II

106TH CONGRESS

1ST SESSION S. 1565

To license America’s Private Investment Companies and provide enhanced

credit to stimulate private investment in low-income communities, and

for other purposes.

IN THE SENATE OF THE UNITED STATES

AUGUST 5, 1999

Mr. SARBANES (for himself, Mr. EDWARDS, Mr. BAYH, and Mr. KERRY) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To license America’s Private Investment Companies and provide enhanced credit to stimulate private investment in

low-income communities, 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 ‘‘America’s Private In5 vestment Companies Act’’.

6 SEC. 2. CONGRESSIONAL FINDINGS AND PURPOSES.

7 (a) CONGRESSIONAL FINDINGS.—Congress makes

8 the following findings:
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1 (1) People living in distressed areas, both urban

2 and rural, characterized by high levels of joblessness,

3 poverty, and low incomes continue to miss out on

4 the economic expansion experienced by the Nation as

5 a whole.

6 (2) Unequal access to economic opportunities

7 continues to make the social costs of joblessness and

8 poverty to our Nation very high.

9 (3) There are significant untapped markets in

10 our Nation, and many of these are in areas that are

11 underserved by institutions that can make equity

12 and credit investments.

13 (b) PURPOSE.—The purposes of this Act are to:

14 (1) license private for profit community devel15 opment entities that will focus on making equity and

16 credit investments for large-scale business develop17 ments that benefit low-income communities;

18 (2) provide credit enhancement for those enti19 ties for use in low-income communities; and

20 (3) provide a vehicle under which the economic

21 and social returns on financial investments made

22 pursuant to this Act may be available both to the in23 vestors in these entities and to the residents of the

24 low-income communities.
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1 SEC. 3. DEFINITIONS.

2 As used in this Act, certain terms have the respective

3 meanings set forth herein:

4 (1) ‘‘Agency’’ is an entity as defined in section

5 551(1) of title 5, United States Code.

6 (2) ‘‘APIC’’ means an America’s Private In7 vestment Company, a business entity that has been

8 licensed under the terms of this Act, and the license

9 of which has not been revoked.

10 (3) ‘‘Administrator’’ means the Administrator

11 of the Small Business Administration.

12 (4) ‘‘Community development entities’’ are enti13 ties whose primary mission must be serving or pro14 viding investment capital for low-income commu15 nities or low-income persons, maintain accountability

16 to residents of low-income communities, and have 60

17 percent of their aggregate gross assets invested in

18 low-income community investments or residential

19 property located in low-income communities.

20 (5) ‘‘Cost’’ has the meaning set forth in section

21 502(5) of the Federal Credit Reform Act of 1990.

22 (6) ‘‘Debentures’’ means debt instruments the

23 terms of any of which may be specified by the Sec24 retary.

25 (7) ‘‘HUD’’ means the Secretary of Housing

26 and Urban Development or the Department of
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1 Housing and Urban Development, as the context re2 quires.

3 (8) ‘‘Low-income communities’’ are census

4 tracts with either (1) poverty rates of at least 20

5 percent, based on the most recent census data; or

6 (2) median family income that does not exceed 80

7 percent of the greater of (A) metropolitan area me8 dian family income or (B) statewide median family

9 income.

10 (9) ‘‘Qualified low-income community invest11 ments’’ means equity investments in, or loans to,

12 qualified active businesses located in low-income

13 communities.

14 (10) ‘‘Qualified active business’’ means a busi15 ness or trade—

16 (A) at least 50 percent of the gross income

17 of which is derived from conduct of trade or

18 business activities in low-income communities;

19 (B) a substantial portion of the use of the

20 tangible property of which is used within low21 income communities;

22 (C) a substantial portion of the services

23 that the employees of which perform are per24 formed in low-income communities;
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1 (D) less than 5 percent of the aggregate

2 unadjusted bases of the property of which is at3 tributable to certain financial property, as the

4 Secretary shall set forth in regulations, or in

5 collectibles, other than collectibles held pri6 marily for sale to customers.

7 (11) ‘‘Secretary’’ means the Secretary of Hous8 ing and Urban Development, unless otherwise speci9 fied in this Act.

10 SEC. 4. AUTHORIZATION.

11 (a) LICENSES.—The Secretary is authorized to li12 cense America’s Private Investment Companies, in accord13 ance with the terms of this Act.

