PRINTER'S NO. 2100
No. 1564 Session of 1990
INTRODUCED BY PETERSON, MADIGAN, CORMAN, STAPLETON, SHAFFER,
JUBELIRER, WENGER, SALVATORE, SHUMAKER, BRIGHTBILL, HELFRICK,
WILT, PORTERFIELD, STOUT AND RHOADES, APRIL 6, 1990
REFERRED TO COMMUNITY AND ECONOMIC DEVELOPMENT, APRIL 6, 1990
AN ACT
1 Establishing the Hardwood Loan Fund; creating a board; requiring
2 eligibility; providing administration; guaranteeing loans;
3 and requiring reports.
4 The General Assembly of the Commonwealth of Pennsylvania
5 hereby enacts as follows:
6 Section 1. Short title.
7 This act shall be known and may be cited as the Hardwood Loan
8 Fund Act.
9 Section 2. Definitions.
10 The following words and phrases when used in this act shall
11 have the meanings given to them in this section unless the
12 context clearly indicates otherwise:
13 "Area loan organization" or "organization." A local
14 development district, or, where a local development district
15 does not exist, an industrial development corporation organized
16 and existing under the act of May 17, 1956 (1955 P.L.1609,
17 No.537), known as the Pennsylvania Industrial Development
18 Authority Act. Each area loan organization shall be certified by
1 the Secretary of Commerce as possessing an acceptable loan
2 review committee, professional staff support and other such
3 qualifications necessary to evaluate and administer loans made
4 under the provisions of this act.
5 "Board." The Hardwood Loan Fund Board created by this act.
6 "Department." The Department of Commerce of the
7 Commonwealth.
8 "Fund." The Hardwood Loan Fund created by this act.
9 "Secretary." The Secretary of Commerce of the Commonwealth.
10 Section 3. Hardwood Loan Fund.
11 (a) Creation.--There is hereby created a special fund in the
12 Treasury Department, to be known as the Hardwood Loan Fund, to
13 which shall be credited all program appropriations made by the
14 General Assembly and all proceeds from loan repayments and any
15 and all other deposits, payments and contributions from any
16 other source made available to the department for the purposes
17 enumerated herein.
18 (b) Requisitions.--The department shall requisition from the
19 fund such amounts as may be necessary to provide adequate funds
20 for payments under this act. The department may establish and
21 charge reasonable fees for processing loans or loan guarantees
22 under this act, with the approval of the secretary. When and as
23 the amounts so allocated and appropriated by the department as
24 loans are repaid to the department pursuant to the terms of the
25 bonds, notes or other agreements made and entered into by the
26 department, the department shall pay such amounts into the fund,
27 it being the intent of this act that the fund shall operate as a
28 revolving fund whereby all appropriations, deposits,
29 contributions and payments and interest made thereto may be
30 applied and reapplied to the purposes of this act, including the
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1 costs to the area loan organization as specified in this
2 subsection.
3 (c) Credits to fund.--All appropriations, deposits and
4 contributions made to the fund shall be immediately credited in
5 full to the fund, and earnings on the moneys held in the fund
6 shall also be credited to the fund for the purposes of this act.
7 Section 4. Hardwood Loan Board.
8 (a) Creation.--There is hereby created the Hardwood Loan
9 Fund Board.
10 (b) Composition.--The board shall be composed of nine
11 members, appointed by the Governor, including:
12 (1) One representative of furniture manufacturers.
13 (2) One representative of veneer manufacturers.
14 (3) One representative of secondary processors.
15 (4) One representative of sawmill operators.
16 (5) One representative of pulp and paper manufacturers.
17 (6) Two representatives of nonprofit corporations which
18 have the purpose to promote and enhance the hardwood industry
19 in this Commonwealth.
20 (7) Two other members, one of whom shall be appointed as
21 chairperson.
22 (c) Vacancies.--Vacancies shall be filled in such a way to
23 ensure that members will represent the groups in subsection (b).
24 Members shall serve at the pleasure of the Governor.
25 (d) Meetings.--The board shall meet at least once each
26 month. Six members of the board shall constitute a quorum.
27 Failure to attend four consecutive meetings will immediately
28 terminate the appointment of such member.
29 (e) Administration.--The department shall be required to
30 provide any staff assistance the board requires. Board members
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1 shall not receive any compensation nor shall they receive
2 expenses for attending meetings of the board.
3 (f) Powers and duties.--The board shall have the following
4 powers and duties:
5 (1) Approve applications for hardwood industry loans as
6 provided for in this act.
7 (2) Prepare a report to be given to the Secretary of the
8 Senate and to the Chief Clerk of the House of
9 Representatives, as specified in section 12.
10 (3) Ensure that the hardwood industry loans approved by
11 the board are having their desired impact and that the funds
12 are being used in accordance with the application approved by
13 the board.
14 (4) Establish, in consultation with the department,
15 procedures and application forms to be used by those desiring
16 assistance from the board.
