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SENATE BILL NO. 6
INTRODUCED BY W. MCNUTT
AN ACT ALLOWING PARTICIPATION BY PRIVATE FINANCIAL INSTITUTIONS WITH THE BOARD OF INVESTMENTS IN PROVIDING LOANS TO BUSINESS ENTERPRISES; AMENDING SECTIONS 17-6-311, 17-6-312, 17-6-314, AND 17-6-324, MCA; AND PROVIDING AN IMMEDIATE EFFECTIVE DATE.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Participation by private financial institutions -- rulemaking. (1) (a) The board may jointly participate with private financial institutions in making loans to a business enterprise if the loan will:
(i) result in the creation of a business estimated to employ at least 15 people in Montana on a permanent, full-time basis; or
(ii) result in the expansion of a business estimated to employ at least an additional 15 people in Montana on a permanent, full-time basis.
(b) Loans under this section may be made only to business enterprises that are producing or will produce value-added products or commodities.
(c) a loan made pursuant to this section does not qualify for a job credit interest rate reduction under 17-6-318.
(2) A loan made pursuant to this section may not exceed 1% of the coal severance tax permanent fund and must comply with each of the following requirements:
(a) (i) The business enterprise seeking a loan must have a cash equity position equal to at least 25% of the total loan amount.
(ii) A participating private financial institution may not require:
(A) the business enterprise to have an equity position greater than 25% of the total loan amount; or
(B) additional security or guarantees to cover its exposure, but this does not preclude federal guarantees.
(b) The board shall provide 75% of the total loan amount.
(c) The term of the loan may not exceed 15 years.
(d) The board shall charge interest at the following rate:
(i) 2% a year for the first 5 years;
(ii) 6% a year for the second 5 years; and
(iii) for the third 5 years, an amount equal to the national prime interest rate, adjusted annually on January 1 of each year, but not to exceed 10% a year.
(e) (i) A participating private financial institution may charge interest in an amount equal to the national prime interest rate, adjusted on January 1 of each year, but the interest rate may not be less than 6% or greater than 12%.
(ii) A participating private financial institution, or lead private financial institution if more than one is participating, may charge a 0.5% annual service fee.
(f) The business enterprise may not be charged a loan prepayment penalty.
(g) The loan agreement must contain provisions providing for pro rata lien priority and pro rata liquidation provisions based upon the loan percentage of the board and each participating private lender.
(3) If a portion of a loan made pursuant to this section is for construction, disbursement of that portion of the loan must be made based upon the percentage of completion to ensure that the construction portion of the loan is advanced prior to completion of the project.
(4) A private financial institution shall participate in a loan made pursuant to this section to the extent of 85% of its lending limit or 25% of the loan, whichever is less. However, the board's participation in the loan must be 75% of the loan amount.
(5) A business enterprise receiving a loan under the provisions of this section may not pay bonuses or dividends to investors until the loan has been paid off, except that incentives may be paid to employees for achieving performance standards or goals.
(6) The board may adopt rules that it considers necessary to implement this section.
Section 2. Section 17-6-311, MCA, is amended to read:
"17-6-311. Limitation on size of investments. (1) Except as provided in subsections (2) through (4), an investment may not be made that will result in any one business enterprise or person receiving a benefit from or incurring a debt to the permanent coal tax trust fund the total current accumulated amount of which exceeds 1% of the permanent coal tax trust fund. This subsection does not apply to a loan made pursuant to [section 1].
(2) Subsection (1) does not limit the board's authority to make loans to the capital reserve account as provided in 17-6-308(2).
(3) Subsection (1) does not apply to the purchase of debentures issued by a capital company
;. however However, the
total amount of such debentures purchased by the board may not exceed 1% of the Montana permanent coal tax trust fund
at the time of purchase.
(4) The total amount of loans made pursuant to 17-6-309(2) or [section 1] may not exceed $50 million, and a single
loan may not be less than $250,000.
A Except for a loan made pursuant to [section 1], a loan may not exceed $16,666 per
for each job that is estimated to be created. In determining the size of a loan made pursuant to 17-6-309(2), the board shall
(a) the estimated number of jobs to be created by the project within a 4-year period from the time that the loan is made and the impact of the jobs on the state and the community where the project will be located;
(b) the long-term effect of corporate and personal income taxes estimated to be paid by the business and its employees;
(c) the current and projected ability of the community to provide necessary infrastructure for economic and community development purposes;
(d) the amount of increased salaries, wages, and business incomes of existing jobholders and businesses; and
(e) other matters that the board considers necessary."
Section 3. Section 17-6-312, MCA, is amended to read:
"17-6-312. State participation in loans. (1) Subject to 17-6-311(4), state participation in any loan to a business enterprise, except for a loan made pursuant to [section 1] or guaranteed by a federal agency, must be limited to 80% of the outstanding loan. The state shall participate in the security for a loan in the same proportion as the loan participation amount.
(2) The purchase of debentures issued by a capital company is not a loan participation and is not subject to subsection (1).
(3) State participation in loans to nonprofit corporations may qualify for the job credit interest rate reductions under 17-6-318 if the interest rate reduction passes through to a for-profit business creating the jobs."
Section 4. Section 17-6-314, MCA, is amended to read:
"17-6-314. Rate of return.
In Except as provided in [section 1], in calculating the rate of return for any Montana
investment to be made from the permanent coal tax trust fund, the board shall consider the long-term benefit to the
Montana economy and the additional service fee discount provided for in 17-6-319."
Section 5. Section 17-6-324, MCA, is amended to read:
"17-6-324. Rulemaking authority. (1) The board may adopt rules to implement the provisions of this part and 17-6-211(2). Rules adopted by the board may include:
(a) definitions of small- and medium-sized businesses
(b) a method of committing funds to financial institutions, including guidelines for lead private financial institutions if a consortium of private financial institutions is participating in a loan made pursuant to [section 1];
(c) guidelines for graduation clauses for refinancing and early payment of loans made pursuant to [section 1]
(d) types of service fees
(e) types of investments to be made.
(2) The board may also adopt procedural rules to govern its proceedings."
Section 6. Codification instruction. [Section 1] is intended to be codified as an integral part of Title 17, chapter 6, part 3, and the provisions of Title 17, chapter 6, part 3, apply to [section 1].
Section 7. Effective date. [This act] is effective on passage and approval.
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