. In this subchapter: 1-9 (1) "Community development investor" means a federally 1-10 certified community development financial institution or multi-bank 1-11 community development corporation. 1-12 (2) "Multi-bank community development corporation" 1-13 means a corporation organized to provide community development 1-14 funds to businesses that employ low and moderate income persons by 1-15 investing in and making loans to disadvantaged businesses located 1-16 in distressed areas of the state. 1-17 (3) "Program" means the community investment program 1-18 established under this subchapter. 1-19 Sec. 2306.702. COMMUNITY INVESTMENT PROGRAM. (a) 1-20 Notwithstanding any other law, the department shall establish a 1-21 community investment program in which the department makes grants 1-22 or interest-free loans to or purchases stock of community 1-23 development investors that use the money to make loans to or invest 1-24 in businesses that are located in distressed areas of the state and 2-1 that cannot qualify for conventional bank loans. 2-2 (b) The department shall determine the eligibility of a 2-3 community development investor to participate in the program and 2-4 may set a limit on the number of eligible community development 2-5 investors that may participate in the program. 2-6 (c) A community development investor is eligible to 2-7 participate in the program if the community development investor 2-8 has raised at least $400,000 in private investments to make loans 2-9 or investments described by Subsection (a). 2-10 (d) To participate in the program, an eligible community 2-11 development investor must enter into a participation agreement with 2-12 the department that sets out the terms and conditions under which 2-13 the department will make a grant or loan to or purchase stock of 2-14 the community development investor. 2-15 Sec. 2306.703. RULEMAKING AUTHORITY. The department shall 2-16 adopt rules relating to the implementation of the program and any 2-17 other rules necessary to accomplish the purposes of this 2-18 subchapter. 2-19 Sec. 2306.704. APPLICATION. (a) An eligible community 2-20 development investor may file a grant or loan application with the 2-21 department in a form approved by the department. The application 2-22 must include a plan of investment that includes the type and number 2-23 of businesses to which the community development investor plans to 2-24 make a loan or in which the community development investor plans to 2-25 invest using money from the program. 2-26 (b) The director shall act on a completed application not 2-27 later than the 30th day after the date on which the application is 3-1 filed with the department. 3-2 Sec. 2306.705. USE OF MONEY. (a) Not later than the last 3-3 day of the 18th month after the month in which a community 3-4 development investor receives a grant or loan from the department, 3-5 the community development investor shall use the money, or commit 3-6 the money to be used, to make loans to or equity investments in 3-7 businesses that are located in distressed areas of the state and 3-8 that cannot qualify for conventional loans. Not later than the 3-9 10th day after the expiration of this 18-month period, the 3-10 community development investor shall return to the department any 3-11 amount of the grant or loan from the department not used as 3-12 required by this subsection. 3-13 (b) A community development investor that has losses of more 3-14 than 25 percent on loans or investments made with money received 3-15 under the program shall: 3-16 (1) return all unencumbered money received under the 3-17 program to the department; and 3-18 (2) deliver to the director all of the documentation 3-19 and related instruments concerning loans and investments made with 3-20 money received under the program. 3-21 Sec. 2306.706. ELIGIBLE INVESTMENTS. (a) Each community 3-22 development investor participating in the program shall establish 3-23 an investment committee to approve loan or investment requests made 3-24 by businesses. Each investment committee must have at least five 3-25 members, at least 30 percent of whom must be bankers and at least 3-26 30 percent of whom must be representatives of the community. 3-27 (b) A community development investor may use money received 4-1 under the program to make a loan or investment only if the loan or 4-2 investment is approved by the investment committee. 4-3 (c) A loan made by a community development investor may be a 4-4 subordinated debt. 4-5 (d) A community development investor shall use at least 60 4-6 percent of the amounts received under the program for loans to or 4-7 investments in businesses that have existed for at least one year 4-8 before the date on which the loan or investment is made. 4-9 Sec. 2306.707. COLLABORATIVE EFFORT. A community 4-10 development investor may make a loan or investment under the 4-11 program with one or more financial institutions through 4-12 partnerships or joint investments. 4-13 Sec. 2306.708. LIMITATIONS RELATING TO LOANS. (a) The 4-14 maximum amount that a community development investor may loan to a 4-15 single business under the program is: 4-16 (1) $200,000 if all of the loan to the business is 4-17 direct; or 4-18 (2) $100,000 if any of the business's debt to the 4-19 community development investor is subordinated to a bank or other 4-20 entity. 4-21 (b) The maximum term of the loan is 15 years. 4-22 Sec. 2306.709. LIMITATIONS RELATING TO EQUITY INVESTMENTS. 4-23 (a) The maximum equity investment that a community development 4-24 investor may make in a single business under the program is 4-25 $50,000. 4-26 (b) The maximum term of the investment is seven years. 4-27 (c) The maximum amount of ownership that a community 5-1 development investor may acquire in a business is 50 percent of the 5-2 business's equity. 5-3 Sec. 2306.710. OWNERSHIP OF INCOME. All income received on 5-4 a loan or investment made with money received under the program is 5-5 the property of the community development investor that makes the 5-6 loan or investment. 5-7 Sec. 2306.711. SEMIANNUAL REPORT. (a) Not later than the 5-8 30th day after the expiration of each six-month period for which 5-9 there is a participation agreement in effect between the department 5-10 and a community development investor, the community development 5-11 investor shall submit a report to the director that states in 5-12 detail the status of each investment or loan made under the 5-13 program. 5-14 (b) The report must be in a form prescribed by the 5-15 department and must contain all information required by the 5-16 department as part of the community development investor's 5-17 participation agreement. 5-18 Sec. 2306.712. ANNUAL AUDIT. The participation agreement 5-19 entered into between the community development investor and the 5-20 department must provide for an annual audit of all money received 5-21 by the community development investor under the program. The board 5-22 shall adopt rules relating to the format of the audit, including 5-23 rules allowing not more than $5,000 of the amount received by the 5-24 community development investor under the program to be used to 5-25 finance the audit. 5-26 SECTION 2. This Act takes effect September 1, 1999. 5-27 SECTION 3. The importance of this legislation and the 6-1 crowded condition of the calendars in both houses create an 6-2 emergency and an imperative public necessity that the 6-3 constitutional rule requiring bills to be read on three several 6-4 days in each house be suspended, and this rule is hereby suspended.