II

107TH CONGRESS

1ST SESSION S. 1004

To provide for the construction and renovation of child care facilities, and

for other purposes.

IN THE SENATE OF THE UNITED STATES

JUNE 7, 2001

Mr. JEFFORDS (for himself and Mr. DODD) introduced the following bill;

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To provide for the construction and renovation of child care

facilities, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Child Care Construc5 tion and Renovation Act’’.

6 SEC. 2. USE OF COMMUNITY DEVELOPMENT BLOCK

7 GRANTS TO ESTABLISH CHILD CARE FACILI8 TIES.

9 Section 105(a) of the Housing and Community De10 velopment Act of 1974 (42 U.S.C. 5305(a)) is amended—
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1 (1) in paragraph (22), by striking ‘‘and’’ at the

2 end;

3 (2) in paragraph (23), by striking the period at

4 the end and inserting a semicolon;

5 (3) in paragraph (24), by striking ‘‘and’’ at the

6 end;

7 (4) in paragraph (25), by striking the period at

8 the end and inserting ‘‘; and’’; and

9 (5) by adding at the end the following:

10 ‘‘(26) the construction and renovation of child

11 care facilities.’’.

12 SEC. 3. INSURANCE FOR MORTGAGES ON NEW AND REHA13 BILITATED CHILD CARE FACILITIES.

14 Title II of the National Housing Act (12 U.S.C. 1707

15 et seq.) is amended by adding at the end the following:

16 ‘‘SEC. 257. MORTGAGE INSURANCE FOR CHILD CARE FA17 CILITIES.

18 ‘‘(a) DEFINITIONS.—In this section:

19 ‘‘(1) CERTIFICATION OF COMPLIANCE.—The

20 term ‘certification of compliance’ means a certifi21 cation that a facility complies with the standards

22 and requirements applicable to the facility under the

23 laws of the State or unit of general local government

24 in which the facility is or is to be located.
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1 ‘‘(2) CHILD CARE FACILITY.—The term ‘child

2 care facility’—

3 ‘‘(A) means a public or private facility

4 that—

5 ‘‘(i) has as its purpose the care and

6 development of—

7 ‘‘(I) children who are less than

8 16 years of age; or

9 ‘‘(II) school-age children and

10 youth during non-school hours; and

11 ‘‘(ii) is operated in accordance with all

12 applicable State and local laws and regula13 tions; and

14 ‘‘(B) does not include any facility for

15 school-age children that is primarily for use

16 during normal school hours.

17 ‘‘(3) EQUIPMENT.—The term ‘equipment’

18 includes—

19 ‘‘(A) machinery, utilities, and built-in

20 equipment, and any necessary enclosure or

21 structure to house them; and

22 ‘‘(B) any other items necessary for the

23 functioning of a particular facility as a child

24 care facility, including necessary furniture,

25 books, and curricular and program materials.
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1 ‘‘(4) FIRST MORTGAGE.—The term ‘first

2 mortgage’—

3 ‘‘(A) means such classes of first liens as

4 are commonly given to secure advances (includ5 ing advances during construction) on, or the

6 unpaid purchase price of, real estate under the

7 laws of the State in which the real estate is lo8 cated, together with the credit instrument or in9 struments (if any) secured thereby; and

10 ‘‘(B) includes any mortgage in the form of

11 1 or more trust mortgages or mortgage inden12 tures or deeds of trust, securing notes, bonds,

13 or other credit instruments, that, by the same

14 instrument or by a separate instrument, creates

15 a security interest in initial equipment, whether

16 or not attached to the realty.

17 ‘‘(5) MORTGAGE.—The term ‘mortgage’ means

18 a first mortgage on real estate in fee simple, or on

19 the interest of either the lessor or lessee thereof

20 under a lease having a period of not less than 7

21 years to run beyond the maturity date of the mort22 gage.

23 ‘‘(6) MORTGAGOR.—The term ‘mortgagor’ has

24 the meaning given the term in section 207(a).
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1 ‘‘(b) INSURANCE OF MORTGAGES.—In order to facili2 tate the establishment and rehabilitation of child care fa3 cilities, the Secretary may—

4 ‘‘(1) insure a mortgage that is secured by a

5 property or project that is—

6 ‘‘(A) a new child care facility, including a

7 new addition to an existing child care facility

8 (regardless of whether the existing facility is

9 being rehabilitated); or

10 ‘‘(B) a substantially rehabilitated child

11 care facility, including equipment to be used in

12 the operation of the facility; and

13 ‘‘(2) make a commitment to insure any mort14 gage described in paragraph (1) before the date of

15 execution or disbursement of the mortgage.

