By Carona S.B. No. 1485
77R5345 ESH-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the issuance of bonds and state financing for the
1-3 development of Texas biotechnological and biomedical products and
1-4 for assistance to small businesses.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subtitle G, Title 9, Government Code, is amended
1-7 by adding Chapter 1403 to read as follows:
1-8 CHAPTER 1403. BONDS FOR PRODUCT DEVELOPMENT AND
1-9 ASSISTANCE TO SMALL BUSINESSES
1-10 SUBCHAPTER A. GENERAL PROVISIONS
1-11 Sec. 1403.001. DEFINITIONS. In this chapter:
1-12 (1) "Board" means the Product Development and Small
1-13 Business Incubator Board.
1-14 (2) "Financing" means:
1-15 (A) a loan, loan guarantee, or equity investment
1-16 from the product development fund to a person for use in the
1-17 development and production of a new or improved product in this
1-18 state; or
1-19 (B) a grant or loan from the small business
1-20 incubator fund to a person for use in the development of a small
1-21 business in this state.
1-22 (3) "Product" means an invention, material, device,
1-23 technique, or process, without regard to whether a patent has or
1-24 could be granted, that is or may be exploitable commercially. The
2-1 term includes products, devices, techniques, or processes that have
2-2 advanced beyond the theoretical stage and have or are readily
2-3 capable of having a commercial application. The term does not
2-4 include pure research.
2-5 (4) "Product development fund" means the Texas product
2-6 development fund.
2-7 (5) "Programs" mean the product development and small
2-8 business incubator programs.
2-9 (6) "Small business fund" means the Texas small
2-10 business incubator fund.
2-11 Sec. 1403.002. PROGRAM COORDINATION. The board and the
2-12 comptroller shall coordinate the administration and funding of the
2-13 programs established under this chapter.
2-14 Sec. 1403.003. CONFIDENTIALITY OF INFORMATION. (a)
2-15 Information in any form provided by or on behalf of an applicant
2-16 for financing or a recipient of financing under this chapter and
2-17 collected, compiled, or maintained by or for the board, including
2-18 information contained in, accompanying, or derived from any
2-19 application or report, is confidential information and may not be
2-20 disclosed by the board or the comptroller if the information:
2-21 (1) relates to a product, the development,
2-22 application, manufacture, or use of a product, or the markets,
2-23 market prospects, or marketing of a product;
2-24 (2) is proprietary information of actual or potential
2-25 commercial value to the applicant or recipient; and
2-26 (3) has not been disclosed to the public.
2-27 (b) Confidential information under Subsection (a) includes:
3-1 (1) scientific and technological information,
3-2 including computer programs and software; and
3-3 (2) marketing and business operation information.
3-4 (c) Subsection (a) applies regardless of whether the product
3-5 to which the information relates:
3-6 (1) is capable of being patented or registered under
3-7 copyright or trademark laws; or
3-8 (2) has a potential for being sold, traded, or
3-9 licensed for a fee.
3-10 (d) Notwithstanding Subsection (a), information in an
3-11 account, voucher, or contract relating to the receipt or
3-12 expenditure of public funds by the board or the comptroller under
3-13 this chapter is not confidential.
3-14 (Sections 1403.004-1403.050 reserved for expansion
3-15 SUBCHAPTER B. PRODUCT DEVELOPMENT AND
3-16 SMALL BUSINESS INCUBATOR BOARD
3-17 Sec. 1403.051. PRODUCT DEVELOPMENT AND SMALL BUSINESS
3-18 INCUBATOR BOARD; COMPOSITION. (a) The Product Development and
3-19 Small Business Incubator Board consists of:
3-20 (1) the comptroller or the comptroller's designee; and
3-21 (2) six persons appointed by the governor with the
3-22 advice and consent of the senate.