17 Section 5. Eligibility for loans; terms and conditions.
18 (a) Authorized loans.--Subject to the terms, conditions and
19 restrictions provided under this act, the secretary may make
20 advances from the fund to area loan organizations for the
21 purpose of making loans to manufacturers of hardwood products
22 for capital development projects limited to the modernization,
23 upgrading or replacement of equipment or technical assistance.
24 No loan shall be made which would do any of the following:
25 (1) Supplant funding that is otherwise available
26 expeditiously from private sector sources on commercially
27 reasonable terms.
28 (2) Be for the purpose of refinancing any portion of the
29 total project cost or other existing loans or debt.
30 (3) Be for the purpose of financing projects located
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1 outside the geographic boundaries of this Commonwealth.
2 (4) Be for the purpose of paying off a creditor which is
3 inadequately secured and is in a position to sustain a loss.
4 (5) Provide funds, directly or indirectly, for payment,
5 distribution or as a loan to owners, partners or shareholders
6 of the small business enterprise, except as ordinary
7 compensation for services rendered.
8 (6) Be for the purpose of repaying a debt owed to a
9 small business investment company.
10 (7) Provide funds for speculation in any kind of
11 property, real or personal, tangible or intangible.
12 (b) Amount.--Loans may be made in an amount not exceeding
13 50% of the total project cost, or $200,000, whichever is less.
14 (c) Collateral.--All loans shall be secured by lien
15 positions on collateral at the highest level of priority which
16 can accommodate the borrower's ability to raise sufficient debt
17 and equity capital and shall be made for such period and shall
18 bear such interest as may be determined by the area loan
19 organization with the approval of the board, subject to the
20 following:
21 (1) The term of any loan shall not exceed seven years.
22 (2) The interest rate shall in no case be less than 3%.
23 (3) The secretary may defer interest and principal
24 payments at his discretion.
25 Section 6. Application and administration.
26 (a) Application.--Application shall be made to the board in
27 the form and manner as the secretary and the board may require.
28 (b) Action by board.--Upon receipt of the application, the
29 board shall investigate and review the application and either
30 approve or disapprove the loan application by proper action of
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1 the board. The decision action of the board shall be based, in
2 whole or in part, upon the following criteria:
3 (1) Ability of the applicant to meet and satisfy all
4 debt service as it becomes due and payable.
5 (2) Sufficiency of available collateral, including
6 satisfactory lien positions on real and personal property.
7 (3) Eligibility of the applicant as a manufacturer of
8 hardwood products.
9 (4) Capital needs of the manufacturer of hardwood
10 products.
11 (5) Relevant criminal and credit history and ratings of
12 the applicant, as determined from outside credit reporting
13 services and other sources.
14 (6) Whether the manufacturer of hardwood products will
15 enhance this Commonwealth's national and international market
16 shares.
17 (7) Conformity or nonconformity of the project, in all
18 respects, to the provisions of this act.
19 (c) Action by secretary.--Upon approval of the loan
20 application by the board, the board shall forward the
21 application and all supporting documentation to the secretary
22 for review and final approval or disapproval. The secretary
23 shall review each application and supporting documentation to
24 ensure the following:
25 (1) Eligibility of the manufacturer and the project for
26 which loan proceeds will be used.
27 (2) Payment to date of all tax obligations due and owing
28 to the Commonwealth or any political subdivision thereof.
29 (3) Compliance with the loan amount limitations provided
30 by this act.
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1 (4) Proper procedural action by the area loan
2 organization.
3 (5) Relevant criminal and credit history and ratings of
4 the applicant as determined from outside credit reporting
5 services and other sources.
6 (6) Conformity of all aspects of the loan transaction
7 with the substantive and procedural provisions of this act
8 and regulations promulgated under this act.
9 (d) Finality and basis of decisions.--All decisions of the
10 secretary regarding the approval or disapproval of loans under
11 this act, including eligibility of business enterprises and loan
12 projects, shall be final. In reaching their decision, the
13 secretary and the board, in addition to the requirements set
14 forth in subsections (b) and (c), shall make their decision on
15 the basis of criteria, including, but not limited to:
16 (1) The competitive market demand for products using
17 such investments.
18 (2) The anticipated increase in this Commonwealth's
19 share of domestic and international markets captured from the
20 out-of-State foreign competitors due to such investments.
21 (3) The utilization by the manufacturer of new and
22 advanced technologies in such investments which are likely to
23 permanently enhance the manufacturer's competitive position
24 within its industry or business.
