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Oregon Bulletin

January 1, 2012

 

Oregon Business Development Department
Chapter 123

Rule Caption: Amending rules regarding prohibition of firearms on University property.

Adm. Order No.: OBDD 7-2011(Temp)

Filed with Sec. of State: 12-8-2011

Certified to be Effective: 12-8-11 thru 6-5-12

Notice Publication Date:

Rules Amended: 123-011-0035, 123-011-0045

Subject: The Oregon Court of Appeals has held that the Board of Higher Education is not authorized to regulate firearms on campus through its rulemaking authority. The University is proposing to amend its rules to remove firearm prohibitions.

      See Oregon Court of Appeals opinion in Oregon Firearms Educational Foundation v. Board of Higher Education and Oregon University System, Case No. A142974, September 28, 2011 (http://www.publications.oid.state.or.us/A142974.pdf)

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-011-0035

Determination of Eligibility

(1) The department shall review the application.

(2) The department shall make a recommendation to the Finance Committee to either approve or deny the application for eligibility for Economic Development Revenue Bonds. The review of the application will be based upon the standards set forth in this rule:

(a) The following economic activities are eligible for Economic Development Revenue Bonds, unless otherwise prohibited under subsection (b) of this section:

(A) Manufacturing or other industrial production;

(B) Agricultural development or food processing;

(C) Aquaculture development or seafood processing;

(D) Development or improved utilization of natural resources;

(E) Research and development;

(F) Destination facilities other than retail or food service businesses;

(G) Convention and trade centers;

(H) Construction of buildings for corporate headquarters;

(I) Product distribution facilities;

(J) Transportation or freight facilities;

(K) Scientific testing including, but not limited to, medical, clinical or engineering testing services;

(L) Sports facilities not otherwise prohibited under paragraph (2)(b)(D) of this rule;

(M) Nonprofit entities organized under Section 501(c)(3) of the U.S. Internal Revenue Code ;

(N) Utilities, as allowed by ORS 285B.323(2).;

(O) Other activities which represent a new technology or type of economic enterprise that the Finance Committee determines are needed to diversify the economic base of an area, or any other activities allowed by Federal law.

(b) Activities or projects that will not be considered for the issuance of Oregon Economic Development Revenue Bonds include:

(A) Retail businesses and shopping centers;

(B) Food service not part of a convention center or destination resort;

(C) Professional corporations for medicine, law, dentistry, or finance;

(D) Athletic, racquetball, handball clubs, amusement parks, or similar endeavors;

(E) Commercial office buildings except for corporate headquarters, unless the office building supports the eligible economic activities listed in (2)(a) of this section;

(F) Activities that maintain private memberships; are not open to the general public; or do not serve a broad cross section of the general public;

(c) The following serve as an elaboration and clarification of activities which are eligible for Economic Development Revenue Bonds:

(A) “Destination Facility” means a project which has a significant impact on the regional tourism economy and has the capacity to be marketed to national or international markets. Incidental food service facilities may be included. Sleeping accommodations without unique attraction capabilities are not eligible;

(B) “Convention and Trade Centers” may include sleeping accommodations, but the majority of the total bond issue must be used for convention meeting facilities. Such facilities must have the capacity to seat a minimum of 300 people. However, the Finance Committee may approve financing for projects, as convention centers, consisting solely or primarily of sleeping accommodations, if the applicant sufficiently demonstrates existing sleeping accommodations are inadequate for existing meeting facility space;

(C) “Corporate Headquarters” may qualify if a minimum of 75 percent of the floor space is allocated to the corporate headquarter function. Corporate headquarters do not include professional corporations for medicine, law, dentistry, or finance or office space to be leased to others;

(D) “Transportation” is not intended to include rolling stock or other highly moveable equipment operated by a carrier for hire;

(E) In deciding whether or not to approve economic development revenue bonding for a utility project, the Finance Committee may consider all relevant factors including but not limited to the utility company’s published tariff schedules and construction and extension procedures as filed with the Oregon Public Utility Commission;

(F) “Pollution Control” equipment may qualify as part of projects that otherwise qualifies under this rule. Where pollution control equipment costs are incidental to the total capital investment of the project, the Finance Committee may qualify such equipment, provided the Oregon Department of Environmental Quality concurs;

(G) “In-State Plant Relocations” not accompanied by an expansion of the applicant’s business or employment, may be considered when the applicant is able to demonstrate that:

(i) The relocation is caused by reasons beyond its control; or

(ii) The relocation will not cause a resulting loss of employment at the former site of the business; or

(iii) The relocation is necessary for the continued operation of the business.