3-23 (b) In appointing members to the board, the governor shall
3-24 appoint:
3-25 (1) two persons who have significant business
3-26 leadership experience in biotechnology, particularly experience
3-27 with transferring research results into commercial applications;
4-1 (2) two persons employed by institutions of higher
4-2 education in this state who have experience in biomedical or
4-3 biotechnological research and their commercial applications; and
4-4 (3) two persons experienced and knowledgeable in
4-5 structuring and providing financing for biomedical or
4-6 biotechnological products or businesses.
4-7 Sec. 1403.052. TERMS. (a) Members of the board appointed
4-8 by the governor serve two-year staggered terms with the terms of
4-9 one-half of the members expiring February 1 of each year.
4-10 (b) If the comptroller designates a person to represent the
4-11 comptroller on the board, the person serves at the will of the
4-12 comptroller.
4-13 Sec. 1403.053. REMOVAL OF BOARD MEMBER. (a) It is a ground
4-14 for removal from the board that a member:
4-15 (1) cannot because of illness or disability discharge
4-16 the member's duties for a substantial part of the term for which
4-17 the member is appointed; or
4-18 (2) is absent from more than half of the regularly
4-19 scheduled board meetings that the member is eligible to attend
4-20 during a calendar year unless the absence is excused by a majority
4-21 vote of the board.
4-22 (b) The validity of an action of the board is not affected
4-23 by the fact that the action was taken when a ground for removal of
4-24 a board member existed.
4-25 Sec. 1403.054. TRAINING OF BOARD MEMBERS. (a) A person who
4-26 is appointed to and qualifies for office as a member of the board
4-27 may not vote, deliberate, or be counted as a member in attendance
5-1 at a meeting of the board until the person completes a training
5-2 program that complies with this section.
5-3 (b) A training program established under this section shall
5-4 provide information to the member regarding:
5-5 (1) the legislation that created the board;
5-6 (2) the programs operated by the board;
5-7 (3) the role and functions of the board;
5-8 (4) the rules of the board, with an emphasis on any
5-9 rules that relate to disciplinary and investigatory authority;
5-10 (5) the current budget for the board;
5-11 (6) the results of the most recent formal audit of the
5-12 board; and
5-13 (7) the requirements of the:
5-14 (A) open meetings law, Chapter 551;
5-15 (B) public information law, Chapter 552;
5-16 (C) administrative procedure law, Chapter 2001;
5-17 (D) conflict of interest laws and other laws
5-18 relating to public officials; and
5-19 (E) applicable ethics policies adopted by the
5-20 board or the Texas Ethics Commission.
5-21 (c) Subsection (a) does not apply to the comptroller but
5-22 does apply to the comptroller's designee, if the comptroller
5-23 designates a person to represent the comptroller on the board.
5-24 Sec. 1403.055. OFFICERS; MEETINGS. (a) The comptroller or
5-25 the comptroller's designee serves as the presiding officer of the
5-26 board.
5-27 (b) The board shall appoint a secretary of the board whose
6-1 duties may be prescribed by the board.
6-2 (c) The board shall hold regular meetings in the City of
6-3 Austin and other meetings at places and times scheduled by the
6-4 board in formal sessions and called by the presiding officer.
6-5 (d) Minutes of all meetings shall be available in the
6-6 board's office for public inspection.
6-7 Sec. 1403.056. PUBLIC TESTIMONY AT BOARD MEETINGS. The
6-8 board shall develop and implement policies that provide the public
6-9 with a reasonable opportunity to appear before the board and to
6-10 speak on any issue under the jurisdiction of the board.
6-11 Sec. 1403.057. COMPENSATION AND REIMBURSEMENT. Appointed
6-12 members of the board serve without compensation but are entitled to
6-13 reimbursement as provided by the General Appropriations Act for
6-14 actual expenses incurred in:
6-15 (1) attending board meetings; or
6-16 (2) performing other board work that has been approved
6-17 by the presiding officer.
6-18 Sec. 1403.058. APPLICABILITY OF CERTAIN LAWS. The board is
6-19 subject to the open meetings law, Chapter 551, the public
6-20 information law, Chapter 552, and the administrative procedure law,
6-21 Chapter 2001.
