Senate Bill No. 717
(By Senators Craigo, Unger, Oliverio, Anderson, Deem, Kessler,
McCabe, Redd, Ross and Sharpe)
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[Originating in the Committee on Small Business;
reported April 2, 2001.]
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A BILL to amend and reenact article one-a, chapter twelve of the
code of West Virginia, one thousand nine hundred thirty-one,
as amended; and to further amend said article by adding
thereto a new section, designated section nine, all relating
to the West Virginia small business linked deposit program.
Be it enacted by the Legislature of West Virginia:
That article one-a, chapter twelve of the code of West
Virginia, one thousand nine hundred thirty-one, as amended, be
amended and reenacted; and that said article be further amended, by
adding thereto a new section, designated section nine, all to read
as follows:
ARTICLE 1A. WEST VIRGINIA SMALL BUSINESS LINKED DEPOSIT PROGRAM.
§12-1A-1. Definitions.
(a) "Board" means the West Virginia state board of
investments. "Treasurer" means the West Virginia treasurer's
office.
(b) "Director" means the director of the governor's office of
community and industrial development.
(c) "Eligible small business" means any business which that:
(1) employs two hundred fifty or less employees or and has gross
annual receipts of four three million dollars or less; (2) is
headquartered in this state; and (3) is organized for profit.
(d)(c) "Eligible lending institution" means a financial
institution that is eligible to make commercial loans, is a public
depository of state funds, and agrees to participate in the linked
deposit program.
(e)(d) "Linked deposit" means a certificate of deposit placed
by the state board of investments treasurer with an eligible
lending institution at up to three percent below current market
rates, as determined and calculated by the state board of
investments treasurer
, provided the institution agrees to lend the
value of such deposit, according to the deposit agreement provided
for by this article, to eligible small businesses at three percent
below the present borrowing rate applicable to each specific
business at the time of the deposit of state funds in the institution.
§12-1A-2. Legislative findings.
The Legislature finds that many small businesses throughout
the state are experiencing economic stagnation or decline, that
high interest rates have caused small businesses in this state to
suffer disproportionately in profitability and competition and that
such high interest rates have fostered a serious increase in
unemployment. The linked deposit program provided for by this
article is intended to provide a statewide availability of lower
cost funds for lending purposes that will materially contribute to
the economic revitalization of this state. Accordingly, it is
declared to be the public policy of the state through the small
business linked deposit program to create an availability of lower-
cost funds to inject needed capital into the small business
community, sustain or improve business profitability, and protect
the jobs of citizens of this state and assist businesses located in
any county declared to be a federal disaster area by the federal
emergency management agency. The Legislature further finds that
the involvement of both the state board of investments treasurer
in
facilitating the deposit of funds for the program
and the director
small business development center in determining which businesses
will receive the benefits of the linked deposit program is necessary in order for state funds to be used in the most effective
manner possible in assisting small businesses throughout the state
and thereby maximizing the impact of the program.
§12-1A-3. Limitations on investment in linked deposits.
(a) The state board of investments may treasurer
shall invest
in linked deposits: Provided,
That at the time of the placement of
the linked deposit not more than ten percent of the state's total
investment portfolio is so invested. The total amount so deposited
at any one time shall not exceed, in the aggregate, two hundred
twenty-five twenty million dollars, of which fifty million dollars
shall be provided for linked deposits to West Virginia flood
victims from the twenty-nine counties eligible for federal disaster
aid as listed by the federal emergency management agency:
Provided, however,
That after the first day of April, one thousand
nine hundred eighty-seven, the state board of investments shall
reserve ten million dollars of the unallocated aggregate for linked
deposits to such West Virginia flood victims and may use the
remaining balance of such unallocated moneys in the regular linked
deposit program: Provided further,
That after the first day of
January, one thousand nine hundred eighty-eight, the remaining
balance of unallocated moneys may be used in the regular linked
deposit program: And provided further,
That effective the first day of July, one thousand nine hundred ninety-one, the board of
investments may not invest in linked deposits until such time as
the board of investments has determined that there are adequate
funds available to meet the needs of the education enhancement
fund, as set forth in section nine-d, article six of this chapter.
