Part 1.
TEXAS DEPARTMENT OF AGRICULTURE
Chapter 25.
TEXAS AGRICULTURAL FINANCE AUTHORITY: RURAL DEVELOPMENT
Subchapter B. PRIVATE ACTIVITY BOND FINANCING PROGRAM
4 TAC §§25.20 - 25.34
The Board of Directors (the board) of the Texas Agricultural
Finance Authority (the Authority) of the Texas Department of Agriculture (the
department) proposes new Chapter 25, Subchapter B, §§25.20-25.34,
concerning the Authority's private activity bond financing program. During
the 77th Legislative session, the Authority was given the authority to serve
as a central issuer of small issue private activity bonds and enterprise zone
facility bonds to fund projects to provide financial assistance to provide
assistance to agribusinesses and to further economic development in rural
areas of the state. The new sections are proposed to establish standards of
eligibility and application procedures for a private activity bond financing
program available through the Authority. The new sections provide the authority
and purpose for the sections, provide definitions to be used in the new subchapter,
provide for examination of records and point a contact for communications
with the Authority regarding the private activity bond financing program,
provide eligibility and filing requirements, provide for the issuance of an
inducement resolution by the Authority's Board, provide policies of the Board,
provide the process for final approvals, provide for the Authority to adopt
a fee schedule for the program, provide for attendance by an applicant and
the commissioner at the bond closing, provide for referral of an applicant
to alternative financing options, provide for the administration of the program
by department staff and provide for waivers by the Authority's Board of program
rules.
Lee Deviney, assistant commissioner for finance and agribusiness development,
has determined that for the first five year period that the new sections are
in effect there will be positive anticipated fiscal impact on state government
as a result of enforcing or administering the proposal. The impact will be
based upon fees charged to process bond issues, and it is not possible to
determine at this time how many bond issues will be made per year and the
par amount of each individual bond issue. There are no anticipated fiscal
implications to local government as a result of enforcing or administering
the proposal.
Mr. Deviney has also determined that for each year of the first five years
the amendments and new sections are in effect, the public benefit anticipated
as a result of enforcing the amendments and new sections will be the provision
of financial assistance, in the form of direct loans funded through the issuance
of private activity revenue bonds, to more agricultural- related businesses
and other rural economic development projects in the state. There is no anticipated
effect on microbusinesses or small businesses, except that eligible small
businesses that are granted financial assistance under the Authority's programs
will benefit from that assistance. There will be anticipated economic costs
to persons/borrowers who apply for private activity bond funds. The costs
to the borrower will be costs associated with the costs of issuance for each
bond issue. Those costs cannot be determined and may be limited by the Internal
Revenue Service regulations.
Comments on the proposal may be submitted to Lee Deviney, Assistant Commissioner
for Finance and Agribusiness Development, Texas Department of Agriculture,
P. O. Box 12847, Austin, Texas 78711. Comments must be received no later than
30 days from the date of publication of the proposal in the
Texas Register
.
The new sections are proposed under the Texas Agriculture Code
(the Code), §58.022, which provides the Authority's Board with the authority
to adopt rules and procedures necessary for the administration of its programs
including the setting and collection of fees in connection with the program;
and, the Code §58.023, which provides the Authority's Board with the
authority to adopt rules to establish criteria for eligibility of applicant
and lenders under the Authority's financial assistance programs.
The Texas Agriculture Code, Chapter 58 is affected by the proposal.
§25.20.Authority.
The Texas Agricultural Finance Authority (the Authority) is authorized
to issue revenue bonds to provide financial assistance to eligible agricultural
businesses and sponsors of rural economic development projects through direct
loans funded through the issuance of private activity revenue bonds.
§25.21.Purpose.
