shall
provide financing" from the product fund and
small business fund, respectively. (Emphasis in original.)
The board disagrees with the comment and the rule has not been changed.
Chapter 489 authorizes, but does not require, the program to provide financing
to any person or business. Section 177.4(c) states that the board does not
have, "any obligation, financial or otherwise, to any person for failure to
issue, sell, or deliver its bonds." The language of §489.211(c) and §489.212(c)
is set forth below. It makes almost identical provision for the product development
fund (§489.211) and the small business fund (§489.212). The differences
are indicated in brackets. The sections state:
(c) Money in the program account of the product [small business] fund,
minus the costs of issuance of bonds under this subchapter and necessary costs
of administering the product [small business] fund, may be used only to provide
financing to aid in the development and production, including the commercialization,
of new or improved products [foster and stimulate the development of small
businesses] in this state. The bank shall provide financing from the product
[small business] fund on the terms and conditions that the bank determines
to be reasonable, appropriate, and consistent with the purposes and objectives
of the product [small business] fund and this subchapter, for the purpose
of aiding in the development and production of new or improved products [fostering
and stimulating the development of new or existing small businesses] in this
state.
The sections are permissive related to financing. "Money in the program
account . . . may be used only to provide financing." The sections are mandatory
when addressing the purpose of the permissive financing. "The bank shall provide
financing . . . for the purpose of aiding in the development and production
of new or improved products [or fostering and stimulating the development
of new or existing small businesses] in this state." The rule and the statute
are not inconsistent.
AeA commented that §177.5 should be rewritten because the section
currently "binds the board arbitrarily to the same terms for each loan agreement,
regardless of the applicant, the purpose for which the loan is granted, and
other circumstances. This strips the Board of its authority to approve the
terms of the financing. . . . This matter should be left to the discretion
of the Board in each transaction."
The board disagrees with the comment and the section has not been changed.
A primary purpose of the rules is to promote fairness and consistency in awarding
loans under the program. The terms set forth in the rules provide a great
deal of flexibility while furthering this purpose. Administrative efficiency
is a secondary purpose of the goals. The board anticipates a successful and
competitive revolving loan program. Under these circumstances, unique, original
terms and conditions for each borrower are not practical or desirable because
it would slow down the loan process. Finally, the board retains the authority
to waive any rule not statutorily imposed upon a showing of good cause. Therefore,
the terms set forth in §177.5 do not prevent different terms being established
under certain circumstances within the board's discretion.
AeA commented that, based on its comment on §177.5, §177.6 should
be reworded to add the phrase, "if applicable" at the beginning of each sentence
in paragraphs (6), (8), and (11). The board disagrees with the comment and
the rule has not been changed for the reasons stated above for §177.5.
AeA commented that §177.7, relating to monitoring and reporting requirements,
should allow for 30 day notification in the event of a user's name change
or any other non-material change (ten days in proposed rule) and in the event
of a material change (five days in proposed rule). AeA further commented that
the language be added stating that "Such visits shall occur during normal
working hours, upon reasonable notice, and be conducted in a manner that is
consistent with obligations of confidentiality and workplace safety."
The board disagrees with the comment in part and agrees with the comment
in part. The five and ten day notifications are recommended because the program
will have to respond and adjust quickly to a user change because asset reserves
are not expected to be adequate at first to allow the program to absorb the
negative impact of some changes. As previously noted, the board may, at its
discretion, waive a notification date requirement for good cause shown. The
board agrees with the addition of the language related to site monitoring
visits and has changed subsection (b) accordingly.
AeA commented that §177.8 should be changed to provide for "Financing
Agreements," rather than Loan Agreements, and that the language should be
changed to state that the agreements "may include," rather than "will include,"
the required provisions. The board does not agree with the comment and the
rule has not been changed. Previously stated purposes and goals of these rules,
including fairness, consistency, and fiscal restraint, weigh in favor of requiring
certain basic, standardized loan terms and assurances of repayment.
The new sections are adopted pursuant to Texas Government Code, §489.210,
which directs the Product Development and Small Business Incubator Board to
adopt rules for implementation of the program, and Texas Government Code,
Chapter 2001, Subchapter B which prescribes the standards for rulemaking by
state agencies.
Texas Government Code, Chapter 489, Subchapter D, is affected by this adoption.