(H) “Nonprofit entities” do not include religious or fraternal organizations;

(I) “Developer Project” may qualify. The Finance Committee shall have right of approval for each tenant occupying 25 percent or more of the leasable space. No more than 25 percent of the leasable space shall be leased to tenants relocating from another Oregon location, unless such relocation is accompanied by an expansion of the tenants’ labor force. These conditions shall be incorporated into bond documents, shall survive closing and shall be enforceable for the term of the bond.

(d) Public Purpose. The applicant must demonstrate that a public purpose is served by the proposed economic development project through economic diversification, creation of new jobs including construction activity, construction occurring before it otherwise could or would, economic activity occurring during economic slumps, tax dollars remaining in the state, or increased productivity. The applicant is encouraged to demonstrate as many public purposes for the proposed project as can be prudently shown;

(e) Prior to determining that an economic development project is an Eligible Project, the Finance Committee shall:

(A) Determine that the action is cost effective, considering both major public expenses and major public benefits;

(B) Find that the project involved is consistent with the department’s comprehensive policy and programs;

(C) Find that the project will produce goods or services which are sold in markets for which national or international competition exists, or if the project is to be constructed and operated by a not-for-profit organization, that the project will not compete significantly with local for-profit businesses;

(D) Determine that the action is the best use of the moneys involved, considering other pending applications for those moneys; and

(E) Provide for public notice of, and public comment on, the action. The public hearing is not a contested case hearing. Members of the public are invited to present written or oral testimony. Only Finance Committee members and department staff will ask questions.

(F) Notify a senior official (such as mayor or city manager) of the city or county (if in unincorporated county property) in which the project will be located about the project and the potential use of economic development revenue bonds.

(f) The Finance Committee may deny an application if the applicant does not demonstrate, to the satisfaction of the Finance Committee, that the project is financially feasible;

(g) The Finance Committee may deny an application if the applicant (or any of the principals in the applicant) is subject to any existing, pending or threatened litigation or unasserted claim, unless such litigation or claim is fully disclosed to the Finance Committee and the arrangements for the settlement thereof are acceptable to the Finance Committee. In any case where such litigation or claim is unknown to the Finance Committee at the time project eligibility is granted or if such litigation or claim arises subsequent to a grant of project eligibility, the Finance Committee may rescind the project eligibility;

(h) The Finance Committee may make any reasonable requirement of the applicant related to the administration of the Oregon Economic Development Revenue Bond Program, including requirements that would survive closing and be enforceable for the term of the bond.

(3) The Finance Committee shall issue a Resolution for Project Eligibility for each economic development project determined to be an eligible project. The term of eligibility shall last 12 months unless extended by the department or the Finance Committee.

(4) Administrative rules in effect at the time the Finance Committee determines a project to be eligible shall continue to govern the project until the bonds have been redeemed, not withstanding any contrary provision in any subsequently adopted administrative rule.

[Publications: Publications referenced are available from the agency.]

Stat. Auth.: ORS 285A.075

Stats. Implemented: ORS 285B.320 - 285B.371

Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 1-1985(Temp), f. & ef. 2-26-85; EDD 3-1985, f. & ef. 6-28-85; EDD 5-1985(Temp), f. & ef. 10-4-85; EDD 6-1985(Temp), f. & ef. 10-22-85; EDD 1-1986, f. 1-28-86, ef. 2-1-86; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88; EDD 9-1988(Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 13-1990, f. & cert. ef. 6-7-90; EDD 14-1994(Temp), f. & cert. ef. 11-10-94; EDD 4-1995, f. 4-28-95, cert. ef. 5-3-95; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 9-2007(Temp), f. & cert. ef. 9-4-07 thru 2-29-08; EDD 9-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 11-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 7-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-011-0045

Fees

In addition to the application fee specified in OAR 123-011-0030(5):

(1) The applicant shall pay to the department at the time of initial bond closing a closing fee of 1/2 of one percent of the total bond issue for the project.

