CHAPTER 59. FARM AND RANCH FINANCE PROGRAM

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AGRICULTURE CODE

TITLE 4. AGRICULTURAL ORGANIZATIONS

CHAPTER 59. FARM AND RANCH FINANCE PROGRAM

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 59.001. DEFINITIONS. In this chapter:

(1) "Authority" means the Texas Agricultural Finance Authority

created by Chapter 58 of this code.

(2) "Board" means the board of directors of the authority.

(3) "Bond" means a general obligation bond, certificate, note,

or other obligation issued or incurred by the authority under

this chapter as provided by Article III, Section 49-f, of the

Texas Constitution.

(4) "Commissioner" means the commissioner of agriculture.

(5) "Fund" means the farm and ranch finance program fund.

(6) "Program" means the farm and ranch finance program.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 3, eff.

Jan. 1, 1996.

Sec. 59.002. DUTIES. (a) The authority shall administer the

program.

(b) The board shall administer the fund.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 4, eff.

Jan. 1, 1996.

Sec. 59.003. LIMITED IMMUNITY FROM SUIT OR LIABILITY. A member

of the board may be sued and held personally liable for damages

that result from an official act or omission only if the act or

omission is corrupt or malicious.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 5, eff.

Jan. 1, 1996.

SUBCHAPTER B. BONDS

Sec. 59.011. BONDS. (a) The board may provide by order or

resolution for the issuance and sale of negotiable bonds

authorized by Article III, Section 49-f, of the Texas

Constitution. The proceeds from the sale of the bonds constitute

the fund.

(b) Subchapter D, Chapter 58, as it relates to the issuance,

sale, and refunding of bonds, applies to the board's issuance,

sale, and refunding of bonds under this chapter to finance the

fund.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 6, eff.

Jan. 1, 1996.

Sec. 59.012. DISPOSITION OF BOND PROCEEDS.

Text of subsec. (a) as amended by Acts 1995, 74th Leg., ch. 858,

Sec. 1

(a) Except as provided by Subsection (b) of this section,

proceeds from the sale of the bonds, other than refunding bonds,

shall be deposited in the state treasury to the credit of the

fund.

Text of subsec. (a) as amended by Acts 1995, 74th Leg., ch. 1014,

Sec. 7

(a) Except as provided by Subsections (b), (c), and (d) of this

section, proceeds from the sale of the bonds, other than

refunding bonds, shall be deposited in the state treasury to the

credit of the fund.

(b) The board may provide for transferring to the interest and

sinking account from the proceeds of the sale of bonds or from

the available money in the fund directly an amount that, together

with the accrued interest received, is sufficient to pay interest

becoming due during the fiscal year in which the bonds are sold

and to establish appropriate reserves.

or from available money in the fund an amount that is reasonable

and necessary to cover the costs of administering the program.

(d) The board shall deposit the proceeds from the sale of bonds,

as authorized by the Texas Constitution, into the Texas

agricultural fund, to be administered as provided by Chapter 58

of this code.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 858, Sec. 1, eff.

Sept. 1, 1995; Acts 1995, 74th Leg., ch. 1014, Sec. 7, eff. Jan.

1, 1996.

Sec. 59.013. PAYMENT OF PRINCIPAL AND INTEREST. The board shall

arrange for payment of the principal of bonds as they mature and

the interest on the bonds as it becomes payable.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 8, eff.

Jan. 1, 1996.

Sec. 59.014. APPROVAL BY ATTORNEY GENERAL. Before the bonds are

delivered to the purchasers, the attorney general shall examine

the record relating to the bonds. If the record demonstrates that

the bonds have been issued in accordance with the Texas

Constitution and this chapter, the attorney general shall approve

the bonds.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993.

Sec. 59.015. USE OF FUND TO PAY COSTS OF ISSUANCE AND DEBT

SERVICE. (a) The board may use money in the fund attributable

to the issuance and sale of bonds to pay:

(1) legal fees and fees for financial advice the board finds

necessary for the sale of bonds;

(2) the expense of publishing notice of sale of an installment

of bonds;

(3) the expense of printing the bonds;

(4) the expense of issuing the bonds, including the actual costs

of travel, lodging, and meals of officers, members, or employees

of the board, directors or employees of the authority, the

comptroller, or the attorney general that the board finds

necessary to implement the issuance, rating, or delivery of the

bonds;

(5) the cost of manually signing the bonds;

(6) remuneration to any agent employed by the board to pay the

principal of and interest on the bonds;

(7) any amount required to be paid to maintain the federal tax

exemption of interest on the bonds; or

(8) any other cost, fee, or expense relating to the issuance of

the bonds.

