By:  Carona, Shapleigh                                S.B. No. 1485
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to state financing of the development and production of
 1-3     Texas biotechnological and biomedical products and small
 1-4     businesses; providing for the issuance of bonds.
 1-5           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-6           SECTION 1.  Chapter 403, Government Code, is amended by
 1-7     adding Subchapter P to read as follows:
 1-8      SUBCHAPTER P.  PRODUCT DEVELOPMENT AND SMALL BUSINESS INCUBATORS
 1-9           Sec. 403.401.  DEFINITIONS.  In this subchapter:
1-10                 (1)  "Board" means the Product Development and Small
1-11     Business Incubator Board.
1-12                 (2)  "Comptroller" includes the designee of the
1-13     comptroller.
1-14                 (3)  "Financing" means a loan, loan guarantee, or
1-15     equity investment from the product fund to a person for use in the
1-16     development and production of a product in this state, or a grant,
1-17     loan, or loan guarantee from the small business fund to a person
1-18     for use in the development of a small business in this state.
1-19                 (4)  "Office" means the office of the comptroller.
1-20                 (5)  "Product" includes an invention, device,
1-21     technique, or process, without regard to whether a patent has been
1-22     or could be granted, that has advanced beyond the theoretical stage
1-23     and has or is readily capable of having a commercial application.
1-24     The term does not include pure research.
1-25                 (6)  "Product fund" means the Texas product development
 2-1     fund.
 2-2                 (7)  "Program" means the product development program or
 2-3     the small business incubator program.
 2-4                 (8)  "Small business fund" means the Texas small
 2-5     business incubator fund.
 2-6           Sec. 403.402.  PRODUCT DEVELOPMENT AND SMALL BUSINESS
 2-7     INCUBATOR BOARD.  (a)  The Product Development and Small Business
 2-8     Incubator Board is created in the office.
 2-9           (b)  The board shall administer the programs, the product
2-10     fund, and the small business fund.
2-11           Sec. 403.403.  MEMBERS OF THE BOARD; APPOINTMENT; TERMS OF
2-12     OFFICE.  (a)  The board consists of the comptroller and eight
2-13     persons appointed by the governor.
2-14           (b)  In appointing members of the board, the governor shall
2-15     appoint:
2-16                 (1)  two persons having significant business leadership
2-17     experience in technology, particularly experience with the transfer
2-18     of research results into commercial applications;
2-19                 (2)  two persons employed by institutions of higher
2-20     education of this state who have experience in technological
2-21     research and its commercial applications;
2-22                 (3)  two persons experienced and knowledgeable in
2-23     structuring and providing financing for technological products or
2-24     businesses; and
2-25                 (4)  two persons who reside in a county of this state
2-26     with above state average unemployment and below state average per
 3-1     capita income and who have experience and knowledge in
 3-2     technology-related  business growth.
 3-3           (c)  Appointed members of the board serve two-year staggered
 3-4     terms with the terms of four members expiring February 1 of each
 3-5     odd-numbered year and the terms of four members expiring February 1
 3-6     of each even-numbered year.
 3-7           (d)  The comptroller is the presiding officer of the board.
 3-8           (e)  The board shall appoint a secretary of the board whose
 3-9     duties may be prescribed by law and by the board.
3-10           (f)  Appointed members of the board serve without pay but are
3-11     entitled to reimbursement for their actual expenses incurred in
3-12     attending meetings of the board or in performing other work of the
3-13     board if that work is approved by the comptroller.
3-14           Sec. 403.404.  REMOVAL OF BOARD MEMBER.  (a)  It is a ground
3-15     for removal from the board if an appointed member:
3-16                 (1)  cannot because of illness or disability discharge
3-17     the member's duties for a substantial part of the term for which
3-18     the member is appointed; or
3-19                 (2)  is absent from more than half of the regularly
3-20     scheduled board meetings that the member is eligible to attend
3-21     during a calendar year unless the absence is excused by majority
3-22     vote of the board.
3-23           (b)  The validity of an action of the board is not affected
3-24     by the fact that the action was taken when a ground for removal of
3-25     a board member existed.
3-26           Sec. 403.405.  TRAINING OF BOARD MEMBERS.  (a)  Before an
 4-1     appointed member of the board may assume the member's duties, the
 4-2     member must complete at least one course of the training program
 4-3     established under this section.
