HBA-DMD C.S.H.B. 1687 76(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 1687
By: Hunter
State, Federal, & International Relations
4/5/1999
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

Texas does not currently offer a consistent financial infrastructure for
the film industry. C.S.H.B. 1687 establishes the Texas film industry
administrative fund. This bill requires the comptroller to establish a loan
guarantee program which guarantees loans for Texas films made by Texas film
producers. Additionally, this bill requires the producer of the film to
provide an indemnity against loss to be issued to the comptroller. C.S.H.B.
1687 prohibits more than $50 million of guarantees from being outstanding
at any one time. This bill also subjects the Texas film industry loan
guarantee indemnity program to the Texas Sunset Act.  

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the comptroller in SECTION 1 (Section
403.330, Government Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 403, Government Code, by adding Subchapter N, as
follows: 

SUBCHAPTER N.  TEXAS FILM INDUSTRY DEVELOPMENT
LOAN GUARANTEE PROGRAM

Sec. 403.321. DEFINITIONS. Defines "eligible Texas film," "filmed
entertainment," "production costs," "program," "Texas derivation," "Texas
film," "Texas film producer," and "Texas lender." 

Sec. 403.322. LIBERAL CONSTRUCTION. Requires this subchapter to be
liberally construed to accomplish the purposes stated in this subchapter. 

Sec. 403.323. TEXAS FILM INDUSTRY ADMINISTRATIVE FUND. Establishes the
Texas film industry administrative fund (fund) as a dedicated account in
the general revenue fund. Specifies amounts to be deposited in the fund.
Authorizes money in the fund to be used only for the administration of this
subchapter. Provides that Section 403.095 (Use of Dedicated Revenue),
Government Code, does not apply to the fund. 

Sec. 403.324. TEXAS FILM INDUSTRY DEVELOPMENT LOAN GUARANTEE INDEMNITY
PROGRAM. Requires the comptroller to establish a loan guarantee program
(program) to guarantee a certain amount of one or  more qualified Texas
film production loans as a means to facilitate access to capital for the
production of filmed entertainment in this state. Authorizes the
comptroller to approve the issuance of a guarantee of a qualified Texas
film production loan or loans for the production of more than one Texas
film by a single Texas film producer. 

(b) Prohibits the comptroller from approving the issuance of a loan
guarantee except on approval of a qualified application submitted by a
Texas film producer with the approval of a Texas lender who has agreed to
make a qualified Texas film production loan to the producer. 

 (c) Requires the comptroller, for each guarantee, to determine the maximum
guarantee amounts and the terms and conditions relating to a guarantee. 

(d) Provides that an action or claim under a loan guarantee must be brought
no later than the third anniversary of the date on which the comptroller
approves the issuance of the guarantee.   

(e) Prohibits the guarantee amount provided by the comptroller under this
subchapter from exceeding 80 percent of the total amount of the Texas film
production loan, or $2.4 million, whichever is less.  

Sec. 403.325. QUALIFIED TEXAS FILM PRODUCTION LOAN. Sets qualifications for
a Texas film production loan.  

Sec. 403.326. APPLICATION FOR LOAN GUARANTEE.  (a) Sets guidelines a loan
guarantee application (application). 

(b) Requires the comptroller to charge a reasonable application fee not to
exceed $100 in order to cover the cost of processing the application.  

(c) Requires the comptroller, upon receiving an application, to verify the
information contained in the application. Authorizes the comptroller to
conduct investigations as necessary to make a determination regarding
information provided in the application.  

(d) Authorizes the comptroller to contract with a private company to verify
the information in the application by conducting an investigation and to
submit a written report of the company's findings to the comptroller.  

(e) Prohibits the comptroller from approving an application unless it is
complete and meets the requirements of this section.  

Sec. 403.327. INDEMNITY REQUIREMENT. Requires the producer of the film to
provide an indemnity against loss in an amount equal to the full amount of
the loan guarantee. Provides that the indemnity must be issued to the
comptroller as the beneficiary of the indemnity by an insurance company,
surety company, or financial institution that is licensed and authorized to
do business in this state and approved by the comptroller.  

Sec. 403.328. SURETY BOND FOR COMPLETION OF FILM. Requires the applicant to
file with the comptroller a surety bond indemnifying this state, the
lender, and the entity providing indemnity under Section 403.327 against
loss that results from the film not being completed by the date and for the
budget certified to the state in the application required by Section
403.326.  