(2) For the Oregon Express Bond Program, the applicant shall pay to the department at the time of the initial bond closing a fee of 1/4th of one percent of the total bond issuance for the project.

(3) An applicant for a current refunding of an outstanding bond shall pay to the department a processing fee of $250 that shall accompany the request for the refunding.

(4) The applicant shall pay to the department a closing fee of 1/10 of one percent of the amount of the refunding bond or for any additional bonds issued under a single project eligibility. This closing fee may be waived for any refunding bond issued within 18 months of the closing date of the bond issue to be refunded.

(5) The department may charge any out-of-pocket expenses, including but not limited to legal expenses, incurred by the department for processing any bond request.

(6) The commission may collect the above fees and expense reimbursements from an applicant that seeks to have an economic development project declared eligible for financing, even though the project has not been determined to be eligible for financing.

Stat. Auth.: ORS 285A.075

Stats. Implemented: ORS 285B.326

Hist.: EDD 8-1984(Temp), f. 12-31-84, ef. 1-1-85; EDD 3-1985, f. & ef. 6-28-85; EDD 4-1988, f. & cert. ef. 2-10-88; EDD 6-1988(Temp), f. & cert. ef. 2-29-88; EDD 9-1988 (Temp), f. & cert. ef. 3-18-88; EDD 15-1988, f. & cert. ef. 5-24-88; EDD 36-1988, f. & cert. ef. 12-15-88; EDD 15-1994, f. & cert. ef. 11-10-94; EDD 10-1996(Temp), f. & cert. ef. 12-4-96; EDD 2-1999(Temp), f. & cert. ef. 3-18-99 thru 9-14-99; EDD 10-1999, f. & cert. ef. 10-11-99; EDD 14-2000(Temp), f. & cert. ef. 12-14-00 thru 6-12-01; Administrative correction 6-14-01; EDD 10-2001(Temp), f. & cert. ef. 12-13-01 thru 6-1-02; Administrative correction 11-29-02; EDD 4-2005, f. & cert. ef. 5-5-05; EDD 9-2007(Temp), f. & cert. ef. 9-4-07 thru 2-29-08; EDD 9-2008(Temp), f. & cert. ef. 3-4-08 thru 8-1-08; EDD 20-2008, f. 7-31-08, cert. ef. 8-1-08; OBDD 7-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

 

Rule Caption: This filing amends the language for eligibility requirements, loan insurance programs and insurance premiums relating to the Credit Enhancement Fund.

Adm. Order No.: OBDD 8-2011(Temp)

Filed with Sec. of State: 12-8-2011

Certified to be Effective: 12-8-11 thru 6-5-12

Notice Publication Date:

Rules Amended: 123-021-0000, 123-021-0010, 123-021-0015, 123-021-0020, 123-021-0040, 123-021-0080, 123-021-0090, 123-021-0110, 123-021-0130

Subject: On September 27, 2010 The Small Business Jobs Act (Congressional HB 5297) was signed into law. One component of the Small Business Jobs Act was the creation of the State Small Business Credit Initiative (SSBCI). SSBCI will support at least $15 billion in small business lending by strengthening state small business programs that leverage private-sector lenders to extend additional credit. $1.5 billion has been allocated to provide capitalization for existing state loan and loan guarantee programs. As a result of the bill, Oregon has been allocated more than $16.5 million for the purpose of providing capitalization to state managed business finance programs (revolving loan programs, forgivable loan programs, loan guarantee programs, capital access programs and venture capital programs).

      The primary deliverable associated with the SSBCI program will be to demonstrate a 10:1 public/private leverage ratio. As a result, by December 31, 2016, to comply with the terms and intent of the program will need to demonstrate that over $165 million in private financing (debt and equity) result from the $16.5 million investment in the Business Finance programs outlined in the application. As a result, the Credit Enhancement Fund was identified as a program to receive capitalization.

      In order to begin enrolling new loans using the SSBCI funds which will help Oregon begin to meet the $165 million private leverage requirement associated with the SSBCI funds, these rules have been amended to reflect the program changes and restrictions associated with the federal funding.

