HBA-SEP S.B. 716 77(R)    BILL ANALYSIS


Office of House Bill AnalysisS.B. 716
By: Duncan
Land & Resource Management
3/23/2001
Engrossed



BACKGROUND AND PURPOSE 

The Texas Agricultural Finance Authority (TAFA) was established in 1987 to
provide financial assistance and support to agriculture related businesses.
Currently, nonagricultural businesses in rural areas are not eligible to
borrow money from loan programs provided by TAFA.   Senate Bill 716
authorizes TAFA to extend financial assistance and support to
nonagricultural businesses for the development or expansion of businesses
in rural areas.   

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to  the board of directors of the Texas
Agricultural Finance Authority in SECTION 8 (Sec. 58.023, Agriculture Code)
and SECTION 11 (Sec. 59.022, Agriculture Code) of this bill. 

ANALYSIS

Senate Bill 716 amends the Agriculture Code to include as an eligible
borrower, a person who is in the business or entering the business of
providing nonagricultural goods or services that provide an economic
benefit to a municipality or county in a rural area for purposes of
agricultural diversification and microenterprise support programs of the
Texas Agricultural Finance Authority (TAFA).  The bill also provides that
an institution of the Farm Credit System headquartered in this state is an
eligible lending institution (Sec. 44.001).  The bill requires the board of
directors of TAFA (board) to establish a linked deposit program to
encourage the development or expansion of businesses in rural areas (Sec.
44.007). The bill prohibits more than $30 million, rather than $25 million,
from being placed in the linked deposit program at any one time, $5 million
of which may be used only to finance the economic development of businesses
in rural areas.  The bill provides that the maximum amount of a loan to
finance a business in a rural area is $250,000 (Sec. 44.010).   

The bill authorizes a suit filed by or on behalf of TAFA to be brought in
Travis County and modifies what constitutes a quorum (Sec. 58.03 and
58.014).  The bill authorizes TAFA to design and implement programs to
reduce the amount of interest paid on loans approved by TAFA and amends the
approval process of the board (Sec. 58.021).   

The bill requires the board by rule to adopt an agreement to be used
between a lender and an approved applicant under which TAFA makes a payment
from the Texas agricultural fund for the purpose of providing a reduced
interest rate on a loan guaranteed to a borrower and adopt rules to
implement the adoption of such an agreement (Sec. 58.023).  The bill
permits TAFA to use the proceeds of revenue bonds for programs designed to
further rural economic development (Sec. 58.033).   

The bill requires TAFA, at the end of each state fiscal year, to transfer
any interest earned on the young farmer loan guarantee account to the
general credit of the Texas agricultural fund, after payment of any
administrative expenses of the young farmer loan guarantee program (Sec.
58.057). 

The bill requires the board to adopt rules governing loan guarantees
provided to lenders by the board in  an amount necessary for the lender to
have a performing loan (Sec. 59.022).  The bill provides that the board has
the power to provide to a lender a loan guarantee for the purchase of real
property by an eligible applicant under the farm and ranch finance program
(Sec. 59.023).  The bill authorizes the board to provide a guarantee of not
more than 90 percent of an approved loan and removes provisions relating to
a down payment (Sec. 59.025).   

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.