S T A T E O F N E W Y O R K
________________________________________________________________________
3384--A
Cal. No. 148
2009-2010 Regular Sessions
I N A S S E M B L Y
January 27, 2009
___________
Introduced by M. of A. WEPRIN, CANESTRARI, AUBRY, CHRISTENSEN, COOK,
PERRY, SCHIMMINGER, JEFFRIES, PEOPLES, PRETLOW, RAMOS, KOON, COLTON --
Multi-Sponsored by -- M. of A. ROBINSON, WRIGHT -- read once and
referred to the Committee on Small Business -- passed by Assembly and
delivered to the Senate, recalled from the Senate, vote reconsidered,
bill amended, ordered reprinted, retaining its place on the order of
third reading
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:
Section 1. Statement of legislative intent. The legislature hereby
finds and declares that small businesses are the economic backbone of
the state and the source of a majority of new jobs. The legislature
further finds that such businesses often have difficulty obtaining small
amounts of capital from traditional banking organizations that is neces-
sary to start-up, improve, or expand operations. State assistance in the
form of loans to meet such capital gaps would enable the formation and
expansion of small businesses across the state and, thus, provide job
opportunities to the state's citizens. The legislature further finds
that the existing regional revolving loan program of the state urban
development corporation demonstrated that it is more efficient and
effective to provide such loans through regional not-for-profit corpo-
rations that are knowledgeable about local businesses and economic
conditions. Therefore, it is the intent of the legislature to improve
job opportunities in the state by revitalizing the urban development
corporation's regional revolving loan program and re-naming it the small
business regional revolving loan program.
S 2. The New York state urban development corporation created by chap-
ter 174 of the laws of 1968 is hereby directed to audit, pursuant to
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06967-04-9
A. 3384--A 2
subdivision 19 of section 16-a of section 1 of the urban development
corporation act, each existing regional corporation administering a
small business regional revolving loan fund and to either recertify such
regional corporation or decertify such regional corporation and competi-
tively select a successor corporation to administer the small business
regional revolving loan fund. In the case of regions that do not have a
regional corporation administering a small business regional revolving
loan fund or that have a decertified regional corporation, the urban
development corporation shall issue a request for proposals, pursuant to
the provisions of section 16-a of section 1 of the urban development
corporation act, to administer small business regional revolving loan
funds. The corporation shall select from the proposals received the most
qualified applicant in each region pursuant to subdivisions 4, 5, and 6
of such section 16-a. If there is no applicant or no qualified applicant
in a region of the state, that region shall not participate in the small
business regional revolving loan fund program. The corporation, from
money available for this purpose, shall allocate funds to each regional
corporation pursuant to subdivision 1 of such section 16-a.
S 3. Section 16-a of section 1 of chapter 174 of the laws of 1968,
constituting the New York state urban development corporation act, as
amended by chapter 477 of the laws of 2002, subdivisions 20 and 21 as
amended by chapter 524 of the laws of 2005, is amended to read as
follows:
S 16-a. [Regional] SMALL BUSINESS REGIONAL revolving loan program. (1)
The corporation shall establish a fund to be known as the "SMALL BUSI-
NESS regional revolving loan trust fund" and shall pay into such fund
any monies made available to the corporation for such fund from any
source. The monies held in or credited to the fund shall be expended
solely for the purposes set forth in this section. The corporation shall
not commingle the monies of such fund with any other monies of the
corporation or any monies held in trust by the corporation.
(2) The corporation shall allocate any monies made available for such
fund for the purpose of making grants to regional corporations. The
grants shall be allocated as follows:
(a) fifty percent divided equally among the regions;
(b) fifty percent according to a formula weighted in favor of those
regions with the greatest levels of economic distress as determined by
poverty rates, number of persons receiving public assistance, unemploy-
ment rates, rate of employment decline and such other indicators of
economic distress as the corporation deems appropriate; and
(c) in the event a regional corporation advises the corporation that
it does not require all or a portion of the funds to be distributed
pursuant to this subdivision, such funds shall be re-distributed by the
corporation equally among the other regional corporations.
(3) In accordance with the rules and regulations of the corporation,
each regional corporation shall establish two special accounts for
monies received by the regional corporation pursuant to the provisions
of this section. The grant monies received from the corporation, earn-
ings on such monies, and any principal repayments shall be deposited in
a loan fund account; any interest earned by the regional corporation on
loans will be deposited in a separate interest repayment account. A
regional corporation shall be authorized to provide financing assistance
to eligible projects. Any interest earned from its loans may be used by
a regional corporation for the cost of administering the programs
authorized by this section.
