House File 728 - Introduced HOUSE FILE BY COMMITTEE ON REBUILD IOWA AND DISASTER RECOVERY (SUCCESSOR TO HSB 238) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act creating a disaster assistance loan and credit guarantee 2 program and fund, making appropriations, and providing an 3 effective date. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1844HV 83 6 tm/nh/8 PAG LIN 1 1 Section 1. DISASTER ASSISTANCE LOAN AND CREDIT GUARANTEE 1 2 PROGRAM. 1 3 1. The department of economic development shall establish 1 4 and administer a disaster assistance loan and credit guarantee 1 5 program by investing the assets of the disaster assistance 1 6 loan and credit guarantee fund in order to provide loan and 1 7 credit guarantees to all of the following qualifying 1 8 businesses: 1 9 a. Businesses directly impacted by a natural disaster 1 10 occurring after May 24, 2008, and before August 14, 2008. 1 11 b. Businesses either locating an existing business or 1 12 starting a new business in a disaster=impacted space in an 1 13 area which was declared a natural disaster area by the 1 14 president of the United States due to a natural disaster 1 15 occurring after May 24, 2008, and before August 14, 2008. For 1 16 purposes of this paragraph, "disaster=impacted space" means a 1 17 building damaged by a natural disaster occurring after May 24, 1 18 2008, and before August 14, 2008, including undamaged upper 1 19 floors of a building that was damaged by the natural disaster. 1 20 c. Businesses filling a critical community need in 1 21 conformance with the comprehensive plan of the city as 1 22 determined by resolution of the city council of the city in 1 23 which the business is located. For purposes of this 1 24 paragraph, a business shall be deemed to be located in a city 1 25 if it is located within two miles of the city limits. 1 26 2. a. The department, pursuant to agreements with 1 27 financial institutions, shall provide loan and credit 1 28 guarantees to qualifying businesses described in subsection 1. 1 29 A loan or credit guarantee under the program shall not exceed 1 30 ten percent of the loan amount or twenty=five thousand 1 31 dollars, whichever is less. Not more than one loan or credit 1 32 guarantee shall be awarded per federal employer identification 1 33 number. 1 34 b. A loan or credit guarantee provided under the program 1 35 may stand alone or may be used in conjunction with or to 2 1 enhance other loan or credit guarantees offered by a financial 2 2 institution. The department may purchase insurance to cover 2 3 defaulted loans meeting the requirements of the program. 2 4 However, the department shall not in any manner directly or 2 5 indirectly pledge the credit of the state. 2 6 c. Eligible project costs include expenditures for 2 7 productive equipment and machinery, land and real estate, 2 8 working capital for operations, research and development, 2 9 marketing, engineering and architectural fees, and such other 2 10 costs as the department may so designate. 2 11 d. A loan or credit guarantee under the program shall not 2 12 be used for purposes of debt refinancing. 2 13 3. Each participating financial institution shall identify 2 14 and underwrite potential lending opportunities with qualifying 2 15 businesses. Upon a determination by a participating financial 2 16 institution that a qualifying business meets the underwriting 2 17 standards of the financial institution, subject to the 2 18 approval of a loan or credit guarantee, the financial 2 19 institution shall submit the underwriting information and a 2 20 loan or credit guarantee application to the department. 2 21 4. Upon approval of a loan or credit guarantee, the 2 22 department shall enter into a loan or credit guarantee 2 23 agreement with the participating financial institution. The 2 24 agreement shall specify all of the following: 2 25 a. The fee to be charged to the financial institution. 2 26 b. The evidence of debt assurance of, and security for, 2 27 the loan or credit guarantee. 2 28 c. A loan or credit guarantee that does not exceed fifteen 2 29 years. 2 30 d. Any other terms and conditions considered necessary or 2 31 desirable by the department. 2 32 e. That the loan or credit guarantee does not invoke or 2 33 pledge the credit or the taxing power of the state and that 2 34 any claim made pursuant to the loan or credit guarantee shall 2 35 be limited to the terms and amount of the loan or credit 3 1 guarantee and to the moneys in the disaster assistance loan 3 2 and credit guarantee fund. 3 3 5. The department shall charge a nonrefundable application 3 4 fee for each application under the program. The department 3 5 shall include the fee information in the application 3 6 materials. The fee is payable upon submission of an 3 7 application for a loan or credit guarantee from a financial 3 8 institution or a qualifying business. The application fee 3 9 shall be not less than five hundred dollars and not more than 3 10 one thousand dollars. Moneys received from fees are 3 11 appropriated to the department for purposes of administering 3 12 this section. 3 13 6. The department may adopt loan and credit guarantee 3 14 application procedures that allow a qualifying business to 3 15 apply directly to the department for a preliminary guarantee 3 16 commitment. A preliminary guarantee commitment may be issued 3 17 by the department subject to the qualifying business securing 3 18 a commitment for financing from a financial institution. The 3 19 application procedures shall specify the process by which a 3 20 financial institution may obtain a final loan or credit 3 21 guarantee. 3 22 7. a. A disaster assistance loan and credit guarantee 3 23 fund is created and established as a separate and distinct 3 24 fund in the state treasury. Moneys in the fund shall only be 3 25 used for purposes provided in this section. The moneys in the 3 26 fund are appropriated to the department to be used for all of 3 27 the following purposes: 3 28 (1) Payment of claims pursuant to loan and credit 3 29 guarantee agreements entered into under this section. 3 30 (2) Payment of administrative costs of the department for 3 31 actual and necessary administrative expenses incurred by the 3 32 department in administering the disaster assistance loan and 3 33 credit guarantee program. 