Chapter 167 Oregon Laws 2003

AN ACT

SB 215

Relating to economic development; creating new provisions; amending ORS 285A.206, 285B.050, 285B.059, 285B.062, 285B.086, 285B.092, 285B.093, 285B.135, 285B.326, 285B.335, 285B.341, 285B.344, 285B.365 and 285B.389; and repealing ORS 285B.153, 285B.374 and 285B.377.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 285B.050 is amended to read:

285B.050. As used in ORS 285B.050 to 285B.098, unless the context requires otherwise:

(1) “Business development project” means the acquisition, engineering, improvement, rehabilitation, construction, operation or maintenance of any property, real or personal, that is used or is suitable for use by an economic enterprise and that will result in, or will aid, promote or facilitate, development of one or more of the following activities:

(a) Manufacturing or other industrial production;

(b) Agricultural development or food processing;

(d) Development or improved utilization of natural resources;

(e) Convention facilities and trade centers;

(f) Transportation or freight facilities; and

(g) Other activities that represent new technology or type of economic enterprise the Oregon Economic and Community Development Commission determines is needed to diversify the economic base of an area but not including:

(A) Construction of office buildings, including corporate headquarters; and

(B) Retail businesses, shopping centers or food service facilities.

(2) “Commission” means the Oregon Economic and Community Development Commission established under ORS 285A.040.

(3) “Fund” means the Oregon Business Development Fund.

(4) “Collateral” has the meaning given that term in ORS 79.0102 for property subject to a security interest.

(5) “Municipality” means any city, municipal corporation or quasi-municipal corporation.

(6) “Person” means any individual, association of individuals, joint venture, partnership or corporation.

(7) “Local development group” means any public or private corporation which has as one of its primary purposes, as stated in its articles of incorporation, charter or bylaws, the promotion of economic development in any part of the State of Oregon.

(8) “Applicant” means any county, municipality, person or any combination of counties, municipalities or persons applying for a loan from the Oregon Business Development Fund under ORS 285B.050 to 285B.098.

(9) “Owned and operated by women and minorities” means, with regard to any specific business enterprise, the ownership or control of more than 50 percent of the units of proprietary or ownership interest in that business enterprise by individuals who are women or [members of minorities] minority individuals, as defined by ORS [430.347 (2)] 200.005.

(10) “Emerging small business” has the meaning given that term by ORS 200.005.

(11) “County” means any county or federally recognized Oregon Indian tribe.

SECTION 2. ORS 285B.059 is amended to read:

285B.059. (1) The Oregon Economic and Community Development Commission may approve a business development project proposed in an application filed under ORS 285B.050 to 285B.098 if, after investigation, it finds that:

(a) The proposed business development project is feasible and a reasonable risk from practical and economic standpoints, and the loan has reasonable prospect of repayment.

(b) The applicant can provide good and sufficient collateral for the loan.

(c) Moneys in the Oregon Business Development Fund are or will be available for the proposed business development project.

(d) There is a need for the proposed business development project, and the applicant’s financial resources are adequate to [assure] ensure success of the project.

[(e) If the proposed project is to be located in an incorporated city, the governing body of that city has executed a resolution recommending the proposed project.]

[(f) If the proposed project is to be located outside any incorporated city, the governing body of the county in which the project is to be located has executed a resolution recommending the proposed project.]

[(g) The Housing and Community Services Department received notification of the proposed project and any related workforce increase at the time the application was received by the commission.]

[(h)] (e) The applicant has not received or entered into a contract or contracts exceeding [$500,000] $1 million with the commission, under authority of ORS 285B.050 to 285B.098, for the previous 365 days, nor is there an amount equal to 20 percent of the total value of the fund in outstanding loans with the commission at any one time for business development projects located in the same county as the proposed project. However, nothing in this paragraph prevents the commission from making a loan to an emerging small business, as provided in subsection (6) of this section, for a project in a distressed area or making a loan of less than $100,000, as provided in ORS 285B.080.

