TITLE 4. AGRICULTURE

PART 1. TEXAS DEPARTMENT OF AGRICULTURE

CHAPTER 17. MARKETING AND PROMOTION

SUBCHAPTER K. GO TEXAN - MARKETING ENHANCEMENT GRANT ASSISTANCE PROGRAM

4 TAC §§17.700 - 17.706

The Texas Department of Agriculture (Department) proposes new Title 4, Part 1, Chapter 17, Subchapter K, §§17.700 - 17.706 to the Texas Administrative Code, providing rules for the establishment, implementation, and administration of the GO TEXAN - Marketing Enhancement Grant Assistance Program (Program), including eligibility, use of funds, application and reporting requirements.

Section 17.700 outlines the purpose of the Program.

Section 17.701 defines important terms and phrases for the subchapter.

Section 17.702 describes the ability for the Department to create and administer grant programs.

Section 17.703 delineates the applicant eligibility requirements to participate in the Program.

Section 17.704 describes allowable activities for use of funds in the Program.

Sections 17.705 and 17.706 identify requirements related to Program administration, including the application process and reporting requirements.

The Department has determined that the proposal will not affect a local economy, so the Department is not required to prepare a local employment impact statement under Texas Government Code, §2001.022.

Karen Reichek, the Department's Administrator for Trade and Business Development, has determined that for each year of the first five years the proposed rules are in effect, there will be no fiscal impact to state government as a result of implementing the proposed rules. For each year of the first five years the proposed rules are in effect, Ms. Reichek does not expect any costs to local governments.

Ms. Reichek has also determined that for each year of the first five years the proposed rules are in effect, the public benefit anticipated as a result of the proposed rules will be to provide an effective and efficient means for the Department to raise awareness of the Texas agriculture industry through additional grant support of promotional activities of the GO TEXAN program and GO TEXAN participants. There are no anticipated economic costs for persons required to comply with the proposed rules. There will be no adverse economic effect on small businesses or micro-businesses. Ms. Reichek does not anticipate that there will be an adverse fiscal impact on rural communities as a result of the implementation of the proposed rules.

Ms. Reichek has also provided the following information related to the government growth impact statement, as required pursuant to Texas Government Code, §2001.0221. As a result of implementing the proposal, for the first five years the proposed rules are in effect:

1. the proposed rules create a government program;

2. no employee positions will be created or eliminated;

3. implementation of the proposed rules does not require an increase or decrease in future legislative appropriations to the Department;

4. the proposed rules do not require an increase or decrease in fees paid to the Department;

5. the proposed rules will create a new regulation;

6. the proposed rules will not repeal an existing regulation;

7. the proposed rules do not increase or decrease the number of individuals subject to the rule's applicability; and

8. the proposed rules do not positively or adversely affect this state's economy.

Written comments on the proposal may be submitted to Ms. Karen Reichek, Administrator for Trade and Business Development, Texas Department of Agriculture at the following address: Karen Reichek, Administrator for Trade and Business Development, Texas Department of Agriculture, P.O. Box 12847, Austin, Texas 78711, or by email to: Karen.Reichek@TexasAgriculture.gov. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register.

The new rules are proposed pursuant to §12.016 of the Texas Agriculture Code (Code), which authorizes the Department to adopt rules as necessary for the administration of its powers and duties under the Code.

The code affected by the proposal is Texas Agriculture Code, Chapters 12 and 46.

§17.700.Statement of Purpose.

The GO TEXAN-Marketing Enhancement Grant Assistance Program is designed to provide grant funds to GO TEXAN partners to assist with the marketing and promotion of certified Texas agricultural products, including those that have been produced, processed, or otherwise had value added to the product in Texas; certified Texas non-agricultural products; Associate GO TEXAN Registrants; and the GO TEXAN Program.

§17.701.Definitions.

General definitions applicable to Title 4, Part 1, including this subchapter, are located in Chapter 1, Rule 1.1. The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:

(1) Associate GO TEXAN Registrants--Persons who apply and are granted limited use of the mark by the department for assistance in the promotion and implementation of the GO TEXAN Program.

(2) Good standing--Means that an applicant's GO TEXAN registration is in full compliance with all of the provisions of the GO TEXAN Program, including applicant's GO TEXAN registration has been approved by TDA and is not currently suspended or terminated, all registration fees have been paid, and the Registrant's account has no outstanding issues.