14 (b) REGULATIONS.—The Secretary is authorized to

15 regulate APICs for compliance with sound financial man16 agement practices, and the program and procedural goals

17 of this and other related Acts, and other purposes as re18 quired or authorized by this Act, or determined by the

19 Secretary. The Secretary may issue regulations, Federal

20 Register notices, and other guidance or directives to carry

21 out licensing and regulatory and other duties under this

22 Act.

23 (c) USE OF CREDIT SUBSIDY FOR LICENSES.—

24 (1) NUMBER OF LICENSES.—The Secretary is

25 authorized to have outstanding at any one time the
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1 number of licenses for APICs that may be supported

2 by the amount of the budget authority appropriated

3 in accordance with the Federal Credit Reform Act of

4 1990 for the subsidy cost and the investment strate5 gies of such APICs.

6 (2) USE OF CREDIT SUBSIDY AFTER INITIAL

7 APPROPRIATION TO HUD.—With respect to any ap8 propriation of budget authority for the credit costs

9 after the initial appropriation, the Secretary may li10 cense additional APICs, or as hereinafter provided,

11 increase the credit subsidy allocated to an APIC as

12 an award for high performance under this Act.

13 (d) COOPERATION AND COORDINATION.—

14 (1) PROGRAM POLICIES.—The Secretary is au15 thorized to coordinate and cooperate, through memo16 randa of understanding, an APIC liaison committee,

17 or otherwise, with the Administrator, the Secretary

18 of the Treasury, and other agencies in the discretion

19 of the Secretary, on implementation of this Act, in20 cluding regulation, examination, and monitoring of

21 APICs under this Act.

22 (2) OPERATIONS.—The Secretary may carry

23 out this Act—
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1 (A) directly, through agreements with

2 other Federal entities under section 1535 of

3 title 31, United States Code, or otherwise, or

4 (B) indirectly, under contracts or agree5 ments, as the Secretary shall determine.

6 (e) FEES AND CHARGES FOR ADMINISTRATIVE

7 COSTS.—To the extent provided in appropriations Acts,

8 the Secretary is authorized to impose fees and charges for

9 application, review, licensing, and regulation, or other ac10 tions under this Act, and to pay for the costs of such ac11 tivities from the fees and charges collected.

12 (f) GUARANTEE FEES.—The Secretary is authorized

13 to set and collect fees for loan guarantee commitments and

14 loan guarantees that the Secretary makes under this Act.

15 (g) FUNDING.—

16 (1) AUTHORIZATION FOR APPROPRIATION OF

17 COST OF ANNUAL LOAN GUARANTEE COMMIT18 MENT.—For each of fiscal years 2000, 2001, 2002,

19 and 2003, there is authorized to be appropriated up

20 to $36,000,000 for the cost of annual loan guar21 antee commitments under this Act. The Secretary

22 may make commitments to guarantee loans only to

23 the extent that the total loan principal, any part of

24 which is guaranteed, will not exceed $1,000,000,000,

25 or the amount specified in appropriations Acts in
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1 each such fiscal year. Amounts appropriated under

2 this paragraph shall remain available for 5 years.

3 (2) AUTHORIZATION FOR APPROPRIATION OF

4 ADMINISTRATIVE EXPENSES.—For each of the fiscal

5 years 2000, 2001, 2002, and 2003, there is author6 ized to be appropriated $1,000,000 for administra7 tive expenses for carrying out this Act. The Sec8 retary may transfer amounts appropriated under

9 this paragraph to any appropriation account of

10 HUD or another agency, to carry out the program

11 under this Act. Any agency to which the Secretary

12 may transfer amounts under this Act is authorized

13 to accept such transferred amounts in any appro14 priation account of such agency.

15 SEC. 5. SELECTION OF APIC’S.

16 (a) NOTICE OF COMPETITIONS.—The Secretary shall

17 select APICs for licensing on the basis of competitions.

18 Such competitions shall be announced by a Federal Reg19 ister notice that invites applications for APIC licenses.

20 Each such notice shall set forth application requirements,

21 and such other terms of the competition not otherwise pro22 vided for, as determined by the Secretary.

23 (b) LICENSEE SELECTION CRITERIA.—The Secretary

24 shall select among applicants for licenses on the basis of

25 the extent to which an applicant may be expected to
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1 achieve the goals of the Act by satisfying the requirements

2 set forth in this subsection—

3 (1) The applicant shall be a private for profit

4 entity that qualifies as a community development en5 tity for the purposes of New Markets Tax Credits.

6 (2) The entity must, as of the time that the li7 cense is approved, have reasonably available to it, as

8 determined by the Secretary, a minimum of

9 $25,000,000 in equity capital, as determined by the

10 Secretary.

11 (3) The entity must demonstrate that its man12 agers are qualified, and have the knowledge, experi13 ence, and capability necessary to raise large amounts

14 of capital and make investments for community eco15 nomic development in distressed areas.