The overall purpose of the Authority is to provide financial assistance
to eligible agricultural businesses and to other rural economic development
projects that the board of directors of the Authority considers to present
a reasonable risk and have a sufficient likelihood of repayment. The Authority
is mandated to promote the expansion, development, and diversification of
production, processing, marketing, and exporting of Texas agricultural products
and to promote the development of rural business and to support rural economic
development projects. These rules establish standards of eligibility and the
application procedures for the Authority's Private Activity Bond Financing
Program.
§25.22.Definitions.
The following words and terms, when used in this subchapter, shall
have the following meanings, unless the context clearly indicates otherwise.
(1)
Act--The Texas Agricultural Finance Act, Texas Agriculture
Code, Chapter 58, as amended.
(2)
Applicant--Any sole proprietorship, corporation, partnership,
cooperative, joint venture, city, county, state agency, institution of higher
education, economic development corporation, or other unit of public government
filing an application seeking to have the Authority issue bonds to provide
financial assistance to a project.
(3)
Application--An application, including supporting documentation
and schedules as required by the Authority, for participation in the program.
(4)
Application and Processing Fee--The fee an applicant shall
be required to pay to the Authority, pursuant to a fee schedule adopted by
the Authority, upon submission of an application, which amount is non-refundable.
(5)
Authority--The Texas Agricultural Finance Authority.
(6)
Board--The board of directors of the Authority.
(7)
Bonds--Revenue obligations issued by the Authority to finance
the costs of a project, whether in the form of notes, bonds or in some other
form.
(8)
Bond Counsel--The firm retained by the Authority to perform
legal services related to the issuance of bonds.
(9)
Business Day--A day on which the Department is open for
business. The term shall not include Saturday, Sunday, or a traditional holiday
officially observed by the State. The Department's normal business working
hours are 8 a.m. to 5 p.m. each Business Day.
(10)
Closing Fee--The fee, which the applicant shall be required
to pay to the Authority, pursuant to a fee schedule adopted by the Authority,
upon delivery of the bonds, which amount is non-refundable.
(11)
Code--The Internal Revenue Code of 1986, as amended.
(12)
Department--The Texas Department of Agriculture.
(13)
Financial Advisor--A financial advisory firm, which has
been retained by the Authority to act as its Financial Advisor.
(14)
Inducement Resolution--A resolution adopted by the Board
taking affirmative action toward the issuance of the bonds in accordance with
the provisions of the Code.
(15)
Post-Issuance Application Fee--The fee, which the applicant
shall be required to pay to the Authority, pursuant to a fee schedule adopted
by the Authority. Payment of the fee may be required upon submission of each
request for any post-issuance amendment, consent, waiver, or other approval
relating to bonds previously issued by the Authority on behalf of such applicant,
which amount is non-refundable.
(16)
Program--The Authority's Private Activity Bond Financing
Program to be administered pursuant to this subchapter.
(17)
Project--An enterprise or project of an eligible agricultural
business or a rural economic development project. A project may include the
land, equipment, building, facilities, and improvements (any one or all) to
be financed, in whole or in part, by the Authority through the issuance of
bonds; provided it is the general policy of the Authority not to issue bonds
to finance retail establishments, hotels or motels, or speculative warehouses
or speculative distribution facilities unless the Board is satisfied that
the use of such warehouse or distribution facilities by the lessees or users
thereof constitutes an industrial or manufacturing use. Further, it is the
intent of the Authority to issue bonds under the program to finance only projects
that are eligible in whole or in part for financing on a tax-exempt basis
under the Code; provided that taxable bonds may be issued under the program
when such issuance is in conjunction with the issuance of tax-exempt bonds
for the project.
(18)
Project Eligibility Questionnaire--The form by that name
included in the application packet.
(19)
Qualified Application--A completed application, including
all documents and information required by the Authority and submitted by the
applicant for a project.
(20)
Rules--The rules found in this subchapter, which have
been adopted by the Board.
(21)
Rural Area--An area which the Board identifies and considers
predominately rural in character.
(22)
Staff--The staff of the Authority or the staff of the
Department performing work for the Authority.
