HBA-JRA, RBT H.B. 3050 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3050 By: Counts Agriculture & Livestock 3/24/1999 Introduced 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, moves the young farmer loan guarantee account into the Texas Agricultural Fund, and transfers the Office of Rural Affairs from the Texas Department of Economic Development to the Department of Agriculture. 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) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 44.001(3), (5), and (6), Agriculture Code, to redefine "eligible borrower," "linked deposit," and "microenterprise." SECTION 2. Amends Section 44.002, Agriculture Code, as follows: Sec. 44.002. New title: CREATION OF MICROENTERPRISE PROGRAM. 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 Sections 44.0045(b), (c), and (d), Agriculture Code, to authorize an applicant for a loan 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 for a loan 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 activity or operation of the microenterprise. Authorizes the board to reserve a portion of the rural enterprises microdevelopment account for use in cooperative loan programs established with the participation of other public or private lenders. Makes conforming changes. SECTION 4. Amends Sections 44.007(b), (d), (e), (f), (h), and (k), Agriculture Code, to include additional factors in the matters that the rules adopted by the board must include. Authorizes the board to delegate authority to review loan application and make recommendations to the commissioner of agriculture. Provides that a member of the board who is an officer, director, or employee of a lending institution that is a participant in a program administered by the board must abstain from any action taken by the board regarding the lending institution. Makes conforming and nonsubstantive changes. SECTION 5. Amends Section 44.010(a), (b), and (c), 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 eligible for national disaster relief, as determined by the board, is $250,000. Provides that a loan granted pursuant to this chapter must be applied to existing debt or 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. Makes conforming and nonsubstantive changes. SECTION 6. Amends Section 44.012, Agriculture Code, as follows: Sec. 44.012. New title: MONEY FOR LOANS. Makes conforming changes. SECTION 7. Amends Section 44.013, Agriculture Code, as follows: Sec. 44.013. New title: RURAL MICROENTERPRISE DEVELOPMENT ACCOUNT. Makes conforming and nonsubstantive changes. SECTION 8. Amends Section 58.002(1), Agriculture Code, to redefine "agricultural business." 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. Provides that a member of the board who is an officer, director, or employee of a lending institution that is a participant in a program administered by the board must abstain from any action taken by the board regarding the lending institution. SECTION 11. Amends Sections 58.021(a), (b), and (c), Agriculture Code, to include promotion of the development of rural agricultural businesses under the auspices of this chapter. Includes the development of rural agricultural businesses among those to receive financial assistance. Includes expansion, development, increase, or improvement of production, possessing, marketing or export among those factors to be enabled. Includes the costs of insect eradication and suppression programs among those costs to be financed. Authorizes the Texas Agricultural Finance Authority (authority) to make, guarantee, insure, coinsure, or reinsure a loan in an amount exceeding $2 million to an entity designated under Section 74.1011 (Designation of Entity to Carry Out Boll Weevil Eradication) to carry out boll weevil eradication consistent with Subchapter D (Official Cotton Grower's Boll Weevil Eradication Foundation), Chapter 74. SECTION 12. Amends Section 58.023(a), Agriculture Code, to make a conforming change. SECTION 13. Transfers Chapter 253, Agriculture Code, to Chapter 58, Agriculture Code, redesignates it as Subchapter E, and renumbers and amends, as follows: SUBCHAPTER E. YOUNG FARMER LOAN GUARANTEE PROGRAM Sec. 58.051. DEFINITIONS. Deletes the definition of "board." Redefines "eligible applicant" to include a person with a net worth less than $400,000, applying for a loan guarantee under this subchapter and "plan" to mean documentation submitted to a lender in support of an application under this subchapter, rather than a cash flow, production, or management plan. Makes conforming changes. Redesignates existing Subdivisions (2)-(4) to Subdivisions (1)-(3), respectively. Sec. 58.052. YOUNG FARMER LOAN GUARANTEE PROGRAM. (a) Includes a first agriculture-related service business among the businesses that may be granted a loan under the young farmer loan guarantee program. (b) Authorizes