16 ‘‘(c) TERMS AND CONDITIONS.—

17 ‘‘(1) ELIGIBLE CHILD CARE FACILITIES.—Each

18 mortgage insured under this section shall be secured

19 by a child care facility for which a certification of

20 compliance has been issued by the Secretary during

21 the 12-month period preceding the date on which the

22 commitment to insure the mortgage is issued under

23 this section.

24 ‘‘(2) APPROVED MORTGAGOR.—
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1 ‘‘(A) IN GENERAL.—Each mortgage in2 sured under this section shall be executed by a

3 mortgagor approved by the Secretary.

4 ‘‘(B) REGULATION.—The Secretary may—

5 ‘‘(i) require an approved mortgagor

6 who executes a mortgage under subpara7 graph (A) to be regulated with respect to

8 charges and methods of financing and, if

9 the mortgagor is a corporate entity, with

10 respect to capital structure and rate of re11 turn; and

12 ‘‘(ii) as an aid to the regulation of any

13 mortgagor under clause (i), make such

14 contracts with and acquire for not more

15 than $100 such stock or interest in such

16 mortgagor as the Secretary considers to be

17 necessary.

18 ‘‘(C) STOCK OR INTEREST.—Any stock or

19 interest purchased under subparagraph (B)(ii)

20 shall be—

21 ‘‘(i) paid for out of the General Insur22 ance Fund; and

23 ‘‘(ii) redeemed by the mortgagor at

24 par upon the termination of all obligations

25 of the Secretary under the insurance.
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1 ‘‘(3) PRINCIPAL OBLIGATION.—Each mortgage

2 insured under this section shall involve a principal

3 obligation in an amount not to exceed 90 percent of

4 the estimated value of the property or project, or 95

5 percent of the estimated value of the property or

6 project in the case of a mortgagor that is a private

7 nonprofit corporation or association (as described in

8 section 221(d)(3)), including—

9 ‘‘(A) equipment to be used in the operation

10 of the facility when the proposed improvements

11 are completed and the equipment is installed; or

12 ‘‘(B) a solar energy system (as defined in

13 subparagraph (3) of the last paragraph of sec14 tion 2(a)) or residential energy conservation

15 measures (as defined in subparagraphs (A)

16 through (G) and (I) of section 210(11) of the

17 National Energy Conservation Policy Act (42

18 U.S.C. 8211(11)), in cases in which the Sec19 retary determines that such measures are in ad20 dition to those required under the minimum

21 property standards and will be cost-effective

22 over the life of the measure.

23 ‘‘(4) AMORTIZATION AND INTEREST.—Each

24 mortgage insured under this section shall—
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1 ‘‘(A) provide for complete amortization by

2 periodic payments under such terms as the Sec3 retary shall prescribe;

4 ‘‘(B) have a maturity date satisfactory to

5 the Secretary, but in no event longer than 25

6 years; and

7 ‘‘(C) bear interest at such rate as may be

8 agreed upon by the mortgagor and the mort9 gagee, and the Secretary shall not issue any

10 regulations or establish any terms or conditions

11 that interfere with the ability of the mortgagor

12 and mortgagee to determine the interest rate.

13 ‘‘(5) RELEASE.—The Secretary may consent to

14 the release of a part or parts of the mortgaged prop15 erty or project from the lien of any mortgage in16 sured under this section upon such terms and condi17 tions as the Secretary may prescribe.

18 ‘‘(6) MORTGAGE INSURANCE TERMS.—Sub19 sections (d), (e), (g), (h), (i), (j), (k), (l), and (n) of

20 section 207 apply to any mortgage insured under

21 this section, except that all references in such sub22 sections to section 207 shall be construed, for pur23 poses of mortgage insurance under this section, to

24 refer to this section.
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1 ‘‘(d) MORTGAGE INSURANCE FOR FIRE SAFETY

2 EQUIPMENT LOANS.—

3 ‘‘(1) AUTHORITY.—The Secretary may, upon

4 such terms and conditions as the Secretary may pre5 scribe, make commitments to insure and insure

6 loans made by financial institutions or other ap7 proved mortgagees to child care facilities to provide

8 for the purchase and installation of fire safety equip9 ment necessary for compliance with the 1967 edition

10 of the Life Safety Code of the National Fire Protec11 tion Association (or any subsequent edition specified

12 by the Secretary of Health and Human Services).

