STATE OF NEW YORK
________________________________________________________________________
7360
2019-2020 Regular Sessions
IN ASSEMBLY
April 26, 2019
___________
Introduced by M. of A. REYES -- read once and referred to the Committee
on Small Business
AN ACT to amend the New York state urban development corporation act, in
relation to the small business regional revolving loan trust fund and
the small business regional revolving loan program
The People of the State of New York, represented in Senate and Assem-
bly, do enact as follows:
1 Section 1. Statement of legislative intent. The legislature hereby
2 finds and declares that small businesses are the economic backbone of
3 the state and the source of a majority of new jobs. The legislature
4 further finds that such businesses often have difficulty obtaining small
5 amounts of capital from traditional banking organizations that is neces-
6 sary to start-up, improve, or expand operations. State assistance in the
7 form of loans to meet such capital gaps would enable the formation and
8 expansion of small businesses across the state and, thus, provide job
9 opportunities to the state's citizens. The legislature further finds
10 that the existing regional revolving loan program of the state urban
11 development corporation demonstrated that it is more efficient and
12 effective to provide such loans through regional not-for-profit corpo-
13 rations that are knowledgeable about local businesses and economic
14 conditions. Therefore, it is the intent of the legislature to improve
15 job opportunities in the state by revitalizing the urban development
16 corporation's regional revolving loan program and re-naming it the small
17 business regional revolving loan program.
18 § 2. The New York state urban development corporation created by chap-
19 ter 174 of the laws of 1968 is hereby directed to audit, pursuant to
20 subdivision (19) of section 16-a of section 1 of the urban development
21 corporation act, each existing regional corporation administering a
22 small business regional revolving loan fund and to either recertify such
23 regional corporation or decertify such regional corporation and competi-
24 tively select a successor corporation to administer the small business
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06075-02-9
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1 regional revolving loan fund. In the case of regions that do not have a
2 regional corporation administering a small business regional revolving
3 loan fund or that have a decertified regional corporation, the urban
4 development corporation shall issue a request for proposals, pursuant to
5 the provisions of section 16-a of section 1 of the urban development
6 corporation act, to administer small business regional revolving loan
7 funds. The corporation shall select from the proposals received the most
8 qualified applicant in each region pursuant to subdivisions (4), (5),
9 and (6) of such section 16-a. If there is no applicant or no qualified
10 applicant in a region of the state, that region shall not participate in
11 the small business regional revolving loan fund program. The corpo-
12 ration, from money available for this purpose, shall allocate funds to
13 each regional corporation pursuant to subdivision 1 of such section
14 16-a.
15 § 3. Section 16-a of section 1 of chapter 174 of the laws of 1968,
16 constituting the New York state urban development corporation act, as
17 amended by chapter 477 of the laws of 2002, subdivision 3-a as added by
18 chapter 474 of the laws of 2017, subdivision 20 as amended by chapter
19 378 of the laws of 2018 and subdivision 21 as amended by chapter 524 of
20 the laws of 2005, is amended to read as follows:
21 § 16-a. [Regional] Small business regional revolving loan program. (1)
22 The corporation shall establish a fund to be known as the "small busi-
23 ness regional revolving loan trust fund" and shall pay into such fund
24 any monies made available to the corporation for such fund from any
25 source. The monies held in or credited to the fund shall be expended
26 solely for the purposes set forth in this section. The corporation shall
27 not commingle the monies of such fund with any other monies of the
28 corporation or any monies held in trust by the corporation.
29 (2) The corporation shall allocate any monies made available for such
30 fund for the purpose of making grants to regional corporations. The
31 grants shall be allocated as follows:
32 (a) fifty percent divided equally among the regions;
33 (b) fifty percent according to a formula weighted in favor of those
34 regions with the greatest levels of economic distress as determined by
35 poverty rates, number of persons receiving public assistance, unemploy-
36 ment rates, rate of employment decline and such other indicators of
37 economic distress as the corporation deems appropriate; and
38 (c) in the event a regional corporation advises the corporation that
39 it does not require all or a portion of the funds to be distributed
40 pursuant to this subdivision, such funds shall be re-distributed by the
41 corporation equally among the other regional corporations.