Rules Coordinator: Mindee Sublette—(503) 986-0036

123-021-0000

Purpose

The purpose of these rules is to provide procedures, standards, and criteria for providing loan insurance from the Oregon Credit Enhancement Fund.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0010

Definitions

For the purposes of these rules, additional definitions may be found in OAR chapter 123, division 1. The following terms shall have the following definitions, unless the context clearly indicates otherwise:

(1) “Authorized loan amount” means the amount of a loan authorized by the Department to be under the CEF Program pursuant to a loan insurance authorization issued by the Department to the financial institution making the loan.

(2) “Brownfield” means any real property where expansion or redevelopment is complicated by actual or perceived environmental contamination.

(3) “CEF Program” means the Credit Enhancement Fund Insurance Program established under ORS 285B.200 to 285B.218.

(4) The “deficiency” of a loan means the amount of principal outstanding upon default, accrued interest and the financial institution’s reasonable costs of collection, exclusive of costs attributable to environmental problems, remaining unpaid after liquidation of collateral and collection of guarantees.

(5) “Destination facilities other than retail or food service” means a qualified business which has a significant impact on the regional recreational or tourism economy. Incidental food service or retail facilities necessary to the operation of a destination facility are eligible. Sleeping accommodations without unique attraction capabilities are not qualified businesses.

(6) “Financial institution” has the meaning set forth in ORS 706.008.

(7) “Fund” means the Credit Enhancement Fund created by ORS 285B.215.

(8) “Loan insurance authorization” means a letter from the director or deputy director or designee to a financial institution agreeing to insure a loan to a borrower on the terms and conditions and subject to the requirements stated therein.

(9) “Loan insurance agreement” means the agreement between the financial institution and the Department required by OAR 123-021-0100.

(10) “Working capital loan” means any loan, the proceeds of which are to be used for operating, maintenance and other costs and expenses, or for purposes other than acquiring real property, production equipment, or other capital assets.

(11) “Principal” in regards to a borrower is defined as:

(a) If a sole proprietorship, the proprietor;

(b) If a partnership, each managing partner and each partner who is a natural person and holds a twenty percent (20%) or more ownership interest in the partnership; and,

(c) If a corporation, limited liability company, association or a development company, each director, each of the five most highly compensated executives or officers of the entity, and each natural person who is a direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity. “Principal” in regards to a financial institution is defined as:

(a) If a sole proprietorship, the proprietor;

(b) If a partnership, each partner; and

(c) If a corporation, limited liability company, association or a development company, each director, each of the five most highly compensated executives, officers or employees of the entity, and each direct or indirect holder of twenty percent (20%) or more of the ownership stock or stock equivalent of the entity.

(12) “SSBCI Funds” means U.S. Treasury funds allocated to the Department under the State Small Business Credit Initiative Act of 2010 (title III of the Small Business Jobs Act of 2010, P.L. 111-240, 124 Stat. 2568, 2582).

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0015

Qualified Business

In a distressed area, any existing or proposed business is a Qualified business. Any company that owns, occupies, operates, or has entered into an agreement to own, occupy or operate real property containing a brownfield is a Qualified business. Outside of a distressed area, a Qualified business is defined as any existing or proposed business that sells goods or services in markets for which national or international competition exists, and such sales of goods or services will result in or will aid, promote or facilitate the development of one or more of the following activities:

(1) Manufacturing or other industrial production;

(2) Food processing;

(3) Aquaculture development or seafood processing;

(4) Convention facilities or trade centers;

(5) Destination facilities other than retail or food service;

(6) Transportation or freight facilities;

(7) Distribution facilities; or

(8) Other activities, as approved by the Department that represent new technology or diversifying activity but not including:

(a) Construction of office buildings;

(b) Retail businesses, shopping centers or food service facilities;

(c) Motels or bed and breakfast hotels;

(d) Professional services for medicine, law, dentistry or finance;

(e) Athletic, racquetball, handball, or private membership clubs, or golf courses;

(f) Sand and gravel facilities;

(g) Newspapers;

(h) Lobbying activities (as defined in Section 3(7) of the Lobbying Disclosure Act of 1995, P.L. 104-65, as amended); or,

