HBA-JRA, RBT H.B. 3050 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 3050 By: Counts Agriculture & Livestock 7/26/1999 Enrolled BACKGROUND AND PURPOSE The Texas Department of Agriculture currently administers several programs to aid, assist, and promote the agriculture industry. H.B. 3050 amends the agricultural diversification program and microenterprise support program to allow refinancing of disaster loans and clarifies the approval process for linked deposit applications, amends the Young Farmer Loan Program to allow funding of projects of agriculture-related businesses and increase funding, establishes the Agriculture Technology Program to develop, maintain, and administer the agri-tech program to support research on agricultural crises, and moves the young farmer loan guarantee account into the Texas Agricultural Fund. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority previously delegated to the board of directors of the Texas Agricultural Finance Authority is modified in SECTION 4 (Section 44.007, Agriculture Code) and is expressly delegated to the board of directors of the Texas Agricultural Finance Authority in SECTIONS 5 and 13 (Sections 44.010 and 58.052, Agriculture Code) and to the commissioner of agriculture in SECTION 7 (Section 46.002, Agriculture Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 44.001, Agriculture Code, to delete the definition of "small business incubator" and redefine "eligible borrower," "linked deposit," and "microenterprise." Redesignates existing Subdivisions (2)-(8) to Subdivisions (1)-(7). SECTION 2. Amends Section 44.002, Agriculture Code, as follows: Sec. 44.002. New title: CREATION OF MICROENTERPRISE PROGRAMS. Requires the board of directors of the Texas Agricultural Finance Authority (board) to create a microenterprise support program to provide financial assistance to microenterprises in rural areas. Deletes language referring to an agricultural diversification program. SECTION 3. Amends Section 44.0045, Agriculture Code, to authorize an applicant applying on behalf of a proposed microenterprise to receive a loan of up to $25,000, rather than $15,000, to begin operation of the microenterprise. Authorizes an applicant applying on behalf of an established microenterprise to receive a loan of up to $50,000, rather than $30,000, to expand, modernize, or otherwise improve an established operation. Authorizes the board of directors of the Texas Agricultural Finance Authority, rather than the board of the microenterprise support program, to reserve a portion of the total fund for use in cooperative loan programs established with the participation of other public or private lenders. Deletes the prohibition against using a loan to refinance an existing debt of a proposed or existing microenterprise. SECTION 4. Amends Section 44.007, Agriculture Code, to require the board to approve or disapprove any and all applications under this chapter, provided that the board is authorized to delegate this authority to the commissioner of agriculture (commissioner). Provides additional factors which the board must take into consideration when promulgating rules for the loan portion of the linked deposit program. Requires the board and the commissioner, after reviewing each application, to make recommendations to the Comptroller of Public Accounts (comptroller). Provides that a lending institution is not ineligible to participate in the linked deposit program solely because a member of the board is also an officer, director, or employee of the lending institution, provided that such a board member be disqualified from any action taken by the board on an application involving that lending institution. Redesignates existing Subsections (b)-(k) to Subsections (c)-(l). Makes conforming and nonsubstantive changes. SECTION 5. Amends Section 44.010, Agriculture Code, to increase to $25 million the maximum amount that is authorized to be placed in linked deposits under this chapter. Provides that the maximum amount of a loan under this chapter to finance production of a crop on land declared eligible for natural disaster relief, as defined by board rule, is $250,000. Authorizes a loan granted under this chapter to be used for any agriculture-related operating expenses, including the purchase or lease of land, the acquisition of fixed assets, or the making of improvements, as identified in the loan application. Authorizes any loan granted under this chapter to be applied to existing debt, rather than only that debt resulting from the financing of eligible water conservation projects or equipment. Makes conforming and nonsubstantive changes. SECTION 6. Amends Sections 44.012 and 44.013, Agriculture Code, as follows: Sec. 44.012. New title: MONEY FOR LOANS. Deletes references to the board making grants and to the agricultural diversification program. Makes conforming changes. Sec. 44.013. RURAL MICROENTERPRISE DEVELOPMENT FUND. Provides that the rural microenterprise development fund (fund) is a fund in the comptroller's office, rather than the state treasury. Requires money appropriated to the board of the Texas Agricultural Finance Authority, rather than the Agricultural Diversification Board, to be deposited to the credit of the fund. SECTION 7. Amends Title 3, Agriculture Code, by adding Chapter 46, as follows: CHAPTER 46. AGRICULTURAL TECHNOLOGY PROGRAM Sec. 46.001. DEFINITIONS. Defines "agricultural crisis," "agri-tech program," "applied research," and "eligible institution." Sec. 46.002. ADMINISTRATION; GUIDELINES AND PROCEDURES. (a) Requires the Texas Department of Agriculture (department) to develop, maintain, and administer the agri-tech program to provide support for eligible institutions to conduct research projects on methods to address agricultural crises in this state. (b) Requires the department, in awarding funds to support projects