42 (3) In accordance with the rules and regulations of the corporation,
43 each regional corporation shall establish two special accounts for
44 monies received by the regional corporation pursuant to the provisions
45 of this section. The grant monies received from the corporation, earn-
46 ings on such monies, and any principal repayments shall be deposited in
47 a loan fund account; any interest earned by the regional corporation on
48 loans will be deposited in a separate interest repayment account. A
49 regional corporation shall be authorized to provide financing assistance
50 to eligible projects. Any interest earned from its loans may be used by
51 a regional corporation for the cost of administering the programs
52 authorized by this section.
53 (3-a) Notwithstanding subdivision three of this section, where appli-
54 cable, the corporation is authorized to enter into agreements as may be
55 necessary for the administration and reporting of funds repaid,
56 received, expended or collected in a manner consistent with the
A. 7360 3
1 provisions in section sixteen-t of this act. The use of such funds by
2 the corporation shall be consistent with the terms, conditions and
3 restrictions set forth in subdivision four of this section, to provide
4 financial assistance to eligible regional corporations as defined in
5 subdivision eighteen of section three of this act. Outstanding expenses,
6 loans and other obligations executed prior to the effective date of this
7 subdivision shall be subject to the terms and conditions of the original
8 contract or contracts.
9 (4) Regional corporations shall be selected by the corporation from
10 among eligible applicants to administer a small business regional
11 revolving loan program. An eligible applicant shall:
12 (a) represent at least two entire contiguous counties;
13 (b) have available to it staff with sufficient expertise to analyze
14 applications for financial assistance, to regularly monitor financial
15 assistance to clients, and have made arrangements to provide management
16 or technical assistance to clients;
17 (c) have an effective plan to market its services to small businesses
18 through such entities as chambers of commerce, industry trade associ-
19 ations, banks, local development corporations, community based organiza-
20 tions and industrial development agencies; and
21 (d) have established a loan committee composed of five or more persons
22 experienced in commercial lending or in the operation of a for-profit
23 business and a staff person of the regional office of the department of
24 economic development. Such loan committee shall review every application
25 to the regional corporation for financial assistance pursuant to this
26 section, shall determine the feasibility of the transaction proposed in
27 the application and shall recommend to the board of directors or other
28 governing body of the regional corporation such action as the committee
29 deems appropriate.
30 (5) Applications to the corporation for certification or recertif-
31 ication as a regional corporation shall:
32 (a) describe the applicant corporation, including its organization,
33 membership, loan committee, staff, and sources of other funds, if any;
34 (b) identify the geographic region to be served;
35 (c) explain the methods and criteria to be used in determining firms
36 eligible for financial assistance from the small business regional
37 revolving loan program;
38 (d) describe the means for coordinating financial assistance available
39 from the small business regional revolving loan program with financial
40 assistance available from other public funding sources within the region
41 and how such program will be used to leverage private financing for
42 projects;
43 [(e) at any time, the corporation may consider proposals to reconfig-
44 ure geographic areas served by regional corporations;] and
45 [(f)] (e) contain such other information as the corporation deems
46 appropriate.
47 (6) The corporation shall select, from among eligible applicants,
48 regional corporations to administer revolving loan programs, on the
49 basis of:
50 (a) the ability of the regional corporation to administer the finan-
51 cial assistance programs authorized under this section;
52 (b) the extent of coordination with other publicly supported financial
53 assistance programs available within the region represented by the
54 regional corporation;
55 (c) the degree of public and private support within the region for the
56 applicant regional corporation; and
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1 (d) the ability of the regional corporation to provide financial and
2 other assistance to businesses located in distressed areas within the
3 region.
