Senate File 382 - Introduced SENATE FILE BY McKINLEY Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act providing for the transfer of the administration of the 2 loan and credit guarantee program and including an effective 3 date. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2265XS 83 6 tw/rj/14 PAG LIN 1 1 DIVISION I 1 2 TRANSFER OF THE LOAN AND CREDIT GUARANTEE PROGRAM 1 3 Section 1. NEW SECTION. 16.141 SHORT TITLE. 1 4 This division shall be known and may be cited as the "Iowa 1 5 Loan and Credit Guarantee Fund Act". 1 6 Sec. 2. NEW SECTION. 16.142 LEGISLATIVE FINDINGS == 1 7 PURPOSES. 1 8 1. The general assembly finds all of the following: 1 9 a. That the expansion of business activity in all 1 10 industries is important to the economic health and vitality of 1 11 Iowa and particularly to increased economic growth and job 1 12 creation, but that such expansion and growth is hampered 1 13 because many small and medium=sized businesses in many 1 14 industries are not able to qualify for conventional financing. 1 15 b. That the limited availability of credit for export 1 16 transactions limits the ability of small and medium=sized 1 17 businesses in this state to compete in international markets. 1 18 c. That, to enhance competitiveness and foster economic 1 19 development, this state must focus on growth in all industry 1 20 sectors. 1 21 d. That the challenge for the public economic sector is to 1 22 create an atmosphere conducive to economic growth, in 1 23 conjunction with financial institutions in the private sector, 1 24 which fill the gaps in credit availability and export finance, 1 25 and that allow the private sector to identify the lending 1 26 opportunities and foster decision making at the local level. 1 27 2. The general assembly declares the purposes of this 1 28 division to be all of the following: 1 29 a. To create incentives and assistance to increase the 1 30 flow of private capital to businesses in need of additional 1 31 financing. 1 32 b. To promote industrial modernization and technology 1 33 adoption. 1 34 c. To encourage the retention and creation of jobs. 1 35 d. To encourage the export of goods and services sold by 2 1 Iowa businesses in national and international markets. 2 2 Sec. 3. NEW SECTION. 16.143 DEFINITIONS. 2 3 As used in this division, unless the context otherwise 2 4 requires: 2 5 1. "Financial institution" means an institution listed in 2 6 section 422.61, or such other financial institution as defined 2 7 by the authority for purposes of this division. 2 8 2. "Program" means the loan and credit guarantee program 2 9 established in this division. 2 10 3. "Qualified business" means an existing or proposed 2 11 business entity with an annual average number of employees not 2 12 exceeding two hundred employees. "Qualified business" does 2 13 not include businesses engaged primarily in retail sales, real 2 14 estate, or the provision of health care or other professional 2 15 services. 2 16 Sec. 4. NEW SECTION. 16.144 LOAN AND CREDIT GUARANTEE 2 17 PROGRAM. 2 18 1. The authority shall establish and administer a loan and 2 19 credit guarantee program. The authority, pursuant to 2 20 agreements with financial institutions, shall provide loan and 2 21 credit guarantees, or other forms of credit guarantees for 2 22 qualified businesses for eligible project costs. The 2 23 authority may invest up to ten percent of the assets of the 2 24 loan and credit guarantee fund, or five hundred thousand 2 25 dollars, whichever is greater, to provide loan and credit 2 26 guarantees or other forms of credit guarantees for eligible 2 27 project costs to microenterprises located in a municipality 2 28 with a population under fifty thousand that is not contiguous 2 29 to a municipality with a population of fifty thousand or more. 2 30 For purposes of this division, "microenterprise" means a 2 31 business providing services with five or fewer full=time 2 32 equivalent employee positions. A loan or credit guarantee 2 33 provided under the program may stand alone or may be used in 2 34 conjunction with or to enhance other loans or credit 2 35 guarantees offered by private, state, or federal entities. 3 1 The authority may purchase insurance to cover defaulted loans 3 2 meeting the requirements of the program. However, the 3 3 authority shall not in any manner directly or indirectly 3 4 pledge the credit of the state. Eligible project costs 3 5 include expenditures for productive equipment and machinery, 3 6 working capital for operations and export transactions, 3 7 research and development, marketing, and such other costs as 3 8 the authority may so designate. 3 9 2. A loan or credit guarantee or other form of credit 3 10 guarantee provided under the program to a participating 3 11 financial institution for a single qualified business shall 3 12 not exceed one million dollars in value. Loan or credit 3 13 guarantees or other forms of credit guarantees provided under 3 14 the program to more than one participating financial 3 15 institution for a single qualified business shall not exceed 3 16 ten million dollars in value. 3 17 3. In administering the program, the authority shall 3 18 consult and cooperate with financial institutions in this 3 19 state. Administrative procedures and application procedures, 3 20 as practicable, shall be responsive to the needs of qualified 3 21 businesses and financial institutions, and shall be consistent 3 22 with prudent investment and lending practices and criteria. 