3 34 (3) Purchase or buyout of superior or prior liens, 3 35 mortgages, or security interests. 4 1 (4) Purchase of insurance to cover the default of loans 4 2 made pursuant to the requirements of the disaster assistance 4 3 loan and credit guarantee program. 4 4 b. Moneys in the disaster assistance loan and credit 4 5 guarantee fund shall consist of all of the following: 4 6 (1) Moneys appropriated by the general assembly for that 4 7 purpose and any other moneys available to and obtained or 4 8 accepted by the department for placement in the fund. 4 9 (2) Proceeds from collateral assigned to the department, 4 10 fees for guarantees, gifts, and moneys from any grant made to 4 11 the fund by any federal agency. 4 12 c. Moneys in the fund are not subject to section 8.33. 4 13 Notwithstanding section 12C.7, interest or earnings on the 4 14 moneys in the fund shall be credited to the fund. 4 15 d. (1) The department shall only pledge moneys in the 4 16 disaster assistance loan and credit guarantee fund and not any 4 17 other moneys under the control of the department. In a fiscal 4 18 year, the department may pledge an amount not to exceed the 4 19 total amount appropriated to the fund for the same fiscal year 4 20 to assure the repayment of loan and credit guarantees or other 4 21 extensions of credit made to or on behalf of qualified 4 22 businesses for eligible project costs. 4 23 (2) The department shall not pledge the credit or taxing 4 24 power of this state or any political subdivision of this state 4 25 or make debts payable out of any moneys except for those in 4 26 the disaster assistance loan and credit guarantee fund. 4 27 8. For purposes of this section, "financial institution" 4 28 means a bank incorporated pursuant to chapter 524 or a credit 4 29 union organized pursuant to chapter 533. 4 30 9. The department of economic development may adopt 4 31 emergency rules under section 17A.4, subsection 3, and section 4 32 17A.5, subsection 2, paragraph "b", to implement the 4 33 provisions of this section and the rules shall be effective 4 34 immediately upon filing unless a later date is specified in 4 35 the rules. Any rules adopted in accordance with this section 5 1 shall also be published as a notice of intended action as 5 2 provided in section 17A.4. 5 3 Sec. 2. APPROPRIATION. 5 4 1. There is appropriated from any interest or earnings on 5 5 moneys in the 2003 federal economic stimulus and jobs holding 5 6 fund to the department of economic development for the fiscal 5 7 year beginning July 1, 2008, and ending June 30, 2009, the 5 8 following amount, or so much thereof as is necessary, for 5 9 deposit in the disaster assistance loan and credit guarantee 5 10 fund created in this Act: 5 11 .................................................. $ 1,800,000 5 12 2. Notwithstanding section 8.33, moneys appropriated in 5 13 this section that remain unencumbered or unobligated at the 5 14 close of the fiscal year shall not revert but shall remain 5 15 available for expenditure for the purposes designated until 5 16 the close of the succeeding fiscal year. 5 17 Sec. 3. EFFECTIVE DATE. This Act, being deemed of 5 18 immediate importance, takes effect upon enactment. 5 19 EXPLANATION 5 20 This bill creates a disaster assistance loan and credit 5 21 guarantee program and fund to be administered by the 5 22 department of economic development. Under the program, loan 5 23 and credit guarantees are given to qualifying businesses. 5 24 Qualifying businesses include businesses directly impacted by 5 25 a natural disaster occurring after May 24, 2008, and before 5 26 August 14, 2008; businesses either locating an existing 5 27 business or starting a new business in a disaster=impacted 5 28 space in an area which was declared a disaster area by the 5 29 president of the United States due to a natural disaster 5 30 occurring after May 24, 2008, and before August 14, 2008; and 5 31 businesses filling a critical community need in conformance 5 32 with the comprehensive plan of the city. 5 33 The bill provides that a loan or credit guarantee under the 5 34 program shall not exceed 10 percent of the loan amount or 5 35 $25,000, whichever is less. The bill provides that a loan or 6 1 credit guarantee provided under the program may stand alone or 6 2 may be used in conjunction with or to enhance other loan or 6 3 credit guarantees offered by a financial institution. The 6 4 bill allows the department to purchase insurance to cover 6 5 defaulted loans. 6 6 The bill provides that eligible project costs include 6 7 expenditures for productive equipment and machinery, land and 6 8 real estate, working capital for operations, research and 6 9 development, marketing, engineering and architectural fees, 6 10 and such other costs as the department may so designate. The 6 11 bill prohibits the use of loan or credit guarantees for 6 12 purposes of debt refinancing. 6 13 The bill requires that each participating financial 6 14 institution shall identify and underwrite potential lending 6 15 opportunities with qualifying businesses. Upon a 6 16 determination that a qualifying business meets the 6 17 underwriting standards of the financial institutions, the 6 18 underwriting information and an application shall be submitted 6 19 to the department. 6 20 The bill specifies terms that must be included in a loan or 6 21 credit guarantee agreement between the department and a 6 22 participating financial institution. The bill allows a 6 23 nonrefundable application fee to be charged. 6 24 The bill allows the department to adopt procedures that 6 25 would allow a qualifying business to apply directly to the 6 26 department for a preliminary guarantee commitment. 6 27 The bill creates a disaster assistance loan and credit 6 28 guarantee fund. The bill provides that the department shall 6 29 only pledge moneys in the disaster assistance loan and credit 6 30 guarantee fund and not any other moneys under the control of 6 31 the department. 6 32 The bill allows the department to adopt emergency rules. 6 33 The bill appropriates $1.8 million from any interest or 6 34 earnings on moneys in the 2003 federal economic stimulus and 6 35 jobs holding fund to the department of economic development 7 1 for FY 2008=2009 for deposit in the disaster assistance loan 7 2 and credit guarantee fund. 7 3 The bill takes effect upon enactment. 7 4 LSB 1844HV 83 7 5 tm/nh/8