 4-4           (b)  A training program established under this section shall
 4-5     provide information to the member regarding:
 4-6                 (1)  the enabling legislation that created the board;
 4-7                 (2)  the programs operated by the board;
 4-8                 (3)  the role and functions of the board;
 4-9                 (4)  the rules of the board, with an emphasis on the
4-10     rules that relate to disciplinary and investigatory authority;
4-11                 (5)  the current budget for the board;
4-12                 (6)  the results of the most recent formal audit of the
4-13     board;
4-14                 (7)  the requirements of the:
4-15                       (A)  open meetings law, Chapter 551;
4-16                       (B)  open records law, Chapter 552; and
4-17                       (C)  administrative procedure law, Chapter 2001;
4-18                 (8)  the requirements of the conflict of interest laws
4-19     and other laws relating to public officials; and
4-20                 (9)  any applicable ethics policies adopted by the
4-21     board or the Texas Ethics Commission.
4-22           Sec. 403.406.  MEETINGS.  (a)  The board shall hold regular
4-23     meetings in Austin and other meetings at places and times scheduled
4-24     by the board in formal sessions and called by the comptroller.
4-25           (b)  The board shall develop and implement policies that
4-26     provide the public with a reasonable opportunity to appear before
 5-1     the board and to speak on any issue under the jurisdiction of the
 5-2     board.
 5-3           (c)  The board shall make minutes of all meetings available
 5-4     in the board's office for public inspection.
 5-5           Sec. 403.407.  APPLICABILITY OF OPEN MEETINGS LAW AND
 5-6     ADMINISTRATIVE PROCEDURE LAW.  The board is subject to the open
 5-7     meetings law, Chapter 551, and the administrative procedure law,
 5-8     Chapter 2001.
 5-9           Sec. 403.408.  STAFF.  (a)  The employees of the comptroller
5-10     selected by the comptroller for that purpose serve as the staff of
5-11     the board.
5-12           (b)  The comptroller shall select and supervise the staff of
5-13     the board and perform other duties delegated to the comptroller by
5-14     the board.
5-15           (c)  The comptroller shall provide to members of the board
5-16     and to board staff, as often as necessary, information regarding
5-17     their qualifications for office or employment under this subchapter
5-18     and their responsibilities under applicable laws relating to
5-19     standards of conduct for state officers or employees.
5-20           (d)  The board shall develop and implement policies that
5-21     clearly separate the policy-making responsibilities of the board
5-22     and the management responsibilities of the comptroller and the
5-23     office.
5-24           Sec. 403.409.  PROGRAM AND FACILITY ACCESSIBILITY.  (a)  The
5-25     board shall comply with federal and state laws related to program
5-26     and facility accessibility.
 6-1           (b)  The board shall prepare and maintain a written plan that
 6-2     describes how a person who does not speak English can be provided
 6-3     reasonable access to the board's programs and services.
 6-4           Sec. 403.410.  POWERS OF THE BOARD; BONDS.  (a)  The board
 6-5     has the powers necessary and reasonable to carry out this
 6-6     subchapter and may adopt rules, policies, and procedures necessary
 6-7     or reasonable to implement this subchapter.
 6-8           (b)  The board may issue general obligation bonds, up to the
 6-9     amounts authorized and as provided by Section 71, Article XVI,
6-10     Texas Constitution, to fund the program.
6-11           (c)  Not more than an amount equal to five percent of the
6-12     total amount of bonds issued may be used to pay administrative fees
6-13     involved in selling the bonds.
6-14           Sec. 403.411.  TEXAS PRODUCT DEVELOPMENT FUND.  (a)  The
6-15     Texas product development fund is a revolving fund in the state
6-16     treasury.
6-17           (b)  The product fund is composed of proceeds of bonds issued
6-18     under this subchapter, financing application fees, loan repayments,
6-19     guarantee fees, royalty receipts, dividend income, money
6-20     appropriated by the legislature for authorized purposes of the
6-21     product fund, amounts received by the state from loans, loan
6-22     guarantees, and equity investments made under this subchapter,
6-23     amounts received by the state from federal grants or other sources,
6-24     and any other amounts received under this subchapter and required
6-25     by resolution of the board to be deposited in the product fund.
6-26     The product fund contains a program account, an interest and
 7-1     sinking account, and other accounts that the board authorizes to be
 7-2     created and maintained.  Money in the product fund is available for
 7-3     use by the board under this subchapter.  Notwithstanding any other
 7-4     provision of this subchapter, any money in the product fund may be
 7-5     used for debt service.