under this chapter, to give priority to applied research projects that the commissioner determines to be necessary to address an immediate agricultural crisis and consider the recommendations of the Commodity Crisis Council for specific projects. (c) Requires the department to award funds to support projects as needed to address agricultural crises in this state. (d) Requires the department to develop and maintain guidelines and procedures to provide awards under this chapter for specific projects at eligible institutions on a competitive, peer-review basis. (e) Requires the department to determine whether an institution of higher education qualifies as an eligible institution for the purposes of this chapter. Provides that, to be designated as an eligible institution, an institution of higher education must demonstrate an exceptional capability to attract federal, state, and private funding for scientific and technical research and have an exceptionally strong research staff and the necessary equipment and facilities. (f) Requires the commissioner, in considering projects for selection, to give special consideration to projects that leverage funds from other sources and propose innovative, collaborative efforts across academic disciplines involving two or more eligible institutions, or involving eligible institutions, private industry, and the federal government. (g) Authorizes the commissioner to adopt rules necessary to accomplish the purposes of this chapter. Sec. 46.003. AGRICULTURAL TECHNOLOGY ACCOUNT. Provides that the agricultural technology account is an account in the general revenue fund consisting of legislative appropriations, gifts and grants and other money required by law to be deposited in the account. Authorizes the department to solicit and accept gifts in kind and grants of money from the federal government, local governments, private corporations, or other persons to be used for the purposes of this chapter. Authorizes the funds in the agricultural technology account to be used only as provided by this chapter. Exempts the account from the application of Section 403.095, Government Code. Requires income from money in the account to be credited to the account. Sec. 46.004. USE OF FUNDS IN AGRICULTURAL TECHNOLOGY ACCOUNT. Requires the comptroller to issue warrants to each eligible institution in the amount certified by the department to the comptroller from funds appropriated for the agri-tech program. Authorizes funds awarded from the agricultural technology account to be expended to support the particular research project for which the award is made and prohibits such funds to be expended for the general support of research and instruction at the institution conducting or sponsoring the project or for the construction or remodeling of a facility. Requires funds in the agricultural technology account to be used, when practicable within the purposes of this chapter, to match grants provided by the federal government or private industry for specific collaborative research projects at eligible institutions. Provides that supplies, materials, services, and equipment purchased with funds obtained under this section are not subject to General Services Commission authority. Sec. 46.005. PROGRESS REPORTS. Requires an institution receiving funds under this chapter to report on the progress of the funded research to the department by September 1 of each year. Sec. 46.006. MERIT REVIEW. Requires the commissioner to appoint a committee consisting of representatives of the agricultural industry and of private enterprise advanced technology research organizations to evaluate the agri-tech program's effectiveness. Requires the committee to report its findings to the department by September 1 of the second year of each biennium. SECTION 8. Amends Section 58.002, Agriculture Code, to redefine "agricultural business" and define "rural area." SECTION 9. Amends Section 58.016(b), Agriculture Code, make a conforming change. SECTION 10. Amends Section 58.0172, Agriculture Code, to provide that a lending institution is not ineligible to participate in the programs administered by the board solely because a member of the board is also an officer, director, or employee of the lending institution, provided that such a board member be disqualified from any action taken by the board on an application involving that lending institution. SECTION 11. Amends Section 58.021, Agriculture Code, to include promotion of the development of rural agricultural businesses under the auspices of this chapter. Includes development, increase, improvement, or expansion of production, possessing, marketing or export among the activities to be financed by the Texas Agricultural Finance Authority's (authority) programs. Includes the development of rural agricultural businesses among the projects to receive financial assistance. Includes the costs of insect eradication and suppression programs among those costs to be financed. Authorizes the authority to make, guarantee, insure, coinsure, or reinsure loans to the entity designated under Section 74.1011 (Designation of Entity to Carry Out Boll Weevil Eradication) to enable that entity to execute Subchapter D (Official Cotton Grower's Boll Weevil Eradication Foundation), Chapter 74. Authorizes the authority to issue an obligation on behalf of, or make, guarantee, participate in, insure, coinsure, or reinsure loans to, a state agency or an institution of higher education for the purposes outlined in this chapter, in an amount determined by the board. Authorizes the authority to make, guarantee, participate in, insure, coinsure, or reinsure loans to an eligible agricultural business from the proceeds of revenue bonds issued in accordance with Section 58.033 in an amount approved by the board. SECTION 12. Amends Section 58.023(a), Agriculture Code, to make a