13 ‘‘(2) LOAN REQUIREMENTS.—To be eligible for

14 insurance under this subsection a loan shall—

15 ‘‘(A) not exceed the estimate by the Sec16 retary of the reasonable cost of the equipment

17 fully installed;

18 ‘‘(B) bear interest at such rate as may be

19 agreed upon by the mortgagor and the mort20 gagee;

21 ‘‘(C) have a maturity date satisfactory to

22 the Secretary;

23 ‘‘(D) be made by a financial institution or

24 other mortgagee approved by the Secretary as
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1 eligible for insurance under section 2 or a mort2 gagee approved under section 203(b)(1);

3 ‘‘(E) comply with other such terms, condi4 tions, and restrictions as the Secretary may

5 prescribe; and

6 ‘‘(F) be made with respect to a child care

7 facility for which a certification of compliance

8 has been issued by the Secretary during the 12-

9 month period preceding the date on which the

10 commitment to insure is issued under this sub11 section.

12 ‘‘(3) INSURANCE REQUIREMENTS.—

13 ‘‘(A) SECTION 2.—Subsections (c), (d),

14 and (h) of section 2 shall apply to any loan in15 sured under this subsection, except that all ref16 erences in such subsections to ‘this section’ or

17 ‘this title’ shall be construed, for purposes of

18 this subsection, to refer to this subsection.

19 ‘‘(B) SECTION 220.—Paragraphs (5), (6),

20 (7), (9), and (10) of section 220(h) shall apply

21 to any loan insured under this subsection, ex22 cept that all references in such paragraphs to

23 home improvement loans shall be construed, for

24 purposes of this subsection, to refer to loans

25 under this subsection.
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1 ‘‘(e) SCHEDULES AND DEADLINES.—The Secretary

2 shall establish schedules and deadlines for the processing

3 and approval (or provision of notice of disapproval) of ap4 plications for mortgage insurance under this section.

5 ‘‘(f) LIMITATION ON INSURANCE AUTHORITY.—

6 ‘‘(1) TERMINATION.—No mortgage may be in7 sured under this section or section 223(h) after Sep8 tember 30, 2006, except pursuant to a commitment

9 to insure issued on or before such date.

10 ‘‘(2) AGGREGATE PRINCIPAL AMOUNT LIMITA11 TION.—

12 ‘‘(A) IN GENERAL.—The aggregate prin13 cipal amount of mortgages for which the Sec14 retary enters into commitments to insure under

15 this section or section 223(h) on or before the

16 date described in paragraph (1) may not exceed

17 $2,000,000,000.

18 ‘‘(B) REPORT.—If, on the date described

19 in paragraph (1), the aggregate insurance au20 thority provided under this paragraph has not

21 been fully used, the Secretary of the Treasury

22 shall submit to Congress a report evaluating the

23 need for continued mortgage insurance under

24 this section.

25 ‘‘(g) NONDISCRIMINATION REQUIREMENT.—
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1 ‘‘(1) IN GENERAL.—A child care facility receiv2 ing assistance under this title may not discriminate

3 on the basis of race, color, or national origin (to the

4 extent provided in title VI of the Civil Rights Act of

5 1964 (42 U.S.C. 2000d et seq.)), religion (subject to

6 paragraph (2)), national origin, sex (to the extent

7 provided in title IX of the Education Amendments

8 of 1972 (20 U.S.C. 1681 et seq.)), or disability (to

9 the extent provided in section 504 of the Rehabilita10 tion Act of 1973 (29 U.S.C. 794)), under any pro11 gram or activity receiving Federal financial assist12 ance under this title.

13 ‘‘(2) FACILITIES OF RELIGIOUS ORGANIZA14 TIONS.—The prohibition with respect to religion

15 under paragraph (1) shall not apply to a child care

16 facility that is controlled by, or that is closely identi17 fied with, the tenets of a particular religious organi18 zation, if the application of this paragraph would not

19 be consistent with the religious tenets of such orga20 nization.

21 ‘‘(h) LIABILITY INSURANCE.—A child care provider

22 operating a child care facility assisted under this section

23 or section 223(h) shall obtain and maintain liability insur24 ance in such amounts and subject to such requirements

25 as the Secretary considers to be appropriate.
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1 ‘‘(i) SMALL PURPOSE LOANS.—

2 ‘‘(1) IN GENERAL.—To the extent that amounts

3 are made available pursuant to subsection (l), the

4 Secretary shall make loans, directly or indirectly, to

5 providers of child care facilities for reconstruction or

6 renovation of such facilities, in accordance with this

7 subsection.