(i) Acquiring or holding passive investments such as commercial real estate ownership or the purchase of securities; this does not include acquisitions of businesses through 100% stock transfer. For the Evergreen Entrants Insurance, a Qualified business includes an existing or proposed business without, or about to be without, an existing line of credit. For the Evergreen Plus Insurance, a Qualified business includes an existing or proposed business with an existing line of credit.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0020

Eligibility

(1) In order for a Qualified business to be eligible, its project must meet one of the following purposes. Eligible purposes mean the acquisition, improvement, or rehabilitation of real or personal property, working capital for operations, export transactions, maintenance and other business costs and expenses which are used for purposes other than acquiring real or personal property. Eligible purposes do not include:

(a) An insured loan used for any personal, family, or household expenses of the Qualified business or any owner or guarantor;

(b) An insured loan used for construction financing; however, permanent financing after completion of construction may be insured;

(c) An insured loan for the purchase or construction of residential housing;

(d) An insured loan made primarily to pay off or refinance an existing debt to a creditor whose loan is inadequately secured or who is in danger of sustaining a loss;

(e) Repayment of delinquent federal or state income taxes unless the Qualified Business has a payment plan in place with the relevant taxing authority;

(f) Repayment of taxes held in trust or escrow;

(g) Reimbursement of funds owed to any owner, including any equity injection or injection of business capital for the business’ continuance;

(h) (For loans insured by SSBCI Funds) Purchase of any portion of the ownership interest of any owner of the business;

(i) An insured loan used to purchase an existing Qualified business, except for:

(A) Expansions where the majority of loan proceeds are used to support expansion improvements;

(B) Purchase of all or substantially all of the assets of a Qualified business,

(C) (For loans not insured by SSBCI Funds) Purchase of 100% of the stock of a Qualified business, including stock held by employee stock ownership plans, where jobs will be created or retained; provided that the Department’s liability for any loss resulting from a loan made for such purchase shall not exceed $500,000.

(2) The Department will consider refinancing requests on a case by case basis. In evaluating such requests, the Department will consider the financial benefits to the borrower, the prospects for success, public benefits such as jobs created or retained, the extent to which financial institutions agree to extend terms or provide other favorable financing to a borrower, and the extent to which collateral securing an insured loan is improved. The Department’s maximum liability for any loss resulting from a refinance that is insured under the CEF Program will be limited to no more than $500,000 and no more than 75% of the authorized loan amount, whichever is less. Unless specifically waived by the Department, all business and personal assets securing a refinance may require an appraisal or other third party valuation to determine liquidation values at the time of application. The Department reserves the right to set the enrollment terms at the time of approval for loan insurance, including but not limited to the Department’s maximum liability or the insured percentage and in its sole discretion may, when setting the Department’s maximum liability or the insured percentage or both, consider whether a loan is less than fully secured, as determined by the estimated liquidation value of the collateral.

(3) The maximum term for an eligible loan insurance per borrower project is the lesser of fifteen (15) years or the useful life of the assets being financed, or one year plus four annual renewals for the Evergreen Entrants Insurance or Evergreen Plus Insurance.

(4) Eligible borrowers are Qualified businesses as defined in OAR 123-021-0015.

(5) Eligible financial institutions are financial institutions as defined by ORS 706.008.

(6) Any loans insured by SSBCI Funds will be required to meet additional U.S. Treasury requirements including, but not limited to:

(a) The loan has not been made in order to place under the protection of the CEF Program prior debt that is not covered by the CEF Program and that is or was owed by the borrower to the financial institution or to an affiliate of the financial institution.

(b) The loan is not a refinancing of a loan previously made to that borrower by the financial institution or an affiliate of the financial institution.

(c) No Principal of the borrower or the financial institution has been convicted of a sex offense against a minor as such terms are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911).

(d) The borrower, or any principal of the borrower, is not:

(A) an executive officer, director, or principal shareholder of the financial institution, or

(B) a member of the immediate family of an executive officer, director or principal shareholder of the financial institution; or

(C) a related interest of any such executive officer, director, principal shareholder or member of the immediate family. For the purposes of this OAR 123-021-0002(6)(d), the terms “executive officer”, “director”, “principal shareholder”, “immediate family”, and “related interest” refer to the same relationship to the financial institution as the relationship described in 12 C.F.R. Part 215.2 (1990) , whether or not the financial institution is a member bank of the Federal Reserve System.

