By: Miles (Senate Sponsor - Estes) H.B. No. 2996

(In the Senate - Received from the House May 12, 2011; May 12, 2011, read first time and referred to Committee on Agriculture and Rural Affairs; May 23, 2011, reported favorably by the following vote: Yeas 4, Nays 1; May 23, 2011, sent to printer.)

A BILL TO BE ENTITLED

AN ACT

relating to the creation of the Texas Urban Agricultural Innovation Authority.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Title 4, Agriculture Code, is amended by adding Chapter 60A to read as follows:

CHAPTER 60A. TEXAS URBAN AGRICULTURAL INNOVATION AUTHORITY

SUBCHAPTER A. ADMINISTRATION AND POWERS

Sec. 60A.001. CREATION OF AUTHORITY; PUBLIC PURPOSE. (a) The Texas Urban Agricultural Innovation Authority is created within the Department of Agriculture as a public authority.

(b) The authority is created to promote the creation and expansion of urban agricultural projects in this state.

Sec. 60A.002. DEFINITION. In this chapter, "authority" means the Texas Urban Agricultural Innovation Authority.

Sec. 60A.003. BOARD OF DIRECTORS. (a) The authority is governed by a board of directors composed of the commissioner and eight members appointed by the commissioner. Members of the board must be appointed in the numbers specified and from the following categories:

(1) two persons who are elected or appointed officials of a municipality with a population of at least 500,000;

(2) three persons who are knowledgeable about agricultural lending practices;

(3) one person who is a representative of an agricultural business, as defined by Section 58.002; and

(4) two persons who represent urban farmers and the interests of urban farmers.

(b) The appointed members of the board serve staggered terms of two years, with the terms of four members expiring on January 1 of each even-numbered year and the terms of four members expiring on January 1 of each odd-numbered year.

(c) Any vacancy occurring in an appointed position on the board shall be filled by the commissioner for the unexpired term.

(d) A board member is not entitled to compensation or reimbursement for serving as a director.

(e) Appointments to the board shall be made without regard to the race, color, disability, sex, religion, age, or national origin of the appointees.

Sec. 60A.004. OFFICERS. (a) The commissioner shall designate a member of the board as the chairman of the board to serve in that capacity at the pleasure of the commissioner. The board shall elect other officers it considers necessary.

(b) The chairman of the board shall preside at meetings of the board and perform other duties prescribed by the board.

Sec. 60A.005. ADMINISTRATION. (a) The commissioner with the assistance of the board shall administer the authority. The commissioner may appoint, employ, contract with, and provide for employees, consultants, agents, and experts as the business of the authority may require.

(b) The board shall hold regular and special meetings at times specified by the chairman.

(c) The board is subject to Chapter 551, Government Code, and Chapter 2001, Government Code.

Sec. 60A.006. FISCAL ACCOUNTING OF ADMINISTRATION. (a) All funds acquired under this chapter may be used for administration of this chapter.

(b) On or before January 1 of each year, the authority shall prepare a report of its activities for the preceding fiscal year. The report must set forth a complete operating and financial statement. The authority shall file copies of the report with the governor and the legislature as soon as practicable.

(c) The board members, administrator, and staff of the authority may not be personally liable for loans issued or contracts executed by the authority and shall be exculpated and fully indemnified in the documents relating to any loans except in the case of fraudulent or wilful misconduct on the part of the individual seeking exculpation or indemnification.

Sec. 60A.007. REMOVAL OF BOARD MEMBER. (a) It is a ground for removal from the board if a member:

(1) does not have at the time of appointment the qualifications required by Section 60A.003;

(2) does not maintain during service on the board the qualifications required by Section 60A.003; or

(3) cannot because of illness or disability discharge the member's duties for a substantial part of the term for which the member is appointed.

(b) The validity of an action of the board is not affected by the fact that it is taken when a ground for removal of a board member exists.

[Sections 60A.008-60A.050 reserved for expansion]

SUBCHAPTER B. PURPOSES AND POWERS

Sec. 60A.051. PURPOSES OF AUTHORITY. In order to promote the creation and expansion of urban agricultural projects in this state, the authority shall implement programs under Subchapters C and D to:

(1) make or acquire loans to eligible persons;

(2) make or acquire loans to lenders to enable those lenders to make loans to eligible persons;

(3) insure, coinsure, and reinsure, wholly or partly, loans to eligible persons;

(4) guarantee, wholly or partly, loans to eligible persons; and

(5) make grants to eligible persons.