(3) GO TEXAN Program--Texas Department of Agriculture's promotion of Texas-made, grown, manufactured or processed products, as well as services and communities.

(4) MEGA Program--GO TEXAN-Marketing Enhancement Grant Assistance Program.

(5) Registrant--A person in good standing with the Department who is authorized to use the GO TEXAN certification mark for the purpose of verifying their product or service is grown, manufactured or provided in Texas.

§17.702.Administration.

(a) The Department shall administer the MEGA Program, subject to the availability of funds.

(b) The Department may create grant programs to benefit products or Associate GO TEXAN Registrants by bringing awareness to the businesses and the GO TEXAN Program as a whole.

(c) The Department shall approve a standard grant application for each MEGA Program grant cycle. The request for grant applications, standard application form, or related guidance materials for each MEGA Program grant cycle shall state the purpose of the grant program, eligibility criteria, required information, selection criteria, due date for submission of applications, and estimated award date.

(d) The Department shall review submitted applications according to the published selection criteria and make funding recommendations to the Commissioner.

§17.703.Eligibility.

(a) Eligibility to participate in the MEGA Program is determined upon the deadline to submit applications for this grant program.

(b) An eligible applicant must be a current GO TEXAN Program Registrant in good standing, as defined in this subchapter. Selected applicants must maintain an appropriate level of the GO TEXAN certification throughout the term of the MEGA Program grant, based on grant eligibility criteria published in the request for grant application for each MEGA Program grant cycle.

(c) An applicant that has a family, employment or business relationship with an executive, officer or employee of the Department is not eligible for a grant and may not participate in the MEGA Program. A family relationship is defined as a relationship within the third degree of consanguinity or second degree of affinity, as established pursuant to Chapter 573 of the Texas Government Code.

§17.704.Use of Grant.

(a) Funds received under this subchapter may only be used for activities related to the purpose of the MEGA Program namely, marketing and promotion of certified GO TEXAN agricultural and non-agricultural products, Associate GO TEXAN Registrants, and the GO TEXAN Program.

(b) Funds shall be distributed to selected applicants on a cost reimbursement basis in accordance with the grant agreement.

§17.705.Filing Requirements; Consideration of Project Requests; Grant Awards.

(a) An applicant must submit an application in accordance with published MEGA Program guidelines outlined in the official request for grant applications.

(b) Eligible applicants shall submit a project request in the format prescribed by the Department as part of the MEGA Program grant application and must describe the project activities to be carried out, propose budget expenditures, reflect an estimated timeline for completion of activities, and include any other information required by the Department.

(c) Maximum grant amounts for individual awards shall be published in the request for grant applications for each MEGA Program grant cycle.

(d) The Department may, in its sole discretion, decline to award any grants during a MEGA Program grant cycle.

§17.706.Reporting Requirements.

Grant recipients shall submit required reports in accordance with Department procedures, and as specified in the grant agreement entered into by the Department and the grant recipient.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 7, 2022.

TRD-202200803

Skyler Shafer

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: April 17, 2022

For further information, please call: (512) 936-9360


CHAPTER 28. TEXAS AGRICULTURAL FINANCE AUTHORITY

SUBCHAPTER G. RURAL ECONOMIC DEVELOPMENT FINANCE PROGRAM

4 TAC §§28.70 - 28.80, 28.83 - 28.87

The Texas Agricultural Finance Authority (Authority), a public authority within the Texas Department of Agriculture (Department) proposes new Title 4, Part 1, Chapter 28, Subchapter G, §§28.70 - 28.80 and 28.83 - 28.87 to the Texas Administrative Code, providing rules for the establishment, implementation, and administration of the Rural Economic Development Finance Program. Under this new program, the Authority is offering two new types of loans, Texas Rural Community Loans; and Agriculture and Community Economic Development Loans, to provide financial assistance to eligible entities, including agricultural businesses and other rural economic development projects. The program delineates specific standards of eligibility, application requirements and procedures, and application evaluation criteria, and addresses loan transactions, including commitments, collateral administration, and default procedures.

Section 28.70 sets out the statutory authority for the Authority and the Department to implement and administer this new program.

Section 28.71 outlines the purpose of the program and policy of the Authority's board.

Section 28.72 defines important terms and phrases for the subchapter.

Sections 28.73 and 28.74 establish and describe the two types of financial assistance under this subchapter: (1) the Texas Rural Community Loans; and (2) the Agriculture and Community Economic Development Loans.