6-22 Sec. 1403.059. STAFF. (a) The employees of the comptroller
6-23 selected by the comptroller for that purpose serve as the staff of
6-24 the board.
6-25 (b) The comptroller shall supervise the staff of the board
6-26 and perform other duties delegated to the comptroller by the board.
6-27 Sec. 1403.060. INFORMATION ON RESPONSIBILITIES OF BOARD
7-1 MEMBERS AND STAFF. The comptroller shall provide to members of the
7-2 board and to board staff, as often as necessary, information
7-3 regarding their qualifications for office or employment under this
7-4 chapter and their responsibilities under applicable laws relating
7-5 to standards of conduct for state officers or employees.
7-6 Sec. 1403.061. SEPARATION OF POLICYMAKING AND MANAGEMENT
7-7 RESPONSIBILITIES. The board shall develop and implement policies
7-8 that clearly separate the policy-making responsibilities of the
7-9 board and the management responsibilities of the comptroller and
7-10 the comptroller's staff.
7-11 Sec. 1403.062. PROGRAM AND FACILITY ACCESSIBILITY. (a) The
7-12 board shall comply with federal and state laws related to program
7-13 and facility accessibility.
7-14 (b) The board shall prepare and maintain a written plan that
7-15 describes how a person who does not speak English can be provided
7-16 reasonable access to the board's programs and services.
7-17 Sec. 1403.063. POWERS OF BOARD. The board:
7-18 (1) shall administer the programs, the product
7-19 development fund, and the small business fund;
7-20 (2) may exercise any power necessary and reasonable to
7-21 implement this chapter; and
7-22 (3) may adopt reasonable rules, policies, and
7-23 procedures necessary to implement this chapter.
7-24 (Sections 1403.064-1403.100 reserved for expansion
7-25 SUBCHAPTER C. BONDS AND FUNDS
7-26 Sec. 1403.101. ISSUANCE OF BONDS. As provided by Section
7-27 71, Article XVI, Texas Constitution, the Texas Public Finance
8-1 Authority shall:
8-2 (1) issue general obligation bonds in the amount of
8-3 $10 million and deposit the proceeds in the product development
8-4 fund; and
8-5 (2) issue general obligation bonds in the amount of
8-6 $10 million and deposit the proceeds in the small business fund.
8-7 Sec. 1403.102. TEXAS PRODUCT DEVELOPMENT FUND. (a) The
8-8 Texas product development fund is a revolving fund in the state
8-9 treasury.
8-10 (b) The product development fund consists of:
8-11 (1) the proceeds of bonds issued under Section
8-12 1403.101(1);
8-13 (2) financing application fees, loan repayments,
8-14 guarantee fees, royalty receipts, and dividend income;
8-15 (3) amounts received by the state from loans and
8-16 equity investments and in connection with loan guarantees made
8-17 under this chapter;
8-18 (4) amounts received by the state from federal grants
8-19 or other sources in connection with the product development
8-20 program;
8-21 (5) money transferred by the legislature for
8-22 authorized purposes of the product development fund; and
8-23 (6) any other amounts received under this chapter and
8-24 required by resolution of the board to be deposited in the product
8-25 development fund.
8-26 (c) The product development fund contains a program account,
8-27 an interest and sinking account, and other accounts that the board
9-1 authorizes to be created and maintained. Money in the product
9-2 development fund is available for use by the board under this
9-3 chapter.
9-4 (d) Money in the program account of the product development
9-5 fund, minus the costs of issuance of bonds under this chapter and
9-6 necessary costs of administering the product development fund, may
9-7 be used only to provide financing to aid in the development and
9-8 production, including the commercialization, of new or improved
9-9 products in this state. The board shall provide financing from the
9-10 product development fund on the terms that the board determines to
9-11 be reasonable, appropriate, and consistent with the purposes and
9-12 objectives of the product development fund and this chapter.
9-13 Sec. 1403.103. TEXAS SMALL BUSINESS INCUBATOR FUND. (a)
9-14 The Texas small business incubator fund is a revolving fund in the
9-15 state treasury.
