HBA-DMD H.B. 1687 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1687 By: Hunter State, Federal, & International Relations 7/27/1999 Enrolled BACKGROUND AND PURPOSE Prior to the 76th Legislature, Texas did not offer a consistent financial infrastructure for the film industry. 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. 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 an 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 administer a 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 approved 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 for 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 pledges 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.