4 (6-a) The corporation shall, every five years, recertify that each
5 regional corporation has complied with the terms and conditions of this
6 section. In the event a regional corporation is not recertified, or its
7 certification is withdrawn pursuant to subdivision nineteen of this
8 section, then the corporation shall give written notice to such regional
9 corporation which shall thereafter neither make new loans nor undertake
10 new obligations except upon written approval of the corporation. The
11 corporation may thereafter certify another regional corporation in the
12 manner provided in this section for the selection of regional corpo-
13 rations. Upon the certification of a successor regional corporation, all
14 remaining loan funds, records and accounts of the regional corporation
15 not recertified shall be transferred to the corporation and the regional
16 corporation not recertified shall cease to function pursuant to this
17 section. The corporation shall transfer returned funds to a successor
18 regional corporation, or in the event no successor regional corporation
19 is formed, equally to other existing regional corporations.
20 (7) A regional corporation certified by the corporation shall use the
21 funds received from the corporation, subject to the terms, conditions
22 and restrictions set forth in this section, to provide financial assist-
23 ance to eligible businesses as defined in subdivision seventeen of
24 section three of this act, for projects that demonstrate a substantial
25 likelihood of providing increases in net new permanent jobs or retaining
26 jobs in businesses that need such financial assistance to remain viable.
27 The regional corporation certified by the corporation shall also use the
28 funds received from the corporation, subject to the terms, conditions,
29 and restrictions set forth in this section, to provide financial assist-
30 ance to micro-enterprises, defined as any commercial business with five
31 or fewer employees, one or more of whom is the owner.
32 (8) The decision to approve or reject an application for financial
33 assistance pursuant to the provisions of this section shall be made by a
34 majority of the directors of the regional corporation, and such decision
35 shall be final. No member of the board or other governing body of a
36 regional corporation shall participate in a decision on a project appli-
37 cation when such member is a party to or has a financial interest in
38 such project. Any member who cannot participate in a decision on a
39 project application for such reason shall not be counted as a member of
40 the board or other governing body for purposes of determining the number
41 of members required for a majority vote on such application.
42 (9) No employee or officer of any regional corporation shall be a
43 party to or have any financial interest in any project that receives
44 financial assistance pursuant to this section.
45 (10) A regional corporation, in approving applications for financial
46 assistance, shall give priority to projects:
47 (a) that will provide increases in net new permanent jobs;
48 (b) located in economically distressed areas as defined by the corpo-
49 ration or employing persons who live in such areas;
50 (c) of minority or women-owned enterprises or enterprises owned by
51 dislocated workers, such workers as defined in the Workforce Investment
52 Act (P.L. 105-220); and
53 (d) of businesses in the early stages of development that have been
54 denied access to credit.
55 (11) The funds allocated to each regional corporation pursuant to this
56 section may be used to guarantee the repayment of a working capital loan
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1 provided by a banking organization to finance an eligible project.
2 Guarantees may be provided for up to ninety percent of the required
3 total project financing, provided that no more than one hundred thousand
4 dollars may be guaranteed for any project. Guarantees may be made for
5 the following types of financing: short and medium term loans for work-
6 ing capital, revolving lines of credit, and seasonal inventory and
7 accounts receivable loans. Guarantees may be made for up to ninety
8 percent of the required total financing up to a maximum of one hundred
9 fifty thousand dollars for interim financing where another lender or
10 guarantor will provide permanent financing within one hundred eighty
11 days. In no event may a loan guarantee be for a term longer than five
12 years. Any loan made by a banking organization that is guaranteed pursu-
13 ant to this subdivision shall be secured by a security agreement, chat-
14 tel paper, loan agreement, or such other instruments or documents deemed
15 necessary or convenient by the regional corporation to secure the loan.
16 Any guarantee made pursuant to this subdivision shall be backed by a
17 minimum reserve within the account established by each regional corpo-
18 ration of at least twenty-five percent of the amount guaranteed that is
19 outstanding.
20 (11-a) A regional corporation, in addition to receiving funds as
21 provided in this section, may also apply for and accept funds from any
22 other source for the purpose of furthering its goals and objectives.
23 Such funds may be used in the same manner as funds received from the
24 corporation to carry out the purposes of this section.
