HBA-KDB, CBW C.S.H.B. 1596 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1596 By: Counts Land & Resource Management 3/16/2001 Committee Report (Substituted) 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 are not eligible to borrow money from loan programs provided by TAFA. C.S.H.B. 1596 authorizes TAFA to extend financial assistance and support to nonagricultural businesses in rural areas for the development or expansion of businesses in those 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 C.S.H.B. 1596 amends the Agricultural Code to add to the definition of "eligible lending institution" an institution of the Farm Credit System in this state. The bill includes 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 under agricultural diversification and microenterprise support programs of the Texas Agricultural Finance Authority (TAFA) in a rural area among eligible borrowers (Sec. 44.001). The bill requires the board of directors of TAFA (boards) to establish a linked deposit program to encourage the development or expansion of businesses in rural areas. The bill authorizes the comptroller of public accounts to withdraw linked deposits if a lending institution holding the linked deposits ceases to be a Farm Credit System institution headquartered in this state (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. 58.003 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. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1596 modifies the original bill by adding an institution of the Farm Credit System headquartered in this state to the definition of "eligible lending institution" (Sec. 44.001).