Sec. 60A.052. POWERS OF AUTHORITY. (a) The authority has all powers necessary to accomplish the purposes and programs of the authority, including the power:

(1) to adopt and enforce bylaws, rules, and procedures and perform all functions necessary for the board to carry out this chapter;

(2) to sue and be sued, complain, and defend, in its own name;

(3) to acquire, hold, invest, use, pledge, and dispose of its revenues, income, receipts, funds, and money from every source and to select one or more depositories, inside or outside the state, subject to this chapter, any resolution, bylaws, or in any indenture pursuant to which the funds are held;

(4) to establish, charge, and collect fees, charges, and penalties in connection with the programs, services, and activities provided by the authority in accordance with this chapter;

(5) to procure insurance and pay premiums on insurance of any type, in amounts, and from insurers as the board considers necessary and advisable to accomplish any of the authority's purposes;

(6) to make, enter into, and enforce contracts, agreements, including management agreements, for the management of any of the authority's property, leases, indentures, mortgages, deeds of trust, security agreements, pledge agreements, credit agreements, and other instruments with any person, including any lender and any federal, state, or local governmental agency, and to take other actions as may accomplish any of its purposes;

(7) to own, rent, lease, or otherwise acquire, accept, or hold real, personal, or mixed property, or any interest in property in performing its duties and exercising its powers under this chapter, by purchase, exchange, gift, assignment, transfer, foreclosure, mortgage, sale, lease, or otherwise and to hold, manage, operate, or improve real, personal, or mixed property, wherever situated;

(8) to sell, lease, encumber, mortgage, exchange, donate, convey, or otherwise dispose of any or all of its properties or any interest in its properties, deed of trust or mortgage lien interest owned by it or under its control, custody, or in its possession, and release or relinquish any right, title, claim, lien, interest, easement, or demand however acquired, including any equity or right of redemption in property foreclosed by it, and to do any of the foregoing by public or private sale, with or without public bidding, notwithstanding any other law; and to lease or rent any improvements, lands, or facilities from any person to effect the purposes of this chapter; and

(9) to request, accept, and use gifts, loans, donations, aid, guaranties, allocations, subsidies, grants, or contributions of any item of value for the furtherance of any of its purposes.

(b) Money acquired under Subsection (a)(9) may be used only for a purpose of the authority. Money from a gift or grant made for a purpose of the authority is subject only to limitations contained in the gift or grant.

Sec. 60A.053. PROGRAMS RULES. (a) The board shall adopt rules to establish criteria for determining which eligible persons may participate in programs under this chapter. The board's rules must state that the policy of the authority is to provide programs for providing financial assistance to eligible persons that the board considers to present a reasonable risk and have a sufficient likelihood of repayment. The board shall adopt collateral or security requirements to ensure the full repayment of that financial assistance and the solvency of any program implemented under this chapter. The board shall approve any and all extensions of that financial assistance under this chapter, provided that the board may delegate this approval authority to the commissioner.

(b) The board shall also adopt rules to establish criteria for lenders that may participate in programs under this chapter.

(c) Eligible persons or lenders participating in the authority's programs shall pay the costs of applying for, participating in, and administering and servicing the program, in amounts the board considers reasonable and necessary. The board shall charge an administrative fee for guaranteeing a loan that may not be less than one percent of the amount of the guaranteed loan. Any costs not paid by the eligible persons or lenders shall be paid from the funds of the authority.

(d) The board by rule shall adopt an agreement to be used between a lender and an approved applicant under Subchapter C under which the authority makes a payment for the purpose of providing a reduced interest rate on a loan guaranteed to a borrower. The agreement must require the borrower to use the proceeds of the loan for the purposes of the program under which the payment is made. The board shall adopt rules to implement this subsection.

Sec. 60A.054. AUTHORITY EXEMPTION FROM TAXATION. The property of the authority, its income, and its operations are exempt from all taxes and assessments imposed by the state and all public agencies and political subdivisions on property acquired or used by the authority under this chapter.

Sec. 60A.055. FUNDING. State money may not be used for purposes of the authority.

[Sections 60A.056-60A.100 reserved for expansion]

SUBCHAPTER C. URBAN FARMER INTEREST RATE REDUCTION PROGRAM

Sec. 60A.101. DEFINITIONS. In this subchapter:

(1) "Eligible lending institution" means a financial institution that makes commercial loans, is either a depository of state funds or an institution of the Farm Credit System headquartered in this state, and agrees to participate in the urban farmer interest rate reduction program and to provide collateral equal to the amount of linked deposits placed with it.

(2) "Linked deposit" means a time deposit governed by a written deposit agreement between the state and an eligible lending institution that provides:

(A) that the eligible lending institution pay interest on the deposit at a rate that is not less than the greater of:

(i) the current market rate of a United States treasury bill or note of comparable maturity minus three percent; or

(ii) 0.5 percent;

(B) that the state not withdraw any part of the deposit before the expiration of a period set by a written advance notice of the intention to withdraw; and

(C) that the eligible lending institution agree to lend the value of the deposit to an eligible borrower at a maximum rate that is the linked deposit rate plus a maximum of four percent.