A. 3384--A 3
(4) Regional corporations shall be selected by the corporation from
among eligible applicants to administer a SMALL BUSINESS regional
revolving loan program. An eligible applicant shall:
(a) represent at least two entire contiguous counties;
(b) have available to it staff with sufficient expertise to analyze
applications for financial assistance, to regularly monitor financial
assistance to clients, and have made arrangements to provide management
or technical assistance to clients;
(c) have an effective plan to market its services to small businesses
through such entities as chambers of commerce, industry trade associ-
ations, banks, local development corporations, community based organiza-
tions and industrial development agencies; and
(d) have established a loan committee composed of five or more persons
experienced in commercial lending or in the operation of a for-profit
business and a staff person of the regional office of the department of
economic development. Such loan committee shall review every application
to the regional corporation for financial assistance pursuant to this
section, shall determine the feasibility of the transaction proposed in
the application and shall recommend to the board of directors or other
governing body of the regional corporation such action as the committee
deems appropriate.
(5) Applications to the corporation for certification or recertif-
ication as a regional corporation shall:
(a) describe the applicant corporation, including its organization,
membership, loan committee, staff, and sources of other funds, if any;
(b) identify the geographic region to be served;
(c) explain the methods and criteria to be used in determining firms
eligible for financial assistance from the SMALL BUSINESS regional
revolving loan program;
(d) describe the means for coordinating financial assistance available
from the SMALL BUSINESS regional revolving loan program with financial
assistance available from other public funding sources within the region
and how such program will be used to leverage private financing for
projects;
[(e) at any time, the corporation may consider proposals to reconfig-
ure geographic areas served by regional corporations;] and
[(f)] (E) contain such other information as the corporation deems
appropriate.
(6) The corporation shall select, from among eligible applicants,
regional corporations to administer revolving loan programs, on the
basis of:
(a) the ability of the regional corporation to administer the finan-
cial assistance programs authorized under this section;
(b) the extent of coordination with other publicly supported financial
assistance programs available within the region represented by the
regional corporation;
(c) the degree of public and private support within the region for the
applicant regional corporation; and
(d) the ability of the regional corporation to provide financial and
other assistance to businesses located in distressed areas within the
region.
(6-a) The corporation shall, every five years, recertify that each
regional corporation has complied with the terms and conditions of this
section. In the event a regional corporation is not recertified, or its
certification is withdrawn pursuant to subdivision nineteen of this
section, then the corporation shall give written notice to such regional
A. 3384--A 4
corporation which shall thereafter neither make new loans nor undertake
new obligations except upon written approval of the corporation. The
corporation may thereafter certify another regional corporation in the
manner provided in this section for the selection of regional corpo-
rations. Upon the certification of a successor regional corporation, all
remaining loan funds, records and accounts of the regional corporation
not recertified shall be transferred to the corporation and the regional
corporation not recertified shall cease to function pursuant to this
section. The corporation shall transfer returned funds to a successor
regional corporation, or in the event no successor regional corporation
is formed, equally to other existing regional corporations.
(7) A regional corporation certified by the corporation shall use the
funds received from the corporation, subject to the terms, conditions
and restrictions set forth in this section, to provide financial assist-
ance to eligible businesses as defined in subdivision seventeen of
section three of this act, for projects that demonstrate a substantial
likelihood of providing increases in net new permanent jobs or retaining
jobs in businesses that need such financial assistance to remain viable.
THE REGIONAL CORPORATION CERTIFIED BY THE CORPORATION SHALL ALSO USE THE
FUNDS RECEIVED FROM THE CORPORATION, SUBJECT TO THE TERMS, CONDITIONS,
AND RESTRICTIONS SET FORTH IN THIS SECTION, TO PROVIDE FINANCIAL ASSIST-
ANCE TO MICRO-ENTERPRISES, DEFINED AS ANY COMMERCIAL BUSINESS WITH FIVE
OR FEWER EMPLOYEES, ONE OR MORE OF WHOM IS THE OWNER.