(b) Small business linked deposit funds shall not be used to
provide each applicant with no more than one hundred fifty thousand
dollars for a each reduced rate loan for each nonmanufacturing job
created or preserved or provide more than one hundred twenty-five
thousand dollars for a reduced rate loan for each manufacturing job
created or preserved. This subsection shall not preclude any flood
victim from applying for a linked deposit under the flood program.
(c) When deciding how much to invest in linked deposits, the
treasurer shall give priority to the investment, liquidity, and
cash flow needs of the state.
§12-1A-4. Applications for loan priority; loan package;
counseling.
(a) An eligible lending institution that desires to receive a
linked deposit shall accept and review applications for loans from
eligible small businesses. The lending institution shall apply all
usual lending standards to determine the credit worthiness of each
eligible small business and whether the loan application meets the criteria established in this article.
(b) An eligible small business shall certify on its loan
application that the reduced rate loan will be used exclusively to
create new jobs or preserve existing jobs and employment
opportunities. An eligible small business shall make a sworn
affidavit stating that the A reduced rate loan will shall not be
used to refinance an existing debt, unless it can be demonstrated
to show the business will fail if not granted such loan. Whoever
knowingly makes a false statement concerning such application shall
be prohibited from entering into the linked deposit loan program
and shall be subject to the criminal penalties of section eight of
this article.
(c) In considering which eligible small businesses should
receive reduced rate loans, the eligible lending institution shall
give priority to the economic needs of the area in which the
business is located, including whether the business is located in
a county declared to be a federal disaster area by the federal
emergency management agency, and the number of jobs to be created
and preserved by the receipt of the loan, the reasonable ability of
the small business to repay the loan, and other factors considered
appropriate by the eligible financial institution. If jobs are to
be preserved by the receipt of such loan, the eligible lending institution shall decide between small businesses that had no
profit in the last tax year verified by independent audit filed for
relief under the federal bankruptcy laws in the past year or has
been adversely affected by a nonreimbursed casualty loss due to a
natural disaster. An eligible small business shall make a sworn
affidavit stating that one of the above mentioned circumstances
applies to their business. There shall also be a continuous
(d) A small businesses receiving a linked deposit loan shall
receive supervision and counseling provided by the small business
development center as a condition of remaining in good standing
with the lending institution and the state, and as a condition of
having the loan renewed for up to four years. The services
available from the small business development center include
eligibility certification, business planning, quarterly financial
statement review, and loan proposal assistance. Eligible small
businesses shall also grant the lending institution the right to
provide information on the status of the loan to the small business
development center so as to assist the small business. internal
audit conducted by the state board of investments which shall be
made available to the Legislature annually.
(d) (e) The eligible financial institution shall forward to
the state board of investments treasurer
a linked deposit loan package, in the form and manner as prescribed by the board small
business development center and the treasurer. The package shall
include such information as required by the board, including the
amount of the loan requested and the number of jobs to be created
or sustained by each eligible small business. The institution
shall certify that each applicant is an eligible small business,
and shall, for each business, certify the present borrowing rate
applicable to each specific eligible business.
(f) The rate charged to the eligible small business shall not
exceed the prime interest rate as published by the wall street
journal.
§12-1A-5. Acceptance or rejection of loan package; deposit
agreement.
(a) The board of investments
small business development center
in cooperation with the treasurer may accept or reject a linked
deposit loan package or any portion thereof based on the criteria
prescribed by this article. the ratio of state funds to be
deposited to jobs sustained or created: Provided, That
notwithstanding any provision of this article to the contrary, the
board of investments may not accept any linked deposit loan package
or any portion thereof unless the same has been reviewed and
approved by the director in his sole discretion.
(b) The board of investments treasurer
shall reject any linked
deposit loan package if the small business requesting such loan is
not in good standing with the state tax department and the bureau
of employment programs, and these agencies shall provide the board
of investments treasurer
with such information as to the standing
of each small business loan applicant, notwithstanding any
provision of this code to the contrary.