(b) If, during the existence of the fund or during the period

any bonds are payable from the fund, the board determines that

there will not be sufficient money in the fund during the

following fiscal year to pay the principal of or interest on the

bonds that is to come due during the following fiscal year, the

comptroller shall transfer to the fund from the first money

coming into the state treasury not otherwise appropriated by the

constitution an amount sufficient to pay the obligations.

this section shall be used to pay the obligations only if at the

time the principal or interest becomes due there is not

sufficient money in the fund to pay the amount due.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 9, eff.

Jan. 1, 1996; Acts 1997, 75th Leg., ch. 1423, Sec. 2.08, eff.

Sept. 1, 1997.

Text of section as amended by Acts 1995, 74th Leg., ch. 265, Sec.

Sec. 59.016. INVESTMENTS. (a) The authority shall give timely

instruction to the board of the dates on which principal on bonds

matures and interest becomes payable. The board shall administer

the fund accordingly.

(b) Money in the fund that is not immediately committed to

paying principal of and interest on the bonds or to paying

expenses as provided by Section 59.015 of this code may be

invested by the board in:

(1) a direct security repurchase agreement or reverse security

repurchase agreement made with a state or national bank domiciled

in this state or with a primary dealer approved by the federal

reserve system;

(2) a direct obligation of or obligation the principal and

interest of which are guaranteed by the United States government;

(3) a direct obligation of or obligation guaranteed by the

Federal Home Loan Banks, the Federal National Mortgage

Association, the Federal Farm Credit System, the Student Loan

Marketing Association, the Federal Home Loan Mortgage

Corporation, or a successor to one of those organizations;

(4) a bankers' acceptance that:

(A) is eligible for purchase by a member of the federal reserve

system;

(B) matures in 270 days or less; and

credit rating by a nationally recognized investment rating firm;

(5) commercial paper that:

(A) matures in 270 days or less; and

(B) has received the highest short-term credit rating by a

nationally recognized investment rating firm;

(6) a contract that is written by the board in which the board

grants the purchaser the right to purchase securities in the

board's marketable securities portfolio at a specified price over

a specified period and for which the board is paid a fee and that

specifically prohibits naked-option or uncovered option trading;

(7) an obligation of a state or of an agency, county, city, or

other political subdivision of a state or a mutual fund composed

of those obligations;

(8) an investment instrument, obligation, or other evidence of

indebtedness the payment of which is directly or indirectly

guaranteed by the full faith and credit of the United States

government;

(9) an investment, account, depository receipt, or deposit that

is fully:

(A) insured by the Federal Deposit Insurance Corporation or a

successor to that organization; or

(B) secured by a security described by Subdivision (2), (3), or

(8) of this subsection;

(10) a collateralized mortgage obligation fully secured by

securities or mortgages issued or guaranteed by the Government

National Mortgage Association (GNMA) or any entity identified by

Subdivision (3) of this subsection;

(11) a security or evidence of indebtedness issued by the Farm

Credit System Financial Assistance Corporation, the Private

Export Funding Corporation, or the Export-Import Bank; and

(12) any other investment authorized for investment of state

funds by the comptroller under Section 404.024, Government Code.

(1) "Direct security repurchase agreement" means an agreement

under which the board buys, holds for a specified time, and then

sells back any of the following securities, obligations, or

participation certificates:

(A) a United States government security;

(B) a direct obligation of or an obligation the principal and

interest of which are guaranteed by the United States government;

Federal Home Loan Banks, the Federal National Mortgage

Association, the Federal Farm Credit System, the Student Loan

Marketing Association, the Federal Home Loan Mortgage

Corporation, or a successor to one of those organizations; or

(D) any other investment instrument, obligation, or other

evidence of indebtedness the payment of which is directly or

indirectly guaranteed by the full faith and credit of the United

States government.