25 (e) Notice and further action.--The secretary shall, to the
26 extent practicable, notify the board and the applicant
27 manufacturer of final approval or disapproval of the loan
28 application within 30 business days after the receipt of the
29 application. In the case of approval of a loan application, the
30 secretary, upon consultation with the board, shall designate an
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1 area loan organization for the project, and the secretary shall
2 arrange to draw the loan amount from the fund and advance the
3 sum to the area loan organization. The advance shall be a debt
4 obligation of the organization to the Commonwealth and shall be
5 evidenced by a note or bond issued in an amount equal to the
6 amount actually advanced and secured in a manner as the
7 secretary shall require. Upon receipt of the advance, the area
8 loan organization shall make the advance available to the
9 manufacturer in the form of a loan transaction, which loan shall
10 be evidenced by a note executed by the manufacturer, be secured
11 in a manner as the board and the secretary shall require, and
12 conform in all respects to the loan package as approved by the
13 board, the organization and the secretary. If the secretary
14 disapproves the application, the board shall be notified, in
15 writing, of the reasons for disapproval.
16 (f) Administration and reports.--All hardwood industry loans
17 shall be administered and monitored by the appropriate area loan
18 organization in accordance with policies and procedures
19 prescribed by the secretary. Each area loan organization shall
20 submit reports to the department twice a year. The report shall
21 show the following:
22 (1) Each outstanding loan.
23 (2) The date approved.
24 (3) The original principal amount.
25 (4) The current principal balance.
26 (5) The interest rate.
27 (6) The purpose for which the loan was made.
28 (7) An enumeration of any problems or issues which have
29 arisen with regard to each loan.
30 (8) Such other information and documentation as the
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1 secretary shall require.
2 Section 7. Loan guarantees and other assistance.
3 (a) Guarantees.--The secretary may make advances or provide
4 other means of guaranteed payment from the fund to area loan
5 organizations for the purpose of guaranteeing, endorsing or
6 acting as surety on the bonds, notes, contracts, mortgages or
7 other obligations of small business enterprises on such terms
8 and conditions and according to such policies and procedures as
9 the secretary may prescribe. Such guarantees, endorsement or
10 sureties may be provided only for manufacturers of hardwood
11 products which conform in all respects to the provisions of
12 section 5.
13 (b) Grants for loan reserve funds or reimbursing loan
14 losses.--The secretary may provide grants and other financial
15 assistance to area loan organizations for the purpose of
16 establishing loan reserve funds or reimbursing loan losses to
17 commercial banks and other financial institutions in order to
18 encourage the expansion and financing of manufacturers of
19 hardwood products in this Commonwealth consistent with the
20 purposes of this act.
21 Section 8. Powers of secretary.
22 The secretary shall have and may exercise all powers and
23 authority necessary to the proper administration and
24 implementation of this act and shall have authority to adopt
25 policies, procedures and guidelines and promulgate rules and
26 regulations necessary to effectuate the provisions of this act.
27 Section 9. Reporting and inspection.
28 (a) Inspection.--Each manufacturer of hardwood products
29 which applies for or receives assistance under this act, upon
30 reasonable request of the department or area loan organization,
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1 shall permit authorized employees of the department and area
2 loan organization to inspect the plant, books and records of the
3 manufacturer of hardwood products.
4 (b) Updating.--Each manufacturer of hardwood products shall
5 update the information given to the department, board and area
6 loan organization in the application if conditions change or to
7 the extent that the information given originally becomes
8 inaccurate or misleading.
9 (c) Periodic reports.--Each recipient of assistance under
10 this act shall provide the department and the area loan
11 organization with such periodic financial reports as the
12 department or area loan organization may require until such time
13 as the loan is paid off.
14 Section 10. Nondiscrimination.
15 No loan or loan guarantee shall be made to a manufacturer of
16 hardwood products unless the manufacturer of hardwood products
17 certifies to the department, in a form satisfactory to the
18 department, that it will not discriminate against any employee
19 or against any applicant for employment because of race,
20 religion, color, national origin, sex or age. The manufacturer
21 of hardwood products shall also certify to the department that
22 it is not currently under citation for pollution violations and
23 that in the future it will meet all applicable antipollution
24 standards.
25 Section 11. Conflict of interest.
26 No employee of the department and no officer or employee of
27 any area loan organization shall, either directly or indirectly,
28 be a party to or have any financial interest in any contract or
29 agreement arising pursuant to this act.
30 Section 12. Reports to General Assembly.
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1 (a) Annual reports.--On or before March 1 of each year, the
2 secretary shall provide a report to the Chief Clerk of the House
3 of Representatives and to the Secretary of the Senate. The
4 report shall describe all relevant activities of the department
5 pursuant to this act and shall include the following:
6 (1) Types of businesses receiving aid and the amounts
7 and terms of the aid.
8 (2) Loans or other aid repaid.
9 (3) Loans or other aid outstanding and balance due,
10 including delinquent payments.
11 (4) Increases in retail sales of the businesses
12 receiving aid.
13 (5) Estimated tax revenue increase due to aid from the
14 fund.
15 (b) Copies of policies, guidelines and rules.--The secretary
16 shall provide copies of all official policies, guidelines or
17 rules regarding the program to the Chief Clerk of the House of
18 Representatives and to the Secretary of the Senate. Reports
19 received by the department under section 6(f) shall be made
20 available, upon request, to members of the General Assembly.
21 Section 13. Effective date.
22 This act shall take effect in 60 days.
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