3 23 4. Each participating financial institution shall identify 3 24 and underwrite potential lending opportunities with qualified 3 25 businesses. Upon a determination by a participating financial 3 26 institution that a qualified business meets the underwriting 3 27 standards of the financial institution, subject to the 3 28 approval of a loan or credit guarantee, the financial 3 29 institution shall submit the underwriting information and a 3 30 loan or credit guarantee application to the authority. 3 31 5. The authority shall adopt a loan or credit guarantee 3 32 application procedure for a financial institution on behalf of 3 33 a qualified business or microenterprise. 3 34 6. Upon approval of a loan or credit guarantee, the 3 35 authority shall enter into a loan or credit guarantee 4 1 agreement with the participating financial institution. The 4 2 agreement shall specify all of the following: 4 3 a. The fee to be charged to the financial institution. 4 4 b. The evidence of debt assurance of, and security for, 4 5 the loan or credit guarantee. 4 6 c. A loan or credit guarantee that does not exceed fifteen 4 7 years. 4 8 d. Any other terms and conditions considered necessary or 4 9 desirable by the authority. 4 10 7. The authority may adopt loan and credit guarantee 4 11 application procedures that allow a qualified business or 4 12 microenterprise to apply directly to the authority for a 4 13 preliminary guarantee commitment. A preliminary guarantee 4 14 commitment may be issued by the authority subject to the 4 15 qualified business or microenterprise securing a commitment 4 16 for financing from a financial institution. The application 4 17 procedures shall specify the process by which a financial 4 18 institution may obtain a final loan and credit guarantee. 4 19 Sec. 5. NEW SECTION. 16.145 TERMS == FEES. 4 20 1. When entering into a loan or credit guarantee 4 21 agreement, the authority shall establish fees and other terms 4 22 for participation in the program by qualified businesses. 4 23 2. The authority, with due regard for the possibility of 4 24 losses and administrative costs, shall set fees and other 4 25 terms at levels sufficient to assure that the program is 4 26 self=financing. 4 27 3. For a preliminary guarantee commitment, the authority 4 28 may charge a qualified business or microenterprise a 4 29 preliminary guarantee commitment fee. The application fee 4 30 shall be in addition to any other fees charged by the 4 31 authority under this section and shall not exceed one thousand 4 32 dollars for an application. 4 33 Sec. 6. NEW SECTION. 16.146 LOAN AND CREDIT GUARANTEE 4 34 FUND. 4 35 1. A loan and credit guarantee fund is created and 5 1 established as a separate and distinct fund in the state 5 2 treasury. Moneys in the fund shall only be used for purposes 5 3 provided in this section. The moneys in the fund are 5 4 appropriated to the authority to be used for all of the 5 5 following purposes: 5 6 a. Payment of claims pursuant to loan and credit guarantee 5 7 agreements entered into under this division. 5 8 b. Payment of administrative costs of the authority for 5 9 actual and necessary administrative expenses incurred by the 5 10 authority in administering the program. 5 11 c. Purchase or buyout of superior or prior liens, 5 12 mortgages, or security interests. 5 13 d. Purchase of insurance to cover the default of loans 5 14 made pursuant to the requirements of the loan and credit 5 15 guarantee program. 5 16 2. Moneys in the loan and credit guarantee fund shall 5 17 consist of all of the following: 5 18 a. Moneys appropriated by the general assembly for that 5 19 purpose and any other moneys available to and obtained or 5 20 accepted by the authority for placement in the fund. 5 21 b. Proceeds from collateral assigned to the authority, 5 22 fees for guarantees, gifts, and moneys from any grant made to 5 23 the fund by any federal agency. 5 24 3. Moneys in the fund are not subject to section 8.33. 5 25 Notwithstanding section 12C.7, interest or earnings on the 5 26 moneys in the fund shall be credited to the fund. 5 27 4. a. The authority shall only pledge moneys in the loan 5 28 and credit guarantee fund and not any other moneys of the 5 29 authority. In a fiscal year, the authority may pledge an 5 30 amount not to exceed the total amount appropriated to the fund 5 31 for the same fiscal year to assure the repayment of loan and 5 32 credit guarantees or other extensions of credit made to or on 5 33 behalf of qualified businesses for eligible project costs. 5 34 b. The authority shall not pledge the credit or taxing 5 35 power of this state or any political subdivision of this state 6 1 or make debts payable out of any moneys except for those in 6 2 the loan and credit guarantee fund. 6 3 Sec. 7. Sections 15E.221, 15E.222, 15E.223, 15E.224, 6 4 15E.225, and 15E.227, Code 2009, are repealed. 6 5 Sec. 8. FUND BALANCE TRANSFERS. 