(23)
State--The State of Texas.
(24)
Trustee--A corporation organized and doing business under
the laws of the United States of American or of the State, authorized under
such laws to exercise corporate trust powers.
§25.23.Examination of Records.
Any party requesting the examination of records pursuant to the Texas
Public Information Act, Texas Government Code, Chapter 552, shall indicate
in writing the specific nature of the document(s) to be viewed, and if copies
are desired.
§25.24.Written Communication with the Authority.
Applications and other written communications to the Authority should
be addressed to the attention of the Texas Agricultural Finance Authority,
in care of the Texas Department of Agriculture, P.O. Box 12847, Austin, Texas
78711.
§25.25.Project Eligibility Requirements.
(a)
Projects. To be eligible for financial assistance under
the program, the proposed project must meet the following criteria:
(1)
the project must provide significant benefits for the maintenance,
expansion, or development of an eligible agricultural business or a rural
economic development activity;
(2)
the project must create or retain employment in the State;
(3)
the applicant must be duly authorized to conduct business
in the State;
(4)
the project must be eligible, in whole or in part, for
financing on a tax-exempt basis under the Code;
(5)
the applicant must have a place of business in the State;
(6)
the applicant must be creditworthy; and
(7)
the project must meet the conditions for an eligible project
defined in a policy adopted by the Board.
(b)
Project costs. The proceeds of any bonds issued by the
Authority and lent to an applicant may be used only to finance expenditures
incurred in connection with the development of a project as identified in
the budget filed with the application and approved by the Board.
§25.26.Filing Requirements and Consideration of Applications.
An applicant may request the Authority to provide financial assistance
to a project by filing with the Board, three originally executed copies of
a completed application provided by the Authority, each copy to include a
completed Project Eligibility Questionnaire. The application should be accompanied
by a check or money order in the amount of the application and processing
fee, which is not refundable. The applicant is invited to contact Staff with
any questions concerning the application or the Project Eligibility Questionnaire.
(1)
Application forms. An applicant seeking financial assistance
from the Authority shall use the application forms provided by the Authority.
(2)
Submission of an application. Applicants are required to
submit the application material to the Staff for presentation to the Board.
Staff will be available prior to submission of the application to discuss
project eligibility.
(3)
Contents of qualified application. An applicant must submit
all information, including the Project Eligibility Questionnaire.
(4)
Other matters. The applicant must submit any other information
as requested by the Staff.
(5)
Staff review. Staff will review the application for completeness
and will notify the applicant of any additional information required. When
all required information has been received, Staff will evaluate the technical,
financial, and market feasibility of the project, the creditworthiness of
the applicant, and the benefits of the project for economic growth in the
State.
(6)
Board review. Staff will submit complete qualified application(s)
to the Board containing Staff's recommendations for consideration.
(7)
Providing false information. An applicant who knowingly
provides false information in an application is liable to the Authority for
any expense incurred by the Authority that would not have been incurred if
the applicant had not provided the false information. If the Authority makes
any inducement or commitment under false pretenses the Authority may pursue
any remedies provided by law.
§25.27.Inducement Resolution.
After the filing of the documents required in § 25.26, of this
title (relating to Filing Requirements and Consideration of Applications)
the following procedures will ordinarily be followed by the Authority.
(1)
Adoption of inducement resolution. The Board will review
the application and the Staff recommendation and it will adopt an Inducement
Resolution if it finds that the following requirements are met:
(A)
the project meets the eligibility criteria set forth in §
25.25 of this title (relating to Project Eligibility Requirements);
(B)
the project presents a reasonable risk and the bonds to
be issued to finance the project have a sufficient likelihood of repayment,
and;
(C)
there is reasonable probability that:
(i)
the application, the bonds, and the project will qualify
for the final action by the Board in accordance with this subchapter;
(ii)
all governmental approvals with respect to the bonds and
the project, including those requirements of this subchapter, will be obtained;
and
(iii)
the financing of the project will be in furtherance of
the public purposes of the Authority. In making the findings set forth in
this paragraph, the Board may request such information concerning the applicant
and the project as it deems necessary and appropriate, including a report
provided by the financial advisor described in subparagraph 25.28(D) of this
title (relating to Policies).