(2) Preference shall be given to a business development project which has a high ratio of employment to the amount of money sought to be borrowed from the Oregon Business Development Fund, which benefits businesses with fewer than 50 employees or which is located within a rural or distressed area of the state. Consideration also shall be given to the extent of participation by local development groups, and the availability and cost of money to the applicant from, or through, commercial lending or financial institutions, or other financial sources, inasmuch as the Oregon Business Development Fund is intended to complement, not supplant, other sources of money for economic development.

(3) The total amount of moneys loaned from the fund for any business development project shall not exceed 50 percent of the cost of the project. Working capital equity contributed by the applicant or a related party shall not be included in the calculation of total project costs.

(4) Except in cases where the applicant is a county or municipality, no money shall be loaned from the fund for any business development project unless there exists a commitment from a commercial or private lender, or a local development group, to participate in the financing of the project.

(5) To encourage private sector and local development group participation in the financing of business development projects, the commission may subordinate the security position of the fund to that of other lenders.

(6) In each fiscal year of a biennium, not less than 15 percent of all moneys available for lending from the Oregon Business Development Fund are reserved for loans to certified emerging small business enterprises which are located in or draw their workforces from within distressed [communities] areas as determined by the Economic and Community Development Department in cooperation with the Employment Department of this state. Any amounts reserved for loans to such businesses that are not loaned in one fiscal year shall be added to the amount reserved for loans to such businesses in the subsequent fiscal year. If the Economic and Community Development Department is unable to obtain a sufficient number of approvable applications to meet the requirements of this subsection, it may, notwithstanding the limitations imposed by ORS 285B.050 (1)(g)(B), make loans to service and retail businesses operated by certified emerging small business enterprises.

(7) In the operation of the Oregon Business Development Fund, the commission and the department shall, to the maximum extent feasible and consistent with constitutional limitations, seek to assure that an amount equal to that specified in subsection (6) of this section be loaned to businesses owned and operated by women and minorities.

SECTION 3. ORS 285B.062 is amended to read:

285B.062. If the Oregon Economic and Community Development Commission approves the business development project, the commission, on behalf of the state, and the applicant may enter into a loan contract of not more than [$500,000] $1 million, secured by good and sufficient collateral, which shall set forth, among other matters:

(1) A plan for repayment by the applicant to the Oregon Business Development Fund of moneys borrowed from the fund used for the business development project with interest charged on those moneys at the rate of not less than one percentage point more than the prevailing interest rate on United States Treasury bills, notes or bonds of a comparable term, as determined by the commission. [However, the commission may make such loans to emerging small businesses, as defined in ORS 200.005, at a rate of not less than one percentage point less than such prevailing interest rate.] The repayment plan, among other matters:

(a) Shall provide for commencement of repayment by the applicant of moneys used for the business development project and interest thereon no later than one year after the date of the loan contract or at such other time as the commission may provide.

(b) May provide for reasonable extension of the time for making any repayment in emergency or hardship circumstances if approved by the commission.

(c) Shall provide for such evidence of debt assurance of, and security for, repayment by the applicant as is considered necessary by the commission.

(d) Shall set forth a schedule of payments and the period of loan which shall not exceed the usable life of the contracted project or [20] 25 years from the date of the contract, whichever is less, and shall also set forth the manner of determining when loan payments are delinquent. The payment schedule shall include repayment of interest which accrues during any period of delay in repayment authorized by paragraph (a) of this subsection, and the payment schedule may require payments of varying amounts for collection of accrued interest.

(e) Shall set forth a procedure for formal declaration of default of payment by the commission, including formal notification of all relevant federal, state and local agencies; and further, a procedure for notification of all relevant federal, state and local agencies that declaration of default has been rescinded when appropriate.

(f) May offer a discount not to exceed 10 percent of the outstanding principal for the early repayment of the entire outstanding principal of any loan. The commission by rule shall adopt policies that provide for greater discounts for earlier repayments and that provide for greater discounts for firms that have created at least one job per each $15,000 loaned to the firm from the Oregon Business Development Fund.