(c) Any linked deposit loan package that is being made to
refinance an existing debt, or any portion thereof, must meet one
of the following criteria:
(1) The small business can demonstrate in good faith that it
is experiencing a substantial loss in its current (fiscal or
calendar) tax-year period;
(2) The small business recently experienced a natural disaster
and suffered unreimbursable casualty losses;
(3) The small business has filed to recover under the Federal
Bankruptcy Act and meets the criteria in (1) above; or
(4) The small business can provide compelling information to
the board of investments that jobs will be saved and/or created as
a result of loan refinancing.
(d) Upon acceptance of the linked deposit loan package or any
portion thereof by the board of investments and the director
the small business development center in cooperation with the
treasurer
, the board of investments treasurer
may place
certificates of deposit with the eligible lending institution at
three percent below current market rates, as determined and
calculated by the board of investments treasurer
. Upon acceptance
of the linked deposit loan package for flood victims or any portion
thereof, the board of investments may place certificates of deposit
with the eligible lending institution at five percent below current
market rates, as determined and calculated by the board of
investments. When necessary, the board treasurer
may place
certificates of deposit prior to acceptance of a linked deposit
loan package.
(e)(d) The eligible lending institution shall enter into a
deposit agreement with the board treasurer in a form in compliance
with the requirements of this article., which shall include
requirements necessary to carry out the purposes of this article.
Such requirements The deposit agreement shall reflect the market
conditions prevailing in the eligible lending institution's lending
area. The agreement may include a specification of, and the period
of time in which the lending institution is to lend funds upon the
placement of a linked deposit and. The deposit agreement shall
include provisions for the certificates of deposit to be placed for up to two-year maturities that may be renewed for up to an
additional two years a maximum of four years with annual renewals
.
Interest shall be paid at the times determined by the board
treasurer
.
§12-1A-6. Rate of loan; certification and monitoring of
compliance; report accountability and reporting.
(a) Upon the placement of a linked deposit with an eligible
lending institution, such institution is required to lend such the
funds to each approved eligible small business listed in the linked
deposit loan package required in subsection (d), section four of
this article, and in accordance with the deposit agreement required
by subsection (c), section five of this article. The loan shall be
at three percent below the present borrowing rate applicable to
each business. The loan shall be at five percent below the present
borrowing rate applicable to each flood victim. A certification of
compliance with this section in the form and manner as prescribed
by the board small business development center and the treasurer
shall be required of the eligible lending institution.
(b) The board small business development center and the
treasurer
shall take any and all steps necessary to implement the
linked deposit program and monitor compliance of eligible lending
institutions
and
The board and
the industrial development authority shall notify each other at
least quarterly of the names of the businesses receiving financial
assistance from their respective programs.
(c) By the first day of January, April, July and October of
each year, the board small business development center
shall report
on the linked deposit program for the preceding calendar quarter
year to the governor and West Virginia development office, which
shall then report to the joint committee on government and finance.
The reports shall set forth the name of the small business, linked
deposits made by the board under the program during the quarter and
shall include information regarding the nature, terms, delinquency
and default rates, job growth, gross income evaluation and amounts
of the loans upon which the linked deposits were based and the
eligible small business to which the loans were made.
§12-1A-7. Liability of state, board of investments and director.
The state, the board and the director treasurer
, and the small
business development center are not liable to any eligible lending
institution in any manner for payment of the principal or interest
on the loan to an eligible small business. Any delay in payment or
default on the part of an eligible small business does not in any
manner affect the deposit agreement between the eligible lending institution and the board.
§12-1A-8. Penalties for violation of article.
Any violation of this article shall be deemed a misdemeanor
and any person convicted thereof shall be fined not less than one
hundred nor more than five hundred dollars and or imprisoned in
the county jail not less than one month nor more than one year.
§12-1A-9. Effective dates.
This article shall be effective from the first day of July,
two thousand one, through the first day of July, two thousand
six.
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