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.