Section 28.75 delineates the applicant and project eligibility requirements.

Section 28.76 describes the application requirements and processes.

Sections 28.77 and 28.78 identify the evaluation criteria and the contents of a qualified application.

Section 28.79 lays out the criteria for approval of a commitment.

Section 28.80 provides the general terms and conditions of a commitment by the Authority.

Section 28.83 describes collateral administration.

Sections 28.84 and 28.85 explain circumstances which result in default and default procedures.

Sections 28.86 and 28.87 define prohibited commitments and ineligible persons under this subchapter.

The Department has determined that the proposal will not affect a local economy, so the Department is not required to prepare a local employment impact statement under Texas Government Code, §2001.022.

Karen Reichek, the Department's Administrator for Trade and Business Development has determined that for each year of the first five years the proposed rules are in effect, there will be no fiscal impact to state government as a result of implementing the proposed rules. The Authority anticipates that it will be able to recover the costs of the program through fees and debt service payments associated with financial assistance provided. For each year of the first five years the proposed rules are in effect, Ms. Reichek does not expect any costs to local governments unless the local government directly participates in the program and incurs interest costs and/or fees associated with the direct financial assistance.

Ms. Reichek has also determined that for each year of the first five years the proposed rules are in effect, the anticipated public benefit as a result of administering the proposed rules will be to provide access to needed finance for rural communities and organizations to address the economic development priorities and to support agricultural development throughout the state. Since the program is voluntary, any costs incurred will be voluntary, and will depend on various factors, including the size of the operation. Ms. Reichek does not anticipate that there will be an adverse fiscal impact on small and micro-businesses or rural communities as a result of the implementation of the proposed rules.

Ms. Reichek has also provided the following information related to the government growth impact statement, as required pursuant to Texas Government Code, §2001.0221. As a result of implementing the proposal, for the first five years the proposed rules are in effect:

1. the proposed rules create a government program;

2. one additional full time employee position may be created, and no existing Department employee positions will be eliminated;

3. there will be no increase or decrease in future legislative appropriations to the Department associated with the creation of new employee positions, or the regulation and administration of the Rural Economic Development Finance program;

4. the proposed rules do not require an increase or decrease in fees paid to the Department, although there will be fees associated with voluntary participation in the program;

5. the proposed rules will create a new regulation;

6. the proposed rules will not repeal an existing regulation;

7. the proposed rules do not increase or decrease the number of individuals subject to the rules' applicability; and

8. the proposed rules will positively affect this state's economy.

Written comments on the proposal may be submitted to Ms. Karen Reichek, Administrator for Trade and Business Development, Texas Department of Agriculture at the following address: Karen Reichek, Administrator for Trade and Business Development, Texas Department of Agriculture, P.O. Box 12847, Austin, Texas 78711, or by email to: Karen.Reichek@TexasAgriculture.gov. Comments must be received no later than 30 days from the date of publication of the proposal in the Texas Register.

The new rules are proposed pursuant to §12.016 of the Texas Agriculture Code (Code), which authorizes the Department to adopt rules as necessary for the administration of its powers and duties under the Code, and §§58.022(1) and 58.023 of the Code, which further authorizes the Authority to adopt and enforce bylaws, rules, and procedures in order to carry out its functions under Chapter 58 of the Code.

The code affected by the proposal is Texas Agriculture Code, Chapters 12 and 58.

§28.70.Authority.

The Texas Agricultural Finance Authority (the Authority) is authorized by §58.021 of the Texas Agriculture Code and by Article III, §49-f(g) of the Texas Constitution to design and implement programs to provide financial assistance to eligible agricultural businesses and other rural economic development projects and to issue general obligation bonds in the maximum principal amount of $200 million outstanding at any one time for such programs. The proceeds of such bonds are required to be deposited in the Texas Agricultural Fund and may be used for the purposes provided by Article III, §49-i of the Texas Constitution and for other rural economic development programs. Proceeds of the bonds are to be administered in the same manner that proceeds of bonds issued under Article III, §49-i of the Texas Constitution are administered. Section 58.041 of the Texas Agriculture Code grants Texas Public Finance Authority the exclusive authority to act on behalf of the Authority in issuing debt instruments authorized to be issued by the Authority.

§28.71.Purpose.