16 (4) The entity must demonstrate that, as a

17 matter of sound financial management practices, it

18 is structured to preclude financial conflict of interest

19 between the APIC and a manager or investor.

20 (5) The entity must prepare and submit an in21 vestment strategy that includes benchmarks for eval22 uation of its progress.

23 (6) The entity must prepare and submit a

24 statement of public purpose goals. The statement

25 shall include elements specified by the Secretary, in-
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1 cluding proposed measurements and strategies for

2 meeting the goals. The goals shall promote commu3 nity and economic development, and include at

4 least—

5 (A) making investments that are qualified

6 investments in low-income communities;

7 (B) creation of jobs that pay decent wages

8 in low-income communities and for residents of

9 such areas; and

10 (C) involvement of community-based orga11 nizations and residents in community develop12 ment activities.

13 (7) The entity must demonstrate a capacity to

14 cooperate with States or units of general local gov15 ernment and with community-based organizations

16 and residents of low-income communities.

17 (8) The entity must agree to comply with appli18 cable laws, including Federal executive orders, Office

19 of Management and Budget circulars, and Treasury

20 requirements, and such operating and regulatory re21 quirements as the Secretary may impose from time

22 to time.

23 (9) The entity must satisfy other application re24 quirements that the Secretary may impose by regu25 lation or Federal Register notice.
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1 (c) COMMUNICATIONS BETWEEN HUD AND APPLI2 CANTS DURING SELECTION PROCESS.—

3 (1) The Secretary shall set forth in regulations

4 the procedures under which HUD, on the one hand,

5 and applicants for APIC licenses, and others, on the

6 other hand, may communicate. Such regulations

7 shall—

8 (A) specify by position the HUD officers

9 and employees who may communicate with such

10 applicants and others;

11 (B) permit such officers and employees to

12 request and discuss with the applicant and oth13 ers (such as banks or other credit or business

14 references, or potential investors, that the appli15 cant specifies in writing) any more detailed in16 formation that may be desirable to facilitate

17 HUD’s review of the applicant’s application;

18 (C) restrict such officers and employees

19 from revealing to any applicant—

20 (i) the fact or chances of award of a

21 license to such applicant, unless there has

22 been a public announcement of the results

23 of the competition; and

24 (ii) any information with respect to

25 any other applicant; and
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1 (D) set forth requirements for making and

2 keeping records of any communications con3 ducted under this subsection, including require4 ments for making such records available to the

5 public after the award of licenses under an ini6 tial or subsequent notice, as appropriate, under

7 subsection (a).

8 (2) Regulations under this subsection may be

9 issued as interim rules for effect on or before the

10 date of publication of the first notice under sub11 section (a), and shall apply only with respect to ap12 plications under such notice. Regulations to imple13 ment this subsection with respect to any notice after

14 the first such notice shall be subject to notice and

15 comment rulemaking.

16 (3) Section 12(e)(2) of the Department of

17 Housing and Urban Development Act is amended by

18 inserting before the period at the end a comma and

19 ‘‘or any license provided under the America’s Private

20 Investment Companies Act’’.

21 SEC. 6. OPERATIONS OF APIC’S.

22 (a) IN GENERAL.—

23 (1) An APIC shall have any powers or

24 authorities—
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1 (A) that the APIC derives from the juris2 diction in which it is organized, or that the

3 APIC otherwise has;

4 (B) as may be conferred by a license under

5 this Act; and

6 (C) as the Secretary may prescribe by reg7 ulation.

8 (2) Nothing in this Act shall preclude an APIC

9 or its investors from receiving an allocation of New

10 Market Tax Credits if the APIC satisfies the appli11 cable terms and conditions under the Internal Rev12 enue Code of 1986.

13 (b) INVESTMENT LIMITATIONS.—

14 (1) QUALIFIED LOW-INCOME COMMUNITY IN15 VESTMENTS.—Substantially all investments that an

16 APIC makes must be qualified low-income commu17 nity investments if the investments are financed

18 with—

19 (A) amounts available from the proceeds of

20 the issuance of an APIC’s debenture guaran21 teed under this Act;

22 (B) proceeds of the sale of obligations de23 scribed under subsection (c)(3)(C)(iii); or
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1 (C) the use of equity capital, as deter2 mined by the Secretary, in an amount specified

3 in the APIC’s license.

4 (2) INVESTMENT LIMIT.—An APIC shall not,

5 as a matter of sound financial practice, invest in any

6 one business, an amount that exceeds an amount

7 equal to 35 percent of the sum of—

8 (A) the APIC’s equity capital, plus

9 (B) an amount equal to the percentage

10 limit that the Secretary determines that APIC

11 may have outstanding at any one time, under

12 subsection (c)(2)(A).