(2)
Denial of a qualified application. If the Board denies
the qualified application, the Authority will notify the applicant in writing
identifying the reasons for the denial. Applicants who have been denied may
re-apply to the program.
(3)
Preparation of closing documents. Following adoption of
an inducement resolution, the Authority will, at the request of the applicant,
instruct bond counsel to begin the preparation of the documents for the issuance
of the bonds.
§25.28.Policies.
The following policies of the Board are to be observed by the applicant
and are the general terms and conditions of the Authority's commitment to
issue bonds.
(1)
Permissible use of bond proceeds. Bonds issued by the Authority
are to be used to finance the project identified in the qualified application.
(2)
Abandonment of project. If the applicant takes no action
to implement the project, including requesting the Authority to begin preparation
of bond documents, for a period of 12 months following adoption of the inducement
resolution, the Authority may, in its sole discretion, treat the project as
abandoned and may repeal the inducement resolution.
(3)
Offering Documents. There shall be filed with the Board
a pro-forma copy of any official statement, prospectus or other offering memoranda,
through the use of which the proposed bonds are to be offered, sold, or placed
with any lender, purchaser, or investor, which offering, sale, or placement
material shall contain prominent disclosure (approved by the Authority) substantially
to the effect that:
(A)
neither the Authority nor the State has undertaken to review
or has assumed any responsibility for the matters contained therein, except
solely as to matters relating to a description of the bonds being offered
thereby and of the Authority;
(B)
all approvals, findings, and determinations by the Authority
are and have been made for its own internal uses and purposes in performing
its duties under this subchapter and are not to be relied upon by any underwriter
or purchaser of the bonds;
(C)
notwithstanding its respective approvals of the bonds and
the project, the State does not endorse or in any manner, directly or indirectly,
guarantee, or promise to pay such Bonds from any source of funds or guarantee,
warrant, or endorse the creditworthiness or credit standing of the applicant
or of any guarantor of such bonds, or in any manner guarantee, warrant, or
endorse the investment quality or value of such bonds;
(D)
such bonds are payable solely from the funds and secured
solely by property furnished and to be furnished and provided by the applicant
and any guarantor and are not in any manner payable wholly or partially from
any funds or properties otherwise belonging to the Authority; and
(E)
by its issuance thereof, the Authority does not in any
manner, directly or indirectly, guarantee, warrant, or endorse the credit-worthiness
or credit standing of the applicant or of any guarantor of such bonds or the
investment quality or value of the same.
(4)
Financial analysis. The Board may require a financial report
and analysis addressed to the Board by the financial advisor pertaining to
the credit standing and credit-worthiness of the applicant and any guarantor
of the bonds.
(5)
Appointment of trustee. In transactions, the Board shall
appoint the trustee to serve as trustee on behalf of the owners of such bonds.
(6)
Representations to lenders. No applicant shall represent,
directly or indirectly, to any lender interim, supplier, contractor or other
person, firm, or entity that the Authority has agreed or is firmly committed
to issue any bonds in relation to the project or application until the Board
has finally approved the same under this subchapter.
§25.29.Final Approvals.
When all financing documents have been completed, they shall be filed
with the Board. Such financing documents shall, among other things, include
an indenture of trust between the Authority and the trustee acting on behalf
of the owners of the bonds. The Board may request such supplemental information
as may be deemed necessary and appropriate in connection with the applicant
or the project. The Board will consider its final action pertaining to issuance
of bonds when requested to do so by the applicant and upon receipt by it of
evidence satisfactory to the Board that the applicant has complied with this
subchapter in all material respects not otherwise waived by the Board.
