By Hunter, Greenberg, Chavez, Goolsby, H.B. No. 1687 76R10924 CLG-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to a state program of loan guarantees to promote the film 1-3 industry in this state; providing a penalty. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter 403, Government Code, is amended by 1-6 adding Subchapter N to read as follows: 1-7 SUBCHAPTER N. TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE 1-8 PROGRAM 1-9 Sec. 403.321. DEFINITIONS. In this subchapter: 1-10 (1) "Eligible Texas film" means a Texas film in which: 1-11 (A) the budget for the production costs of the 1-12 film is at least 70 percent of the budget for the total cost to 1-13 produce the film; and 1-14 (B) the budget for the total cost to produce the 1-15 film is at least $1 million but not more than $5 million. 1-16 (2) "Filmed entertainment" means a visual and sound 1-17 production that may be displayed in any media, including a theater 1-18 or television broadcast, or through technology by means of a 1-19 consumer owned or operated device. 1-20 (3) "Production costs" means the total cost of 1-21 producing filmed entertainment minus the sum of: 1-22 (A) the total costs incurred for the producer, 1-23 director, writer, and screenplay of the production; 1-24 (B) the total amount paid to the actors 1-25 appearing in the production, not to exceed the total amount paid to 2-1 the five highest-paid actors appearing in the production; and 2-2 (C) the ordinary and necessary interstate and 2-3 foreign travel expenses involved in the production. 2-4 (4) "Program" means the loan guarantee indemnity 2-5 program administered by the comptroller under this subchapter. 2-6 (5) "Texas derivation" means goods purchased or leased 2-7 or services purchased, leased, or employed from a: 2-8 (A) resident of this state; or 2-9 (B) vendor or supplier who is located and doing 2-10 business in this state. 2-11 (6) "Texas film" means filmed entertainment in which 2-12 at least 80 percent of the budget for the production costs of the 2-13 filmed entertainment is dedicated for goods and services of Texas 2-14 derivation. 2-15 (7) "Texas film producer" means: 2-16 (A) an individual resident of this state who 2-17 produces Texas films; or 2-18 (B) a corporation, limited liability company, 2-19 partnership, or other private entity that: 2-20 (i) is organized under the laws of this 2-21 state; and 2-22 (ii) includes as one of its purposes the 2-23 production of one or more Texas films. 2-24 (8) "Texas lender" means a state or national bank that 2-25 is domiciled in or has a branch office in this state. 2-26 Sec. 403.322. LIBERAL CONSTRUCTION. This subchapter shall 2-27 be liberally construed to accomplish the purposes stated in this 3-1 subchapter. 3-2 Sec. 403.323. TEXAS FILM INDUSTRY ADMINISTRATIVE FUND. (a) 3-3 The Texas film industry administrative fund is an account in the 3-4 general revenue fund. 3-5 (b) The following amounts shall be deposited in the fund: 3-6 (1) appropriations for the implementation and 3-7 administration of this subchapter; 3-8 (2) interest paid on money in the fund; 3-9 (3) fees charged under this subchapter; 3-10 (4) any proceeds from the realization of collateral 3-11 provided to this state under the program; and 3-12 (5) any other amounts received by this state for loan 3-13 guarantees approved for issuance under this subchapter. 3-14 (c) Money in the fund may be used only for the 3-15 administration of this subchapter. 3-16 (d) Section 403.095 does not apply to the fund. 3-17 Sec. 403.324. TEXAS FILM INDUSTRY LOAN GUARANTEE INDEMNITY 3-18 PROGRAM. (a) The comptroller shall administer a program to 3-19 guarantee a certain amount of one or more qualified Texas film 3-20 production loans as a means to facilitate access to capital for the 3-21 production of filmed entertainment in this state. The comptroller 3-22 may approve the issuance of a guarantee of a qualified Texas film 3-23 production loan or loans for the production of more than one Texas 3-24 film by a single Texas film producer. 3-25 (b) The comptroller may not approve the issuance of a loan 3-26 guarantee except on approval of a qualified application submitted 3-27 by a Texas film producer with the approval of a Texas lender who 4-1 has agreed to make a qualified Texas film production loan to the 4-2 producer. 4-3 (c) For each guarantee, the comptroller shall: 4-4 (1) determine the maximum guarantee amounts; and 4-5 (2) determine the terms and conditions relating to a 4-6 guarantee. 4-7 (d) An action or claim under a loan guarantee must be 4-8 brought not later than the third anniversary of the date on which 4-9 the comptroller approves the issuance of the guarantee. 