13 (c) BORROWING POWERS—DEBENTURES.—

14 (1) ISSUING.—An APIC may issue debentures

15 that the Secretary may guarantee under the terms

16 of this Act.

17 (2) LEVERAGE LIMITS.—In general, as a mat18 ter of sound financial management practices—

19 (A) the total amount of debentures that an

20 APIC issues under this Act that an APIC may

21 have outstanding at any one time shall not ex22 ceed an amount equal to 200 percent of the eq23 uity capital of the APIC, as determined by the

24 Secretary: Provided, That the Secretary may by

25 regulation increase the foregoing percentage to
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1 up to 300 percent for all APICs, or any reason2 able class of APICs; and

3 (B) an APIC must not have more than

4 $300,000,000 in face value of debentures issued

5 under this Act outstanding at any one time.

6 (3) REPAYMENT.—

7 (A) An APIC must have repaid, or have

8 otherwise been relieved of indebtedness, with re9 spect to any interest or principal amounts of

10 borrowings under this subsection no less than 2

11 years before the APIC may dissolve or other12 wise complete the wind-up of its business.

13 (B) An APIC may repay any interest or

14 principal amounts of borrowings under this sub15 section at any time: Provided, That the repay16 ment of such amounts shall not relieve an APIC

17 of any duty otherwise applicable to the APIC

18 under this Act, unless the Secretary orders such

19 relief.

20 (C) Until an APIC has repaid all interest

21 and principal amounts on APIC borrowings

22 under this subsection, an APIC may use the

23 proceeds of investments in accordance with reg24 ulations issued by the Secretary only to—
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1 (i) pay for proper costs and expenses

2 the APIC incurs in connection with such

3 investments;

4 (ii) pay for the reasonable administra5 tive expenses of the APIC;

6 (iii) purchase Treasury securities;

7 (iv) repay interest and principal

8 amounts on APIC borrowings under this

9 subsection;

10 (v) make interest, dividend, or other

11 distributions to or on behalf of an investor;

12 or

13 (vi) undertake such other purposes as

14 the Secretary may approve.

15 (D) After an APIC has repaid all interest

16 and principal amounts on APIC borrowings

17 under this subsection, and subject to continuing

18 compliance with subsection (a), the APIC may

19 use the proceeds from investments to make in20 terest, dividend, or other distributions to or on

21 behalf of investors in the nature of returns on

22 capital, or the withdrawal of equity capital,

23 without regard to subparagraph (C) but in con24 formity with the APIC’s investment strategy

25 and statement of public purpose goals.
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1 (d) REUSE OF DEBENTURE PROCEEDS.—An APIC

2 may use the proceeds of sale of Treasury securities pur3 chased under subsection (c)(3)(C)(iii) to make qualified

4 low-income community investments, subject to the Sec5 retary’s approval. In making the request for the Sec6 retary’s approval, the APIC shall follow the procedures ap7 plicable to an APIC’s request for HUD guarantee action,

8 as the Secretary may modify such procedures for imple9 mentation of this subsection. Such procedures shall never10 theless include the description and certifications that an

11 APIC must include in all requests for guarantee action,

12 and the environmental certification applicable to initial ex13 penditures for a project or activity.

14 (e) ANTIPIRATING.—Notwithstanding any other pro15 vision of law, an APIC may not use any equity capital

16 required to be contributed under this Act, or the proceeds

17 from the sale of any debenture under this Act, to make

18 an investment, as determined by the Secretary, to assist

19 directly in the relocation of any industrial or commercial

20 plant, facility, or operation, from 1 area to another area,

21 if the relocation is likely to result in a significant loss of

22 employment in the labor market area from which the relo23 cation occurs.

24 (f) BANKRUPTCY RESTRICTION—EXCLUSION OF

25 APIC FROM DEFINITION OF DEBTOR.—Section
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1 109(b)(2) of title 11 of the United States Code is amended

2 by inserting before ‘‘credit union’’ the following: ‘‘Amer3 ica’s Private Investment Companies licensed by the De4 partment of Housing and Urban Development under the

5 America’s Private Investment Companies Act,’’.

6 SEC. 7. CREDIT ENHANCEMENT BY THE FEDERAL GOVERN7 MENT.

8 (a) ISSUANCE AND GUARANTEE OF DEBENTURES.—

9 Consistent with the Federal Credit Reform Act of 1990,

10 the Secretary is authorized to make commitments to guar11 antee and guarantee the timely payment of all principal

12 and interest as scheduled on, debentures issued by APICs.

