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
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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.  The committees due
  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
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