(8) The decision to approve or reject an application for financial
assistance pursuant to the provisions of this section shall be made by a
majority of the directors of the regional corporation, and such decision
shall be final. No member of the board or other governing body of a
regional corporation shall participate in a decision on a project appli-
cation when such member is a party to or has a financial interest in
such project. Any member who cannot participate in a decision on a
project application for such reason shall not be counted as a member of
the board or other governing body for purposes of determining the number
of members required for a majority vote on such application.
(9) No employee or officer of any regional corporation shall be a
party to or have any financial interest in any project that receives
financial assistance pursuant to this section.
(10) A regional corporation, in approving applications for financial
assistance, shall give priority to projects:
(a) that will provide increases in net new permanent jobs;
(b) located in economically distressed areas as defined by the corpo-
ration or employing persons who live in such areas;
(c) of minority or women-owned enterprises or enterprises owned by
dislocated workers, such workers as defined in the Workforce Investment
Act (P.L. 105-220); and
(d) of businesses in the early stages of development that have been
denied access to credit.
(11) The funds allocated to each regional corporation pursuant to this
section may be used to guarantee the repayment of a working capital loan
provided by a banking organization to finance an eligible project.
Guarantees may be provided for up to ninety percent of the required
total project financing, provided that no more than one hundred thousand
dollars may be guaranteed for any project. Guarantees may be made for
the following types of financing: short and medium term loans for work-
ing capital, revolving lines of credit, and seasonal inventory and
accounts receivable loans. Guarantees may be made for up to ninety
percent of the required total financing up to a maximum of one hundred
A. 3384--A 5
fifty thousand dollars for interim financing where another lender or
guarantor will provide permanent financing within one hundred eighty
days. In no event may a loan guarantee be for a term longer than five
years. Any loan made by a banking organization that is guaranteed pursu-
ant to this subdivision shall be secured by a security agreement, chat-
tel paper, loan agreement, or such other instruments or documents deemed
necessary or convenient by the regional corporation to secure the loan.
Any guarantee made pursuant to this subdivision shall be backed by a
minimum reserve within the account established by each regional corpo-
ration of at least twenty-five percent of the amount guaranteed that is
outstanding.
(11-a) A regional corporation, in addition to receiving funds as
provided in this section, may also apply for and accept funds from any
other source for the purpose of furthering its goals and objectives.
Such funds may be used in the same manner as funds received from the
corporation to carry out the purposes of this section.
(12) The funds of each regional corporation derived pursuant to this
section may be used to provide loans for working capital for eligible
projects; provided that the amount of the loan does not exceed ninety
percent of the total project cost, or one hundred thousand dollars,
whichever is less. The interest rate and the terms [on] OF such loans
shall be determined by the regional corporation, but in no event shall
the interest rate be less than [five percent] THE FEDERAL DISCOUNT RATE.
The term of any loan shall not exceed five years. All loans shall be
secured by lien positions on collateral at the highest level of priority
that can accommodate the borrower's ability to raise sufficient debt and
equity capital for the project.
(13) A regional corporation shall not provide any financial assistance
authorized by this section unless the following conditions are met:
(a) the applicant has demonstrated that there is little prospect of
obtaining the project financing requested from other public sources of
funding within the region, including local revolving loan funds, and
that there is little prospect of obtaining adequate project financing
from private sources of capital, or in the case of a loan guarantee,
that there is little prospect of obtaining project financing without the
guarantee; except that in the case of local revolving loan funds, finan-
cial assistance from the SMALL BUSINESS regional revolving loan fund
account may be provided for a project in conjunction with financial
assistance from a local revolving loan fund, provided that assistance
from the SMALL BUSINESS regional revolving loan fund is no greater than
that provided by the local revolving loan fund, and that a project qual-
ifying for financial assistance available from a local revolving loan
fund is not denied such assistance;
(b) the applicant has a minimum equity interest of at least ten
percent in the business or project;
(c) there is a reasonable prospect of repayment;
(d) the project is located in the region represented by the regional
corporation;
(e) the project will comply with any applicable environmental rules or
regulations;
(f) the applicant has certified that it will not discriminate against
any employee or any applicant for employment because of race, religion,
color, national origin, sex, or age;
(g) a staff member or a representative of the regional corporation
acting in an official capacity has personally visited the project site
and/or the applicant's place of business; and
A. 3384--A 6
(h) financial commitments for the project have been obtained from
other public and private sources.