13 Such commitments or guarantees may be made by the

14 Secretary on such terms and conditions, including but not

15 limited to amounts, expirations, number, priorities of re16 payment, security, collateral, amortization, payment of in17 terest (including the timing thereof), and fees and charges,

18 as the Secretary determines to be appropriate, in docu19 ments that the Secretary approves for any commitment

20 or guarantee, or pursuant to regulations issued by the Sec21 retary. Debentures guaranteed by the Secretary under this

22 subsection shall be senior to any debt obligation, equity

23 contribution or earnings, or the distribution of dividends,

24 interest, or other amounts of an APIC, notwithstanding

25 any Federal or other law. Debentures may be issued for
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1 a term of not to exceed 21 years and shall bear interest

2 during all or any part of that time period at a rate or

3 rates approved by the Secretary. The debentures shall also

4 contain such other terms as the Secretary may fix.

5 (b) ISSUANCE OF TRUST CERTIFICATES.—The Sec6 retary, or an agent or entity selected by the Secretary,

7 is authorized to issue trust certificates representing own8 ership of all or a fractional part of guaranteed debentures

9 issued by APICs and held in trust.

10 (c) GUARANTEE OF TRUST CERTIFICATES.—

11 (1) IN GENERAL.—The Secretary is authorized,

12 upon such terms and conditions as the Secretary de13 termines to be appropriate, to guarantee the timely

14 payment of the principal of and interest on trust

15 certificates issued by the Secretary, or an agent or

16 other entity, for purposes of this section. Such guar17 antee shall be limited to the extent of principal and

18 interest on the guaranteed debentures which com19 pose the trust.

20 (2) SUBSTITUTION OPTION.—The Secretary

21 shall have the option to replace in the corpus of the

22 trust any prepaid or defaulted debenture with a de23 benture, another full faith and credit instrument, or

24 any obligations of the United States, that may rea-
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1 sonably substitute for such prepaid or defaulted de2 benture.

3 (3) PROPORTIONATE REDUCTION OPTION.—In

4 the event that the Secretary elects not to exercise

5 the option under paragraph (2), and a debenture in

6 such trust is prepaid, or in the event of default of

7 a debenture, the guarantee of timely payment of

8 principal and interest on the trust certificate shall be

9 reduced in proportion to the amount of principal and

10 interest that such prepaid debenture represents in

11 the trust. Interest on prepaid or defaulted deben12 tures shall accure and be guaranteed by the Sec13 retary only through the date of payment of the guar14 antee. During the term of a trust certificate, it may

15 be called for redemption due to prepayment or de16 fault of all debentures that are in the corpus of the

17 trust.

18 (d) FULL FAITH AND CREDIT BACKING OF GUARAN19 TEES.—The full faith and credit of the United States is

20 pledged to the timely payment of all amounts which may

21 be required to be paid under any guarantee by the Sec22 retary pursuant to this section.

23 (e) SUBROGATION AND LIENS.—

24 (1) In the event the Secretary pays a claim

25 under a guarantee issued under this section, the
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1 Secretary shall be subrogated fully to the rights sat2 isfied by such payment.

3 (2) No State or local law, and no Federal law,

4 shall preclude or limit the exercise by the Secretary

5 of its ownership rights in the debentures in the cor6 pus of a trust under this section.

7 (f) REGISTRATION.—

8 (1) The Secretary shall provide for a central

9 registration of all trust certificates issued pursuant

10 to this section.

11 (2) The Secretary may contract with an agent

12 or agents to carry out on behalf of the Secretary the

13 pooling and the central registrations functions of

14 this section notwithstanding any other provisions of

15 law, including maintenance on behalf of and under

16 the direction of the Secretary, such commercial bank

17 accounts or investments in obligations of the United

18 States as may be necessary to facilitate trusts

19 backed by debentures guaranteed under this Act and

20 the issuance of trust certificates to facilitate forma21 tion of the corpus of the trusts. The Secretary may

22 require such agent or agents to provide a fidelity

23 bond or insurance in such amounts as the Secretary

24 determines to be necessary to protect the interests

25 of the Government.
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1 (3) Book-entry or other electronic forms of reg2 istration for trust certificates under this Act are au3 thorized.

4 (g) TIMING OF ISSUANCE OF GUARANTEES OF DE5 BENTURES AND TRUST CERTIFICATES.—The Secretary

6 may, from time to time in the Secretary’s discretion, exer7 cise the authority to issue guarantees of debentures under

8 this Act or trust certificates under this Act.