25 (12) The funds of each regional corporation derived pursuant to this
26 section may be used to provide loans for working capital for eligible
27 projects; provided that the amount of the loan does not exceed ninety
28 percent of the total project cost, or one hundred thousand dollars,
29 whichever is less. The interest rate and the terms [on] of such loans
30 shall be determined by the regional corporation, but in no event shall
31 the interest rate be less than [five percent] the federal discount rate.
32 The term of any loan shall not exceed five years. All loans shall be
33 secured by lien positions on collateral at the highest level of priority
34 that can accommodate the borrower's ability to raise sufficient debt and
35 equity capital for the project.
36 (13) A regional corporation shall not provide any financial assistance
37 authorized by this section unless the following conditions are met:
38 (a) the applicant has demonstrated that there is little prospect of
39 obtaining the project financing requested from other public sources of
40 funding within the region, including local revolving loan funds, and
41 that there is little prospect of obtaining adequate project financing
42 from private sources of capital, or in the case of a loan guarantee,
43 that there is little prospect of obtaining project financing without the
44 guarantee; except that in the case of local revolving loan funds, finan-
45 cial assistance from the small business regional revolving loan fund
46 account may be provided for a project in conjunction with financial
47 assistance from a local revolving loan fund, provided that assistance
48 from the small business regional revolving loan fund is no greater than
49 that provided by the local revolving loan fund, and that a project qual-
50 ifying for financial assistance available from a local revolving loan
51 fund is not denied such assistance;
52 (b) the applicant has a minimum equity interest of at least ten
53 percent in the business or project;
54 (c) there is a reasonable prospect of repayment;
55 (d) the project is located in the region represented by the regional
56 corporation;
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1 (e) the project will comply with any applicable environmental rules or
2 regulations;
3 (f) the applicant has certified that it will not discriminate against
4 any employee or any applicant for employment because of race, religion,
5 color, national origin, sex, or age;
6 (g) a staff member or a representative of the regional corporation
7 acting in an official capacity has personally visited the project site
8 and/or the applicant's place of business; and
9 (h) financial commitments for the project have been obtained from
10 other public and private sources.
11 (14) Grants made by the corporation pursuant to this section shall not
12 be made available for:
13 (a) projects that would result in the relocation of any business oper-
14 ation from one municipality within the state to another, except under
15 one of the following conditions: (i) when a business is relocating
16 within a municipality with a population of at least one million where
17 the governing body of such municipality approves such relocation; or
18 (ii) the regional corporation notifies each municipality from which such
19 business operation will be relocated and each municipality agrees to
20 such relocation;
21 (b) projects of newspapers, broadcasting or other news media; medical
22 facilities, libraries, community or civic centers; or public infrastruc-
23 ture improvements;
24 (c) refinancing any portion of the total project cost or other exist-
25 ing loans or debts of an applicant, except for the purpose of trans-
26 ferring to the employees or to other local interests ownership of a
27 company that would otherwise depart from or cease or substantially
28 reduce operations in the state and except when such refinancing is
29 required to enable a viable business to maintain or expand its oper-
30 ations in the state;
31 (d) providing funds, directly or indirectly, for payment, distrib-
32 ution, or as a loan, to owners, partners or shareholders of the appli-
33 cant enterprise, except as ordinary income for services rendered; and
34 (e) retail projects, except where the regional corporation finds there
35 will be an increase in net new permanent jobs.
36 (15) A regional corporation may charge application, commitment and
37 loan guarantee fees pursuant to a schedule of fees adopted by the
38 regional corporation and approved by the corporation.
39 (16) The regional corporations shall submit annual reports for the
40 previous fiscal year to the corporation describing the financial assist-
41 ance provided pursuant to this section, including: the number of
42 projects assisted; the amount and type of assistance provided; a
43 description of the projects; the number of jobs created or retained; the
44 status of outstanding loans, guarantees, earnings and account balances;
45 and such other information as the corporation may require.