(2) Provisions satisfactory to the commission for field engineering and inspection, the commission to be the final judge of completion of the contract.

(3) That the liability of the state under the contract is contingent upon the availability of moneys in the Oregon Business Development Fund for use in the business development project.

(4) Such further provisions as the commission considers necessary to insure expenditure of the funds for the purposes set forth in the approved application.

(5) That the commission may institute appropriate action or suit to prevent use of the facilities of a business development project financed by the Oregon Business Development Fund if the applicant is delinquent in the repayment of any moneys due the fund.

SECTION 4. ORS 285B.086 is amended to read:

285B.086. (1) The Oregon Economic and Community Development Commission may authorize funds from the Oregon Business Development Fund to be used in appropriate joint governmental participation projects or as match money with any municipally, county, state or federally funded business development project authorized within a county or city, subject to the stipulations of ORS 285B.050 to 285B.098.

(2) Any application for a loan under this section shall be in such form as the commission prescribes and shall furnish such proof of federal, state or local approval as appropriate for funding of the business development project.

(3) The total amount of moneys loaned from the fund for federal, state or local joint business development project purposes shall not exceed [$500,000] $1 million per project.

SECTION 5. ORS 285B.092 is amended to read:

285B.092. (1) There is created within the State Treasury a revolving fund known as the Oregon Business Development Fund, separate and distinct from the General Fund. Interest earned by the fund shall be credited to the fund. Moneys in this fund are continuously appropriated to the Oregon Economic and Community Development Commission for the following purposes:

(a) Administrative expenses of the commission in marketing public business finance, processing applications, investigating proposed business development projects and servicing outstanding loans. In any one year, administrative expenses charged under this paragraph may not be greater than the total revenues received in that year from fees provided for in subsection (2)(a) of this section, plus four percent of the total asset value of the fund.

(b) Payment of loans to applicants under ORS 285B.050 to 285B.098.

[(c) Transfers of moneys as provided in ORS 285B.374 (4)(a).]

[(d)] (c) Purchase or buy out of superior or prior liens or mortgages on or a security interest in any business development project financed in part by a loan from the fund, when the commission determines:

(A) A loan from the fund is in default and is in liquidation or at risk of being forced into liquidation by another creditor to the project;

(B) Such action is necessary to maintain or enhance the value of the commission’s collateral in the project; and

(C) The amount of the purchase or buyout of superior or prior liens or mortgages on that project does not exceed [$500,000] $1 million.

(2) The fund created by subsection (1) of this section shall consist of:

(a) Fees required by ORS 285B.056 (2) and 285B.068 (2).

(b) Repayment of moneys loaned to counties, municipalities or persons from the Oregon Business Development Fund, including interest on those moneys.

(d) Moneys obtained from any interest accrued from funds.

(e) Moneys from any grant made to the fund by any federal agency.

(3) Notwithstanding any other law, if at any time there are insufficient funds in the Oregon Entrepreneurial Development Loan Fund established by ORS 285B.758, the Director of the Economic and Community Development Department may direct the transfer of unobligated funds from the Oregon Business Development Fund to the Oregon Entrepreneurial Development Loan Fund. Transfers under this subsection shall be in amounts necessary to meet the reasonably foreseeable demand for participation in the entrepreneurial loan program.

SECTION 6. ORS 285B.093 is amended to read:

285B.093. (1) The Oregon Economic and Community Development Commission may establish the Oregon Targeted Development Account as an account within the Oregon Business Development Fund.

(2) If the account is established, the purpose of the Oregon Targeted Development Account is to promote cooperation and foster partnership among the commission, the Economic and Community Development Department and financial institutions in Oregon to encourage investment in distressed areas, as defined by the department.

(3) The Economic and Community Development Department may make loans from the Oregon Targeted Development Account in distressed areas without regard to the minimum rate of interest that is otherwise applicable under ORS 285B.062. The department may make loans in distressed areas at an interest rate that is determined by the Oregon Economic and Community Development Commission.

