BILL ANALYSIS

 

 

Senate Research Center                                                                                                        S.B. 825

81R1584 KFF-D                                                                                                                   By: Ellis

                                                                                                                        Business & Commerce

                                                                                                                                            5/12/2009

                                                                                                                                              As Filed

 

 

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

 

This bill designates certain areas as banking development districts to encourage the establishment of financial institution branches in geographic areas where there is a demonstrated need for banking services.   The bill requires the Finance Commission of Texas (finance commission), in consultation with the Texas Economic Development and Tourism Office, to adopt rules regarding the criteria for the designation of banking development districts.  The bill also authorizes a local government, in conjunction with a financial institution, to submit an application to the finance commission for designation of a banking development district.

 

This legislation provides for tax incentives to be offered to financial institutions that establish and conduct business in designated areas and allows local and state governments to deposit public funds in the banks.

 

As proposed,  S.B. 825 relates to the designation of certain areas as banking development districts to encourage the establishment of financial institution branches in those areas.

 

RULEMAKING AUTHORITY

 

Rulemaking authority is expressly granted to the Finance Commission of Texas in SECTION 1 (Section 279.052, Finance Code) and SECTION 4 of this bill.

 

SECTION BY SECTION ANALYSIS

 

SECTION 1.  Amends Subtitle Z, Title 3, Finance Code, by adding Chapter 279, as follows:

 

CHAPTER 279.  BANKING DEVELOPMENT DISTRICTS

 

SUBCHAPTER A.  GENERAL PROVISIONS

 

Sec. 279.001.  DEFINITIONS.  Defines "finance commission," "financial institution," and "local government."

 

[Reserves Sections 279.002-279.050 for expansion.]

 

SUBCHAPTER B.  POWERS AND DUTIES OF FINANCE COMMISSION

 

Sec. 279.051.  ADMINISTRATION OF PROGRAM.  Requires the Finance Commission of Texas (finance commission) to administer and monitor a banking development district program under this chapter to encourage the establishment of branches of a financial institution in geographic areas where there is a demonstrated need for banking services.

 

Sec. 279.052.  RULES.  (a)  Requires the finance commission, subject to Subsection (b), to adopt rules to implement this chapter.

 

(b)  Requires the finance commission, in consultation with the Texas Economic Development and Tourism Office, to adopt rules regarding the criteria for the designation of banking development districts under this chapter.  Requires that the rules require the finance commission to consider the location, number, and proximity of sites where banking services are available in the proposed district,  consumer needs for banking services in the proposed district, the economic viability and local credit needs of the community in the proposed district, the existing commercial development in the proposed district, and the impact additional banking services would have on potential economic development in the proposed district.   

 

[Reserves Sections 279.053-279.100 for expansion.]

 

SUBCHAPTER C.  DESIGNATION OF BANKING DEVELOPMENT DISTRICT

 

Sec. 279.101.  APPLICATION FOR DESIGNATION OF BANKING DEVELOPMENT DISTRICT.  Authorizes a local government, in conjunction with a financial institution, to submit an application to the finance commission for the designation of a banking development district.

 

Sec. 279.102.  APPLICATION BY FINANCIAL INSTITUTION TO OPEN BRANCH IN DISTRICT.  Authorizes a financial institution to apply to open a branch in the district at the time the local government submits an application in conjunction with the institution under Section 279.101.

 

Sec. 279.103.  APPLICATION BY FINANCIAL INSTITUTION WITH EXISTING BRANCH IN PROPOSED DISTRICT.  (a)  Authorizes a local government to submit an application under Section 279.101 in conjunction with a financial institution that operates a branch in the proposed district at the time the application is submitted, if the branch was opened after December 31, 1996.

 

(b)  Requires the finance commission to consider the importance and benefits of preserving the banking services offered by the branch located in the proposed district in making a determination under Section 279.104.

 

Sec. 279.104.  DETERMINATION BY FINANCE COMMISSION.  (a)  Requires the finance commission, not later than the 91st day after the date an application for the designation of a banking development district is submitted under Section 279.101, to make a determination regarding whether to approve the application.