9 SEC. 8. APIC REQUESTS FOR GUARANTEE ACTIONS.

10 (a) ALL APIC REQUESTS FOR HUD GUARANTEE

11 ACTION.—An APIC may request that the Secretary guar12 antee a debenture that the APIC intends to issue, in ac13 cordance with the Secretary’s regulations. All such re14 quests shall include a description of the manner in which

15 the APIC intends to use the proceeds from such deben16 ture. All such requests shall also include certification by

17 the APIC that the APIC is in substantial compliance

18 with—

19 (1) this Act and other applicable laws;

20 (2) all terms and conditions of its license, and

21 of any penalty or condition that may have arisen

22 from examination or monitoring by the Secretary or

23 otherwise, including the satisfaction of any financial

24 audit exception that may have been outstanding;
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1 (3) all requirements relating to the allocation

2 and use of New Markets Tax Credits; and

3 (4) any other requirements that the Secretary

4 may specify under regulations.

5 (b) REQUESTS FOR GUARANTEE OF DEBENTURES

6 THAT WOULD INCLUDE FUNDING FOR INITIAL EXPENDI7 TURE FOR A PROJECT OR ACTIVITY.—In addition to the

8 description and certification that an APIC is required to

9 supply in all requests for guarantee action under sub10 section (a), in the case of an APIC’s request for a guar11 antee that includes a debenture, the proceeds of which the

12 APIC expects to be used as its initial expenditure for a

13 project or activity in which the APIC intends to invest,

14 and the expenditure for which would require an environ15 mental assessment under the National Environmental Pol16 icy Act of 1969 and other related laws that further the

17 purposes of such Act, such request for guarantee action

18 must include evidence satisfactory to the Secretary of the

19 certification of the completion of environmental review of

20 the project or activity required of the cognizant State or

21 local government under subsection (c). If the environ22 mental review responsibility for the project or activity has

23 not been assumed by a State or local government under

24 subsection (c), then the Secretary is responsible for car25 rying out the applicable responsibilities under the National
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1 Environmental Policy Act of 1969 and other provisions

2 of law that further the purposes of such Act that relate

3 to the project or activity, and the Secretary must execute

4 such responsibilities before acting on the APIC’s request

5 for the guarantee that is covered by this subsection.

6 (c) RESPONSIBILITY FOR ENVIRONMENTAL RE7 VIEWS.—

8 (1) EXECUTION OF RESPONSIBILITY BY THE

9 SECRETARY.—This subsection shall apply to guaran10 tees by the Secretary of debentures under this Act,

11 the proceeds of which would be used in connection

12 with qualified low-income community investments of

13 APICs under this Act.

14 (2) ASSUMPTION OF RESPONSIBILITY BY COG15 NIZANT UNIT OF GENERAL GOVERNMENT.—

16 (A) GUARANTEE OF DEBENTURES.—In

17 order to assure that the policies of the National

18 Environmental Policy Act of 1969 and other

19 provisions of law that further the purposes of

20 such Act (as specified in regulations issued by

21 the Secretary) are most effectively implemented

22 in connection with the expenditure of funds

23 under this Act, and to assure to the public

24 undiminished protection of the environment, the

25 Secretary may, under such regulations, in lieu
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1 of the environmental protection procedures oth2 erwise applicable, provide for the guarantee of

3 debentures, any part of the proceeds of which

4 are to fund particular qualified low-income com5 munity investments of APICs under this Act, if

6 a State or unit of general local government, as

7 designated by the Secretary in accordance with

8 regulations issued by the Secretary, assumes all

9 of the responsibilities for environmental review,

10 decisionmaking, and action pursuant to the Na11 tional Environmental Policy Act of 1969 and

12 such other provisions of law that further such

13 Act as the regulations of the Secretary specify,

14 that would otherwise apply to the Secretary

15 were the Secretary to undertake the funding of

16 such investments as a Federal action.

17 (B) IMPLEMENTATION.—The Secretary

18 shall issue regulations to carry out this sub19 section only after consultation with the Council

20 on Environmental Quality. Such regulations

21 shall—

22 (i) specify any other provisions of law

23 which further the purposes of the National

24 Environmental Policy Act of 1969 and to
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1 which the assumption of responsibility as

2 provided in this subsection applies;

3 (ii) provide eligibility criteria and pro4 cedures for the designation of a State or

5 unit of general local government to assume

6 all of the responsibilities in this subsection;

7 (iii) specify the purposes for which

8 funds may be committed without regard to

9 the procedure established under paragraph

10 (3);

11 (iv) provide for monitoring of the per12 formance of environmental reviews under

13 this subsection;

14 (v) in the discretion of the Secretary,

15 provide for the provision or facilitation of

16 training for such performance; and

17 (vi) subject to the discretion of the

18 Secretary, provide for suspension or termi19 nation by the Secretary of the assumption

20 under subparagraph (A).