(e) The activities of the borrower are not activities currently prohibited by U.S. Treasury, such as but not limited to:

(A) The borrower is not a business engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade unless those activities are incidental to the regular activities of the business and are part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business;

(B) The borrower is not a business that earns more than half of its annual net revenue from lending activities unless the business is a non-bank or non-bank holding company community development financial institution;

(C) The borrower is not a business engaged in pyramid sales, or engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted; or,

(D) The borrower is not a business engaged in gambling enterprises, unless the business earns less than 33% of its annual net revenue from lottery sales.

(f) The financial institution is in compliance with requirements of 31 C.F.R. § 103.121.

(g) At the time of approval the borrower does not employ more than 750 employees in the United States.

(h) Total financing for the project is $20,000,000 or less.

(i) No Principal of the borrower is a current member or delegate to the United States Congress or resident U.S. Commissioner.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 8-1999, f. & cert. ef. 10-1-99; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 14-2010, f. 4-30-10, cert. ef. 5-1-10; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0040

Application Contents

(1) Required Contents. Unless waived by the Department, the financial institution shall submit to the Department an application containing the following:

(a) A completed General Information Sheet provided by the Department;

(b) A written narrative by the financial institution analyzing the borrower’s application (i.e. credit analysis), including an identification of the proposed amount of the loan, the requested percentage of insurance and Department insurance program, the purpose, terms and conditions of the loan, a description of the collateral and basis for its valuation, a summary of the borrower’s credit standing, and a description of other sources of financing;

(c) Complete resumes of the borrower, all partners, owners, officers and guarantors, as applicable;

(d) Historical business financial statements for the prior three years, including income statements and balance sheets (income tax returns may also be required), as applicable, if an existing borrower. Income tax returns may be sufficient if accountant prepared statements are unavailable. Interim financial statements must also be included if the most recent statements are beyond 90 days;

(e) Signed current personal financial statement(s) of owners with a minimum 20% ownership interest in the borrower. Federal tax returns may be required. This information may also be required of guarantors;

(f) Pro forma balance sheet and income statement with supporting assumptions. In some instances, monthly cash flow statements may also be required. Cash flow statements are required in cases where loan repayment is dependent on projections, and for borrowers seeking working capital financing;

(g) Completion of the Department’s environmental questionnaire or a comparable one provided by the financial institution and approved by the Department for loans secured in whole or part by real property and for other insured loans, if requested by the Department;

(h) Other information as the Department may require including, but not limited to, projected jobs created or jobs retained by a borrower.

(2) Supplemental Information. The Department may require, at its discretion:

(a) Appraisals of collateral or the financial institution’s basis for determining collateral value;

(b) A business or marketing plan, including an analysis of competition;

(c) Certificates from the Oregon Department of Environmental Quality or any other governmental or regulatory agencies with jurisdiction, if applicable;

(d) Copies of leases or purchase agreements, as applicable;

(e) Any other information or certifications from the borrower or the financial institution deemed by the Department to be necessary or desirable in connection with an insured loan application.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0080

Loan and Insurance Terms and Conditions

(1) Interest rate and term. The rate of interest on the insured loan and the term of the loan shall be agreed between the financial institution and a borrower provided that no term may exceed the lesser of fifteen years or the useful life of the assets being financed or one year plus four annual renewals for the Evergreen Entrants or Evergreen Plus Programs.

(2) Collateral. Repayment of an insured loan shall be secured by such collateral as the Department deems prudent.

(a) Insured loans may, at the discretion of the Department, be secured by collateral valued for collateral purposes at less than the amount of the insured loan, provided the borrower, its principals, and the guarantors, to the satisfaction of the Department, are of good character, have good credit histories, and exhibit the ability to service the proposed and existing debt;

(b) Real estate or unmovable machinery or equipment constituting a significant portion of collateral for repayment of an insured loan shall be located within the state. Mobile machinery or equipment, including vessels, constituting a significant portion of collateral for repayment of an insured loan shall be registered with and taxed by the state or municipal authorities, if the State or municipal authorities register or tax machinery or equipment of a type similar to the collateral, and shall be stored or berthed in the state when not in use.

