Oklahoma § 74-5063.4 - Fund - Use and expenditures - Credit enhancement Rules and regulations for administration

§ 74-5063.4. Fund - Use and expenditures - Credit enhancement Rules and regulations for administration

A. The Fund shall be employed by the Oklahoma Development

Finance Authority solely to secure the payment of principal,

interest and premium, if any, on the revenue bonds and other

Oklahoma Statutes - Title 74. State Government

financial obligations issued by the Authority pursuant to the

Oklahoma Development Finance Authority Act, for the specific purpose

of enhancing and supporting the credit of such revenue bonds and

other financial obligations. Such other financial obligations may

include guarantees, loans, letters of credit or other similar

obligations issued by the Authority pursuant to the Oklahoma

Development Finance Authority Act, and may include commitments by

the Authority for the Fund to secure loans made by private financial

institutions. Except for the financial obligation provided in

Section 5 of this act and Section 5063.4i of this title, each such

other financial obligation must be secured by a first lien security

interest on real estate, equipment or inventory, and, except as

provided in Section 5 of this act and Sections 5063.4i and 5063.4b

of this title, the amount of the commitment by the Fund shall not

exceed twenty-five percent (25%) of the value of the collateral

securing each such financial transaction. No portion of the monies

or other assets deposited to the Fund shall be expended or otherwise

used by the Authority in meeting its day-to-day operating expenses,

in paying the cost of issuance of the Authority's revenue bonds or

other financial obligations, or in supporting any other activity of

the Authority not directly related to the Credit Enhancement Reserve

Fund or to enhancing the credit of the Authority's revenue bonds and

other financial obligations.

B. The Authority shall administer the Fund prudently and

according to good insurance practice. Such administration will

minimize the loss experience of the Fund, assure the future

viability of the Fund, and assure the continuing availability of the

proceeds of general obligation bonds issued pursuant to Section

5063.11 of this title as a credit enhancement vehicle for bond

issues in this state on an ongoing basis. Accordingly, the granting

of credit enhancement by the Fund shall be based on principles of

insurability generally applied in the credit enhancement/insurance

industry. The Authority is authorized and directed to adopt initial

rules and regulations governing the credit enhancement activities

and administration of the Fund, including rules and regulations

dealing with the subjects of project feasibility, credit evaluation,

collateral evaluation, reinsurance, maximum risk retention by the

Fund, avoidance of adverse risk selection, and all other factors

deemed relevant by the Authority to the decision whether the Fund

should provide credit enhancement to a particular issue of debt, to

what extent, on what terms, and for what premium rate.

C. The initial rules and regulations for administration of the

Fund promulgated by the Authority pursuant to subsection B of this

section shall be subject to the approval of the Legislature in

accordance with the requirements of the Oklahoma Administrative

Procedures Act.

Oklahoma Statutes - Title 74. State Government

D. No general obligation bonds may be issued pursuant to

Section 5063.11 of this title except upon the approval by a vote of

the people of the State of Oklahoma authorizing the Oklahoma

Development Finance Authority to issue general obligation bonds for

the purposes set forth in this act and unless and until initial

rules and regulations governing administration of the Fund have been

adopted by the Authority. The Authority by resolution or other

appropriate action of the Authority shall determine each issue of

bonds or portions thereof with respect to which the benefits of the

act shall inure.

E. The Authority is authorized to amend the initial rules and

regulations governing administration of the Fund, either by addition

of new rules and regulations, or a change or repeal of existing

rules and regulations; provided, that such amendment, whether by

addition, change or repeal, shall be subject to the approval of the

Legislature in accordance with the requirements of the Oklahoma

Administrative Procedures Act.

F. Except as provided in subparagraph b of paragraph 4 of

subsection A of Section 695.8 of Title 62 of the Oklahoma Statutes,

credit enhancement by the Fund for any bonds or other financial

obligations issued by the Authority pursuant to law shall also

require approval of the Executive Bond Oversight Commission and the

Legislative Bond Oversight Commission as provided by law.

Added by Laws 1987, c. 222, § 74, operative July 1, 1987. Amended

by Laws 1989, c. 374, § 9, emerg. eff. June 6, 1989; Laws 1990, c.

342, § 8, emerg. eff. May 30, 1990; Laws 1993, c. 275, § 40, eff.

July 1, 1994; Laws 1994, c. 285, § 8, eff. July 1, 1994.

§74-5063.4a. Portfolio mix categories.

A. Credit enhancement granted by the Oklahoma Development

Finance Authority shall be categorized by use as portfolio mix

categories as follows:

1. Industrial, agribusiness, and other private activity;

2. Infrastructure and other publicly owned facilities of

governmental entities;

3. Health care and other nonprofit-owned facilities; and

4. The Quality Jobs Investment Program established pursuant to

Section 5062.8a of this title.