9-16 (b) The small business fund consists of:
9-17 (1) the proceeds of bonds issued under Section
9-18 1403.101(2);
9-19 (2) financing application fees and loan repayments;
9-20 (3) amounts received by the state from federal grants
9-21 or other sources in connection with the small business incubator
9-22 program;
9-23 (4) money transferred by the legislature for
9-24 authorized purposes of the small business fund; and
9-25 (5) any other amounts received under this chapter and
9-26 required by resolution of the board to be deposited in the small
9-27 business fund.
10-1 (c) The small business fund contains a project account, an
10-2 interest and sinking account, and other accounts that the board
10-3 authorizes to be created and maintained. Money in the small
10-4 business fund is available for use by the board under this chapter.
10-5 (d) Money in the project account of the small business fund,
10-6 minus the costs of issuance of bonds under this chapter and
10-7 necessary costs of administering the small business fund, may be
10-8 used only to provide financing to foster and stimulate the
10-9 development of small businesses in this state. The board shall
10-10 provide financing from the small business fund on the terms that
10-11 the board determines to be reasonable, appropriate, and consistent
10-12 with the purposes and objectives of the small business fund and
10-13 this chapter.
10-14 (Sections 1403.104-1403.150 reserved for expansion
10-15 SUBCHAPTER D. FINANCING FOR PRODUCT DEVELOPMENT
10-16 AND SMALL BUSINESSES
10-17 Sec. 1403.151. ELIGIBLE PRODUCTS AND BUSINESSES; FINANCING.
10-18 (a) Financing may be made under this chapter only for a product or
10-19 small business as approved by the board.
10-20 (b) In determining eligible products and small businesses,
10-21 the board shall give preference to products or businesses in the
10-22 areas of biomedicine and biotechnology that have the greatest
10-23 probability of commercial success and creating and retaining jobs
10-24 in this state. The board shall give additional further preference
10-25 to providing financing to projects or businesses that are:
10-26 (1) grantees under the small business innovation
10-27 research program established under 15 U.S.C. Section 638 and its
11-1 subsequent amendments;
11-2 (2) applicants based in this state formed to
11-3 commercialize research funded at least in part with state funds;
11-4 (3) applicants that have acquired other sources of
11-5 financing;
11-6 (4) applicants based in this state receiving
11-7 assistance from designated state small business development
11-8 centers; or
11-9 (5) applicants who are residents of this state doing
11-10 business in the state and performing financed activities
11-11 predominantly in the state.
11-12 (c) The board shall adopt rules establishing limits on the
11-13 amount of financing an applicant may receive and otherwise
11-14 governing the terms of the financing. The rules must include:
11-15 (1) requirements for appropriate security of
11-16 collateral, equity interest, and the rights and remedies of the
11-17 board and the comptroller if the person receiving a loan defaults
11-18 on the loan; and
11-19 (2) requirements that applicants report to the board
11-20 on the use of money distributed through the product development
11-21 fund or small business fund.
11-22 Sec. 1403.152. AGREEMENT REQUIRED. (a) Before approving the
11-23 provision of financing to a person under the product development
11-24 program, the board shall enter into an agreement with the person
11-25 under which the board will obtain an appropriate portion of
11-26 royalties, patent rights, equitable interests, or a combination of
11-27 those royalties, rights, and interests, from or in the product or
12-1 proceeds of the product for which financing is requested.
12-2 (b) An agreement entered into under this chapter must
12-3 include provisions to ensure the proper use of funds and the
12-4 receipt by the board of royalties, patent rights, or equity
12-5 interest, as appropriate.
12-6 (c) An agreement entered into under this chapter must state
12-7 the amount and type of financing to be provided and the schedule
12-8 and other terms for repayment of any loan.
12-9 Sec. 1403.153. APPLICATION. (a) The board shall adopt an
12-10 application form for persons seeking financing from the board.