(14) Grants made by the corporation pursuant to this section shall not
be made available for:
(a) projects that would result in the relocation of any business oper-
ation from one municipality within the state to another, except under
one of the following conditions: (i) when a business is relocating
within a municipality with a population of at least one million where
the governing body of such municipality approves such relocation; or
(ii) the regional corporation notifies each municipality from which such
business operation will be relocated and each municipality agrees to
such relocation;
(b) projects of newspapers, broadcasting or other news media; medical
facilities, libraries, community or civic centers; or public infrastruc-
ture improvements;
(c) refinancing any portion of the total project cost or other exist-
ing loans or debts of an applicant, except for the purpose of trans-
ferring to the employees or to other local interests ownership of a
company that would otherwise depart from or cease or substantially
reduce operations in the state AND EXCEPT WHEN SUCH REFINANCING IS
REQUIRED TO ENABLE A VIABLE BUSINESS TO MAINTAIN OR EXPAND ITS OPER-
ATIONS IN THE STATE;
(d) providing funds, directly or indirectly, for payment, distrib-
ution, or as a loan, to owners, partners or shareholders of the appli-
cant enterprise, except as ordinary income for services rendered; and
(e) retail projects, except where the regional corporation finds there
will be an increase in net new permanent jobs.
(15) A regional corporation may charge application, commitment and
loan guarantee fees pursuant to a schedule of fees adopted by the
regional corporation and approved by the corporation.
(16) The regional corporations shall submit annual reports for the
previous fiscal year to the corporation describing the financial assist-
ance provided pursuant to this section, including: the number of
projects assisted; the amount and type of assistance provided; a
description of the projects; the number of jobs created or retained; the
status of outstanding loans, guarantees, earnings and account balances;
and such other information as the corporation may require.
(17) The corporation shall, assisted by the commissioner of economic
development and in consultation with the department of economic develop-
ment, promulgate rules and regulations in accordance with the state
administrative procedure act setting forth procedures to be followed by,
and the responsibilities and obligations of, regional corporations and
the corporation. Such rules and regulations shall be consistent with the
program plan required by subdivision nineteen of section one hundred of
the economic development law.
(18) For any positions opened as a result of assistance provided in
this section, businesses so assisted shall first consider unemployed or
low income individuals eligible to participate in programs funded
through the Workforce Investment Act (P.L. 105-220) who shall be
referred to the business by local workforce investment boards created
pursuant to such act or by the job service division of the department of
labor.
(19) The corporation shall annually conduct an audit of each regional
corporation to ensure conformity of all aspects of program adminis-
tration and of financial assistance transactions with the substantive
and procedural provisions of this section. In the event that the corpo-
A. 3384--A 7
ration finds instances of substantive noncompliance by a regional corpo-
ration with any of the provisions of this section and such instances
were, or should have been, known to be in noncompliance, the regional
corporation shall return, within thirty days, upon demand by the corpo-
ration, all uncommitted grant funds on hand and provide an accounting of
the loans currently outstanding.
The corporation may withdraw a regional corporation's certification:
(a) when a member of a board of directors or other governing body, an
officer or an employee of said regional corporation is party to or has
financial interests in loan projects;
(b) when said regional corporation fails to comply with the require-
ments for project loans pursuant to this section; or
(c) when a regional corporation makes no loans within the previous
fiscal year and there is more than one hundred thousand dollars remain-
ing in its loan fund account.
The corporation shall transfer funds returned from a decertified
regional corporation to a successor regional corporation, or, if there
be none, distribute such funds equally among other existing regional
corporations. Outstanding loans and other obligations payable to such a
decertified regional corporation shall be assigned to its successor
regional corporation, or to the corporation or an agent designated by
the corporation upon such terms and conditions as the corporation shall
determine.
(20) [Reporting.] The corporation shall, on or before October 1, 1988
and on or before each October first thereafter, submit a report to the
governor and the legislature on the operations and accomplishments of
the SMALL BUSINESS regional revolving loan program. Such report shall
include a summary of the information contained in the reports submitted
pursuant to subdivision sixteen of this section and of the results of
the audits performed by the corporation pursuant to subdivision nineteen
of this section, and shall set forth the status of the SMALL BUSINESS
regional revolving loan program for the previous fiscal year, including
grants to the regional corporations, earnings and account balances as
reported to the corporation. The report to be submitted on October 1,
2005 and on or before each October first thereafter shall be consol-
idated with the annual program report of the corporation required under
the provisions of subdivision (b) of section thirty of this act, as
amended.