conforming change. SECTION 13. Amends Subchapter C, Chapter 58, Agriculture Code, by adding Section 58.026, as follows: Sec. 58.026. LIMITATION OF LIABILITY FOR CERTAIN RECREATIONAL ACTIVITIES. Makes the provisions of Chapter 75 (Limitation of Landowners' Liability), Civil Practice and Remedies Code, applicable to eligible recreational activities which are funded under this chapter. SECTION 14. Amends Chapter 58, Agriculture Code, by adding Subchapter E, as follows: SUBCHAPTER E. YOUNG FARMER LOAN GUARANTEE PROGRAM Sec. 58.051. DEFINITIONS. Defines "eligible applicant," "commercial lender," and "plan" in this subchapter. Sec. 58.052. YOUNG FARMER LOAN GUARANTEE PROGRAM. (a) Requires the board to administer a loan guarantee program that benefits eligible applicants who desire to establish or enhance a farming or ranching operation or an agriculture-related business. (b) Authorizes the board to grant an eligible applicant a guarantee of a loan directly or through the authority granted to the commissioner. Prohibits the guarantee amount from exceeding the lesser of $250,000, rather than $100,000, or 90 percent of the total loan amount. (c) Prohibits the aggregate amount guaranteed under this subchapter from exceeding twice the amount contained in the young farmer loan guarantee account within the Texas agricultural fund. (d) Authorizes a loan guarantee recipient to use proceeds from the loan for working capital for operating a farm or ranch, including the lease of facilities, the purchase of machinery and equipment, or for any agriculture-related business purpose, including the purchase of real estate, as identified in the plan. Provides that a loan guarantee is voidable by the board if the recipient uses loan proceeds for any purposes other than those identified in the plan. Requires the board to include this restriction as a condition in each loan guarantee instrument executed under this subchapter. (e) Requires the board to adopt an agreement, to be used between a commercial lender and an approved eligible applicant, under which the program provides a payment from money in the young farmer loan guarantee account for the purpose of providing a reduced interest rate on a loan guaranteed to a borrower under this subchapter. Requires the board to adopt rules to implement this subsection. Prohibits the maximum rate reduction under this subsection from exceeding three percentage points. Sec. 58.053. APPLICATION FOR LOAN GUARANTEE. (a) Requires an eligible applicant's documentation submitted for the board's review to include the plan for the applicant's proposed farm or ranch operation or agriculture-related business to be financed that includes a budget, a completed loan application from a commercial lender on which the applicant has indicated how the loan proceeds will be used to implement the applicant's plan, and the signed statement of a loan officer of the commercial lender that a loan guarantee is required for approval of the application. (b) Authorizes the board to charge a reasonable application fee for processing an application filed under this section. Sec. 58.054. BOARD CONSIDERATION OF LOAN GUARANTEE APPLICATION. Requires the board, in deciding whether to approve an application for a loan guarantee to consider, the anticipated benefits from granting a loan guarantee to the applicant, including both potential job creation and commercial benefits to the agricultural industry; the applicant's qualifications; the feasibility of the applicant's plan; and other repayment sources available to the applicant. Sec. 58.055. DEFAULT. Authorizes the authority, through its representative, to bring suit against a recipient of a loan guarantee that defaults on a loan that is guaranteed under this subchapter and on which the authority is required to honor its guarantee. Authorizes any such suit to have venue in Travis County. Sec. 58.056. MONEY FOR LOAN GUARANTEE PROGRAM. Authorizes the authority to accept gifts and grants of money from the federal government, local governments, private corporations, or other persons for use in the young farmer loan guarantee program. Authorizes the legislature to appropriate money for the program. Sec. 58.057. YOUNG FARMER LOAN GUARANTEE ACCOUNT. (a) Provides that the young farmer loan guarantee account is an account in the Texas agricultural fund. Authorizes money in the account to be used only by the authority for the purpose of making or administering loan guarantees under this subchapter. (b) Sets forth the sources of account revenues. Provides that the account is exempt from the application of Section 403.095 (Use of Dedicated Revenue), Government Code. (c) Prohibits the board from spending more than $100,000 during each fiscal year from income earned on the account and from application fees collected by the authority under Section 58.053 to pay the costs of administering the program. (d) Requires the board to attempt to administer the fund in a manner that makes private donations to the fund an eligible itemized deduction for federal income taxation purposes. (e) Provides that the board has the same authority in administering the young farmer loan guarantee program as it has in administering other programs established by this chapter. SECTION 15. Amends Section 502.174(b), Transportation Code, to make a conforming change. SECTION 16. Repealer: Sections 44.004 (Research and Innovation), 44.005 (Business Assistance), 44.006 (Small Business Incubators), 44.011 (Criteria for all Grants), and Chapter 253 (Young Farmer Loan Guarantee Program), Agriculture Code. SECTION 17. Provides that Section 7 of this Act, adding Chapter 46, Agriculture Code, takes effect only if a specific appropriation for the implementation of this Act is provided in H.B. 1 (General Appropriations Act), Acts of the 76th Legislature, Regular Session, 1999. SECTION 18. Emergency clause.