The purpose of the Rural Economic Development Finance Program (Program) is to provide financial assistance to eligible entities including agricultural businesses and other rural economic development projects. It is the policy of the Board of Directors of the Authority to provide programs for providing financial assistance to eligible entities that the board considers to present a reasonable risk and have a sufficient likelihood of repayment. This subchapter establishes standards of eligibility and the application procedures for the Program.

§28.72.Definitions.

In addition to the definitions set forth in Texas Agriculture Code, §58.002 and §28.2 of this chapter (relating to Definitions), the following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Applicant--Any entity recognized by state law to conduct business in the state of Texas including for-profit and non-profit entities, political subdivision, or economic development corporation submitting an application with the Authority for a financial assistance under this subchapter.

(2) Commitment--Any form of financial assistance provided to an applicant as approved by the board, including, but not limited to, a guaranty, a direct loan, a participation commitment, an anticipation note, or a conduit issuance for a political subdivision or any other eligible entity as defined by this subchapter.

(3) Economic Development Corporation (EDC)--An entity created pursuant to the Development Corporation Act of 1979, which gives cities the ability to raise funds and finance economic and community development efforts through the creation of economic development corporations (EDCs). Chapters 501, 504 and 505 of the Local Government Code define the scope of EDCs. A Type A EDC is governed by Chapter 504; and a Type B EDC is governed by Chapter 505.

(4) Eligible application--A completed application, including all application fees, documents, and information required by the Authority and submitted by the lender or applicant for a project, that is consistent with the purpose of agricultural and rural economic development and meets the terms and benchmarks defined by the Authority's Credit Policy and Procedures. The Department, the Authority, or the Authority's representative will review the application and issue an approval or denial.

(5) For-profit entity--An organization that is registered in the state of Texas and has a principal place of business in Texas, which operates with the intention of making a profit or whose efforts are made to obtain a profit.

(6) Interest rate--The interest rate approved by the Authority for an approved commitment.

(7) Lender--A lending institution, including a bank, trust company, banking association, savings bank, mortgage company, investment banker, credit union, Community Development Financial Institution, or any affiliate of those entities, and any other financial institution that customarily provides financing for agricultural businesses or rural economic development loans, or any affiliate of such institution.

(8) Non-profit entity--A local, community or regional organization that was formed and conducts its affairs to benefit the public or to assist other individuals, groups or causes, and can demonstrate its non-profit status by providing one of the following:

(A) A copy of the Internal Revenue Service ruling, indicating tax-exempt status;

(B) A copy of the Texas secretary of state charter indicating non-profit status; or

(C) Documentation of its status as an educational institution recognized by the State of Texas.

(9) Political subdivision--A county, municipality, special district, school district, junior college district, housing authority, or other political subdivision of this state as defined by Chapter 172 of the Local Government Code.

(10) Program--Rural Economic Development Finance Program.

(11) Project--An enterprise or project, which would further agricultural business or the economic development of a rural area.

(12) Recipient--An entity approved by the Authority or its designee to receive a commitment outlined in this subchapter.

(13) Rural area--A rural area means an area which is predominately rural in character; an unincorporated area or a city with a population under 50,000; or a county with a population under 200,000.

(14) Special purpose district--A political subdivision of Texas with geographic boundaries that define the subdivision's territorial jurisdiction, as described in Chapter 403, Texas Government Code.

§28.73.Texas Rural Community Loan.

(a) Purpose. The purpose of the Texas Rural Community Loan is to provide financial assistance to political subdivisions and economic development corporations and allow the loans to be secured with sales tax, utility fees, ad valorem taxes, or other revenues or collateral to fund eligible projects.

(b) Eligible Entities. Rural municipalities, counties, special purpose districts, economic development corporations, and political subdivisions supporting agricultural businesses or furthering rural economic development may apply for loan funds under this section.

(c) Use of Funds. Loans may be used for eligible real estate purchases, building construction, site improvements, equipment, water and wastewater systems, municipal infrastructure projects, and any other eligible use that can be identified to further in the economic development of the rural area and/or support agricultural businesses.

(d) Loan Terms. The loan terms will be determined by the board and as defined by this subchapter.

(e) Collateral. The collateral and security requirements will be determined by the board and as defined by this subchapter.

§28.74.Agriculture and Community Economic Development Loan.

(a) Purpose. The purpose of the Agriculture and Community Economic Development Loan is to provide financial assistance to Texas-based private entities via an approved participating lender.

