SENATE BILL REPORT

SB 5205

BYSenators Anderson, McMullen, Lee, Smitherman and Barr

Establishing a distressed area investment program.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):February 1, 1989

Senate Staff:Jack Brummel (786-7428)

AS OF FEBRUARY 2, 1989

BACKGROUND:

Community revitalization requires the development of new business ventures and the stimulation of private investment.  The changes in the banking industry in the last decade have, according to some observers, had negative effects on low and moderate income communities in both urban and rural settings.  The demands of investors in the secondary loan market are determining the types of loans made to a greater extent than the particular borrowing needs of local communities.  The smaller or more labor intensive loans which often fuel a healthy local economy are not as profitable as they once were.

SUMMARY:

The State Treasurer establishes a linked deposit program to increase small business loans in distressed communities.  The Treasurer purchases certificates of deposit from financial institutions which make qualifying loans.  The C.D. purchased is equal in amount to the loan made.  The Treasurer establishes interest rates for certificates of deposit and loans.  Preference lending is given to firms engaged in manufacturing, exporting goods or services, or having innovative products or production processes.

The state does not make loans and is not liable for payment on any loans made under the program.

Appropriation:    none

Revenue:    yes

Fiscal Note:      requested January 26, 1989