(1)
Final approval. Projects will be finally approved by the
Board if it first affirmatively determines that:
(A)
all requirements for final approval under this subchapter
have been met and are in form and substance satisfactory to the Board; and
(B)
the operation of the project will constitute a lawful activity,
and complies with and promotes the purposes and satisfies the requirements
of the Act and the policies contained in this subchapter.
(2)
Closing. After final approval of an application by the
Board, Staff will proceed to close the delivery of such Bonds upon receipt
of such approvals in accordance with the documents approved by bond counsel
in accordance with the terms of sale or placement.
§25.30.Fees.
The Authority shall adopt a fee schedule covering the application and
processing fee, the closing fee and the post-issuance application fee, to
which applicants shall be deemed to agree. Further, any and all issuance costs
incurred by the Authority in issuing bonds will also be an obligation of the
applicant.
(1)
Issuance Costs. Concurrently with the closing of any financing
pursuant to an approved application, the applicant shall reimburse the Authority
for (or otherwise pay) the following professional fees and other costs:
(A)
the fees of bond counsel;
(B)
the fees of financial advisor;
(C)
the actual amount of any closing or acceptance fees of
the trustee, plus any fees for casualty insurance, title insurance, and security
filing costs, and similar costs and expenses relating to the bonds, their
security, the project, or the closing thereof payable at that time;
(D)
any amounts payable pursuant to any indemnity contract
or agreement executed in connection with any financing hereunder; and
(E)
the closing fee payable to the Authority.
(2)
Post-issuance application fee. Concurrently with the submission
of each request for any post-issuance amendment, consent, waiver, or other
approval relating to bonds previously issued by the Authority, the applicant
requesting such amendment, consent, waiver, or other approval shall pay:
(A)
to the Authority the post-issuance application fee, which
amount is not refundable, whether or not such request is approved; and
(B)
the fees and expenses of the bond counsel and/or financial
advisor incurred in connection with such request.
(3)
Fee schedule changes. The Authority reserves the right
at any time to change, increase, or reduce the fees payable under this subchapter
and to make the same effective as to any applicant whose application is filed,
or bonds delivered, subsequent to the date of such change.
§25.31.Closing the Bonds.
The applicant and the commissioner of agriculture or the commissioner's
designee may attend the verification and signing of the closing documents
as prepared by Staff, bond counsel and/or the financial advisor.
§25.32.Alternative Financing Options.
The Authority shall consider whether the desired project financing
appears to be available to the applicant on reasonable terms from other sources
and, if so, may direct the applicant to other sources.
§25.33.Administration.
Except as otherwise provided by state law, by this subchapter, or by
resolution of the Board, the Staff with the approval of the commissioner of
agriculture, the deputy commissioner of agriculture, or the official of the
Department designated by the commissioner of agriculture as being responsible
for the program, shall have the authority to act on behalf of the Authority,
without specific Board approval, in regard to the collection, settlement,
and enforcement of each and every bond issue or other financial commitment
under the program. Such authority shall include, without limitation, the actions
required to be taken by the Authority under any inducement resolution, and
any other agreement entered into by the Authority concerning commitments provided
by the Authority.
§25.34.Waivers.
(a)
Board may waive rules. The Board reserves the rights to
waive any portion of this subchapter as to any applicant, application, or
project upon written request of the applicant seeking such waiver and stating
the reasons therefore.
(b)
Action by Board. Nothing in this section shall prevent
the Staff or the commissioner of agriculture, the deputy commissioner, or
the official of the Department designated by the commissioner of agriculture,
from submitting any matter to the Board for its consideration and approval.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on May 9, 2002.
TRD-200202896
Dolores Alvarado Hibbs
Deputy General Counsel
Texas Department of Agriculture
Earliest possible date of adoption: June 23, 2002
For further information, please call: (512) 463-4075
Chapter 26.
TEXAS AGRICULTURAL FINANCE AUTHORITY: LINKED DEPOSIT PROGRAM