 7-6           (c)  Money in the program account of the product fund, minus
 7-7     the costs of issuance of bonds under this subchapter and necessary
 7-8     costs of administering the product fund, may be used only to
 7-9     provide financing to aid in the development and production,
7-10     including the commercialization, of new or improved products in
7-11     this state.  The board shall provide financing from the product
7-12     fund on the terms and conditions that the board determines to be
7-13     reasonable, appropriate, and consistent with the purposes and
7-14     objectives of the product fund and this subchapter, for the purpose
7-15     of aiding in the development and production of new or improved
7-16     products in this state.
7-17           Sec. 403.412.  SMALL BUSINESS INCUBATOR FUND.  (a)  The Texas
7-18     small business incubator fund is a revolving fund in the state
7-19     treasury.
7-20           (b)  The small business fund is composed of proceeds of bonds
7-21     issued under this subchapter, financing application fees, loan
7-22     repayments, guarantee fees, royalty receipts, dividend income,
7-23     money appropriated by the legislature for authorized purposes of
7-24     the small business fund, amounts received by the state from loans,
7-25     loan guarantees, and equity investments made under this subchapter,
7-26     amounts received by the state from federal grants or other sources,
 8-1     and any other amounts received under this subchapter and required
 8-2     by resolution of the board to be deposited in the small business
 8-3     fund.  The small business fund contains a project account, an
 8-4     interest and sinking account, and other accounts that the board
 8-5     authorizes to be created and maintained.  Money in the small
 8-6     business fund is available for use by the board under this
 8-7     subchapter.  Notwithstanding any other provision of this
 8-8     subchapter, any money in the small business fund may be used for
 8-9     debt service.
8-10           (c)  Money in the project account of the small business fund,
8-11     minus the costs of issuance of bonds under this subchapter and
8-12     necessary costs of administering the small business fund, may be
8-13     used only to provide financing to foster and stimulate the
8-14     development of small businesses in this state.  The board shall
8-15     provide financing from the small business fund on the terms and
8-16     conditions that the board determines to be reasonable, appropriate,
8-17     and consistent with the purposes and objectives of the small
8-18     business fund and this subchapter, for the purpose of fostering and
8-19     stimulating the development of new or existing small businesses in
8-20     this state.
8-21           Sec. 403.413.  ELIGIBLE PRODUCTS AND BUSINESSES; FINANCING.
8-22     (a)  Financing may be made under this subchapter only for a product
8-23     or small business approved by the board.
8-24           (b)  In determining eligible products and small businesses,
8-25     the board shall give special preference to products or businesses
8-26     in the areas of biotechnology and biomedicine that have the
 9-1     greatest likelihood of commercial success, job creation, and job
 9-2     retention in this state.  The board shall give further preference
 9-3     to providing financing to projects or businesses that are:
 9-4                 (1)  grantees under the small business innovation
 9-5     research program established under 15 U.S.C. Section 638, as
 9-6     amended;
 9-7                 (2)  companies formed in this state to commercialize
 9-8     research funded at least in part with state funds;
 9-9                 (3)  applicants that have acquired other sources of
9-10     financing;
9-11                 (4)  companies formed in this state and receiving
9-12     assistance from designated state small business development
9-13     centers; or
9-14                 (5)  applicants who are residents of this state doing
9-15     business in this state and performing financed activities
9-16     predominantly in this state.
9-17           (c)  The board shall adopt rules governing the terms and
9-18     conditions of the financing, specifically including requirements
9-19     for appropriate security or collateral, equity interest, and the
9-20     rights and remedies of the board and office in the event of a
9-21     default on the loan.  The rules must include a requirement that
9-22     applicants report to the board on the use of money distributed
9-23     through either fund.
9-24           (d)  Before approving the provision of financing to a person,
9-25     the board shall enter into an agreement with the person under which
9-26     the board will obtain an appropriate portion of royalties, patent
 10-1    rights, equitable interests, or a combination of those royalties,
 10-2    rights, and interests from or in the product or proceeds of the
 10-3    product for which financing is requested.  Contracts executed under
 10-4    this subchapter must include agreements to ensure proper use of
 10-5    funds and the receipt of royalties, patent rights, or equity
 10-6    interest, as appropriate.