(2) "Market value" means the fair and reasonable prevailing

price at which a security is being sold on the open market at the

time of the appraisement of the security by the board.

(3) "Reverse security repurchase agreement" means an agreement

under which the board sells and after a specified time buys back

any of the securities, obligations, or participation certificates

listed by Subdivision (1) of this subsection.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 265, Sec. 3, eff. Aug.

28, 1995; Acts 1997, 75th Leg., ch. 1423, Sec. 2.09, eff. Sept.

1, 1997.

Text of section as amended by Acts 1995, 74th Leg., ch. 1014,

Sec. 10

Sec. 59.016. INVESTMENTS. The board shall invest funds as

provided under Section 58.022.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 10, eff.

Jan. 1, 1996.

SUBCHAPTER C. ADMINISTRATION

Sec. 59.021. FUND. (a) The farm and ranch finance program fund

is a fund in the state treasury.

(b) At the direction of the board, money received from the state

or federal government or from any other person, in addition to

proceeds from bonds issued under this chapter, may be deposited

to the credit of the fund.

separate accounts in the fund, including program accounts, an

interest and sinking account, a reserve account, and any other

accounts provided for by resolution of the board.

(d) Money received as repayment of financial assistance shall be

deposited first in the interest and sinking account as provided

by resolution of the board authorizing its bonds until that

account is fully funded as provided by resolution of the board.

(e) The fund and each account in the fund shall be kept and

maintained at the direction of the board and held in trust by the

comptroller for and on behalf of the board and the owners of the

bonds issued under this chapter.

(f) The fund may be used only as provided by this chapter.

(g) Pending its use, money in the fund shall be invested as

provided by the resolution authorizing issuance of the bonds.

(h) The board may receive, and shall deposit in the fund,

appropriations, grants, donations, earned federal funds, and the

proceeds of any investment pools operated by the comptroller.

Text of subsec. (i) as added by Acts 1995, 74th Leg., ch. 858,

Sec. 2

(i) In addition to other uses provided by this chapter, the

authority may use money in the fund to pay costs and expenses of

administering the program.

Text of subsec. (i) as added by Acts 1995, 74th Leg., ch. 1014,

Sec. 11

(i) The board may use money in the fund to pay the costs and

expenses of administering the program.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 858, Sec. 2, eff.

Sept. 1, 1995; Acts 1995, 74th Leg., ch. 1014, Sec. 11, eff. Jan.

1, 1996; Acts 1997, 75th Leg., ch. 1423, Sec. 2.10, eff. Sept. 1,

1997.

Sec. 59.022. RULES. (a) The board shall adopt rules governing

application for financial assistance under this chapter. The

board may adopt rules it considers necessary to administer the

program or considers in the best interest of the program. The

board may adopt rules concerning the sale of land acquired by the

board under this chapter by default, foreclosure, forfeiture, or

any other means. The board shall adopt collateral or security

requirements to ensure the full repayment of financial assistance

granted under this chapter. The board may approve any extension

of financial assistance under this chapter or may delegate that

approval authority to the commissioner.

(b) The board may adopt rules it considers necessary to

administer the fund or considers in the best interest of the

fund, including rules on the investment of the fund.

reasonable and necessary to cover the expenses of administering

the program or considers in the best interest of the program.

Those fees shall be deposited in the state treasury to the credit

of the farm and ranch finance program fund. An applicant for

financial assistance participating in the program shall pay the

costs of applying for, participating in, and administering and

servicing the program, in amounts the board considers reasonable

and necessary. Any cost not paid by an applicant shall be paid

from the fund.

(d) The board shall adopt rules governing loan guarantees

provided to lenders by the board in an amount necessary for the

lender to have a performing loan.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 858, Sec. 3, eff.

Sept. 1, 1995; Acts 1995, 74th Leg., ch. 1014, Sec. 12, eff. Jan.

1, 1996; Acts 2001, 77th Leg., ch. 26, Sec. 11, eff. May 2, 2001.