(b) Eligible Entities. A private for-profit or non-profit entity authorized to do business in the state of Texas, significantly impacting the agricultural industry and/or furthering rural economic development in Texas may apply for loan funds under this section.

(c) Use of Funds. Loans may be used for real estate purchases, building construction, site improvements, equipment, and any other uses that can be identified to positively impact the agricultural industry and/or improve or assist in the economic development of the rural area.

(d) Loan Terms. The loan terms will be determined by the lender, the board and as defined by this subchapter.

(e) Collateral. The collateral and security requirements will be determined by the board and the participating lender.

§28.75.Applicant and Minimum Project Eligibility Requirements.

(a) Applicant. An applicant is eligible for a loan from the Authority if it meets the following criteria:

(1) The applicant is a legal entity under the laws of the United States of America and the State of Texas;

(2) The applicant has a principal place of business in the state;

(3) The applicant is an eligible entity pursuant to §§28.73 or 28.74 of this subchapter (relating to Texas Rural Community Loan and Agriculture and Community Economic Development Loan);

(4) The applicant submits an eligible application to the Authority;

(5) If applicable, the lender submits required documentation to the Authority;

(6) The applicant is not considered an ineligible person as defined by §28.87 of this subchapter (relating to Ineligible Persons);

(7) The applicant has complied with state law and Authority rules; and

(8) The applicant meets the criteria and guidelines in the Authority's credit policy.

(b) Project. The project is an eligible project if it provides significant benefits to agricultural development and/or rural economic development and is not considered an ineligible commitment as defined by §28.86 of this subchapter (relating to Prohibited Commitments).

(c) Project costs. Any proceeds provided by the Authority may be used only to finance expenditures incurred in connection with the development of the project as identified in the budget filed with the application and approved by the board.

(d) Ineligible project costs. Any expenditure that is not identified in the approved budget filed with the application, or is otherwise prevented by regulation or statute, is not eligible for financing hereunder, unless the applicant provides evidence accepted by the board that such expenditure is necessary for completion of the project, complies with regulation and statute, and will not increase the commitment approved.

§28.76.Application Filing Requirements and Application Review Processes.

(a) Application forms. An applicant or participating lender seeking a commitment from the Authority must use the application forms provided by the Authority and the Department.

(b) Submission of a qualified application. Applicants are required to submit the application material to Department staff for presentation to the board.

(c) Staff Review. Staff will review all applications per evaluation criteria included in §28.77 of this subchapter (relating to Evaluation Criteria).

(d) Board review. Staff will submit a report and recommendation on each qualified application to the board as defined by the Credit Policy and Procedures. The board may, in its discretion, recommend the imposition of additional conditions and requirements in the approval of an eligible application.

(e) Notification of approval. Upon conditional approval of the qualified application by the board, staff will notify the applicant or lender in writing identifying the terms and conditions of the commitment provided.

(f) Denial of eligible application. If the eligible application is denied by the board, staff will notify the applicant in writing identifying the reasons for denial. Applicants who have been denied may re-apply to the program.

(g) Reporting to the board. Staff shall report to the board at each board meeting the status of all outstanding loans.

§28.77.Evaluation Criteria.

In evaluating applications for financial assistance under this subchapter, the board and staff shall consider at minimum:

(1) The anticipated benefits arising from the financial assistance to the applicant, including both the potential impact on agricultural development and rural economic development;

(2) The qualifications and eligibility of the applicant;

(3) The applicant's ability to repay the financial obligation;

(4) The demonstrated level of need for the Authority's financial assistance;

(5) The funding needed for continued development;

(6) The collateral offered by the applicant; and

(7) The present involvement and support of local organizations.

§28.78.Contents of Eligible Application.

Required information. The eligible application must set forth the information necessary for the determination to provide a commitment by the Authority or the Authority's designee and will include all that is outlined and required in the application and at minimum:

(1) Applicant's name, address, email and telephone number;

(2) Applicant's representative;

(3) Lender's name, address, email and telephone number, if applicable;

(4) Applicant's ownership structure and names of key management, principals, board members, principal investors and percentage of ownership, if applicable;

(5) Detailed statement of project benefit and/or economic impact;

(6) Articles of incorporation and bylaws, or other founding documents, certificate of good standing with the secretary of state, or other instruments that establish or describe the legal operation or structure of the applicant and/or the benefitting business, if applicable; and

(7) Copies of Internal Revenue Service applications and approvals for non-profit status, if applicable.

