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H.R. 4531 (ih) To amend the Reclamation Wastewater and Groundwater Study and [Introduced in House] ...


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                                                 Union Calendar No. 452
106th CONGRESS
  2d Session
                                H. R. 4530

                          [Report No. 106-785]

   To amend the Small Business Investment Act of 1958 to direct the 
 Administrator of the Small Business Administration to establish a New 
        Markets Venture Capital Program, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                              May 24, 2000

    Ms. Velazquez (for herself, Mr. Talent, Mr. King, Ms. Millender-
McDonald, Mrs. Kelly, Mr. Davis of Illinois, Mr. English, Mrs. McCarthy 
 of New York, Mrs. Bono, Mr. Pascrell, Mr. Sweeney, Mr. Hinojosa, Mrs. 
 Christensen, Mr. Brady of Pennsylvania, Mr. Udall of New Mexico, Mr. 
 Moore, Mrs. Jones of Ohio, Mr. Gonzalez, Mr. Phelps, Mrs. Napolitano, 
   Mr. Baird, Ms. Berkley, Mr. Udall of Colorado, Ms. Stabenow, Mr. 
Kanjorski, and Mr. Barrett of Wisconsin) introduced the following bill; 
         which was referred to the Committee on Small Business

                             July 25, 2000

Committed to the Committee of the Whole House on the State of the Union 
                       and ordered to be printed

_______________________________________________________________________

                                 A BILL


 
   To amend the Small Business Investment Act of 1958 to direct the 
 Administrator of the Small Business Administration to establish a New 
        Markets Venture Capital Program, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``New Markets Venture Capital Program 
Act of 2000''.

SEC. 2. NEW MARKETS VENTURE CAPITAL PROGRAM.

    Title III of the Small Business Investment Act of 1958 (15 U.S.C. 
681 et seq.) is amended--
            (1) in the heading for the title, by striking ``SMALL 
        BUSINESS INVESTMENT COMPANIES'' and inserting ``INVESTMENT 
        DIVISION PROGRAMS'';
            (2) by inserting before the heading for section 301 the 
        following:

            ``Part A--Small Business Investment Companies''5

        ; and
            (3) by adding at the end the following:

             ``Part B--New Markets Venture Capital Program

``SEC. 351. DEFINITIONS.

    ``In this part, the following definitions apply:
            ``(1) Developmental venture capital.--The term 
        `developmental venture capital' means capital in the form of 
        equity investments in businesses made with a primary objective 
        of fostering economic development in low- or moderate-income 
        geographic areas.
            ``(2) Low- or moderate-income geographic area.--The term 
        `low- or moderate-income geographic area' means--
                    ``(A) a census tract, or the equivalent county 
                division as defined by the Bureau of the Census for 
                purposes of defining poverty areas, in which--
                            ``(i) the poverty rate is not less than 20 
                        percent;
                            ``(ii) in the case of a census tract or 
                        division located within a metropolitan area, 
                        the median family income for such tract or 
                        division does not exceed the greater of 80 
                        percent of the statewide median family income 
                        or 80 percent of the metropolitan area median 
                        family income; or
                            ``(iii) in the case of a census tract or 
                        division not located within a metropolitan 
                        area, the median family income for such tract 
                        or division does not exceed 80 percent of the 
                        statewide median family income; or
                    ``(B) any area located within--
                            ``(i) a historically underutilized business 
                        zone (HUBZone), as defined in section 3(p) of 
                        the Small Business Act (15 U.S.C. 632(p));
                            ``(ii) an urban empowerment zone or an 
                        urban enterprise community, as designated by 
                        the Secretary of the Department of Housing and 
                        Urban Development; or
                            ``(iii) a rural empowerment zone or a rural 
                        enterprise community, as designated by the 
                        Secretary of the Department of Agriculture.
            ``(3) New markets venture capital company.--The term `New 
        Markets Venture Capital company' means a company that--
                    ``(A) has been granted final approval by the 
                Administration under section 354(e); and
                    ``(B) has entered into a participation agreement 
                with the Administration.
            ``(4) Operational assistance.--The term `operational 
        assistance' means management, marketing, and other technical 
        assistance that assists a small business concern with business 
        development.
            ``(5) Participation agreement.--The term `participation 
        agreement' means an agreement, between the Administration and a 
        company granted final approval under section 354(e), that--
                    ``(A) details the company's operating plan and 
                investment criteria; and
                    ``(B) requires the company to make investments in 
                smaller enterprises at least 80 percent of which are 
located in low- or moderate-income geographic areas.
            ``(6) Specialized small business investment company.--The 
        term `specialized small business investment company' means any 
        small business investment company that--
                    ``(A) invests solely in small business concerns 
                that contribute to a well-balanced national economy by 
                facilitating ownership in such concerns by persons 
                whose participation in the free enterprise system is 
                hampered because of social or economic disadvantages;
                    ``(B) is organized or chartered under State 
                business or nonprofit corporations statutes, or formed 
                as a limited partnership; and
                    ``(C) was licensed under section 301(d), as in 
                effect before September 30, 1996.