 

(b)  Requires the finance commission, if the finance commission approves the application, to notify the local government, financial institution, comptroller of public accounts (comptroller), Texas Economic Development and Tourism Office, lieutenant governor, and speaker of the house of representatives.

 

[Reserves Sections 279.105-279.150 for expansion.]

 

SUBCHAPTER D.  DEPOSIT OF PUBLIC FUNDS IN BANKING DISTRICT

DEPOSITORY

 

Sec. 279.151.  DESIGNATION OF BANKING DISTRICT DEPOSITORY.  (a)  Authorizes the governing body of a local government in which a banking development district has been designated under Subchapter C, by resolution to designate a financial institution located in the district as a banking district depository for purposes of this subchapter regardless of whether the financial institution is designated by the comptroller as a state depository under Subchapter C (State Depositories and Investment of State Funds), Chapter 404 (State Treasury Operations of Comptroller), Government Code.

 

(b)  Requires that a resolution adopted under Subsection (a) specify the maximum amount that is authorized to be kept on deposit with the banking district depository.

 

(c)  Authorizes the governing body of a local government, in calculating the yield under Section 2256.006 (Standard of Care), Government Code, of public funds deposited in a banking district depository, to consider the benefit to this state of stimulating economic development.

 

Sec. 279.152.  DEPOSIT OF PUBLIC FUNDS BY LOCAL GOVERNMENT.  (a)  Authorizes a local government to deposit public funds with a financial institution designated as a banking district depository under Section 279.151.

 

(b)  Authorizes public funds deposited in the banking district depository, subject to an agreement between the governing body and the banking district depository, to earn a fixed interest rate that is at or below the financial institution's posted two year certificate of deposit rate.  Requires that the terms of the agreement be specified in the resolution adopted under Section 279.151.

 

Sec. 279.153.  DEPOSIT OF PUBLIC FUNDS BY STATE.  (a)  Authorizes the comptroller to deposit public funds with a financial institution designated as a banking district depository under Section 279.151.

 

(b)  Authorizes public funds deposited in the banking district depository, subject to an agreement between the comptroller and the banking district depository, to earn a fixed interest rate that is at or below the financial institution's posted two year certificate of deposit rate. 

 

(c)  Authorizes the comptroller, in calculating the yield under Section 2256.006, Government Code, of public funds deposited in a banking district depository, to consider the benefit to this state of stimulating economic development.

 

[Reserves Sections 279.154-279.200 for expansion.]

 

SUBCHAPTER E.  BANKING DISTRICT BENEFITS

 

Sec. 279.201.  TAX ABATEMENT.  Authorizes the governing body of a local government to enter into a tax abatement agreement as provided by Chapter 312 (Property Redevelopment and Tax Abatement Act), Tax Code, with a financial institution that owns property in a banking development district.

 

SECTION 2.  Amends Subchapter B, Chapter 312, Tax Code, by adding Section 312.2012, as follows:

 

Sec. 312.2012.  BANKING DEVELOPMENT DISTRICT.  Provides that the designation of an area as a banking development district under Chapter 279, Finance Code, constitutes designation of the area as a reinvestment zone under this subchapter without further hearing or other procedural requirements other than those provided by Chapter 279, Finance Code, except that property is eligible for tax abatement under this subchapter only if the property is owned by a financial institution as defined by Section 279.001, Finance Code.

 

SECTION 3.  Amends Subchapter C, Chapter 312, Tax Code, by adding Section 312.4012, as follows:

 

Sec. 312.4012.  BANKING DEVELOPMENT DISTRICT.  Provides that the designation of an area as a banking development district under Chapter 279, Finance Code, constitutes designation of the area as a reinvestment zone under this subchapter without further hearing or other procedural requirements other than those provided by Chapter 279, Finance Code, except that property is eligible for tax abatement under this subchapter only if the property is owned by a financial institution as defined by Section 279.001, Finance Code.

 

SECTION 4.  Requires the finance commission to adopt rules, not later than January 1, 2010, governing the designation of banking development districts, as required by Chapter 279, Finance Code, as added by this Act.

 

SECTION 5.  Effective date:  upon passage or September 1, 2009.