Sec. 59.023. POWERS OF BOARD. The board has the power necessary

to accomplish the purposes and carry out the programs provided by

this chapter, including the power:

(1) to adopt and enforce bylaws, rules, and procedures necessary

to carry out this chapter;

(2) to establish, charge, and collect a fee, charge, or penalty

in connection with a program, service, or activity provided by

the board under this chapter;

(3) to issue bonds, provide for and secure the payment of the

bonds, and provide for the rights of the owners of the bonds, in

the manner and to the extent permitted by this chapter;

(4) to purchase, hold, cancel, or resell or otherwise dispose of

its bonds, subject to any restrictions and any resolution

authorizing the issuance of its bonds;

(5) to own, rent, lease, or otherwise acquire, accept, or hold

any interest in real, personal, or mixed property, by purchase,

exchange, gift, assignment, transfer, foreclosure, mortgage,

sale, lease, or otherwise;

(6) to hold, manage, operate, or improve real, personal, or

mixed property;

(7) to sell, lease, encumber, mortgage, exchange, donate,

convey, or otherwise dispose of any of its property or any

interest in its property, deed of trust, or mortgage lien owned

by it, under its control or custody, or in its possession and to

release or relinquish any right, title, claim, lien, interest,

easement, or demand, including any equity or right of redemption

in property foreclosed by it, by public or private sale, with or

without public bidding;

(8) to lease or rent any improvement, land, or facility from any

person;

(9) to make a secured or unsecured loan to provide financial

assistance as provided by this chapter, including the refunding

of an outstanding obligation, mortgage, or advance used for those

purposes, and to charge and collect interest on those loans for

loan payments and on terms and conditions the board considers

advisable that are not in conflict with this chapter;

(10) to purchase or acquire, sell, discount, assign, negotiate,

or otherwise dispose of notes or other evidence of indebtedness

of eligible applicants as the board determines or portions or

portfolios of or participations in those evidences of

indebtedness;

(11) to sell and guarantee securities, whether taxable or tax

exempt under federal law, in primary and secondary markets; and

(12) to provide to a lender a loan guarantee for the purchase of

real property by an eligible applicant under Section 59.024.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 13, eff.

Jan. 1, 1996; Acts 2001, 77th Leg., ch. 26, Sec. 12, eff. May 2,

2001.

Sec. 59.024. APPLICATION; ELIGIBILITY. (a) To borrow money

from the fund, a person must submit an application to the

authority that contains an acceptable agricultural business plan

for the land proposed to be purchased that assures the authority

the applicant intends to use the land for the primary purpose of

farming or ranching.

(b) To be eligible to borrow money from the fund, a person, at

the time of application, must:

(1) provide evidence to the authority that demonstrates that the

person has at least three years of experience relevant to the

person's agricultural business plan for the land proposed to be

purchased; and

(2) have a net worth of less than $400,000.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 858, Sec. 4, eff.

Sept. 1, 1995; Acts 1997, 75th Leg., ch. 473, Sec. 1, eff. Sept.

1, 1997.

Sec. 59.025. MAXIMUM AMOUNT OF LOAN OR GUARANTEE. (a) A loan

under this chapter may not exceed the lesser of:

(1) $250,000; or

(2) an amount equal to 95 percent of the lesser of the purchase

price of the land or the land's appraised value under Section

59.028.

(b) The board may provide a guarantee of not more than 90

percent of a loan approved under this section.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 858, Sec. 5, eff.

Sept. 1, 1995; Acts 1995, 74th Leg., ch. 1014, Sec. 14, eff. Jan.

1, 1996; Acts 1997, 75th Leg., ch. 473, Sec. 2, eff. Sept. 1,

1997; Acts 2001, 77th Leg., ch. 26, Sec. 13, eff. May 2, 2001.

Sec. 59.026. TRANSFER OF BORROWER'S INTEREST. (a) The contract

for a loan under this chapter must provide that transfer of

ownership of the land without the board's express written

permission before the entire principal and interest due have been

paid constitutes default under the contract.

(b) If the borrower dies or becomes financially incapacitated or

if the borrower's interest in land is involuntarily transferred

by court order or other proceedings, including bankruptcy,

sheriff or trustee sale, or divorce, the land may be conveyed by

the borrower or the borrower's heirs, administrators, executors,

or successors in interest by complying with the rules adopted by

the board and obtaining the board's written permission.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 15, eff.

Jan. 1, 1996.