46 (17) The corporation shall, assisted by the commissioner of economic
47 development and in consultation with the department of economic develop-
48 ment, promulgate rules and regulations in accordance with the state
49 administrative procedure act setting forth procedures to be followed by,
50 and the responsibilities and obligations of, regional corporations and
51 the corporation. Such rules and regulations shall be consistent with the
52 program plan required by subdivision nineteen of section one hundred of
53 the economic development law.
54 (18) For any positions opened as a result of assistance provided in
55 this section, businesses so assisted shall first consider unemployed or
56 low income individuals eligible to participate in programs funded
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1 through the Workforce Investment Act (P.L. 105-220) who shall be
2 referred to the business by local workforce investment boards created
3 pursuant to such act or by the job service division of the department of
4 labor.
5 (19) The corporation shall annually conduct an audit of each regional
6 corporation to ensure conformity of all aspects of program adminis-
7 tration and of financial assistance transactions with the substantive
8 and procedural provisions of this section. In the event that the corpo-
9 ration finds instances of substantive noncompliance by a regional corpo-
10 ration with any of the provisions of this section and such instances
11 were, or should have been, known to be in noncompliance, the regional
12 corporation shall return, within thirty days, upon demand by the corpo-
13 ration, all uncommitted grant funds on hand and provide an accounting of
14 the loans currently outstanding.
15 The corporation may withdraw a regional corporation's certification:
16 (a) when a member of a board of directors or other governing body, an
17 officer or an employee of said regional corporation is party to or has
18 financial interests in loan projects;
19 (b) when said regional corporation fails to comply with the require-
20 ments for project loans pursuant to this section; or
21 (c) when a regional corporation makes no loans within the previous
22 fiscal year and there is more than one hundred thousand dollars remain-
23 ing in its loan fund account.
24 The corporation shall transfer funds returned from a decertified
25 regional corporation to a successor regional corporation, or, if there
26 be none, distribute such funds equally among other existing regional
27 corporations. Outstanding loans and other obligations payable to such a
28 decertified regional corporation shall be assigned to its successor
29 regional corporation, or to the corporation or an agent designated by
30 the corporation upon such terms and conditions as the corporation shall
31 determine.
32 (20) [Reporting.] (a) The lending organization shall submit to the
33 corporation annual reports stating: the number of program loans made;
34 the amount of program funding used for loans; the use of loan proceeds
35 by the borrower; the number of jobs created or retained; the status of
36 each outstanding program loan, including fund balance; and such other
37 information as the corporation may require.
38 (b) The corporation shall, on or before October 1, 1988 and on or
39 before each October first thereafter, submit a report to the governor
40 and the legislature on the operations and accomplishments of the small
41 business regional revolving loan program. Such report shall include a
42 summary of the information contained in the reports submitted pursuant
43 to subdivision sixteen of this section and of the results of the audits
44 performed by the corporation pursuant to subdivision nineteen of this
45 section, and shall set forth the status of the small business regional
46 revolving loan program for the previous fiscal year, including grants to
47 the regional corporations, earnings and account balances as reported to
48 the corporation. The report to be submitted on October 1, 2005 and on or
49 before each October first thereafter shall be consolidated with the
50 annual program report of the corporation required under the provisions
51 of subdivision (b) of section thirty of this act, as amended.
52 (c) Beginning April 1, 2019, the corporation shall publish on its
53 website the information contained in the annual reports required under
54 paragraphs (a) and (b) of this subdivision in aggregate form omitting
55 borrower identifiable information.
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1 (21) [Evaluation.] (a) The corporation shall submit to the director of
2 the division of the budget, the chairperson of the senate finance
3 committee, and the chairperson of the assembly ways and means committee
4 an evaluation of this program prepared by an entity independent of the
5 corporation. Such evaluation shall be submitted by September 1, 2005 and
6 by September first every four years thereafter.
7 (b) Between evaluation due dates, the corporation shall maintain the
8 necessary records and data required to satisfy such evaluation require-
9 ments and to satisfy information requests received from the director of
10 the budget, the chairperson of the senate finance committee and the
11 chairperson of the assembly ways and means committee between such evalu-
12 ation due dates.