21 (C) RESPONSIBILITIES OF STATES AND

22 UNITS OF GENERAL LOCAL GOVERNMENT.—The

23 Secretary’s duty under subparagraph (B) shall

24 not be construed to limit any responsibility as25 sumed by a State or unit of general local gov-
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1 ernment with respect to any particular request

2 for guarantee under subparagraph (A), or the

3 use of funds for a qualified investment.

4 (3) PROCEDURE.—The Secretary shall approve

5 the request for guarantee of a debenture, any part

6 of the proceeds of which is to fund particular quali7 fied low-income community investments of APICs

8 under this Act, that is subject to the procedures au9 thorized by this subsection only if, not less than 15

10 days prior to such approval and prior to any com11 mitment of funds to such investment (except for

12 such purposes specified in the regulations issued

13 under paragraph (2)(B)), the APIC submits to the

14 Secretary a request for guarantee of a debenture

15 that is accompanied by evidence of a certification of

16 the State or unit of general local government which

17 meets the requirements of paragraph (4). The ap18 proval by the Secretary of any such certification

19 shall be deemed to satisfy the Secretary’s respon20 sibilities pursuant to paragraph (1) under the Na21 tional Environmental Policy Act of 1969 and such

22 other provisions of law as the regulations of the Sec23 retary specify insofar as those responsibilities relate

24 to the guarantees of debentures, any parts of the
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1 proceeds of which are to fund such investments,

2 which are covered by such certification.

3 (4) CERTIFICATION.—A certification under the

4 procedures authorized by this subsection shall—

5 (A) be in a form acceptable to the Sec6 retary;

7 (B) be executed by the chief executive offi8 cer or other officer of the State or unit of gen9 eral local government who qualifies under regu10 lations of the Secretary;

11 (C) specify that the State or unit of gen12 eral local government under this subsection has

13 fully carried out its responsibilities as described

14 under paragraph (2); and

15 (D) specify that the certifying officer—

16 (i) consents to assume the status of a

17 responsible Federal official under the Na18 tional Environmental Policy Act of 1969

19 and each provision of law specified in regu20 lations issued by the Secretary insofar as

21 the provisions of such Act or other such

22 provision of law apply pursuant to para23 graph (2); and

24 (ii) is authorized and consents on be25 half of the State or unit of general local
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1 government and himself or herself to ac2 cept the jurisdiction of the Federal courts

3 for the purpose of enforcement of the re4 sponsibilities of such an official.

5 SEC. 9. EXAMINATION AND MONITORING OF APIC’S.

6 (a) IN GENERAL.—The Secretary shall, under regula7 tions, through audits, performance agreements, license

8 conditions, or otherwise, examine and monitor the oper9 ations and activities of APICs for compliance with sound

10 financial management practices, and for satisfaction of the

11 program and procedural goals of this Act and other re12 lated Acts. The Secretary may undertake any responsi13 bility under this section in cooperation with an APIC liai14 son committee, or any agency that is a member of such

15 a committee, or other agency.

16 (b) MONITORING, UPDATING, AND PROGRAM RE17 VIEW.—

18 (1) REPORTING AND UPDATING.—The Sec19 retary may establish such annual or more frequent

20 reporting requirements for APICs, and such require21 ments for independent audits, and the updating of

22 the statement of public purpose goals, investment

23 strategy (including the benchmarks in such strat24 egy), and other documents that may have been used

25 in the license application process under this Act, as
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1 the Secretary determines necessary to assist the Sec2 retary in monitoring the compliance and perform3 ance of APICs.

4 (2) EXAMINATIONS.—The Secretary shall, no

5 less often than once every 2 years, examine the oper6 ations and portfolio of each APIC licensed under

7 this Act for compliance with sound financial man8 agement practices, and for compliance with this Act.

9 (3) EXAMINATION STANDARDS.—

10 (A) SOUND FINANCIAL MANAGEMENT

11 PRACTICES.—The Secretary shall examine each

12 APIC to ensure, as a matter of sound financial

13 management practices, substantial compliance

14 with this and other applicable laws, including

15 Federal executive orders, Department of Treas16 ury and Office of Management and Budget

17 guidance, circulars, and application and licens18 ing requirements on a continuing basis. The

19 Secretary may set any additional sound finan20 cial management practices standards by regula21 tion, including standards that address solvency

22 and financial exposure.

23 (B) PERFORMANCE AND OTHER EXAMINA24 TIONS.—The Secretary shall monitor each

25 APIC’s progress in meeting the goals in the
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1 APIC’s statement of public purpose goals, exe2 cuting the APIC’s investment strategy, and

3 other matters.