B. The balance, as determined by the total principal amount

authorized pursuant to Section 5063.11 of this title less the amount

of Credit Enhancement Reserve Fund applications approved by the Bond

Oversight Commissions prior to June 9, 1990, less the amount

allocated pursuant to Section 5063.4i of this title, shall be

allocated to the portfolio mix categories as follows:

1. Twenty-five percent (25%) of said balance shall be allocated

to the industrial, agribusiness, and other private activity

portfolio mix category; and

Oklahoma Statutes - Title 74. State Government

2. Seventy-five percent (75%) of said balance shall be

allocated to the infrastructure and other publicly owned facilities

of governmental entities portfolio mix category, health care and

other nonprofit-owned facilities portfolio mix category; provided,

no more than twenty percent (20%) of this allocation may be used for

health care and other nonprofit-owned facility projects.

C. The Authority is authorized to credit enhance and secure the

payment of principal, interest and premium, if any, on the revenue

bonds and other financial obligations issued pursuant to the

Oklahoma Development Finance Authority Act, the Local Development

Financing Act and the Credit Enhancement Reserve Fund Act. Except

as used for the Small Business Credit Enhancement Program, the

original principal amount of a credit enhancement commitment of the

Authority granted to obligations in the industrial, agribusiness,

and other private activity portfolio mix category shall not exceed

Two Million Five Hundred Thousand Dollars ($2,500,000.00).

D. To maximize use of the credit enhancement resource and to

assure the viability of the Fund, the Fund shall have a balanced

portfolio by loan size. In the case of the industrial,

agribusiness, and other private activity portfolio mix category, the

Fund shall strive to achieve a cumulative average loan size of less

than One Million Dollars ($1,000,000.00).

E. Notwithstanding any other provisions of this act, any

obligations issued pursuant to the Local Development Financing Act

may be allocated to any of the portfolio mix categories pursuant to

this section and Section 5063.4 of this title.

Added by Laws 1990, c. 342, § 9, emerg. eff. May 30, 1990. Amended

by Laws 1991, c. 123, § 2, emerg. eff. April 29, 1991; Laws 1993, c.

275, § 41, eff. July 1, 1994; Laws 1994, c. 285, § 9, eff. July 1,

1994; Laws 2004, c. 527, § 4, eff. July 1, 2004.

§74-5063.4b. Small Business Credit Enhancement Program - Creation Requirements.

There is hereby created the Small Business Credit Enhancement

Program. Twenty-five percent (25%) of the amount allocated to the

industrial, agribusiness, and other private activity portfolio mix

category pursuant to Section 9 of this act shall be used for the

Small Business Credit Enhancement Program. Credit enhancements

provided pursuant to this section shall be subject to the following

requirements:

1. The original principal amount of credit enhancement on

behalf of any borrower shall not exceed Two Hundred Fifty Thousand

Dollars ($250,000.00);

2. The Authority may insure no more than eighty-five percent

(85%) of a loan, and at least twenty-five percent (25%) of the loan

proceeds shall be used for improvements and not more than twenty-

Oklahoma Statutes - Title 74. State Government

five percent (25%) of the loan proceeds may be used to refinance

existing obligations of a borrower;

3. The borrower:

a.

in the case of an existing business, at the time

application is made for financing assistance, employs

twenty (20) persons or less or has gross sales not

exceeding One Million Five Hundred Thousand Dollars

($1,500,000.00) per year, or

b.

in the case of a new business, at the time application

is made for financing assistance, projects that,

during the first twelve (12) months of operation, it

is reasonably expected will employ twenty (20) persons

or less or have gross sales not exceeding One Million

Five Hundred Thousand Dollars ($1,500,000.00);

4. Borrowers shall be for-profit entities; and

5. Repayment of loans of less than One Hundred Thousand Dollars

($100,000.00) may be secured by less than full collateral if the

borrower or the principals of the borrower have good credit records

as determined by the Authority.

Added by Laws 1990, c. 342, § 10, emerg. eff. May 30, 1990.

§74-5063.4c. Security requirements.

Except as otherwise provided in Section 6 of this act, at the

time of loan origination, the Oklahoma Development Finance Authority

shall require such security from the applicant as it deems necessary

in the circumstances of the insurance commitment. Except for the

infrastructure and other publicly owned facilities of governmental

entities and Quality Jobs Investment Program portfolio mix

categories, such security will include, but not be limited to:

1. A first mortgage or coordinate first mortgage on real

property, facilities or systems and fixtures located thereon; or

2. A second mortgage on real property, facilities or systems

and fixtures located thereon, provided the amount thereof may not

exceed One Million Dollars ($1,000,000.00).

Added by Laws 1990, c. 342, § 11, emerg. eff. May 30, 1990. Amended

by Laws 1993, c. 275, § 42, eff. July 1, 1994; Laws 2002, c. 299, §

16, emerg. eff. May 23, 2002.

§74-5063.4d. Limitations on principal amount of underlying loan.