(c) The Department may, at its sole discretion, require independent collateral valuation and appraisal of the real property assets securing the loan.

(3) Covenants. The covenants and requirements of the loan shall be established by the financial institution in accordance with prudent lending practices. The Department may require such additional covenants and requirements as may be necessary, prudent or desirable. At a minimum, the loan documents should require the borrower to:

(a) Make periodic payments of principal and interest, with the exception of short term working capital loans or evergreen working capital loans or lines of credit where periodic interest payments with a balloon principal payment and/or term options may be acceptable, as determined by the Department;

(b) Make any lease payments;

(c) Maintain adequate insurance on collateral, and maintain books and records on the business;

(d) Pay any taxes or governmental charges assessed against the collateral and comply with all applicable laws and regulations;

(e) Keep the collateral free of liens and encumbrances except for as may be expressly accepted by the financial institution and Department;

(f) Provide for periodic financial reports to the financial institution;

(g) Pay advances necessary to protect the collateral and all expenses of protecting or enforcing the rights of the financial institution and Department.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0090

Loan Insurance Programs

The Department shall offer the following insurance programs:

(1) Conventional Insurance, under which the Department may insure

(a) Up to 80 percent of a loan in which case the Department’s maximum liability for any loss under the Conventional Insurance is the lesser of $2,000,000 or an amount equal to the insured percentage times the authorized loan amount, or

(b) Up to 90 percent of a loan in which case the Department’s maximum liability for any loss under the Conventional Insurance is the lesser of $500,000 or an amount equal to the insured percentage times the authorized loan amount. Should a borrower which receives an insured loan default or otherwise be unable to make loan payments, the Department will pay the financial institution the deficiency of a loan times the insured percentage, subject to the limitation set forth above. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Conventional Insurance and the uninsured portion of the loan.

(2)(a) Evergreen Entrants Insurance, under which the Department may insure up to 75 percent of a line of credit working capital loan. Should a borrower which receives an insured loan default or otherwise be unable to make loan payments, the Department will pay the financial institution the deficiency of the line of credit working capital loan times the insured percentage; provided that the Department’s maximum liability for any deficiency under the Evergreen Entrants Insurance is the lesser of $1,500,000 or an amount equal to the insured percentage of the authorized loan amount. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Evergreen Entrants Insurance and the uninsured portion of the loan.

(b) Eligible borrowers include persons or enterprises without or about to be without existing line of credit working capital loans.

(c) To obtain Evergreen Entrants Insurance, a financial institution must have the capacity to service the loan effectively, including monitoring compliance with any audit and control procedures prescribed by the Department or comparable procedures of the financial institution approved by the Department and must have in place and operating a lending program specializing in line of credit loans secured by or with advances based upon eligible accounts receivable and inventory or other assets. The Department must be satisfied that the financial institution is sufficiently experienced and capable of operating such a lending program effectively.

(3) First Loss Insurance, under which the Department will pay 100 percent of the deficiency of a loan, but the Department’s maximum liability under the First Loss Insurance shall be the lesser of (a) the insured percentage (which shall not exceed 25 percent) times the authorized loan amount, (b) the insured percentage (which shall not exceed 25 percent) times the outstanding balance of the loan, including accrued interest and reasonable costs and expenses of collection and liquidation of collateral exclusive of costs attributable to environmental problems, but not taking into account the proceeds of collateral liquidation and payments by guarantors, or (c) $300,000. Any recovery after payment of a deficiency is applied first to the uninsured portion of the loan and then to the portion of a loan insured through First Loss Insurance.

(4)(a) Evergreen Plus Insurance, under which the Department may insure up to 90 percent of a new increment of a line of credit; provided that the Department’s maximum liability under the Evergreen Plus Insurance is $1,500,000 and the aggregate amount of the line of credit insured under any program does not exceed 80% of the total line of credit. If a financial institution makes a payment request for any deficiency, the Department will pay to the financial institution the lesser of:

(A) A ratable share of the total default charges; or

(B) the deficiency times the insured percentage. The balance of any loss is absorbed by the financial institution. Loan payments, the proceeds of collateral (including collection of guarantees), and any recovery after payment of a deficiency are applied pro rata to the portion of a loan insured through Evergreen Plus Insurance and the uninsured portion of the loan.