§177.3.Procedures of the Board.
(a)
Officers.
(1)
The board chair shall be appointed by the Governor.
(A)
The chair shall have the duty to generally direct, supervise,
or control the business of the board and shall exercise supervisory duties
as may be required or given her by the board from time to time.
(B)
The chair is hereby authorized to represent, both verbally
and in written communications, the official position of the board and the
department on issues concerning the fund.
(2)
Vice Chair. The vice chair of the board shall have such
powers and duties as may be assigned to him by the chair and shall exercise
the powers of the chair during any time that the chair is absent or unable
to act. During any time that the vice chair is absent or unable to act, either
the chair or the vice chair may designate another board member to exercise
the powers of the chair.
(3)
Secretary. The secretary shall keep or cause to be kept
the minutes of all meetings and records of all actions of the board. During
any time that the secretary is absent or unable to fulfill his duties, the
secretary or the chair may designate another board member to exercise the
powers of the secretary.
(4)
To the extent permitted by law, the board may designate
the chair, any member or members, or staff to act on behalf of the full board.
(b)
Committees.
(1)
Standing committees of the board. By a majority vote, the
board may from time to time establish standing committees to assist the board
in carrying out its duties. Such committees will be made up of not less than
two and not more than four members of the board, and shall serve the board
in an advisory capacity. Standing committees may be established to expire
upon a certain term and/or may be dissolved at any time by a majority vote
of the board.
(2)
Advisory committees. By a majority vote, the board may
from time to time establish advisory committees, made up of any individuals
and for any legal purpose, to study, advise, make recommendations, and otherwise
assist the board in carrying out its duties. Advisory committees may be established
to expire upon a certain term and/or may be dissolved at any time by a majority
vote of the board.
(3)
Special committees, made up of any individuals and for
any legal purpose, may be appointed and dissolved at any time by majority
vote of the board.
(4)
A member of a standing committee, an advisory committee,
or a special committee shall serve without compensation, and members shall
not be reimbursed for expenses unless reimbursement is deemed necessary and
feasible by the board, subject to any applicable limitation on reimbursement
provided by the General Appropriations Act or other law.
(c)
Meetings.
(1)
The board shall hold regular meetings, as called by the
chair, at least two times per year.
(2)
Public appearances at board meetings. Members of the public
may appear before the board regarding any issue under the board's jurisdiction.
(A)
Unless otherwise required or instructed by staff, a person
or organization wishing to be placed on the board meeting agenda must provide
a written statement of such request. The request must identify the name of
the presenter(s) and the topic of discussion desired to be discussed, and
must be delivered to the office at 221 East 11th Street, Austin, Texas 78701,
or mailed to P.O. Box 12428, Austin, Texas 78711-2428, or faxed to (512) 936-0520.
The request must include a contact person's name, mailing address, telephone
number, and fax number, if available.
(B)
Within 30 days after receipt of the request, the requestor
will be notified of the time and place of the next board meeting for which
the requestor may be placed on the agenda and the amount of time scheduled
for the requestor's presentation.
(3)
Public comment on scheduled agenda items. Members of the
public may comment on scheduled agenda items as determined by the board, consistent
with the Texas Open Meetings Act.
(A)
Members of the public who wish to speak on a scheduled
board agenda item must complete a comment sheet, identifying the presenter
and the item to be addressed, prior to board discussion on the item. Comment
sheets will be available to members of the public prior to and during board
meetings.
(B)
The chairman will recognize the presenter at the point
in the agenda where the comments are most relevant and may determine an appropriate
amount of time for the presentation. The board may further limit presentations
at any time in accordance with the Act.
(4)
To the greatest extent practicable and where consistent
with the Texas Open Meetings Act, meetings shall proceed in accordance with
Robert's Rules of Order. In the event a point of order is raised with respect
to any process or action of the governing board, a determination regarding
the validity of the process or action shall be within the discretion of the
Governor's General Counsel division.
(5)
Meeting accessibility. Any disabled or non-English speaking
person who requires assistance in order to attend a board meeting will be
reasonably accommodated whenever possible. Any person requiring an accommodation
must contact the bank as set out in paragraph (2)(A) of this subsection.
