1-1     By:  Greenberg (Senate Sponsor - Lucio)                 H.B. No. 64
 1-2           (In the Senate - Received from the House April 23, 1999;
 1-3     April 26, 1999, read first time and referred to Special Committee
 1-4     on Border Affairs; May 7, 1999, reported favorably, as amended, by
 1-5     the following vote:  Yeas 7, Nays 0; May 7, 1999, sent to printer.)
 1-6     COMMITTEE AMENDMENT NO. 1                                By:  Lucio
 1-7           Amend S.B. No. 64, adding an appropriately numbered SECTION
 1-8     to read as follows:
 1-9           "SECTION ___.  This Act takes effect only if a specific
1-10     appropriation for the implementation of this Act is provided in
1-11     H.B. No. 1 (General Appropriations Act), Acts of the 76th
1-12     Legislature, Regular Session, 1999.  If no specific appropriation
1-13     is provided in H.B. No. 1, the General Appropriations Act, this Act
1-14     has no effect."
1-15                            A BILL TO BE ENTITLED
1-16                                   AN ACT
1-17     relating to a Texas community investment program to assist certain
1-18     businesses in distressed areas of the state.
1-19           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-20           SECTION 1.  Chapter 481, Government Code, is amended by
1-21     adding Subchapter Q to read as follows:
1-22              SUBCHAPTER Q.  TEXAS COMMUNITY INVESTMENT PROGRAM
1-23           Sec. 481.221.  DEFINITIONS.  In this subchapter:
1-24                 (1)  "Community development investor" means a federally
1-25     certified community development financial institution or multibank
1-26     community development corporation.
1-27                 (2)  "Multibank community development corporation"
1-28     means a corporation organized to provide community development
1-29     funds to businesses that employ low and moderate income persons by
1-30     investing in and making loans to disadvantaged businesses located
1-31     in distressed areas of the state.
1-32                 (3)  "Program" means the community investment program
1-33     established under this subchapter.
1-34           Sec. 481.222.  COMMUNITY INVESTMENT PROGRAM.  (a)
1-35     Notwithstanding any other law, the department shall establish a
1-36     community investment program in which the department makes grants
1-37     or interest-free loans to or purchases stock of community
1-38     development investors that use the money to make loans to or invest
1-39     in businesses that are located in distressed areas of the state and
1-40     that cannot qualify for conventional bank loans.
1-41           (b)  The department shall determine the eligibility of a
1-42     community development investor to participate in the program and
1-43     may set a limit on the number of eligible community development
1-44     investors that may participate in the program.
1-45           (c)  A community development investor is eligible to
1-46     participate in the program if the community development investor
1-47     has raised at least $400,000 in private investments to make loans
1-48     or investments described by Subsection (a).
1-49           (d)  To participate in the program, an eligible community
1-50     development investor must enter into a participation agreement with
1-51     the department that sets out the terms and conditions under which
1-52     the department will make a grant or loan to or purchase stock of
1-53     the community development investor.
1-54           Sec. 481.223.  RULEMAKING AUTHORITY.  The governing board
1-55     shall adopt rules relating to the implementation of the program and
1-56     any other rules necessary to accomplish the purposes of this
1-57     subchapter.
1-58           Sec. 481.224.  APPLICATION.  (a)  An eligible community
1-59     development investor may file a grant or loan application with the
1-60     department in a form approved by the department.  The application
1-61     must include a plan of investment that includes the type and number
1-62     of businesses to which the community development investor plans to
1-63     make a loan or in which the community development investor plans to
 2-1     invest using money from the program.
 2-2           (b)  The executive director shall act on a completed
 2-3     application not later than the 30th day after the date on which the
 2-4     application is filed with the department.
 2-5           Sec. 481.225.  USE OF MONEY.  (a)  Not later than the last
 2-6     day of the 18th month after the month in which a community
 2-7     development investor receives a grant or loan from the department,
 2-8     the community development investor shall use the money, or commit
 2-9     the money to be used, to make loans to or equity investments in
2-10     businesses that are located in distressed areas of the state and
2-11     that cannot qualify for conventional loans.  Not later than the
2-12     10th day after the expiration of this 18-month period, the
2-13     community development investor shall return to the department any
2-14     amount of the grant or loan from the department not used as
2-15     required by this subsection.