(4) ORS 285B.059 [(1)(e) to (g),] (2) [and (5)] does not apply to business development projects financed wholly or in part with moneys from the Oregon Targeted Development Account.

SECTION 7. ORS 285B.135 is amended to read:

285B.135. (1) The Economic and Community Development Department shall establish a loss reserve account for each financial institution with which the department makes a contract under ORS 285B.132.

(2) The loss reserve account for a financial institution shall consist of moneys paid as fees by borrowers and the financial institution under ORS 285B.138 and moneys transferred to the account from the Capital Access Fund under ORS 285B.138.

(3) Notwithstanding ORS chapter 293 or 295, the department may establish and maintain loss reserve accounts with any financial institution under such policies as the department may adopt. The department may deposit up to $50,000 per financial institution in a loss reserve account to encourage a financial institution to participate in the capital access program. The total amount of such deposits may not exceed $250,000 per biennium.

(4) All moneys in a loss reserve account established under ORS 285B.126 to 285B.147 are the property of the State of Oregon.

(5) The amounts transferred from the Capital Access Fund to a loss reserve account on behalf of any single qualified business shall not exceed $150,000.

SECTION 8. ORS 285B.326 is amended to read:

285B.326. (1) Upon determining an economic development project an “eligible project,” the Oregon Economic and Community Development Commission shall forward the application to the State Treasurer, who shall determine whether to issue the bonds.

(2) The commission shall collect the fees set forth in subsection (3) of this section from an applicant that seeks to have an economic development project declared eligible for financing. The fee may be collected even though the project has not been determined to be eligible for financing. Moneys collected under this subsection shall be deposited in the Oregon Community Development Fund created under ORS 285A.227 and are continuously appropriated to the commission for the purpose of administration or funding of any program it is authorized to operate. [Participation fees received on bonds issued pursuant to ORS 285B.377 may be paid to local development groups for administration expenses related to investigating proposed economic development projects and assisting the commission in processing applications pursuant to ORS 285B.377.]

(3) The fees described in subsection (2) of this section are as follows:

(a) $250 for an application of not to exceed $500,000.

(b) $500 for an application of more than $500,000.

(c) A closing fee of not to exceed one-half of one percent of the total bond issue for the project, as determined by the commission.

[(d) A one-time participation fee, not to exceed one-half of one percent of the total bond issue or an annual participation fee not to exceed one one-sixteenth of one percent of the outstanding principal of the bond issue as determined by the commission.]

[(e) For bonds issued under ORS 285B.374 and 285B.377, insurance assessments in amounts and payable at such times as are required by rules adopted pursuant to ORS 285A.110.]

SECTION 9. ORS 285B.389 is amended to read:

285B.389. (1) The Oregon Economic and Community Development Commission shall collect the fees set forth in subsection (2) of this section from an applicant that seeks to have the real and personal property constituting the eligible project declared eligible for the tax exemption provided in ORS 307.123. The fee may be collected even though the project has not been determined to be eligible for the tax exemption.

(2) The fees described in subsection (1) of this section are as follows:

(a) $10,000 upon application to the commission; and

(b) $50,000 when the eligible project is determined by the commission to be eligible for the tax exemption provided in ORS 307.123. The commission shall pay 50 percent of this fee to the Department of Revenue for the purpose of administration of ORS 307.123.

(3) The fees collected under subsection (2) of this section shall be deposited in the [Financial Programs Account created by ORS 285A.212] Oregon Community Development Fund created under ORS 285A.227.

SECTION 10. ORS 285A.206 is amended to read:

285A.206. (1) In each calendar year, the Economic and Community Development Department shall prepare, in accordance with generally accepted governmental accounting principles, a financial statement relating to each of the following funds:

(a) The Special Public Works Fund created by ORS 285B.455;

(b) The Title I Bank Fund established by ORS 285A.306;

[(d) The Oregon Economic and Community Development Fund created by ORS 285B.374;]

[(e)] (d) The Oregon Port Revolving Fund created by ORS 285A.708; and

[(f)] (e) Any other fund or account that is used by the department or Oregon Economic and Community Development Commission to make loans or loan guarantees or to provide other financial assistance to private business firms organized for profit.