4-10 (e) The guarantee amount approved for issuance by the 4-11 comptroller under this subchapter may not exceed the lesser of: 4-12 (1) 80 percent of the total amount of the Texas film 4-13 production loan; or 4-14 (2) $2.4 million. 4-15 Sec. 403.325. QUALIFIED TEXAS FILM PRODUCTION LOAN. To 4-16 qualify as a Texas film production loan, a loan must: 4-17 (1) be in an amount not to exceed the lesser of: 4-18 (A) 60 percent of the total cost to produce the 4-19 film; or 4-20 (B) $3 million; and 4-21 (2) be made by a Texas lender under a written loan 4-22 agreement that: 4-23 (A) is entered into with a Texas film producer 4-24 to finance the production of an eligible Texas film; 4-25 (B) may be conditioned on the approval for the 4-26 issuance of a loan guarantee under this subchapter; 4-27 (C) provides that the loan must be secured by: 5-1 (i) a security interest on the eligible 5-2 Texas film to be financed by the loan and proceeds and receivables 5-3 due from the film; and 5-4 (ii) a security or other interest in a 5-5 distribution agreement covering the film, an irrevocable letter of 5-6 credit, a presale agreement covering the film, a certificate of 5-7 deposit, a marketable security, or another instrument that meets 5-8 all requirements and is secured in the manner and to the extent 5-9 provided by rules adopted by the comptroller; and 5-10 (D) meets any other requirement prescribed by 5-11 the comptroller. 5-12 Sec. 403.326. APPLICATION FOR LOAN GUARANTEE. (a) An 5-13 application for a loan guarantee under the program must: 5-14 (1) contain the names and addresses of the Texas 5-15 lender and the Texas film producer of the film that is the subject 5-16 of the loan; 5-17 (2) contain a certification by the Texas film producer 5-18 that the film is an eligible Texas film; 5-19 (3) be accompanied by: 5-20 (A) a certification by the Texas lender that: 5-21 (i) the Texas lender has reviewed the 5-22 application; 5-23 (ii) the budget for the total cost to 5-24 produce the Texas film as disclosed in the application is the same 5-25 as the budget for the total cost to produce the film that was 5-26 disclosed to the Texas lender for purposes of determining whether 5-27 to make the loan; and 6-1 (iii) the information contained in the 6-2 application is not contrary to the information submitted to the 6-3 Texas lender in connection with the loan; 6-4 (B) a copy of the loan agreement described by 6-5 Section 403.325; and 6-6 (C) a copy of a distribution agreement or other 6-7 instrument described by Section 403.325(2)(C)(ii), as appropriate; 6-8 and 6-9 (4) contain any other information required by the 6-10 comptroller. 6-11 (b) The comptroller shall charge an application fee in a 6-12 reasonable amount not to exceed $100 to cover the cost of 6-13 processing the application. 6-14 (c) On receipt of an application, the comptroller shall 6-15 verify the information contained in the application. The 6-16 comptroller may conduct investigations as necessary to make a 6-17 determination regarding information provided in the application. 6-18 (d) The comptroller may contract with a private company to 6-19 perform any of the comptroller's duties under Subsection (c) and to 6-20 submit a written report of the company's findings to the 6-21 comptroller. 6-22 (e) The comptroller may not approve an application submitted 6-23 under this section unless it is complete and meets the requirements 6-24 of this section. 6-25 Sec. 403.327. INDEMNITY REQUIREMENT. For each film to be 6-26 produced with the proceeds from a loan approved to be guaranteed 6-27 under the program, the producer of the film shall provide an 7-1 indemnity against loss in an amount equal to the full amount of the 7-2 loan guarantee. The indemnity must be issued to the comptroller as 7-3 the beneficiary of the indemnity by an insurance company, surety 7-4 company, or financial institution that is: 7-5 (1) licensed and authorized to do business in this 7-6 state; and 7-7 (2) approved by the comptroller. 7-8 Sec. 403.328. SURETY BOND FOR COMPLETION OF FILM. An 7-9 applicant shall file with the comptroller a surety bond 7-10 indemnifying this state, the lender, and the entity providing 7-11 indemnity under Section 403.327 against loss that results from the 7-12 film not being completed by the date and for the budget certified 7-13 to the state in the application required by Section 403.326. 