8 ‘‘(2) REQUIREMENTS.—A loan under this

9 subsection—

10 ‘‘(A) may be made only for a child care fa11 cility that is financially and operationally viable,

12 as determined under standards established by

13 the Secretary;

14 ‘‘(B) may not have a term to maturity ex15 ceeding 7 years;

16 ‘‘(C) shall bear interest at a rate estab17 lished by the Secretary; and

18 ‘‘(D) shall be subject to such other terms

19 and conditions as the Secretary may establish

20 by regulation.

21 ‘‘(3) AGGREGATE LOAN AMOUNT.—The aggre22 gate amount of loans under this subsection to a sin23 gle provider may not exceed $30,000.

24 ‘‘(j) NOTIFICATION.—The Secretary shall take such

25 actions as may be necessary to publicize the availability
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1 of the programs for mortgage insurance under this section

2 and section 223(h), and the loan program under sub3 section (i) of this section, in a manner that ensures that

4 information concerning such programs will be available to

5 child care providers throughout the United States.

6 ‘‘(k) REGULATIONS.—The Secretary shall—

7 ‘‘(1) issue any regulations necessary to carry

8 out this section; and

9 ‘‘(2) in carrying out paragraph (1), consult with

10 the Secretary of Health and Human Services with

11 respect to any aspects of the regulations regarding

12 child care facilities.

13 ‘‘(l) AUTHORIZATION OF APPROPRIATIONS.—There is

14 authorized to be appropriated to carry out this section

15 $30,000,000 for fiscal year 2002, to remain available until

16 expended, of which not more than 10 percent may be used

17 for loans under subsection (i).’’.

18 SEC. 4. INSURANCE FOR MORTGAGES FOR ACQUISITION OR

19 REFINANCING DEBT OF EXISTING CHILD

20 CARE FACILITIES.

21 (a) IN GENERAL.—Section 223 of the National

22 Housing Act (12 U.S.C. 1715n) is amended by adding at

23 the end the following:

24 ‘‘(h) MORTGAGE INSURANCE FOR PURCHASE OR RE25 FINANCING OF EXISTING CHILD CARE FACILITIES.—
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1 ‘‘(1) DEFINITIONS.—In this subsection, the

2 terms that are defined in section 257(a) have the

3 same meanings as in that section.

4 ‘‘(2) AUTHORITY.—Notwithstanding any other

5 provision of this Act, the Secretary may insure

6 under any section of this title a mortgage executed

7 in connection with—

8 ‘‘(A) the purchase or refinancing of an ex9 isting child care facility;

10 ‘‘(B) the purchase of a structure to serve

11 as a child care facility; or

12 ‘‘(C) the refinancing of existing debt of an

13 existing child care facility.

14 ‘‘(3) PURCHASE OF EXISTING FACILITIES AND

15 STRUCTURES.—In the case of the purchase under

16 this subsection of an existing child care facility or

17 purchase of an existing structure to serve as such a

18 facility, the Secretary shall prescribe any terms and

19 conditions that the Secretary considers necessary to

20 ensure that—

21 ‘‘(A) the facility or structure purchased

22 continues to be used as a child care facility; and

23 ‘‘(B) the facility receives a certification of

24 compliance.
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1 ‘‘(4) REFINANCING OF EXISTING FACILITIES.—

2 In the case of refinancing of an existing child care

3 facility, the Secretary shall prescribe any terms and

4 conditions that the Secretary considers necessary to

5 ensure that—

6 ‘‘(A) the refinancing is used to lower the

7 monthly debt service costs (taking into account

8 any fees or charges connected with such refi9 nancing) of the existing facility;

10 ‘‘(B) the proceeds of any refinancing will

11 be employed only to retire the existing indebted12 ness and pay the necessary cost of refinancing

13 on the existing facility;

14 ‘‘(C) the existing facility is economically

15 viable; and

16 ‘‘(D) the facility receives a certification of

17 compliance.

18 ‘‘(5) LIMITATION ON INSURANCE AUTHORITY.—

19 The authority of the Secretary to enter into commit20 ments to insure mortgages under this subsection is

21 subject to section 257(f).’’.
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1 SEC. 5. STUDY OF AVAILABILITY OF SECONDARY MARKETS

2 FOR MORTGAGES ON CHILD CARE FACILI3 TIES.

4 (a) STUDY.—The Secretary of the Treasury shall

5 conduct a study of the secondary mortgage markets to

6 determine—

7 (1) whether such a market exists for purchase

8 of mortgages eligible for insurance under sections

9 223(h) and 257 of the National Housing Act (as

10 added by this Act);

11 (2) whether such a market would affect the

12 availability of credit available for development of

13 child care facilities or would lower development costs

14 of such facilities; and

15 (3) the extent to which such a market or other

16 activities to provide credit enhancement for loans for

17 child care facilities is needed to meet the demand for

18 such facilities.