13 (22) The corporation shall recertify existing regional corporations
14 or, in the event a regional corporation's certification has been with-
15 drawn, seek successor corporations among eligible applicants after April
16 first, two thousand two.
17 § 4. Paragraph (f) of subdivision 2 of section 16-c of section 1 of
18 chapter 174 of the laws of 1968, constituting the New York state urban
19 development corporation act, as added by chapter 169 of the laws of
20 1994, is amended to read as follows:
21 (f) The provisions of subdivisions eight, nine, and fourteen through
22 nineteen of section sixteen-a of this act pertaining to the small busi-
23 ness regional revolving [loans] loan trust fund shall also be applicable
24 to the minority and women revolving loan trust fund, provided that:
25 where the term "regional corporation" appears therein it shall be inter-
26 preted to mean an entity selected to administer a minority and women
27 revolving loan trust fund account, and "small business regional revolv-
28 ing [loans] loan trust fund" shall mean a minority and women revolving
29 loan trust fund, and where the term "this section" appears therein it
30 shall mean this section sixteen-c.
31 § 5. Paragraph (h) of subdivision 1 of section 16-e of section 1 of
32 chapter 174 of the laws of 1968, constituting the New York state urban
33 development corporation act, as added by chapter 169 of the laws of
34 1994, is amended to read as follows:
35 (h) "Revolving loan fund account grants" shall include: (i) grants to
36 provide the local match for federally funded community-based loan funds;
37 (ii) grants to capitalize and recapitalize small business regional
38 revolving loan trust fund accounts pursuant to section sixteen-a of this
39 act; and (iii) grants to recapitalize minority and women revolving loan
40 trust fund accounts established pursuant to section sixteen-c of this
41 act.
42 § 6. Subdivision 13 of section 16-e of section 1 of chapter 174 of the
43 laws of 1968, constituting the New York state urban development corpo-
44 ration act, as added by chapter 169 of the laws of 1994, is amended to
45 read as follows:
46 (13) Regional loan fund account grants. Assistance from this program
47 may be provided for grants of up to five hundred thousand dollars to
48 capitalize, and up to two hundred thousand dollars to recapitalize,
49 small business regional revolving loan trust fund accounts established
50 pursuant to section sixteen-a of this act and up to two hundred thousand
51 dollars to recapitalize minority and women revolving loan trust fund
52 accounts established pursuant to section sixteen-c of this act; and up
53 to two hundred thousand dollars to provide the local match for appropri-
54 ately federally-financed community-based loan funds.
55 § 7. The opening paragraph of paragraph (b-1) of subdivision 6 of
56 section 16-l of section 1 of chapter 174 of the laws of 1968, constitut-
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1 ing the New York state urban development corporation act, as added by
2 chapter 603 of the laws of 2003, is amended to read as follows:
3 The corporation is authorized, within available appropriations in the
4 empire state economic development fund established pursuant to section
5 16-m of this act, to provide financial assistance in the form of loans,
6 loan guarantees, working capital loans, and interest subsidy grants to
7 subsidize loans from federally chartered instrumentalities and state and
8 private lending institutions, including agricultural cooperative corpo-
9 rations, provided that such assistance to state lending institutions
10 shall not exceed one-third of the total project cost or four hundred
11 thousand dollars, whichever is less, to agricultural enterprises seeking
12 to implement the projects listed in this paragraph. Funds for such
13 loans, grants, subsidies, or any other assistance specified pursuant to
14 this act may come from funds derived from the financial assistance for
15 small and medium-sized business assistance projects established pursuant
16 to section 9-a of this act, the small business regional revolving loan
17 trust fund established pursuant to section 16-a of this act, the
18 regional economic development partnership program established pursuant
19 to section 16-e of this act, the empire state economic development fund
20 established pursuant to section 16-m of this act, or from any other
21 funds, programs, or projects administered by the corporation or by other
22 state appropriations.
23 § 8. This act shall take effect immediately.