85R1796 DDT-D

By: Thierry H.B. No. 1047

A BILL TO BE ENTITLED

AN ACT

relating to the establishment of a community development grocery store and healthy corner store revolving loan fund program.

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

SECTION 1. It is the intent of the legislature to support revitalization in food deserts, reduce the cost of financing agricultural development projects, and increase the number of food markets providing affordable and nutritious foods in underserved areas.

SECTION 2. Title 2, Agriculture Code, is amended by adding Chapter 26 to read as follows:

CHAPTER 26. TEXAS COMMUNITY DEVELOPMENT GROCERY STORE AND HEALTHY

CORNER STORE REVOLVING LOAN FUND

Sec. 26.001. DEFINITIONS. In this chapter:

(1) "Community development financial institution" has the meaning assigned by 12 U.S.C. Section 4702.

(2) "Corner store" means a store that has less than 2,000 square feet of retail space.

(3) "Food desert" means a geographic area determined by the department to be an area that:

(A) has limited access to healthy food retailers and is located in a lower-income or high-poverty area; or

(B) otherwise has serious healthy food access limitations.

(4) "Fund" means the community development grocery store and healthy corner store revolving loan fund established by this chapter.

(5) "Grocery store" means a store that has at least:

(A) 66 percent of the store's retail space reserved for the sale of food products;

(B) 50 percent of the store's food retail space reserved for the sale of non-prepared foods or foods intended for home preparation and consumption; and

(C) 30 percent of the store's food retail space reserved for the sale of perishable foods, including dairy products, fresh produce, fresh meats, poultry, and fish, and frozen foods.

(6) "Healthy corner store" means a corner store that:

(A) offers a wide variety of fresh produce for sale; and

(B) allocates at least 20 percent of the store's retail space to fresh produce and other perishable foods, including dairy products.

(7) "Program" means the loan program authorized by this chapter.

(8) "Supplemental nutrition assistance program" means the nutritional assistance program formerly referred to as the food stamp program.

(9) "WIC program" means the federal special supplemental nutrition program for women, infants, and children authorized by 42 U.S.C. Section 1786.

Sec. 26.002. TRUST FUND. (a) The community development grocery store and healthy corner store revolving loan fund is a trust fund outside the state treasury held by a community development financial institution and overseen by the department as trustee on behalf of entities operating grocery stores or healthy corner stores located in food deserts in this state.

(b) The fund is composed of:

(1) gifts or grants received from public or private sources; and

(2) income from other money in the fund.

(c) The department may accept on behalf of the fund gifts and grants for the use and benefit of the program.

Sec. 26.003. COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS. (a) The department shall contract with and award money, if available, to not more than five community development financial institutions to carry out the purposes of this chapter.

(b) In selecting a community development financial institution, the department shall consider the financial institution's:

(1) demonstrated success in implementing similar economic development projects;

(2) ability to raise additional capital; and

(3) solvency.

(c) The community development financial institution shall:

(1) provide revolving loan funds to entities proposing to operate or operating grocery stores or healthy corner stores in food deserts;

(2) develop, in consultation with the department, a system used to underwrite loan applications;

(3) provide training on business management and the profitable sale of healthy foods to corner store owners receiving a loan or grant money from the program;

(4) accept gifts and grants; and

(5) seek funding from various government and private sources.

Sec. 26.004. LOAN REVIEW COMMITTEE. (a) Before contracting with a community development financial institution, the department shall require the financial institution to establish or make use of an existing loan review committee to approve loan requests of entities proposing to operate or operating grocery stores or healthy corner stores.

(b) The loan review committee may not approve a loan request of an entity proposing to operate or operating a grocery store or healthy corner store unless the grocery store or healthy corner store:

(1) will be or currently is located in a food desert;

(2) will be or currently is located in a low and moderate income area, as determined by the United States Department of Housing and Urban Development, or will serve or currently is serving a customer base living in a low and moderate income area;

(3) will accept benefits under the WIC program and the supplemental nutrition assistance program not later than the 90th day after the date the store opens, or currently accepts benefits under those programs; and

(4) will be or currently is open year-round.

Sec. 26.005. CONSIDERATION OF OTHER RESOURCES. The loan review committee in approving a loan request shall give preference to an entity proposing to operate or operating a grocery store or healthy corner store that uses additional public and private resources to fund the grocery store or healthy corner store, including cash or in-kind matches.