Sec. 403.329. ISSUANCE OF LOAN GUARANTEE. Prohibits the comptroller from
approving the issuance of a loan guarantee unless the loan guarantee meets
certain criteria.  

Sec. 403.330. RULEMAKING AUTHORITY. Requires the comptroller to adopt rules
relating to the implementation of the program and any other rules necessary
to accomplish the purposes of this subchapter. Provides that the rules must
include: 

(1)  terms and conditions for a security interest or other pledge of
collateral to be provided to a lender or this state as security for any
default of a loan guaranteed under the program; and 
(2)  procedures for the enforcement of obligations owed and pledge of
collateral provided to the comptroller under the program.  

Sec. 403.331. OFFENSE. Provides that a person commits a third degree felony
offense if the person signs an application or submits to the comptroller a
document the person knows is false in any material respect with the intent
of causing the comptroller to issue a loan  guarantee under the program.  

Sec. 403.332. LIMITATIONS IN PROGRAM. Prohibits more than $50 million of
guarantees issued from being outstanding at any one time. Provides that the
liability of the state for a loan guarantee for a film is limited to the
amount of the indemnity provided for the film under Section 403.327. 

Sec. 403.333. QUARTERLY REPORT. Requires the comptroller, at least
quarterly, to provide to the director of the Legislative Budget Board, the
presiding officer of the Senate Finance Committee, and the presiding
officer of the House Appropriations Committee a report that contains
certain relevant information. 

Sec. 403.334. GIFTS AND GRANTS. Authorizes the comptroller to solicit and
accept gifts, grants, and donations from any source for the purposes of
this subchapter.  

Sec. 403.335. APPLICATION OF SUNSET ACT TO PROGRAM.  (a) Subjects the
program to Chapter 325 (Texas Sunset Act), Government Code,  as if it were
a state agency subject to review under that chapter. Provides that this
program is abolished and this subchapter expires on September 1, 2005, if
it is not continued in existence in accordance with that chapter. 

(b) Requires the comptroller, to the extent that Chapter 325 (Texas Sunset
Act), Government Code, places a duty on a state agency subject to review
under that chapter, to perform the duty as it relates to the program.  

SECTION 2.  Amends Subchapter B, Chapter 403, Government Code, by adding
Section 403.029, as follows: 

Sec. 403.029.  TRANSFER OF CERTAIN MONEY TO GENERAL REVENUE FUND. Sets
forth that on the expiration of Subchapter N: 

(1) the comptroller is required to determine the amount sufficient to
administer loan guarantees or obligations of the comptroller that remain
outstanding under the Texas film industry loan guarantee indemnity program
administered by the comptroller under Subchapter N; and 
(2) authorizes any amount in the fund that exceeds the amount computed
under Subdivision (1) to be used only by the Music, Film, Television, and
Multimedia Office in the governor's office for the purpose of promoting the
film industry in this state.  

SECTION 3. Requires the comptroller to adopt rules required by Section
403.330, Government Code, as added by this Act, no later than December 1,
1999.  

SECTION 4.Effective date: September 1, 1999.  

SECTION 5.Emergency clause.    

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 1687 differs from the original bill by transferring all
requirements and obligations of the Texas Department of Economic
Development in the original bill to the comptroller in the substitute.
Additionally, the substitute amends Chapter 403 instead of 481, Government
Code, by adding Subchapter N, instead of Subchapter CC, and by modifying
the definition for "program" in SECTION 1 to conform to the transfer of
requirements and obligations to the comptroller. 

This substitute creates Section 403.327 (Indemnity Requirement), under
which the producer of the film is required to provide an indemnity against
loss to be issued to the comptroller and deletes Sections 481.607
(Guarantee Fee) and 408.608 (Indemnity Policy) from the original.
Additionally, the substitute modifies the conditions of the loan which
qualifies the loan as a Texas film production loan. Section 403.328 of the
substitute requires an applicant to file a surety bond with the
comptroller providing indemnity against loss that results from the film not
being made. 

This substitute also changes the name of the Texas Film Industry
Development Fund to the Texas Film Industry Administrative Fund and changes
the name of the Texas Film Industry Development Loan Guarantee Program to
the Texas Film Industry Loan Guarantee Indemnity Program and renames the
Sections accordingly in SECTION 1 (Sections 403.323 and 403.324, Government
Code). This substitute also limits the liability of the state for the loan
guarantee to the amount of the indemnity. This substitute also makes
conforming and nonsubstantive changes.