19 (b) REPORT.—Not later than 2 years after the date

20 of enactment of this Act, the Secretary of the Treasury

21 shall submit to Congress a report regarding the results

22 of the study conducted under this section.

23 SEC. 6. TECHNICAL AND FINANCIAL ASSISTANCE GRANTS.

24 (a) DEFINITIONS.—In this section:

25 (1) CHILD CARE FACILITY.—The term ‘child

26 care facility’ has the meaning given that term in sec-
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1 tion 257(a) of the National Housing Act, as added

2 by section 3.

3 (2) ELIGIBLE INTERMEDIARY.—The term ‘‘eli4 gible intermediary’’ means a private, nonprofit inter5 mediary organization that has demonstrated experi6 ence in—

7 (A) financing the construction and renova8 tion of physical facilities;

9 (B) providing technical and financial as10 sistance to child care providers or other similar

11 entities;

12 (C) working with small businesses; and

13 (D) securing private sources for capital fi14 nancing; and

15 (3) ELIGIBLE RECIPIENT.—The term ‘‘eligible

16 recipient’’ means any—

17 (A) existing or start-up center-based or

18 home-based child care provider; and

19 (B) organization in the process of estab20 lishing a center-based or home-based child care

21 program or otherwise seeking to provide child

22 care services.

23 (4) EQUIPMENT.—The term ‘equipment’ has

24 the meaning given that term in section 257(a) of the

25 National Housing Act, as added by section 3.
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1 (b) GRANT AUTHORITY.—The Secretary of Housing

2 and Urban Development, in consultation with the Sec3 retary of Health and Human Services, may award grants

4 on a competitive basis in accordance with this section to

5 eligible intermediaries for use in accordance with sub6 sections (e) and (f).

7 (c) APPLICATIONS.—To be eligible to receive a grant

8 under this section an eligible intermediary shall submit to

9 the Secretary an application, in such form and containing

10 such information as the Secretary may require.

11 (d) PRIORITY.—In awarding grants under this sec12 tion the Secretary shall give a priority to applicants under

13 subsection (c) that serve low-income or rural areas.

14 (e) USE OF FUNDS.—

15 (1) REVOLVING LOAN FUND.—Each eligible

16 intermediary that receives a grant under this section

17 shall deposit the grant amount into a child care re18 volving loan fund established by the eligible inter19 mediary.

20 (2) PAYMENTS FROM FUND.—Subject to sub21 section (f), from amounts deposited into the revolv22 ing loan fund under paragraph (1), each eligible

23 intermediary shall provide technical and financial as24 sistance (in the form of loans, grants, investments,

25 guarantees, interest subsidies, and other appropriate
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1 forms of assistance) to eligible recipients for the ac2 quisition or improvement of child care facilities or

3 equipment.

4 (3) LOAN REPAYMENTS AND INVESTMENT PRO5 CEEDS.—Any amount received by an eligible inter6 mediary from an eligible recipient in the form of a

7 loan repayment or investment proceeds shall be de8 posited into the child care revolving fund of the eligi9 ble intermediary for redistribution to other eligible

10 recipients in accordance with this section.

11 (f) ALLOCATION OF FUNDS.—Of the amounts dis12 tributed from the revolving loan fund of an eligible inter13 mediary under subsection (e)(2) in each fiscal year—

14 (1) not less than 50 percent shall be used for

15 the renovation or construction of child care facilities

16 or the acquisition of equipment by eligible recipients,

17 except that the amount made available to any eligi18 ble recipient under this paragraph may not exceed

19 40 percent of the total costs incurred by the eligible

20 recipient in connection with such renovation, con21 struction, or acquisition; and

22 (2) the amount remaining after distribution

23 under paragraph (1), shall be used to provide direct

24 assistance to eligible recipients in obtaining public or

25 private financing for the renovation or construction
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1 of child care facilities and the acquisition of equip2 ment, including developing and implementing financ3 ing resources, options, and plans for those recipi4 ents.

5 (g) AUTHORIZATION OF APPROPRIATIONS.—There is

6 authorized to be appropriated to carry out this section

7 $10,000,000 for each of fiscal years 2002 through 2006.

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