(2) The financial statements required by this section shall record and summarize all the financial transactions during the reporting period that involved moneys credited to a fund or account and shall describe the financial condition of the fund or an account at the end of the reporting period. The reporting period for financial statements required by this section shall be the fiscal year commencing on July 1 and ending on June 30.

(3) The financial statements required by this section shall be in a form prescribed by the Secretary of State.

(4) Each financial statement required by this section shall describe the financial transactions and condition of a single fund and shall be submitted to the Governor, the President of the Senate and the Speaker of the House of Representatives not later than December 31 in each year.

SECTION 11. ORS 285B.335 is amended to read:

285B.335. In addition to any other powers granted by law or by charter, in relation to an eligible project, the state, acting through the State Treasurer or a designee thereof, may:

(1) Enter into agreements to finance the costs of an eligible project by loaning or otherwise making available the proceeds of bonds authorized by ORS [285B.374 and 285B.377] 285B.344 to any person, firm or public or private corporation or federal or state governmental subdivision or agency under such terms and with such security as the state may approve;

(2) Lease and sublease eligible projects to any person, firm or public or private corporation or federal or state governmental subdivision or agency in such manner that rents to be charged for the use of such projects shall be established, and revised from time to time as necessary, so as to produce income and revenue sufficient to provide for the prompt payment of principal of and interest on all bonds issued under this section when due, and the lease or financing agreement shall also provide that the lessee, borrower or financing party shall be required to pay all expenses of the operation and maintenance of the project including, but without limitation, adequate insurance thereon and insurance against all liability for injury to persons or property arising from the operation thereof, and all taxes and special assessments levied upon or with respect to the leased premises and payable during the term of the lease, during which term ad valorem taxes in the same amount and to the same extent as though the lessee were the owner of all real and personal property comprising the project;

(3) Pledge and assign to the holders of such bonds or a trustee therefor all or any part of the revenues of one or more eligible projects owned or to be acquired by the state, and define and segregate such revenues or provide for the payment thereof to a trustee;

(4) Mortgage or otherwise encumber eligible projects in favor of the holders of such bonds or in favor of any escrow agent, vendor, lender, other financing party or trustee therefor. However, in creating any such mortgages or encumbrances the state can not obligate itself except with respect to the project;

(5) Make all contracts, execute and deliver all instruments, and do all things necessary or convenient in the exercise of the powers granted by this section, or in the performance of its covenants or duties, or in order to secure the payment of its bonds; including a contract entered into prior to the construction, acquisition and installation of the eligible project authorizing the lessee, borrower or other financing party, subject to such terms and conditions as the state shall find necessary or desirable and proper, to provide for the construction, acquisition and installation of the buildings, improvements and equipment to be included in the project by any means available to the lessee, borrower or other financing party, and in the manner determined by the lessee, borrower or other financing party, and without advertisement for bids as may be required for the construction, acquisition or installation of other public facilities;

(6) Enter into and perform such contracts and agreements with political subdivisions and state agencies as the respective governing bodies of the same may consider proper and feasible for or concerning the planning, construction, installation, lease, or other acquisition, and the financing of such facilities, which contracts and agreements may establish a board, commission or such other body as may be deemed proper for the supervision and general management of the facilities of the eligible project;

(7) Accept from any authorized agency of the state or federal government loans or grants for the planning, construction, acquisition, leasing, or other provision of any eligible project, and enter into agreements with such agency respecting such loans or grants; and

(8) Acquire, own, sell, assign or otherwise hold legal or equitable title to or an interest in eligible projects or hold federal tax ownership of eligible projects.