Sec. 26.006. LOANS TO GROCERY STORES OR CORNER STORES. (a) The community development financial institution may not make a loan to an entity proposing to operate or operating a grocery store or healthy corner store in a food desert unless the loan review committee has approved the loan.

(b) A loan made by the community development financial institution may be subordinated debt.

(c) The community development financial institution may make a loan under the program through a partnership or joint investment with one or more financial institutions or federal or state programs.

(d) Payments on grocery store or healthy corner store loans shall be made to the community development financial institution. The community development financial institution shall use the repayments of loan principal by entities operating grocery stores or healthy corner stores to make new loans as provided by this chapter.

(e) The community development financial institution may make a forgivable loan at a zero percent interest rate for a period of five years to an entity proposing to operate or operating a grocery store or healthy corner store in a food desert. The community development financial institution that makes a forgivable loan under this subsection:

(1) may not make a forgivable loan to an entity that exceeds $500,000;

(2) may not forgive an amount greater than one-fifth of the forgivable loan amount each year;

(3) shall annually evaluate an entity that receives a forgivable loan under this subsection to ensure that the entity is in compliance with the requirements of this chapter; and

(4) if the community development financial institution determines that the entity is not in compliance with the requirements of this chapter, shall require the entity to repay the remaining balance of the forgivable loan.

(f) A loan provided under this chapter must be made from available funds that must be used for that purpose.

Sec. 26.007. INCREASE IN INTEREST RATE; ACCELERATED REPAYMENT. If a recipient of a loan does not comply with the requirements of this chapter, the community development financial institution that made the loan, as provided by department rule, may:

(1) increase the interest rate on the loan;

(2) accelerate repayment of the principal of and interest on the loan; or

(3) take any other remedy permitted by department rule that the institution considers appropriate.

Sec. 26.008. SELF-FUNDING. The department shall develop the fund program as a revolving loan fund that will become self-funding over the life of the program.

Sec. 26.009. INCOME FROM LOAN. All income received on a loan made with money received under the program is the property of the community development financial institution. Income received on a loan includes the payment of interest by a borrower and the administrative fees assessed by the community development financial institution.

Sec. 26.010. RULES. (a) The department shall adopt rules to administer this chapter, including rules that require:

(1) the department to review the lending and servicing practices of a community development financial institution to ensure the practices conform to generally accepted accounting principles;

(2) an eligible entity proposing to operate or operating a grocery store or healthy corner store to enter into an agreement with the community development financial institution that states the terms of the loan made to the entity;

(3) the community development financial institution to provide to the department semiannual reports giving details of the status of each loan made under the program;

(4) the community development financial institution to develop rules to regulate financial monitoring and inventory;

(5) a third-party certified public accountant to perform biennial audits of grocery stores for which loans are made under the program; and

(6) the department to provide oversight of the community development financial institution as necessary to qualify the community development financial institution for loan guarantees from federal or state programs.

(b) Under rules adopted by the department, the community development financial institution may:

(1) make grants to eligible entities proposing to operate or operating grocery stores or healthy corner stores from money other than money that may be received from the fund; or

(2) seek funds from state or federal agencies or private sources to supplement and complement any funds received under the program.

(c) The department may adopt other rules as necessary to accomplish the purposes of this chapter.

Sec. 26.011. BIENNIAL REPORT. (a) Not later than December 1 of each even-numbered year, the department, in coordination with the community development financial institution, shall submit a report to the House Appropriations Committee, the Senate Finance Committee, the governor, and the Legislative Budget Board.

(b) The report must include for the preceding two state fiscal years:

(1) the number of entities receiving loans or grants under this chapter;

(2) repayment rates on loans;

(3) the total amount of money loaned or awarded by grants;

(4) the amount of square footage of commercial space created;

(5) the number of jobs created or retained;

(6) the average wages of the jobs created or retained; and

(7) the additional property tax revenue gained by local entities.

SECTION 3. Not later than November 15, 2017, the Department of Agriculture shall adopt rules to administer Chapter 26, Agriculture Code, as added by this Act.

SECTION 4. Not later than January 15, 2018, the Department of Agriculture shall designate community development financial institutions as provided by Section 26.003, Agriculture Code, as added by this Act, to carry out the purposes of Chapter 26, Agriculture Code, as added by this Act.

SECTION 5. Not later than February 15, 2018, the Department of Agriculture shall transfer money in the community development grocery store and healthy corner store revolving loan fund to a community development financial institution.

SECTION 6. This Act takes effect September 1, 2017.