Sec. 60A.102. URBAN FARMER INTEREST RATE REDUCTION PROGRAM. (a) The board shall establish an urban farmer interest rate reduction program to promote the creation and expansion of urban agriculture in this state.

(b) To be eligible to participate in the urban farmer interest rate reduction program, an applicant must own or lease real property for agricultural purposes in a municipality with a population of at least 500,000.

(c) The board shall approve or disapprove any and all applications under this subchapter, provided that the board may delegate this authority to the commissioner.

(d) The board shall adopt rules for the loan portion of the urban farmer interest rate reduction program.

(e) In order to participate in the urban farmer interest rate reduction program, an eligible lending institution may solicit loan applications from eligible applicants.

(f) After reviewing an application and determining that the applicant is eligible and creditworthy, the eligible lending institution shall send the application for a linked deposit loan to the authority.

(g) The eligible lending institution shall certify the interest rate applicable to the specific eligible applicant and attach it to the application sent to the authority.

(h) After reviewing each loan application under this subchapter, the board or the commissioner shall recommend to the comptroller the acceptance or rejection of the application.

(i) After acceptance of the application, the comptroller shall place a linked deposit with the applicable eligible lending institution for the period the comptroller considers appropriate. The comptroller may not place a deposit for a period extending beyond the state fiscal biennium in which it is placed. Subject to the limitations described by Section 60A.105, the comptroller may place time deposits at an interest rate described by Section 60A.101(2).

(j) Before the placing of a linked deposit, the eligible lending institution and the state, represented by the comptroller, shall enter into a written deposit agreement containing the conditions on which the linked deposit is made.

(k) If a lending institution holding linked deposits ceases to be either a state depository or a Farm Credit System institution headquartered in this state, the comptroller may withdraw the linked deposits.

(l) The board may adopt rules that create a procedure for determining priorities for loans granted under this subchapter. Each rule adopted must state the policy objective of the rule.

(m) A lending institution is not ineligible to participate in the urban farmer interest rate reduction program solely because a member of the board is also an officer, director, or employee of the lending institution, provided that a board member shall recuse himself or herself from any action taken by the board on an application involving a lending institution by which the board member is employed or for which the board member serves as an officer or director.

Sec. 60A.103. COMPLIANCE. (a) On accepting a linked deposit, an eligible lending institution must loan money to eligible applicants in accordance with the deposit agreement and this subchapter. The eligible lending institution shall forward a compliance report to the board.

(b) The board shall monitor compliance with this subchapter and inform the comptroller of noncompliance on the part of an eligible lending institution.

Sec. 60A.104. STATE LIABILITY PROHIBITED. The state is not liable to an eligible lending institution for payment of the principal, interest, or any late charges on a loan made under this subchapter. A delay in payment or default on a loan by a borrower does not affect the validity of the deposit agreement. Linked deposits are not an extension of the state's credit within the meaning of any state constitutional prohibition.

Sec. 60A.105. LIMITATIONS IN PROGRAM. (a) The maximum amount of a loan under this subchapter is $500,000.

(b) A loan granted under this subchapter may be used for any agriculture-related operating expense, including the purchase or lease of land or fixed assets acquisition or improvement, as identified in the application.

[Sections 60A.106-60A.150 reserved for expansion]

SUBCHAPTER D. URBAN FARMER GRANT PROGRAM

Sec. 60A.151. GRANT PROGRAM. (a) The authority shall administer an urban farmer grant program. A grant must be for the purpose of fostering the creation and expansion of urban agricultural projects in this state.

(b) The board shall adopt rules governing the operation of the program and selection criteria for grant recipients.

(c) The board shall select grant recipients.

Sec. 60A.152. ELIGIBILITY. To be eligible to receive a grant under this subchapter, a person must:

(1) be an agricultural producer;

(2) own or lease real property for agricultural purposes in a municipality with a population of at least 500,000; and

(3) provide matching funds in the amount of not less than one dollar for each dollar of grant money received.

Sec. 60A.153. AMOUNT OF GRANTS. A grant under the urban farmer grant program may not be less than $5,000 or more than $20,000.

SECTION 2. As soon as practicable after the effective date of this Act, the commissioner of agriculture shall appoint the members of the Texas Urban Agricultural Innovation Authority created by Section 60A.001, Agriculture Code, as added by this Act.

SECTION 3. This Act takes effect September 1, 2011.

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