(b) The formula for calculating the Department’s ratable share of total default charges is:

R = (G÷T)*P

R represents the ratable share of total default charges.

G represents the amount of the new increment of the line of credit.

T represents the total credit facility made available.

P represents the principal outstanding upon default plus accrued unpaid interest and costs of collateral liquidation and collection of guarantees exclusive of costs attributable to environmental problems.

(c) To obtain the Evergreen Plus Insurance, a financial institution must have in place and operating a lending program specializing in line of credit loans secured by or with advances based upon eligible accounts receivable and inventory or other assets. The Department must be satisfied that the financial institution is sufficiently experienced and capable of operating such a lending program effectively.

(5) The Conventional Insurance and First Loss Insurance are available for all types of non-revolving loans with regular periodic payments of principal and interest no less often than annually for eligible purposes, including working capital loans that are secured by fixed assets.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 13-2002(Temp), f. & cert. ef. 6-18-02 thru 12-13-02; Administrative correction 4-15-03; EDD 6-2005(Temp), f. & cert. ef. 8-5-05 thru 1-31-06; EDD 1-2006, f. & cert. ef. 2-10-06; EDD 5-2008(Temp), f. & cert. ef. 2-26-08 thru 8-1-08; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0110

Insurance Premiums

(1) The Department shall charge a one-time (up-front) insurance premium. Premiums are due at the time financial institutions originate loans and execute loan authorizations with the Department. The Department’s insurance is not effective until premiums are paid. It is expected that financial institutions will pass along the cost of premiums to borrowers. Premiums, expressed as a percentage of the Department’s maximum liability, shall be charged in accordance with the following schedule for the programs indicated: [Schedule not included. See ED. NOTE.]

(2) The fee for the Evergreen Entrants Insurance is 1.25 percent annually; the fee for the Evergreen Plus Insurance is 2.5 percent annually.

(3) For revolving lines of credit or evergreen facilities, the premium is based on the Department’s maximum liability in regard to the credit facility made available to a borrower, regardless of whether or not the line of credit is fully drawn down. Examples:

(a) The premium due on a $200,000, five year loan with 85% Conventional Insurance would be $3,400 ($200,000 x .85 x .02);

(b) The premium for a $200,000 loan with 75% Evergreen Entrants Insurance is $1,875 ($200,000 x .75 x .0125); this amount would be due every year thereafter for up to four additional years, assuming the loan and amount is renewed each year for the maximum term permitted under the Evergreen Entrants program (5 years);

(c) The premium for a $200,000, eight year loan with 25% First Loss Insurance is $2,500 ($200,000 x .25 x .05);

(d) The premium for a $700,000 increment to the line of credit with 25% Evergreen Plus Insurance is $4,375 ($700,000 x .25 x.025); this amount would be due every year thereafter for up to four additional years, assuming the loan and amount is renewed each year for the maximum term permitted under the program (5 years).

[ED. NOTE: Schedules referenced are available from the agency.]

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

123-021-0130

Delegation

With the exception of appeals, the Department may authorize and approve loan insurance authorizations and require execution of any document necessary or convenient to make effective such insurance.

Stat. Auth.: ORS 285A.075 & 285B.200 - 285B.218

Stats. Implemented: ORS 285B.200 - 285B.218

Hist.: EDD 5-1994(Temp), f. & cert. ef. 3-3-94; EDD 11-1994, f. & cert. ef. 7-29-94; EDD 24-2008, f. 7-31-08, cert. ef. 8-1-08; EDD 17-2009, f. 10-030-09, cert. ef. 11-1-09; OBDD 8-2011(Temp), f. & cert. ef. 12-8-11 thru 6-5-12

Notes
1.) This online version of the OREGON BULLETIN is provided for convenience of reference and enhanced access. The official, record copy of this publication is contained in the original Administrative Orders and Rulemaking Notices filed with the Secretary of State, Archives Division. Discrepancies, if any, are satisfied in favor of the original versions. Use the OAR Revision Cumulative Index found in the Oregon Bulletin to access a numerical list of rulemaking actions after November 15, 2011.

2.) Copyright 2012 Oregon Secretary of State: Terms and Conditions of Use

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