§28.79.General Criteria for Approval of Financial Assistance.

(a) Capital contribution. The Authority shall also consider the applicant's equity contribution in the project and whether the applicant has secured additional financial assistance.

(b) Reasonable risk. There must be reasonable assurance, in the judgment of the Authority, that the commitment provided can and will be repaid according to its terms. In making this judgment the Authority may consider the following:

(1) Evidence of the manner, means, and security of payment by the applicant;

(2) Projected cash flow of the applicant;

(3) Firm commitments from other independent and responsible financial sources for all other funds in excess of the Authority's commitment;

(4) Collateral and other sources of guarantees or insurance securing the Authority's commitment;

(5) Credit history and financial condition of the applicant;

(6) Historical financial information of applicant;

(7) The applicant's management; and

(8) Eligibility of lender, if applicable. The lender originating an application for the program must have a continuing ability to evaluate, perform and service the loan; and make the necessary reports as identified in the rules of the program. The lender must agree to exercise due diligence in the servicing, maintenance, review and evaluation of performance without regard to the existence of participation by the Authority or any other limitation of risk. The Authority reserves the right to refuse to enter into an agreement with lenders which, in the judgment of the Authority, do not have the ability to appropriately make and service the loan.

(c) Credit Policy. The Credit Policy and Procedures established by the Authority represents the minimum requirements for a commitment made by the Authority.

§28.80.General Terms and Conditions of the Authority's Commitment.

(a) Permissible use of the commitment. The commitment is to be used to finance the project or purpose identified in the approved application.

(b) Interest. The interest rate shall be the rate approved by the Authority and/or lender, if applicable.

(c) Fees. The Authority may approve fees, as it deems appropriate, on a case-by-case basis. An application fee may be required at the time of application.

(d) Security. Loans must be secured by collateral of a type, amount, and value which, when considered with other criteria, ensures the full repayment of the financial assistance and the solvency of the Program.

(e) Maturity. The maturity of the commitment may not exceed thirty years, or the useful life of the collateral, whichever is less. The maturity shall be negotiated between the Authority, applicant, and participating lender, if applicable. For commitments secured by revenues, including sales tax, the amortization period is determined by the Debt Service Coverage Ratio and with consideration given to prior volatility in tax/revenue collections. Financing terms are set forth in the Credit Policy and Procedures.

(f) Reporting requirements to the Authority for a commitment provided by the Authority may include:

(1) Annual financial audit, and annual employment information, when applicable;

(2) Quarterly reports summarizing project status and any anticipated challenges in a format provided by the Authority; and

(3) If necessary, the Authority may request other reports or documentation reasonably necessary for an assessment of the recipient's compliance with the program.

(g) Additional reporting requirements for participation loans provided by the lender to the Authority at minimum include:

(1) Notification if the loan is placed on a watch list;

(2) Quarterly reports indicating loan balance, repayment status and any significant change to the recipient's credit and/or financial position in the format requested by the Authority;

(3) Notification in the event of any breaches or defaults in the terms, conditions, or covenants of the note, loan agreement or other loan documents; and

(4) If necessary, the Authority may request other reports or documentation reasonably necessary for an assessment of the recipient's compliance with the program, or ability to comply with the program in the future.

(h) Lender Agreement. The Lender Agreement supplied by the Authority shall be evidence of the terms agreed upon by the Authority, recipient, and lender, if applicable, including loan administration, loan repayment, and any applicable terms, fees, and interest rate requirements.

§28.83.Collateral Administration.

(a) Except as otherwise provided by state law, by these rules or by resolution of the board, the staff, with approval of the commissioner of agriculture, the deputy commissioner of agriculture, or the official of the department designated by the commissioner of agriculture, shall have the authority to act on behalf of the Authority, without specific board approval, in regard to the collection, settlement and enforcement of each and every commitment under the program. Such authority shall include, without limitation, the actions required to be taken by the Authority under any loan agreement, any participation agreement and any other agreement entered into by the Authority concerning commitments provided by the Authority.

(b) The Authority shall make efforts to perfect and preserve any security interest in collateral or other security pledge, and exercise any and all remedies available in the event of a default including possession, repossession and liquidation as appropriate to recover losses and other costs, including any attorneys' fees and court costs.

(c) Nothing in this section shall prevent the staff or the commissioner of agriculture, the deputy commissioner of agriculture, or the official of the department designated by the commissioner of agriculture from submitting any matter to the board for its consideration and approval.