12-11 (b) A person seeking financing under this chapter must
12-12 deliver to the comptroller:
12-13 (1) an application for financing; and
12-14 (2) a reasonable application fee in the amount set by
12-15 board rule.
12-16 (c) An application for financing must contain a business
12-17 plan that contains the information required by the board,
12-18 including:
12-19 (1) information regarding the applicant's history and
12-20 financial condition, including:
12-21 (A) the applicant's income statement;
12-22 (B) information about the applicant's present
12-23 markets and market prospects; and
12-24 (C) information about the integrity of the
12-25 applicant's management;
12-26 (2) a statement of the feasibility of the product or
12-27 business for which financing is requested, including the state of
13-1 development of any product to be developed and the proposed
13-2 timelines of its commercialization; and
13-3 (3) if applicable, documentation of attempts to obtain
13-4 private financing.
13-5 Sec. 1403.154. EVALUATION AND APPROVAL OF APPLICATION. (a)
13-6 For each application for financing under this chapter, the board
13-7 shall determine whether:
13-8 (1) the product or business for which financing is
13-9 requested is economically sound;
13-10 (2) there is a reasonable expectation that the product
13-11 or business will be successful;
13-12 (3) the product or business will create or preserve
13-13 jobs and otherwise benefit the economy of the state;
13-14 (4) the applicant has the management resources and
13-15 other funding necessary to complete the project;
13-16 (5) financing under this chapter is necessary because
13-17 full financing is unavailable in traditional capital markets or the
13-18 applicant has been offered credit only on terms that would preclude
13-19 the success of the project; and
13-20 (6) there is reasonable assurance that the potential
13-21 revenue to be derived from the sale of the product or the income of
13-22 the business will be sufficient to repay any financing approved by
13-23 the board.
13-24 (b) After considering the application and all other
13-25 information the board considers relevant, the board shall approve
13-26 or deny the application and promptly notify the applicant of its
13-27 decision.
14-1 Sec. 1403.155. ADVISORY COMMITTEE. The board may appoint an
14-2 advisory committee of experts in the areas of biomedicine and
14-3 biotechnology to review projects and businesses for which
14-4 applicants seek financing under this chapter.
14-5 Sec. 1403.156. PROVISION OF FINANCING. If the board
14-6 approves an application for financing under this chapter, the
14-7 comptroller shall use money in the product development fund or
14-8 small business fund, as applicable, to provide financing to the
14-9 applicant in accordance with the agreement entered into under
14-10 Section 1403.152.
14-11 Sec. 1403.157. WITHDRAWN AND DENIED APPLICATIONS. (a) If
14-12 an applicant for financing under this chapter withdraws the
14-13 application before it is approved by the board or if the board
14-14 denies an application for financing, the board on request shall
14-15 promptly return to the applicant:
14-16 (1) the application; and
14-17 (2) all materials submitted by or on behalf of the
14-18 applicant that relate to the application.
14-19 (b) Notwithstanding Subsection (a), the board may retain a
14-20 record of the submission and disposition of a withdrawn or denied
14-21 application that does not include any information considered
14-22 confidential under Section 1403.003.
14-23 SECTION 2. (a) The governor shall make the initial
14-24 appointments to the Product Development and Small Business
14-25 Incubator Board under Chapter 1403, Government Code, as added by
14-26 this Act, not later than October 1, 2001. In making those
14-27 appointments, the governor shall designate three members for terms
15-1 expiring February 1, 2002, and three members for terms expiring
15-2 February 1, 2003.
15-3 (b) An initial appointee to the Product Development and
15-4 Small Business Incubator Board shall complete the training required
15-5 by Section 1403.054, Government Code, as added by this Act, not
15-6 later than the 60th day after the date on which the person is
15-7 appointed. Notwithstanding Section 1403.054(a), Government Code, as
15-8 added by this Act, an initial appointee to the board may serve as a
15-9 board member without completing the training required by that
15-10 section. If the person does not complete the training within the
15-11 time prescribed by this subsection, the person vacates the office.
15-12 SECTION 3. This Act takes effect September 1, 2001.