§ 5-13-12-8 — Economic development obligation or credit enhancement obligation guarantees; limitation; conditions; claims, losses, or debts

Indiana § 5-13-12-8

• Jurisdiction: Indiana
• Title 5: STATE AND LOCAL ADMINISTRATION
• Art. 13: INVESTMENT OF PUBLIC FUNDS
• Ch. 12: Board for Depositories

Text

(a) The board for depositories, in making the
economic development obligation or credit enhancement obligation
guarantees authorized under section 7(d)(6) of this chapter, shall
comply with the following limitations:
(1) A guarantee shall be made only of economic development
obligations or credit enhancement obligations for the purpose of
retaining, retaining and expanding, or bringing significant
employment into Indiana, as determined by the board under
subdivision (3)(A).
(2) Each economic development obligation or credit enhancement
obligation must be guaranteed not only by the board but also by
the Indiana economic development corporation created by IC 5-28-3-1. Each guarantee must provide that in the event of a valid
claim of loss by the lender, the lessor, or the issuer of the credit
enhancement arising under the economic development obligation
or credit enhancement documents, the amount of the loss, up to
two million dollars ($2,000,000), shall first be paid by the
industrial development project guaranty fund created by IC 5-28-30-9, and only the remainder of the loss, if any, shall to the
extent guaranteed be paid by the public deposit insurance fund.
Neither fund is responsible for the amount due from the other
under its guarantee.
(3) The guarantee of the economic development obligation or
credit enhancement obligation by the board for depositories must
be recommended by the Indiana economic development
corporation. Subject to that recommendation, the board for
depositories may make the guarantee if it determines:
(A) that the guarantee creates a reasonable probability that loss
in Indiana employment that would occur will be significantly
reduced or that Indiana's employment will be significantly
expanded;
(B) that the consequent reduction in employment loss or the
expansion in employment will enhance the economic stability
of the community or communities in the state where the
borrower or lessee conducts its business;
(C) that there is reasonable probability that the economic
development obligation will be repaid or satisfied or that the
credit enhancement will be satisfied; and
(D) that the economic development obligation or credit
enhancement obligation and guarantee are protected against
loss and the borrower or lessee has agreed to pay the insurance
fund a guarantee premium annually as provided in subdivision
(6).
(4) Protection against loss on the economic development
obligation or credit enhancement obligation guaranteed will be
provided:
(A) in loan transactions by:
(i) a valid security agreement;
(ii) mortgage;
(iii) combination of security agreements and mortgages under
items (i) and (ii); or
(iv) other document; and
(B) in lease transactions by the guaranteed party's rights as
owner of the leased property.
(5) The term of the guarantee must not exceed twenty (20) years.
The amount of the guarantee provided by the board, together with
the corresponding guarantee to be provided by the industrial
development project guaranty fund under subdivision (2), must
not exceed:
(A) the lesser of:
(i) ninety percent (90%) of the unpaid balance of the
obligation; or
(ii) ninety percent (90%) of the appraised fair market value of
the real estate;
if the obligation is backed by real estate;
(B) the lesser of:
(i) seventy-five percent (75%) of the unpaid balance of the
obligation; or
(ii) seventy-five percent (75%) of the appraised fair market
value of the equipment;
if the obligation is backed by equipment; or
(C) a weighted average of the figures derived under clauses
(A)(ii) and (B)(ii) if the obligation is backed by real estate and
equipment.
(6) The guarantee premium to be received by the public deposit
insurance fund for the guarantee must be at an annual percentage
rate on the outstanding principal amount of the economic
development obligation or the credit enhancement obligation of
not less, in the discretion of the board, than the market rate for
guarantees, mortgage insurance rates, or letters of credit used for
similar purposes at the time the guarantee is made. However, the
annual percentage rate must not exceed two percent (2%) of the
outstanding principal obligation.
(b) The following conditions apply to the making of bond bank
obligation guarantees under section 7(d)(7) of this chapter:
(1) Each bond bank obligation guaranteed must be secured by a
pledge of securities of a qualified entity (as defined in IC 5-1.5-1-8) under an indenture of trust requiring an adequate debt
reserve fund.
(2) The board for depositories shall fix the one (1) time or annual
charge to be paid by the bond bank for each guarantee in an
amount considered by the board to be appropriate and consistent
with the market rate for that guarantee, taking into consideration
the terms of the indenture applicable to the bond bank obligation.
(3) The board for depositories may agree to other terms for each
guarantee that the secretary-investment manager certifies as being
commercially reasonable and that the board, in its judgment,
determines to be proper.
(c) Any claim, loss, or debt arising out of any guarantee authorized
by section 7(d)(6) or 7(d)(7) of this chapter is the obligation of the
board for depositories payable out of the public deposit insurance fund
only and does not constitute a debt, liability, or obligation of the state
or a pledge of the faith and credit of the state. The document
evidencing any guarantee must have on its face the words, "The
obligations created by this guarantee (or other document as
appropriate) do not constitute a debt, liability, or obligation of the state
or a pledge of the faith and credit of the state but are obligations of the
board for public depositories and are payable solely out of the public
deposit insurance fund, and neither the faith and credit nor the taxing
power of the state is pledged to the payment of any obligation
hereunder.".
(d) Any claim of loss by a lender or lessor under a guarantee
authorized by section 7(d)(6) or 7(d)(7) of this chapter, at the time it is
made in writing to the board, has priority against the fund on all claims
made after that time.

Legislative History

As added by P.L.19-1987, SEC.14. Amended by P.L.11-1990, SEC.108; P.L.235-2005, SEC.82; P.L.162-2007, SEC.20; P.L.189-2018, SEC.37.