A. At the time of the Authority's issuance of credit

enhancement on its revenue bonds or other obligations, the principal

amount of the underlying loan for industrial, agribusiness, and

other private activity portfolio mix category and health care and

other nonprofit-owned facilities portfolio mix category financings,

excluding infrastructure and other publicly owned facilities of

government entities and Quality Jobs Investment Program portfolio

Oklahoma Statutes - Title 74. State Government

mix category financings, shall be subject to the following

limitations:

1. For costs of financing or refinancing real property,

including soft costs associated with the construction or development

of the facilities and the insurance premium, the principal amount of

the underlying loan will not exceed ninety percent (90%) of the

lower of:

a.

the actual certified and documented costs of such

projects, or

b.

the appraised (as built) fair market value of the real

property as indicated in an independent appraisal by

an appraiser acceptable to the Authority;

2. For costs of financing the acquisition of personal property,

machinery and equipment, the principal amount of the loan will not

exceed seventy-five percent (75%) of the actual certified or

documented installation cost, including the expense of delivery,

refurbishing and installation. The Authority may require an

independent appraisal in connection with establishing a fair market

value of such personal property and in such case, the principal

amount of the loan may not exceed seventy-five percent (75%) of the

lower of:

a.

the fair market value of such personal property, or

b.

its documented installed costs;

3. The principal amount of a loan, or portions thereof, secured

by accounts receivable, inventory, other current assets and other

personal property will not exceed fifty percent (50%) of the value

of the collateral as determined by the Oklahoma Development Finance

Authority; and

4. The principal amount of a loan, or portions thereof, secured

by cash or cash equivalents or by eligible investment securities

will not exceed one hundred percent (100%) of their market value.

B. The maximum amount of an insurance commitment in enhancing a

public sector entity financing or refinancing of facilities or

program participation will not exceed one hundred percent (100%) of

the entity's cost of financing, refinancing or program

participation.

C. The provisions of this section shall not apply to credit

enhancement of less than One Hundred Thousand Dollars ($100,000.00)

done pursuant to the Small Business Credit Enhancement Program.

D. Limitations on the authorized amounts as established in this

section and in Section 5063.4a of this title notwithstanding, the

Authority may increase such amounts to provide a cash reserve or to

secure a letter of credit or surety bond equal to six-months'

principal and interest payments on its revenue bonds or other

obligations which fund the underlying loan.

Oklahoma Statutes - Title 74. State Government

Added by Laws 1990, c. 342, § 12, emerg. eff. May 30, 1990. Amended

by Laws 1991, c. 123, § 3, emerg. eff. April 29, 1991; Laws 1993, c.

275, § 43, eff. July 1, 1994.

§74-5063.4e. Coinsurers.

In addition to its other powers and except as applied to Section

5063.4d of this title, the Oklahoma Development Finance Authority

may select a coinsurer to insure a percentage of each loan in a pool

or in the portfolio of loans for which Credit Enhancement Reserve

Fund-backed bonds have been or may be issued, provided that the

Authority may also select a coinsurer to insure individual nonpooled

loans should such loans be credit enhanced or supported by the

Credit Enhancement Reserve Fund. The Authority may contract to pay

losses up to a stated limit and permitting principal reductions to

be applied to reduce the liability of the coinsurer until its

liability is extinguished.

Added by Laws 1990, c. 342, § 13, emerg. eff. May 30, 1990; Laws

1991, c. 305, § 3, emerg. eff. May 30, 1991.

§74-5063.4f. Reserve fund.

The Oklahoma Development Finance Authority may grant credit

enhancement to the funding of reserve fund backed loan guarantee

programs in accordance with criteria and standards established by

the Authority pursuant to rules. Private financial institutions to

which credit enhancements have been granted on behalf of loans made

to borrowers may be required to partially secure a reserve fund.

Added by Laws 1990, c. 342, § 14, emerg. eff. May 30, 1990.

§74-5063.4g. Provisions not applicable to certain Credit

Enhancement Reserve Fund applications - Validation.

The provisions of Section 5062.6a, subsection B of Section

5063.3 and Sections 5063.4a through 5063.4f of this title shall not

apply to Credit Enhancement Reserve Fund applications approved by

the Bond Oversight Commissions prior to June 9, 1990, and such

previously approved applications are confirmed, validated and

ratified.

Added by Laws 1990, c. 342, § 15, emerg. eff. May 30, 1990; Laws

1991, c. 1, § 2, emerg. eff. Feb. 13, 1991.

§74-5063.4h. Debt-service reserve.

To establish a debt-service reserve for those revenue bonds

approved for Credit Enhancement Reserve Fund insurance by the Bond

Oversight Commissions prior to June 9, 1990, the Oklahoma

Development Finance Authority may increase the amounts of credit

enhancement, the revenue bonds and the underlying loans in an amount

sufficient to provide a cash reserve or to secure a letter of credit

or surety bond equal to six-months' principal and interest on the

Oklahoma Statutes - Title 74. State Government

revenue bonds, plus a rounding factor if necessary. The total

amount of any such increase shall not exceed ten percent (10%) of

the revenue bond amount approved by the Commissions.

Added by Laws 1991, c. 123, § 4, emerg. eff. April 29, 1991.

§74-5063.4i. Allocation to the Quality Jobs Investment Program.

Forty percent (40%) of the amount authorized pursuant to Section

5063.11 of this title is hereby allocated and may be used for the

Quality Jobs Investment Program pursuant to Section 5 of this act.

Added by Laws 1993, c. 275, § 44, eff. July 1, 1994. Amended by

Laws 1994, c. 285, § 10, eff. July 1, 1994.