SECTION 12. ORS 285B.341 is amended to read:

285B.341. Except as provided in ORS 285B.335 and 285B.338, the state [shall] does not have the power to operate any eligible project as a business or in any manner whatsoever, and except as provided in ORS 285B.335, 285B.338, 285B.374 and 285B.377, nothing in ORS 285B.320 to 285B.377 authorizes the state to expend any funds on any eligible project, other than the revenues of such projects, or the proceeds of revenue bonds issued hereunder, or other funds granted to the state for the purposes of an eligible project. For the purpose of exercising the powers and authority granted under ORS 285B.335 or 285B.338, the state and the Oregon Economic and Community Development Commission are not subject to the requirements of ORS chapter 279.

SECTION 13. ORS 285B.344 is amended to read:

285B.344. (1) If the State Treasurer determines that bonds should be issued:

(a) The State Treasurer may authorize and issue in the name of the State of Oregon bonds secured by revenues from eligible economic development projects or from other financing sources[, and where applicable, secured as provided in ORS 285B.374 and 285B.377,] to finance or refinance in whole or part the cost of acquisition, construction, reconstruction, improvement or extension of projects. The bonds shall be identified by project and issued in the manner prescribed by ORS 286.010, 286.020 and 286.105 to 286.135, and refunding bonds may be issued to refinance such bonds.

(b) The State Treasurer shall designate the underwriter, vendor, lender or other financing party, if any, and enter into appropriate agreements with each to carry out the provisions of ORS 285B.320 to 285B.377. The Economic and Community Development Department, with the approval of the State Treasurer, shall designate the trustee and enter into appropriate agreements with the trustee to carry out the provisions of ORS 285B.320 to 285B.377. The department may appoint bond counsel as authorized by ORS 288.523, or the State Treasurer may enter into an agreement with bond counsel if the services provided under the agreement comply with the provisions of ORS 288.523 and the appointment is approved by the Attorney General as required by ORS 288.523. The department may not make an appointment or enter into an agreement under this paragraph unless the State Treasurer has reviewed and approved the terms and conditions of the appointment or agreement. ORS 279.712 does not apply to any appointment or agreement described in this paragraph.

(2) Any escrow agent, bond registrar, paying agent or trustee, if any, designated by the State Treasurer to carry out all or part of the powers specified in ORS 285B.335 must agree to furnish financial statements and audit reports for each bond issue.

SECTION 14. ORS 285B.365 is amended to read:

285B.365. (1) Revenue bonds issued under ORS 285B.320 to 285B.377:

(a) Shall not be payable from nor charged upon any funds other than the revenue pledged to the payment thereof, [except as provided in this section and ORS 285B.374 and 285B.377,] nor shall the state be subject to any liability thereon. No holder or holders of such bonds shall ever have the right to compel any exercise of the taxing power of the state to pay any such bonds or the interest thereon, nor to enforce payment thereof against any property of the state except those projects or portions thereof, mortgaged or otherwise encumbered under the provisions and for the purposes of ORS 285B.320 to 285B.377.

(b) Shall not constitute a charge, lien or encumbrance, legal or equitable, upon any property of the state, except those eligible projects, or portions thereof, mortgaged or otherwise encumbered, under the provisions and for the purposes of ORS 285B.320 to 285B.377 [and except as provided in ORS 285B.374 and 285B.377].

(2) Each bond issued under ORS 285B.320 to 285B.377 shall recite in substance that the bond, including interest thereon, is payable solely from the revenue pledged to the payment thereof [and as provided in ORS 285B.374 and 285B.377]. No such bond shall constitute a debt of the state or a lending of the credit of the state within the meaning of any constitutional or statutory limitation. However, nothing in ORS 285B.320 to 285B.377 is intended to impair the rights of holders of bonds to enforce covenants made for the security thereof as provided in ORS 285B.368.

SECTION 15. On the effective date of this 2003 Act, all moneys remaining in the Oregon Economic and Community Development Fund created under ORS 285B.374 shall be transferred to the Oregon Community Development Fund created under ORS 285A.227 and shall be used for the purposes of the Oregon Community Development Fund.

SECTION 16. ORS 285B.153, 285B.374 and 285B.377 are repealed.

Approved by the Governor May 30, 2003

Filed in the office of Secretary of State June 2, 2003

Effective date January 1, 2004

__________