 10-7          (e)  The board may appoint an advisory committee of experts
 10-8    in the areas of biotechnology and biomedicine to review projects
 10-9    and businesses seeking financing from the board.
10-10          (f)  The amount of financing provided to a single recipient
10-11    may not exceed 10 percent of the total amount of bonds issued.
10-12          (g)  A claim of the state for a payment owed to the state
10-13    under this subchapter by a person who has been provided financing
10-14    has priority over all other claims against the person.
10-15          Sec. 403.414.  APPLICATION PROCESS.  (a)  To apply for
10-16    financing from the board, an applicant shall submit to the board:
10-17                (1)  an application for financing on a form prescribed
10-18    by the board; and
10-19                (2)  a reasonable application fee set by the board.
10-20          (b)  The application must include a business plan, containing
10-21    the information required by the board, including at a minimum:
10-22                (1)  information regarding:
10-23                      (A)  the history and financial condition of the
10-24    applicant, including the applicant's income statement;
10-25                      (B)  the applicant's present markets and market
10-26    prospects; and
 11-1                      (C)  the integrity of the applicant's management;
 11-2                (2)  a statement of the feasibility of the product for
 11-3    which financing is requested, including the state of development of
 11-4    any product to be developed and the proposed schedule of its
 11-5    commercialization; and
 11-6                (3)  if applicable, documentation of attempts to obtain
 11-7    private financing.
 11-8          (c)  The board shall determine, with respect to each
 11-9    application for financing, whether:
11-10                (1)  the product or business for which financing is
11-11    requested is economically sound;
11-12                (2)  there is a reasonable expectation that the product
11-13    or business will be successful;
11-14                (3)  the product or business will create or preserve
11-15    jobs and otherwise benefit the economy of the state;
11-16                (4)  the applicant has the management resources and
11-17    other funding to complete the project;
11-18                (5)  financing is necessary because full financing is
11-19    unavailable in traditional capital markets or credit has been
11-20    offered on terms that would preclude the success of the project;
11-21    and
11-22                (6)  there is reasonable assurance that the potential
11-23    revenues to be derived from the sale of the product will be
11-24    sufficient to repay any financing approved by the board.
11-25          (d)  After considering the application and all other
11-26    information it considers relevant, the board shall approve or deny
 12-1    the application and promptly notify the applicant of its decision.
 12-2          Sec. 403.415.  INFORMATION CONFIDENTIAL.  (a)  Information
 12-3    described by Subsection (b) collected, assembled, or maintained by
 12-4    or for the board is confidential and may not be disclosed by the
 12-5    board, the comptroller, or the office.
 12-6          (b)  This section applies to information in any form provided
 12-7    by or on behalf of an applicant for financing or a recipient of
 12-8    financing under this subchapter, including information contained
 12-9    in, accompanying, or derived from any application or report, that
12-10    relates to a product, to the development, application, manufacture,
12-11    or use of a product, or to the markets, market prospects, or
12-12    marketing of a product, and that is proprietary information of
12-13    actual or potential commercial value to the applicant or recipient
12-14    that has not been disclosed to the public.  Confidential
12-15    information includes scientific and technological information,
12-16    including computer programs and software, and marketing and
12-17    business operation information, regardless of whether the product
12-18    to which the information relates is patentable or capable of being
12-19    registered under copyright or trademark laws or has a potential for
12-20    being sold, traded, or licensed for a fee.  This section does not
12-21    make confidential information in an account, voucher, or contract
12-22    relating to the receipt or expenditure of public funds by the board
12-23    or the comptroller under this subchapter.
12-24          (c)  Any application for financing that is withdrawn by the
12-25    applicant before approval or funding or that is denied by the board
12-26    shall be returned to the applicant promptly on request, together
 13-1    with all materials submitted by or on behalf of the applicant that
 13-2    relate to the application, except that the board may retain a
 13-3    record of the submission and disposition of the application that
 13-4    does not include any information described by Subsection (b).
 13-5          Sec. 403.416.  PROGRAM COORDINATION.  The board and office
 13-6    shall coordinate the administration and funding of the programs.
 13-7          SECTION 2.  This Act takes effect immediately if it receives
 13-8    a vote of two-thirds of all the members elected to each house, as
 13-9    provided by Section 39, Article III, Texas Constitution.  If this
13-10    Act does not receive the vote necessary for immediate effect, this
13-11    Act takes effect September 1, 2001.