the board to grant an eligible applicant a guarantee of a loan directly or through the authority granted to the commissioner of agriculture (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) Makes a conforming change. (d) Authorizes the use of proceeds from the loan for the lease of facilities of a farm or ranch and operation of an agriculture-related service business. Prohibits a loan guarantee recipient from using loan proceeds to purchase land. Makes conforming changes. (e) Requires the board to adopt an agreement to be used by a commercial lender, rather than authorizes the board to enter an agreement with a lender, and a borrower under which the board provides a payment from money in the young farmer loan guarantee account. Makes conforming changes. Sec. 58.053. APPLICATION FOR LOAN GUARANTEE. Deletes requirement that the plan be reviewed and approved by an individual who is knowledgeable about agricultural science and technology. Deletes text requiring a district agricultural economist employed by the Texas Agricultural Extension Service to assist with the review and approval of a plan. Redesignates existing Subsection (c) to Subsection (b). Makes conforming changes. Sec. 58.054. BOARD CONSIDERATION OF LOAN GUARANTEE APPLICATION. Makes conforming changes. Sec. 58.055. DEFAULT. Deletes provision that a suit against a defaulting party may be brought in the county in which the defaulting party resides or in which the commercial lender is located. Makes conforming changes. Sec. 58.056. MONEY FOR LOAN GUARANTEE PROGRAM. Authorizes the authority, rather than the commissioner, to solicit, as well as accept gifts of money for use in the young farmer loan guarantee program. Sec. 58.057. YOUNG FARMER LOAN GUARANTEE ACCOUNT. Provides that the young farmer loan guarantee account is an account in the Texas Agricultural Fund, rather than the general revenue fund. Deletes the provision that the account is exempt from the application of Sections 403.094(h) and (i), Government Code, which were previously repealed. Makes conforming changes. SECTION 14. Amends Section 502.174(b), Transportation Code, to make a conforming change. SECTION 15. Transfers and renumbers Section 481.0067 (Office of Rural Affairs), Government Code, to Section 12.038, Chapter 12, Agriculture Code. SECTION 16. Repealer: Sections 44.001(1), which defines "small business incubator," 44.004 (Research and Innovation), 44.0045(e), which prohibits a loan from being used to refinance an existing debt of a proposed or existing microenterprise, 44.005 (Business Assistance), 44.006 (Small Business Incubators), 44.010(d), which authorizes a loan to be used to refinance water conservation projects or agricultural equipment, and 44.011 (Criteria for all Grants), Agriculture Code. SECTION 17. (a) Effective date: September 1, 1999. (b) Provides that, as soon as practicable after the effective date but not later than January 1, 2000, all powers, duties, rights, and obligations of the Texas Department of Economic Development relating to the Office of Rural Affairs are transferred to the commissioner of agriculture and the Department of Agriculture; all assets, liabilities, personnel, equipment, data, documents, facilities, and other items relating to the Office of Rural Affairs are transferred to the Texas Department of Economic Development and the Department of Agriculture; and any appropriation to the Texas Department of Economic Development relating to the Office of Rural Affairs is transferred to the Department of Agriculture. (c) Authorizes the governing board of the Texas Department of Economic Development to decide whether to transfer employees to the Department of Agriculture who perform both duties that relate to the Office of Rural Affairs and duties that do not and assets that are used by both the Office of Rural Affairs and other divisions of the Texas Department of Economic Development. (d) Requires the officers and employees of the Texas Department of Economic Development and the Department of Agriculture to cooperate fully with the transfer. (e) Requires the transfer of functions to occur on the date specified in an interagency contract among the governing board of the Texas Department of Economic Development, the director of the Office of Rural Affairs, and the Department of Agriculture. (f) Provides that the governing board of the Texas Department of Economic Development retains all powers and duties relating the Office of Rural Affairs until the effective date of the transfer, notwithstanding the change made by this Act. (g) Provides that a change in law made by this Act does not affect the validity of any action taken by the governing board of the Texas Department of Economic Development relating to the Office of Rural Affairs before the effective date of the change in law. SECTION 18. Emergency clause.