2-16           (b)  A community development investor that has losses of more
2-17     than 25 percent on loans or investments made with money received
2-18     under the program shall:
2-19                 (1)  return all unencumbered money received under the
2-20     program to the department; and
2-21                 (2)  deliver to the executive director all of the
2-22     documentation and related instruments concerning loans and
2-23     investments made with money received under the program.
2-24           Sec. 481.226.  ELIGIBLE INVESTMENTS.  (a)  Each community
2-25     development investor participating in the program shall establish
2-26     an investment committee to approve loan or investment requests made
2-27     by businesses.  Each investment committee must have at least five
2-28     members, at least 30 percent of whom must be bankers and at least
2-29     30 percent of whom must be representatives of the community.
2-30           (b)  A community development investor may use money received
2-31     under the program to make a loan or investment only if the loan or
2-32     investment is approved by the investment committee.
2-33           (c)  A loan made by a community development investor may be a
2-34     subordinated debt.
2-35           (d)  A community development investor shall use at least 60
2-36     percent of the amounts received under the program for loans to or
2-37     investments in businesses that have existed for at least one year
2-38     before the date on which the loan or investment is made.
2-39           Sec. 481.227.  COLLABORATIVE EFFORT.  A community development
2-40     investor may make a loan or investment under the program with one
2-41     or more financial institutions through partnerships or joint
2-42     investments.
2-43           Sec. 481.228.  LIMITATIONS RELATING TO LOANS.  (a)  The
2-44     maximum amount that a community development investor may loan to a
2-45     single business under the program is:
2-46                 (1)  $200,000 if all of the loan to the business is
2-47     direct; or
2-48                 (2)  $100,000 if any of the business's debt to the
2-49     community development investor is subordinated to a bank or other
2-50     entity.
2-51           (b)  The maximum term of the loan is 15 years.
2-52           Sec. 481.229.  LIMITATIONS RELATING TO EQUITY INVESTMENTS.
2-53     (a)  The maximum equity investment that a community development
2-54     investor may make in a single business under the program is
2-55     $50,000.
2-56           (b)  The maximum term of the investment is seven years.
2-57           (c)  The maximum amount of ownership that a community
2-58     development investor may acquire in a business is 50 percent of the
2-59     business's equity.
2-60           Sec. 481.230.  OWNERSHIP OF INCOME.  All income received on a
2-61     loan or investment made with money received under the program is
2-62     the property of the community development investor that makes the
2-63     loan or investment.
2-64           Sec. 481.231.  SEMIANNUAL REPORT.  (a)  Not later than the
2-65     30th day after the expiration of each six-month period for which
2-66     there is a participation agreement in effect between the department
2-67     and a community development investor, the community development
2-68     investor shall submit a report to the executive director that
2-69     states in detail the status of each investment or loan made under
 3-1     the program.
 3-2           (b)  The report must be in a form prescribed by the
 3-3     department and must contain all information required by the
 3-4     department as part of the community development investor's
 3-5     participation agreement.
 3-6           Sec. 481.232.  ANNUAL AUDIT.  The participation agreement
 3-7     entered into between the community development investor and the
 3-8     department must provide for an annual audit of all money received
 3-9     by the community development investor under the program.  The
3-10     governing board shall adopt rules relating to the format of the
3-11     audit, including rules allowing not more than $5,000 of the amount
3-12     received by the community development investor under the program to
3-13     be used to finance the audit.
3-14           SECTION 2.  This Act does not make an appropriation.  The
3-15     Texas Department of Economic Development must establish the
3-16     community investment program under Subchapter Q, Chapter 481,
3-17     Government Code, if money is specifically appropriated to fund that
3-18     program.
3-19           SECTION 3.  This Act takes effect September 1, 1999.
3-20           SECTION 4.  The importance of this legislation and the
3-21     crowded condition of the calendars in both houses create an
3-22     emergency and an imperative public necessity that the
3-23     constitutional rule requiring bills to be read on three several
3-24     days in each house be suspended, and this rule is hereby suspended.
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