§28.84.Default by Recipient.

A recipient may be declared in default if one or more of the following conditions exists as determined by the Authority and/or lender, whichever is applicable, and any other reasons that may be identified in the closing documents of the loan:

(1) The recipient does not pay a scheduled principal or interest payment;

(2) The recipient fails to comply with any condition, covenant, obligation, provision, requirement, or term of the note, loan agreement, or instrument securing the loan;

(3) The recipient fails personally to complete the project as described in the application;

(4) The recipient fails to provide the lender with financial statements and any other documents as required by these rules; or

(5) The recipient fails to meet the project goals defined in the application.

§28.85.Default Procedures.

The Authority will define default procedures in the Credit Policy and Procedures.

§28.86.Prohibited Commitments.

Prohibited commitments under the Rural Economic Development Finance Program include the following:

(1) Commitments for lobbying activities, as such activities are defined under state or federal law;

(2) Commitments involving the acquisition or holding of passive investments, such as commercial real estate ownership;

(3) Commitments for the repayment of delinquent federal or state income taxes;

(4) Commitments for the repayment of payroll or sales taxes, or other taxes required to be held in trust or escrow;

(5) Commitments that are, or are made in a manner that is, prohibited by federal or state laws that pertain to the investment of public money; and

(6) Commitments to an entity that a member of the Authority may have an interest in or a commitment to an entity that could present a conflict of interest. A conflict of interest occurs when a person serves or represents two distinct entities and must choose between two conflicting interests or loyalties. Generally, when an individual's official duties clash with the individual's personal interests, a conflict of interest may occur. Examples include nepotism, personal or professional relationships, direct or indirect financial interests, or business or professional activity, including incurring an obligation or receiving a benefit of any nature, that is in substantial conflict with the proper discharge of the officer or employee's duties in the public interest.

§28.87.Ineligible Persons.

The following persons or entities are ineligible to receive financial assistance under the Rural Economic Development Finance Program:

(1) A principal, executive officer, director, shareholder, member, or partner of a recipient, or any subsidiary, parent, affiliate or related entity or person of a recipient;

(2) A member of the immediate family of a principal, executive officer, director, shareholder, member, or partner of a recipient;

(3) A related interest of a principal, executive officer, director, shareholder, member, or partner of recipient;

(4) A person if the investment would result in violation of Chapter 176 of the Texas Local Government Code;

(5) A person (or any principal executive officer, director, shareholder, or member) who has been convicted of a felony;

(6) A person (or any principal, executive officer, director, shareholder, or member) that has demonstrated a pattern or practice of defalcation of accounts or funds;

(7) A person (or any principal executive officer, director, shareholder, or member) who has mis-certified its status as a minority and/or woman owned business enterprise;

(8) A person (or any principal executive officer, director, shareholder, or member) who has been debarred from participating in other federal or state programs;

(9) A person (or any principal executive officer, director, shareholder, or member) that has been convicted of, or subjected to a civil judgment for fraud;

(10) A person (or any principal executive officer, director, shareholder, or member) who has been convicted of, or subjected to a civil judgment for, federal or state antitrust law violations;

(11) A person (or any principal executive officer, director, shareholder, or member) who has been convicted of a criminal offense relating to embezzlement, theft, forgery, bribery, falsification, or destruction of records, making false statements, receiving stolen property, making false claims, obstruction of justice, or conspiracy to do the same;

(12) A person (or any principal executive officer, director, shareholder, or member) who has been convicted of a criminal offense indicating a breach of trust, dishonesty or lack of integrity, or conspiracy to do the same;

(13) A business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade, such as stock investments, commodities futures, and currency trading;

(14) A business that earns more than half of its annual net revenue from lending activities unless the business is a Community Development Financial Institution;

(15) A business engaged in pyramid sales, where a participant's primary incentive is based on the sales made by an ever-increasing number of participants, or a multi-level marketing organization or business;

(16) A business engaged in activities that are prohibited by federal or Texas law; and

(17) A business engaged in gambling enterprises, with the sole exception of a retail grocery or convenience store business that earns less than 33% of its annual net revenue from lottery sales.

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on March 7, 2022.

TRD-202200791

Skyler Shafer

Assistant General Counsel

Texas Department of Agriculture

Earliest possible date of adoption: April 17, 2022

For further information, please call: (512) 936-9360