6 6 1. Notwithstanding any other provision of law to the 6 7 contrary, on July 1, 2009, the unencumbered and unobligated 6 8 balance of moneys in the loan and credit guarantee fund 6 9 established pursuant to section 15E.227 shall be transferred 6 10 to the loan and credit guarantee fund established pursuant to 6 11 section 16.146 as enacted in this Act. 6 12 2. If any moneys in the loan and credit guarantee fund 6 13 established pursuant to section 15E.227 are obligated or 6 14 encumbered at the close of the fiscal year ending June 30, 6 15 2009, but subsequently become unencumbered or otherwise cease 6 16 to be obligated, such moneys shall be transferred to the loan 6 17 and credit guarantee fund established pursuant to section 6 18 16.146 as enacted in this Act as soon as practicable. 6 19 Sec. 9. LOAN AND CREDIT GUARANTEE PROGRAM ADMINISTRATION. 6 20 The department of economic development and the Iowa finance 6 21 authority shall coordinate efforts to transfer administration 6 22 of the loan and credit guarantee program from the department 6 23 to the authority as soon as practicable. 6 24 DIVISION II 6 25 CONFORMING AMENDMENTS 6 26 Sec. 10. Section 15.103, subsection 6, Code 2009, is 6 27 amended to read as follows: 6 28 6. As part of the organizational structure of the 6 29 department, the board shall establish a due diligence 6 30 committee and a temporary loan and credit guarantee committee 6 31 composed of members of the board. Thecommitteesdue 6 32 diligence committee shall serve in an advisory capacity to the 6 33 board and shall carry out any duties assigned by the board in 6 34 relation to programs administered by the department. The loan 6 35 and credit guarantee committee shall advise the board and the 7 1 Iowa finance authority on the transfer of the administration 7 2 of the loan and credit guarantee program from the department 7 3 to the authority. 7 4 Sec. 11. Section 15G.111, subsection 1, paragraph a, 7 5 subparagraphs (1) and (2), Code 2009, are amended to read as 7 6 follows: 7 7 (1) For each fiscal year of the fiscal period beginning 7 8 July 1, 2007, and ending June 30, 2009, to the department of 7 9 economic development thirty million dollars for the following 7 10 programs administered by the department: 7 11 (a) The targeted small business financial assistance 7 12 program established pursuant to section 15.247. 7 13 (b) The community economic betterment program established 7 14 pursuant to section 15.317. 7 15 (c) The entrepreneurial ventures assistance program 7 16 established pursuant to section 15.339. 7 17 (d) The value=added agricultural products and processes 7 18 financial assistance program established pursuant to section 7 19 15E.111. 7 20 (e) The physical infrastructure financial assistance 7 21 program established pursuant to section 15E.175. 7 22(f) The loan and credit guarantee program established 7 23 pursuant to section 15E.224.7 24 (2) For each fiscal year of the fiscal period beginning 7 25 July 1, 2009, and ending June 30, 2015, to the department of 7 26 economic development thirty=two million dollars for the 7 27 following programs administered by the department: 7 28 (a) The targeted small business financial assistance 7 29 program established pursuant to section 15.247. 7 30 (b) The community economic betterment program established 7 31 pursuant to section 15.317. 7 32 (c) The entrepreneurial ventures assistance program 7 33 established pursuant to section 15.339. 7 34 (d) The value=added agricultural products and processes 7 35 financial assistance program established pursuant to section 8 1 15E.111. 8 2 (e) The physical infrastructure financial assistance 8 3 program established pursuant to section 15E.175. 8 4(f) The loan and credit guarantee program established 8 5 pursuant to section 15E.224.8 6 Sec. 12. EFFECTIVE DATE. The section of this division of 8 7 this Act amending section 15.103, subsection 6, being deemed 8 8 of immediate importance, takes effect upon enactment. 8 9 EXPLANATION 8 10 This bill provides for the transfer of the administration 8 11 of the loan and credit guarantee program from the department 8 12 of economic development to the Iowa finance authority. 8 13 The bill repeals the existing sections of the Code 8 14 establishing the program, including its related fund, and 8 15 recreates the program within the Iowa finance authority. All 8 16 duties currently performed by the department in relation to 8 17 the program are to be performed by the authority. All moneys 8 18 in the existing loan and credit guarantee fund are transferred 8 19 to a new loan and credit guarantee fund under the control of 8 20 the authority. 8 21 The eligibility, operation, and administration of the 8 22 program remain unchanged with the following exceptions: (1) 8 23 all references to "targeted industry businesses" have been 8 24 removed from the program and the legislative findings language 8 25 is changed to reflect a focus on all qualified businesses 8 26 instead of a particular focus on certain targeted industries; 8 27 and (2) the program is no longer funded from the grow Iowa 8 28 values fund. 8 29 The bill directs the economic development board to 8 30 establish a temporary loan and credit guarantee committee 8 31 comprising members of the board to advise the department and 8 32 the authority on the transfer of the administration of the 8 33 program, and makes conforming amendments. The temporary 8 34 committee provision takes effect upon enactment. 8 35 LSB 2265XS 83 9 1 tw/rj/14