7-14 Sec. 403.329. ISSUANCE OF LOAN GUARANTEE. The comptroller 7-15 may not approve the issuance of a loan guarantee under the program 7-16 unless: 7-17 (1) the loan for which the guarantee is sought meets 7-18 the qualifications of a Texas film production loan under Section 7-19 403.325; 7-20 (2) the comptroller approves the application for the 7-21 loan guarantee; 7-22 (3) the comptroller has received the application fee 7-23 required by Section 403.326(b); and 7-24 (4) the indemnity requirements of Section 403.327, the 7-25 surety bond requirements of Section 403.328, and any other bond or 7-26 insurance requirements prescribed under this subchapter or by 7-27 comptroller rule have been satisfied. 8-1 Sec. 403.330. RULEMAKING AUTHORITY. The comptroller shall 8-2 adopt rules relating to the implementation of the program and any 8-3 other rules necessary to accomplish the purposes of this 8-4 subchapter. The rules must include: 8-5 (1) terms and conditions for a security interest or 8-6 other pledge of collateral to be provided to a lender or this state 8-7 as security for any default of a loan guaranteed under the program; 8-8 and 8-9 (2) procedures for the enforcement of obligations owed 8-10 and pledges of collateral provided to the comptroller under the 8-11 program. 8-12 Sec. 403.331. OFFENSE. (a) A person commits an offense if 8-13 the person signs an application or submits to the comptroller a 8-14 document the person knows is false in any material respect with the 8-15 intent of causing the comptroller to issue a loan guarantee under 8-16 the program. 8-17 (b) An offense under this section is a felony of the third 8-18 degree. 8-19 Sec. 403.332. LIMITATIONS IN PROGRAM. (a) Not more than $50 8-20 million of guarantees issued under this program may be outstanding 8-21 at any one time. 8-22 (b) The liability of the state for a loan guarantee for a 8-23 film is limited to the amount of the indemnity provided for the 8-24 film under Section 403.327. 8-25 Sec. 403.333. QUARTERLY REPORT. At least quarterly, the 8-26 comptroller shall provide to the director of the Legislative Budget 8-27 Board, the presiding officer of the Senate Finance Committee, and 9-1 the presiding officer of the House Appropriations Committee a 9-2 report that contains: 9-3 (1) the names and addresses of the Texas film 9-4 producers that have applied to the comptroller for a loan guarantee 9-5 under the program and their respective Texas lenders; 9-6 (2) the names and addresses of the Texas film 9-7 producers and their respective Texas lenders that have been 9-8 approved to receive a loan guarantee under the program; 9-9 (3) the amount of the loan guarantee approved by the 9-10 comptroller to each applicant described by Subdivision (2); and 9-11 (4) any other information relating to the program that 9-12 may be requested to be included in the report. 9-13 Sec. 403.334. GIFTS AND GRANTS. The comptroller may solicit 9-14 and accept gifts, grants, and donations from any source for the 9-15 purposes of this subchapter. 9-16 Sec. 403.335. APPLICATION OF SUNSET ACT TO PROGRAM. (a) 9-17 The program is subject to review under Chapter 325 (Texas Sunset 9-18 Act) as if it were a state agency subject to review under that 9-19 chapter. If the program is not continued in existence in 9-20 accordance with that chapter, the program is abolished and this 9-21 subchapter expires September 1, 2005. 9-22 (b) To the extent that Chapter 325 (Texas Sunset Act) places 9-23 a duty on a state agency subject to review under that chapter, the 9-24 comptroller shall perform the duty as it relates to the program. 9-25 SECTION 2. Subchapter B, Chapter 403, Government Code, is 9-26 amended by adding Section 403.029 to read as follows: 9-27 Sec. 403.029. TRANSFER OF CERTAIN MONEY TO GENERAL REVENUE 10-1 FUND. On the expiration of Subchapter N: 10-2 (1) the comptroller shall determine the amount 10-3 sufficient to administer loan guarantees or obligations of the 10-4 comptroller that remain outstanding under the Texas film industry 10-5 loan guarantee indemnity program administered by the comptroller 10-6 under Subchapter N; and 10-7 (2) any amount in the Texas film industry 10-8 administrative fund that exceeds the amount determined under 10-9 Subdivision (1) may be used only by the Music, Film, Television, 10-10 and Multimedia Office in the governor's office for the purpose of 10-11 promoting the film industry in this state. 10-12 SECTION 3. The comptroller shall adopt rules required by 10-13 Section 403.330, Government Code, as added by this Act, not later 10-14 than December 1, 1999. 10-15 SECTION 4. This Act takes effect September 1, 1999. 10-16 SECTION 5. The importance of this legislation and the 10-17 crowded condition of the calendars in both houses create an 10-18 emergency and an imperative public necessity that the 10-19 constitutional rule requiring bills to be read on three several 10-20 days in each house be suspended, and this rule is hereby suspended.