4 SEC. 10. INCENTIVES AND PENALTIES.

5 (a) INCENTIVES.—From amounts of budget authority

6 appropriated after the initial appropriation for the cost of

7 annual loan guarantee commitments under this Act, the

8 Secretary may increase the credit subsidy allocated to an

9 APIC, in the Secretary’s discretion, as an award for high

10 performance of the APIC in carrying out its investment

11 strategy and statement of public purpose goals.

12 (b) PENALTIES.—

13 (1) IN GENERAL.—The Secretary may penalize

14 any APIC, or any manager of an APIC, in the event

15 such APIC or a manager of the APIC commits an

16 act of fraud, mismanagement, or noncompliance with

17 this Act or regulations thereunder or a condition of

18 the APIC’s license under this Act. The Secretary in

19 regulations shall identify, by generic description of a

20 role or responsibilities, any manager of an APIC

21 that is subject to this subsection.

22 (2) PENALTIES REQUIRING NOTICE AND HEAR23 ING.—With respect to an act of commission or omis24 sion under paragraph (1) for which the Secretary

25 may penalize an APIC or a manager, the Secretary
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1 may, following notice in writing to the APIC or the

2 manager, and opportunity for administrative

3 hearing—

4 (A) assess a civil money penalty against an

5 APIC, or a manager of an APIC, the amount

6 of which may exceed $10,000;

7 (B) require an APIC to divest any interest

8 in an investment, on such terms and conditions

9 as the Secretary imposes; or

10 (C) revoke the APIC’s license.

11 (3) PENALTIES REQUIRING NOTICE AND AN OP12 PORTUNITY TO RESPOND.—With respect to any act

13 of commission or omission under paragraph (1) for

14 which the Secretary may penalize an APIC or a

15 manager, following notice in writing and an oppor16 tunity for the APIC or manager to respond, impose

17 any reasonable penalty. Such a penalty may, in addi18 tion to any others, be—

19 (A) a civil money penalty of $10,000 or

20 less;

21 (B) the suspension of an APIC’s license, or

22 the conditioning of the use of an APIC’s li23 cense, for up to 90 days, including the deferral

24 for the period of the suspension of a commit-
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1 ment to guarantee any new debenture of the

2 APIC; or

3 (C) any other penalty that the Secretary

4 determines to be less burdensome to the APIC

5 than a penalty that requires notice and an ad6 ministrative hearing under this Act.

7 (c) PROCEDURES.—

8 (1) No award under this section shall be made

9 until notice thereof is published in the Federal Reg10 ister.

11 (2) No civil money penalty, or other penalty

12 under subsection (b), except suspension or condi13 tioning of an APIC’s license under subsection

14 (b)(3)(B), shall be due and payable, or otherwise

15 take effect, or be subject to enforcement by an order

16 of a court, until notice thereof is published in the

17 Federal Register.

18 (3)(A) The Secretary may suspend or condition

19 an APIC’s license for up to 45 days without prior

20 notice in the Federal Register, but such suspension

21 or conditioning shall take effect only after the Sec22 retary has issued a written notice (including a writ23 ing in electronic form) of such action to the APIC.

24 Such written notice shall be effective without regard

25 to whether the APIC has been accorded the oppor-
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1 tunity to respond. Such suspension or conditioning

2 shall be subject to enforcement by an order of a

3 court when the Secretary has issued such written

4 notice.

5 (B) After such suspension or conditioning takes

6 effect, the Secretary shall promptly cause a notice of

7 suspension or conditioning of such license for up to

8 90 days to be published in the Federal Register. The

9 APIC shall be entitled to respond to such notice. In

10 counting the time period of the suspension or condi11 tioning, the first day shall be the day that written

12 notice under this paragraph is issued.

13 (C) During the time period of such suspension

14 or conditioning, the Secretary may proceed under

15 subsection (b)(2), and in accordance with the proce16 dures applicable to such subsection, to revoke the

17 APIC’s license. Only if the Secretary so proceeds,

18 notwithstanding any other provision of this section,

19 the Secretary may extend the suspension or condi20 tioning of the APIC’s license by publishing a notice

21 of such action in the Federal Register—

22 (i) for the first such extension, before the

23 up to 90 days under subparagraph (B) expires;

24 and
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1 (ii) for any subsequent extensions of up to

2 90 days, before the preceding period of up to

3 90 days expires.

4 (D) The suspension or conditioning of an

5 APIC’s license by the Secretary under this para6 graph shall remain in effect in accordance with its

7 terms until final adjudication in any litigation un8 dertaken to challenge such suspension or condi9 tioning, or revocation, of an APIC’s license.

Æ