(6)
Written communication with the Board. Applications and
other written communications regarding the program should be addressed to
the attention of the Office of the Governor, Economic Development and Tourism
Division, Texas Economic Development Bank, Attn: Product Development and Small
Business Incubator Program, Post Office Box 12428, Austin, Texas 78711-2428.
(d)
Responsibilities of the Board and Bank.
(1)
The board will develop and implement policies that separate
the policy-making responsibilities of the board and the management responsibilities
of the office, the bank, and the executive director of the office. In addition,
the board shall:
(A)
approve bonds issued for the program;
(B)
review and approve financing documents, loan applications,
and loan agreements presented to it by the bank; and
(C)
exercise any powers necessary and reasonable to implement
the program.
(2)
The bank, as staffed by the executive director of the office,
will carry out administrative duties related to the bonds and the program
and carry out any duties and responsibilities reasonable and necessary to
implement the program. In addition, in accordance with the bond resolution,
the bank shall:
(A)
review and approve financing documents, including but not
limited to financing agreements, funds management agreements, loan agreements,
and official statements; and
(B)
approve loan applications.
(C)
Financing documents and other agreements executed by the
bank will be signed by the governor's chief of staff or other designee of
the governor, as applicable, according to the internal policies of the governor's
office.
(3)
The bonds shall be issued as Texas Economic Development
Bank, State of Texas, General Obligation Variable Rate Demand Bonds, with
program and series designations to be added as set forth in the bond resolution.
(A)
The bonds will be executed on behalf of the state by the
governor with his/her manual or facsimile signature.
(B)
The bonds shall be authorized by resolution of the board;
the resolution shall be approved as to form by the governor's chief of staff
or other designee on behalf of the bank and the executive director on behalf
of the office.
(C)
Bonds issued by the bank for the program shall be a public
security issued by a state agency for purposes of Government Code, Chapters
1201, 1202 and 1371.
(D)
All issuances of bonds under the program shall be subject
to review and approval by the Bond Review Board and the attorney general.
§177.4.Bonds.
(a)
Use of product development bond proceeds. The proceeds
of the product development bonds may be used:
(1)
to fund reasonably required reserve accounts.
(2)
to pay costs incurred in issuing the bonds; and
(3)
to either:
(A)
fund loans made by the bank to an applicant to provide
financing to aid in the development and production, including the commercialization,
of new or improved products in this state; or
(B)
refund or redeem all or part of any outstanding bonds.
(b)
Use of small business incubator bond proceeds. The proceeds
of the small business incubator bonds may be used:
(1)
to fund reasonably required reserve accounts.
(2)
to pay all costs incurred in issuing the bonds; and
(3)
to either:
(A)
fund loans made by the bank to an applicant to provide
financing to foster and stimulate the development of small businesses in this
state; or
(B)
refund or redeem all or part of any outstanding bonds.
(c)
In no event shall the board, the governing body, the office,
or the unit have any obligation, financial or otherwise, to any person for
failure to issue, sell, or deliver its bonds.
§177.7.Monitoring and Reporting Requirements.
(a)
Any user under the program will be required to meet reporting
and compliance requirements, as set out in the agreement between the user
and the bank, including, but not limited to:
(1)
annual submission of audited fiscal year end financial
statements;
(2)
annual update, including but not limited to efforts and
progress toward commercialization;
(3)
the use of money distributed through either fund;
(4)
notification within 10 days of a user's name change or
any other non-material change in the user's product or business;
(5)
notification in advance of any anticipated material change
to the user's product or business; and
(6)
notification within five days of any material change to
the user's product or business.
(7)
In the event of a name change, sale, or assumption, or
similar change, notification to the bank must include a copy of the certificate
of amendment to the articles of incorporation, and/or the d/b/a statement
under which the user operates, filed with the Texas Secretary of State, as
applicable.
(b)
Projects may be subject to on site monitoring visits, by
the board, the bank or its designee. Such visits shall occur during normal
working hours, upon reasonable notice, and be conducted in a manner that is
consistent with obligations of confidentiality and workplace safety.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of
the Secretary of State on May 9, 2005.
TRD-200501876
Mae C. Jemison, M.D.
Chair
Office of the Governor, Economic Development and Tourism Division
Effective date: May 29, 2005
Proposal publication date: March 25, 2005
For further information, please call: (512) 936-0181