(21) [Evaluation.] (a) The corporation shall submit to the director of
the division of the budget, the chairperson of the senate finance
committee, and the chairperson of the assembly ways and means committee
an evaluation of this program prepared by an entity independent of the
corporation. Such evaluation shall be submitted by September 1, 2005 and
by September first every four years thereafter.
(b) Between evaluation due dates, the corporation shall maintain the
necessary records and data required to satisfy such evaluation require-
ments and to satisfy information requests received from the director of
the budget, the chairperson of the senate finance committee and the
chairperson of the assembly ways and means committee between such evalu-
ation due dates.
(22) The corporation shall recertify existing regional corporations
or, in the event a regional corporation's certification has been with-
drawn, seek successor corporations among eligible applicants after April
first, two thousand two.
S 4. Paragraph (f) of subdivision 2 of section 16-c of section 1 of
chapter 174 of the laws of 1968, constituting the New York state urban
A. 3384--A 8
development corporation act, as added by chapter 169 of the laws of
1994, is amended to read as follows:
(f) The provisions of subdivisions eight, nine, and fourteen through
nineteen of section sixteen-a of this act pertaining to the SMALL BUSI-
NESS regional revolving [loans] LOAN trust fund shall also be applicable
to the minority and women revolving loan trust fund, provided that:
where the term "regional corporation" appears therein it shall be inter-
preted to mean an entity selected to administer a minority and women
revolving loan trust fund account, and "SMALL BUSINESS regional revolv-
ing [loans] LOAN trust fund" shall mean a minority and women revolving
loan trust fund, and where the term "this section" appears therein it
shall mean this section sixteen-c.
S 5. Paragraph (h) of subdivision 1 of section 16-e of section 1 of
chapter 174 of the laws of 1968, constituting the New York state urban
development corporation act, as added by chapter 169 of the laws of
1994, is amended to read as follows:
(h) "Revolving loan fund account grants" shall include: (i) grants to
provide the local match for federally funded community-based loan funds;
(ii) grants to capitalize and recapitalize SMALL BUSINESS regional
revolving loan trust fund accounts pursuant to section sixteen-a of this
act; and (iii) grants to recapitalize minority and women revolving loan
trust fund accounts established pursuant to section sixteen-c of this
act.
S 6. Subdivision 13 of section 16-e of section 1 of chapter 174 of the
laws of 1968, constituting the New York state urban development corpo-
ration act, as added by chapter 169 of the laws of 1994, is amended to
read as follows:
(13) Regional loan fund account grants. Assistance from this program
may be provided for grants of up to five hundred thousand dollars to
capitalize, and up to two hundred thousand dollars to recapitalize,
SMALL BUSINESS regional revolving loan trust fund accounts established
pursuant to section sixteen-a of this act and up to two hundred thousand
dollars to recapitalize minority and women revolving loan trust fund
accounts established pursuant to section sixteen-c of this act; and up
to two hundred thousand dollars to provide the local match for appropri-
ately federally-financed community-based loan funds.
S 7. The opening paragraph of paragraph (b-1) of subdivision 6 of
section 16-l of section 1 of chapter 174 of the laws of 1968, constitut-
ing the New York state urban development corporation act, as added by
chapter 603 of the laws of 2003, is amended to read as follows:
The corporation is authorized, within available appropriations in the
empire state economic development fund established pursuant to section
16-m of this act, to provide financial assistance in the form of loans,
loan guarantees, working capital loans, and interest subsidy grants to
subsidize loans from federally chartered instrumentalities and state and
private lending institutions, including agricultural cooperative corpo-
rations, provided that such assistance to state lending institutions
shall not exceed one-third of the total project cost or four hundred
thousand dollars, whichever is less, to agricultural enterprises seeking
to implement the projects listed in this paragraph. Funds for such
loans, grants, subsidies, or any other assistance specified pursuant to
this act may come from funds derived from the financial assistance for
small and medium-sized business assistance projects established pursuant
to section 9-a of this act, the SMALL BUSINESS regional revolving loan
trust fund established pursuant to section 16-a of this act, the
regional economic development partnership program established pursuant
A. 3384--A 9
to section 16-e of this act, the empire state economic development fund
established pursuant to section 16-m of this act, or from any other
funds, programs, or projects administered by the corporation or by other
state appropriations.
S 8. This act shall take effect immediately.