``SEC. 352. PURPOSES.

    ``The purposes of the New Markets Venture Capital Program 
established under this part are--
            ``(1) to promote economic development and the creation of 
        wealth and job opportunities in low- or moderate-income 
        geographic areas and among individuals living in such areas by 
        encouraging developmental venture capital investments in 
        smaller enterprises primarily located in such areas; and
            ``(2) to establish a developmental venture capital program, 
        with the mission of addressing the unmet equity investment 
        needs of small enterprises located in low- and moderate-income 
        geographic areas, to be administered by the Administration--
                    ``(A) to enter into participation agreements with 
                New Markets Venture Capital companies;
                    ``(B) to guarantee debentures of New Markets 
                Venture Capital companies to enable each such company 
                to make developmental venture capital investments in 
                smaller enterprises in low- or moderate-income 
                geographic areas; and
                    ``(C) to make grants to New Markets Venture Capital 
                companies, and to other entities, for the purpose of 
                providing operational assistance to smaller enterprises 
                financed, or expected to be financed, by such 
                companies.

``SEC. 353. ESTABLISHMENT.

    ``In accordance with this part, the Administration shall establish 
a New Markets Venture Capital Program, under which the Administration 
may--
            ``(1) enter into participation agreements with companies 
        granted final approval under section 354(e) for the purposes 
        set forth in section 352;
            ``(2) guarantee the debentures issued by New Markets 
        Venture Capital companies as provided in section 355; and
            ``(3) make grants to New Markets Venture Capital companies, 
        and to other entities, under section 358.

``SEC. 354. SELECTION OF NEW MARKETS VENTURE CAPITAL COMPANIES.

