GENERAL ASSEMBLY OF NORTH CAROLINA
1995 SESSION

CHAPTER 310
SENATE BILL 300

AN ACT TO AUTHORIZE THE DEPARTMENT OF COMMERCE TO PLEDGE BLOCK GRANT FUNDS AS LOAN GUARANTEES PURSUANT TO THE HOUSING AND COMMUNITY DEVELOPMENT ACT.

The General Assembly of North Carolina enacts:

Section 1 . G.S. 143B-431(d) reads as rewritten:
"(d)	The Department of Commerce, with the approval of the Governor, may apply for and accept grants from the federal government and its agencies and from any foundation, corporation, association, or individual and may comply with the terms, conditions, and limitations of such grants in order to accomplish the Department's purposes. Grant funds shall be expended pursuant to the Executive Budget Act. In addition, the Department shall have the following powers and duties with respect to its duties in administering federal programs:
(1)	To negotiate, collect, and pay reasonable fees and charges regarding the making or servicing of grants, loans, or other evidences of indebtedness.
(2)	To establish and revise by regulation, in accordance with Chapter 150B of the General Statutes, schedules of reasonable rates, fees, or charges for services rendered, including but not limited to, reasonable fees or charges for servicing applications. Schedules of rates, fees, or charges may vary according to classes of service, and different schedules may be adopted for public entities, nonprofit entities, private for-profit entities, and individuals.
(3)	To pledge current and future federal fund appropriations to the State from the Community Development Block Grant (CDBG) program for use as loan guarantees in accordance with the provisions of the Section 108 Loan Guarantee program, Subpart M, 24 CFR 570.700, et seq., authorized by the Housing and Community Development Act of 1974 and amendments thereto. The Department may enter into loan guarantee agreements with authorized State and federal agencies and other necessary parties in order to carry out its duties under this subdivision.  In making loan guarantees authorized under this subdivision, the Department shall ensure that apportionment of the risks involved in pledging future federal funds in accordance with State policies and priorities for financial support of categories of assistance is made primarily against the category from which the loan guarantee originally derived. A pledge of future CDBG funds under this subdivision is not a debt or liability of the State or any political subdivision of the State or a pledge of the faith and credit of the State or any political subdivision of the State.  The pledging of future CDBG funds under this subdivision does not directly, indirectly, or contingently obligate the State or any political subdivision of the State to levy or to pledge any taxes, nor may pledges exceed twice the amount of annual CDBG funds.
Prior to issuing a Section 108 Loan Guarantee agreement, the Department of Commerce must make the following findings:
a.	The minimum size of the Section 108 Loan Guarantee is seven hundred fifty thousand dollars ($750,000) and the maximum size is five million dollars ($5,000,000) per project.
b.	The Section 108 Loan Guarantee cannot constitute more than fifty percent (50%) of total project costs.
c.	The project has twenty-five percent (25%) equity from the corporation, partnership, or sponsoring party.
d.	The project has the personal guarantee of any person owning ten percent (10%) or more of the corporation, partnership, or sponsoring entity.  Collateral on the loan must be sufficient to cover outstanding debt obligations.
e.	The project has sufficient cash flow from operations for debt service to repay the Section 108 loan.
f.	The project meets all underwriting and eligibility requirements of the North Carolina Section 108 Guarantee Program Guidelines and of the Department of Housing and Urban Development regulations, except that projects involving hotels, motels, private recreational facilities, private entertainment facilities, and convention centers are ineligible for Section 108 loan guarantees.
The Department shall create a loan loss reserve fund as additional security for loans guaranteed under this section and may deposit federal program income or other funds governed by this section into the loan loss reserve fund.  The Department shall maintain a balance in the reserve fund of no less than ten percent (10%) of the outstanding indebtedness secured by Section 108 loan guarantees."
Sec. 2.  G.S. 153A-376 is amended by adding the following new subsection to read:
"(e)	Any county may receive and dispense funds from the Community Development Block Grant Section 108 Loan Guarantee program, Subpart M, 24 CFR 570.700 et seq., either through application to the North Carolina Department of Commerce or directly from the federal government, in accordance with State and federal laws governing these funds.  Any county that receives these funds directly from the federal government may pledge current and future CDBG funds for use as loan guarantees in accordance with State and federal laws governing these funds.  Any county that has pledged current or future CDBG funds for use as loan guarantees prior to the enactment of this subsection is authorized to have taken such action.  A pledge of future CDBG funds under this subsection is not a debt or liability of the State or any political subdivision of the State or a pledge of the faith and credit of the State or any political subdivision of the State.  The pledging of future CDBG funds under this subsection does not directly, indirectly, or contingently obligate the State or any political subdivision of the State to levy or to pledge any taxes."
Sec. 3.  G.S. 160A-456 is amended by adding the following new subsection to read:
"(d1)	Any city may receive and dispense funds from the Community Development Block Grant Section 108 Loan Guarantee program, Subpart M, 24 CFR 570.700 et seq., either through application to the North Carolina Department of Commerce or directly from the federal government, in accordance with State and federal laws governing these funds.  Any city that receives these funds directly from the federal government may pledge current and future CDBG funds for use as loan guarantees in accordance with State and federal laws governing these funds.  Any city that has pledged current or future CDBG funds for use as loan guarantees prior to the enactment of this subsection is authorized to have taken such action.  A pledge of future CDBG funds under this subsection is not a debt or liability of the State or any political subdivision of the State or a pledge of the faith and credit of the State or any political subdivision of the State.  The pledging of future CDBG funds under this subsection does not directly, indirectly, or contingently obligate the State or any political subdivision of the State to levy or to pledge any taxes."
Sec. 4.  This act becomes effective July 1, 1995.
In the General Assembly read three times and ratified this the 21st day of June, 1995.

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Dennis A. Wicker
President of the Senate

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Harold J. Brubaker
Speaker of the House of Representatives