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. 3-25 * * * * *