    ``(a) Eligibility.--A company shall be eligible to apply to 
participate, as a New Markets Venture Capital company, in the program 
established under this part if--
            ``(1) the company is a newly formed for-profit entity or a 
        newly formed for-profit subsidiary of an existing entity;
            ``(2) the company has a management team with experience in 
        community development financing or relevant venture capital 
        financing; and
            ``(3) the company has a primary objective of economic 
        development of low- or moderate-income geographic areas.
    ``(b) Application.--To participate, as a New Markets Venture 
Capital company, in the program established under this part a company 
meeting the eligibility requirements set forth in subsection (a) shall 
submit an application to the Administration that includes--
            ``(1) a business plan describing how the company intends to 
        make successful developmental venture capital investments in 
        identified low- or moderate-income geographic areas;
            ``(2) information regarding the community development 
        finance or relevant venture capital qualifications and general 
        reputation of the company's management;
            ``(3) a description of how the company intends to work with 
        community organizations and to seek to address the unmet 
        capital needs of the communities served;
            ``(4) a proposal describing how the company will use the 
        grant funds provided under this part to provide operational 
        assistance to smaller enterprises financed by the company, 
        including information regarding whether the company will use 
        licensed professionals, where applicable, on the company's 
        staff or from an outside entity;
            ``(5) with respect to binding commitments to be made to the 
        company under this part, an estimate of the ratio of cash to 
        in-kind contributions;
            ``(6) a description of the criteria to be used to evaluate 
        whether and to what extent the company meets the objectives of 
        the program established under this part;
            ``(7) information regarding the management and financial 
        strength of any parent firm, affiliated firm, or any other firm 
        essential to the success of the company's business plan; and
            ``(8) such other information as the Administration may 
        require.
    ``(c) Conditional Approval.--
            ``(1) In general.--From among companies submitting 
        applications under subsection (b), the Administration shall, in 
        accordance with this subsection, conditionally approve 
        companies to participate in the New Markets Venture Capital 
        Program.
            ``(2) Selection criteria.--In selecting companies under 
        paragraph (1), the Administration shall consider the following:
                    ``(A) The likelihood that the company will meet the 
                goals of its business plan.
                    ``(B) The experience and background of the 
                company's management team.
                    ``(C) The need for developmental venture capital 
                investments in the geographic areas in which the 
                company intends to invest.
                    ``(D) The extent to which the company will 
                concentrate its activities on serving the geographic 
                areas in which it intends to invest.
                    ``(E) The likelihood that the company will be able 
                to satisfy the conditions under subsection (d).
                    ``(F) The extent to which the activities proposed 
                by the company will expand economic opportunities in 
                the geographic areas in which the company intends to 
                invest.
                    ``(G) The strength of the company's proposal to 
                provide operational assistance under this part as the 
                proposal relates to the ability of the applicant to 
                meet applicable cash requirements and properly utilize 
                in-kind contributions, including the use of resources 
                for the services of licensed professionals whether 
                provided by persons on the company's staff or by 
                persons outside of the company.
                    ``(H) Any other factors deemed appropriate by the 
                Administration.
            ``(3) Nationwide distribution.--The Administration shall 
        select companies under paragraph (1) in such a way that 
        promotes investment nationwide.
    ``(d) Requirements To Be Met for Final Approval.--The 
Administration shall grant each conditionally approved company a period 
of time, not to exceed 2 years, to satisfy the following requirements:
            ``(1) Capital requirement.--Each conditionally approved 
        company must raise not less than $5,000,000 of private capital 
        or binding capital commitments from 1 or more investors (other 
        than agencies or departments of the Federal Government) who 
        meet criteria established by the Administration.
            ``(2) Nonadministration resources for operational 
        assistance.--In order to provide operational assistance to 
        smaller enterprises expected to be financed by the company, 
        each conditionally approved company--
                    ``(A) must have binding commitments (for 
                contribution in cash or in kind)--
                            ``(i) from any sources other than the 
                        Administration that meet criteria established 
                        by the Administration;
                            ``(ii) payable or available over a 
                        multiyear period acceptable to the 
                        Administration (not to exceed 10 years); and
                            ``(iii) in an amount not less than 30 
                        percent of the total amount of capital and 
                        commitments raised under paragraph (1);
                    ``(B) must have purchased an annuity--
                            ``(i) from an insurance company acceptable 
                        to the Administration;
                            ``(ii) using funds (other than the funds 
                        raised under paragraph (1)) from any source 
                        other than the Administration; and
                            ``(iii) that yields cash payments over a 
                        multiyear period acceptable to the 
                        Administration (not to exceed 10 years) in an 
                        amount not less than 30 percent of the total 
                        amount of capital and commitments raised under 
                        paragraph (1); or
                    ``(C) must have binding commitments (for 
                contributions in cash or in kind) of the type described 
                in subparagraph (A) and must have purchased an annuity 

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