Sec. 59.027. CHANGES IN USE. (a) Before a borrower may use

land acquired with financial assistance under this chapter for a

primary purpose other than farming or ranching, the borrower must

submit to the board an application for approval of the change of

use.

(b) As soon as practicable after an application for a change of

use is received, the board shall approve or deny the application

and shall notify the borrower of the board's decision.

under this chapter for a purpose other than farming or ranching

without the approval of the board constitutes default under the

contract.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 16, eff.

Jan. 1, 1996.

Sec. 59.028. APPRAISAL. (a) Before the board may loan money

for the purchase of land under this chapter, the board must have

an appraisal of the property made to determine its value.

(b) An appraiser representing the board must be qualified to

give competent appraisals of land. The board may use appraisers

employed by the board.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 17, eff.

Jan. 1, 1996.

Sec. 59.029. PAYMENTS TO BOARD UNDER CERTAIN LEASES. If, during

a period a person is indebted to the board for land purchased

with financial assistance under this chapter, the person executes

or there exists a lease or contract of sale of oil, gas, or other

minerals, chemicals, hard metals, timber, sand, gravel, or other

material that covers the land purchased from the board that would

result in the depletion of the corpus of the land, not less than

one-half of all bonus money, delay rentals, or royalties received

as consideration for or payment under the oil, gas, or mineral

lease and not less than one-half of all money received under a

lease or contract of sale of other minerals, chemicals, hard

metals, timber, sand, gravel, or other material shall be paid to

the board by the lessee under the lease or the buyer under the

contract of sale. The board shall apply those payments to the

satisfaction of the indebtedness.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 18, eff.

Jan. 1, 1996.

Sec. 59.030. TERM OF LEASES. (a) A purchaser may not lease

land purchased with financial assistance under this chapter for a

term longer than 10 years, except:

(1) a lease for oil, gas, or other minerals may be for a term of

not longer than 10 years, and as long thereafter as oil, gas, or

other minerals are produced from the land in commercial

quantities; and

(2) a lease for coal and lignite may be for a term of not longer

than 40 years, and as long thereafter as coal and lignite are

produced from the land in commercial quantities.

(b) A lease or a separate instrument to take effect in the

future may not contain a provision for option or renewal of the

lease or re-lease of the property for any term that would result

in a fixed term of the lease that exceeds the maximum fixed term

authorized under Subsection (a) of this section. A lease or

instrument that contains an option renewal or re-lease agreement

in violation of this section is void.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993.

Sec. 59.031. DEATH OF A BORROWER. (a) If a borrower receiving

financial assistance under this chapter dies while indebted to

the state under a contract, the borrower's rights under this

chapter and the contract devolve on the borrower's heirs,

devisees, or personal representatives under the laws of this

state, subject to all rights, claims, and charges of the board.

(b) Default by an heir, devisee, or personal representative with

respect to a right, claim, or charge of the board has the same

effect as default by the borrower before the borrower's death.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 19, eff.

Jan. 1, 1996.

Sec. 59.032. UNENCUMBERED TITLE. The board may establish a

procedure by which a borrower acquiring land with a loan under

this chapter may obtain title to a portion of the tract clear of

encumbrances.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993. Amended by Acts 1995, 74th Leg., ch. 1014, Sec. 20, eff.

Jan. 1, 1996.

SUBCHAPTER D. OFFENSES; PENALTIES

Sec. 59.046. FALSE OR FICTITIOUS WRITTEN STATEMENT. (a) A

person commits an offense if the person knowingly or

intentionally makes, publishes, passes, files, or uses any false,

fictitious, or forged paper, document, contract, affidavit,

application, assignment, or other written instrument relating to

the procurement of financial assistance under this chapter or to

the purchase, sale, or resale of land under this chapter or in

connection with any transaction under this chapter.

(b) An offense under this section is a felony of the third

degree.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993.

Sec. 59.047. FRAUD. (a) A person commits an offense if the

person defrauds a person of rights or benefits under this chapter

or uses this chapter to defraud the state by an act of fraud,

duress, deceit, coercion, or misrepresentation.

(b) An offense under this section is a felony of the third

degree.

Added by Acts 1993, 73rd Leg., ch. 542, Sec. 1, eff. Sept. 1,

1993.

State Codes and Statutes

State Codes and Statutes

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State Codes and Statutes

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