----------------------------------------------------------------------------


 9  AN ACT concerning economic development; establishing community de-
10    velopment corporations; amending K.S.A. 1996 Supp. 9-1101 and re-
11    pealing the existing section.
12
13  Be it enacted by the Legislature of the State of Kansas:
14    New Section 1.  This section shall be referred to as the community
15  development corporation assistance act.
16    New Sec. 2.  For purposes of this section, unless the context suggests
17  otherwise, the following terms shall have the meanings given them:
18    (a)  ``Director'' means the director of community development with
19  the department of commerce.
20    (b)  ``Poverty line'' means the level of income established by the
21  United States community services administration in the Code of Federal
22  Regulations, title 45, section 1060.2-2.
23    (c)  ``Moderate income'' means family income not more than 80% of
24  the statewide median income or countywide median income whichever
25  is less.
26    (d)  ``Distressed area'' means a contiguous geographical or readily
27  identified neighborhood in which the unemployment rate is at least 150%
28  of the state average or at least 40% of the residents have household in-
29  comes at or below 80% of the applicable county median household in-
30  come.
31    (e)  ``Metropolitan county'' has the same meaning as ascribed in K.S.A.
32  74-5093 and amendments thereto.
33    New Sec. 3.  The division of community development shall adopt
34  rules and regulations for the administration of this program consistent
35  with criteria stated in this act. The director shall administer the program
36  and shall enforce the rules and regulations related to community devel-
37  opment corporations adopted by the division.
38    New Sec. 4.  (a) There is hereby established a grant program to pro-
39  vide assistance to community development corporations in the revitali-
40  zation of economically distressed areas.
41    (b)  The director shall designate a community development corpora-
42  tion as eligible to receive grants under this section if the corporation is
43  exempt from taxation under the provisions of 501(c)(3) of the federal
HB 2457
                                     

 1  internal revenue code as in effect on January 1, 1997, and meets the other
 2  criteria of this act. No eligible corporation shall receive more than $50,000
 3  in any one fiscal year.
 4    (c)  The corporation, in its articles of incorporation or bylaws, shall
 5  designate a specific geographic community within which the corporation
 6  will operate. The community must be in a distressed area within a city of
 7  the first class within a metropolitan county. If a proposed geographic area
 8  overlaps the designated community of an existing community develop-
 9  ment corporation, the proposed community development corporation
10  must obtain the written permission of the existing corporation before the
11  proposed corporation may be eligible to receive grants under this act.
12    (d)  The corporation shall limit voting membership to residents of its
13  designated area.
14    (e)  The corporation shall have a board of directors with 15 to 30
15  members unless the corporation can demonstrate to the satisfaction of
16  the director that a smaller or larger board is more advantageous. At least
17  40% of the directors must have incomes that do not exceed 80% of the
18  county median family income or 80% of statewide median family income,
19  whichever is less, and the remaining directors must be members of the
20  business or financial community and the designated community at large.
21  To the greatest extent possible, and at least 60% of, the directors must
22  be residents of the designated community. Directors who meet the in-
23  come limitations of this paragraph must be elected by the members of
24  the corporation. The remaining directors may be elected by the members
25  or appointed by the directors who meet the income limitations of this
26  paragraph.
27    (f)  The corporation shall hire low-income residents of the designated
28  community to fill nonmanagerial and nonprofessional positions.
29    (g)  The corporation shall demonstrate that it has or will have the
30  technical skills to analyze projects, that it is familiar with other available
31  public and private funding sources and economic development programs,
32  and that it is capable of packaging economic development projects.
33    New Sec. 5.  (a) The director shall approve a grant to a community
34  development corporation only for a project carried on within the desig-
35  nated community, except when the corporation demonstrates that a pro-
36  ject carried on outside the area will have a significant impact inside the
37  community.
38    (b)  The commissioner may approve a grant to a community devel-
39  opment corporation for projects, including but not limited to: Organiza-
40  tion of the corporation, training of the directors, creation of a strategic
41  development plan, establishment of a business venture or business in-
42  cubator, purchase of a full or partial interest in a business venture or
43  development of resources or facilities for the establishment of a business
HB 2457
                                     

 1  venture.
 2    New Sec. 6.  (a) The commissioner must be named as an assignee of
 3  the rights of a state-funded community development corporation on any
 4  loan or other evidence of debt provided by a community development
 5  corporation to a private enterprise. The assignment of rights must provide
 6  that it will be effective upon the dormancy or cessation of existence of
 7  the community development corporation. ``Dormancy'' for the purpose
 8  of this section means the continuation of the corporation in name only
 9  without any functioning officers or activities.  Upon the cessation of the
10  activities of a state-funded community development corporation, any as-
11  signed money paid to the director must be deposited in the state treasury
12  and credited to the general fund.
13    (b)  A community development corporation may sell, at private or
14  public sale, at the price or prices determined by the corporation, any note,
15  mortgage, lease, sublease, lease purchase or other instrument or obliga-
16  tion evidencing or securing a loan made for the purpose of economic
17  development, job creation, redevelopment or other similar project.
18    New Sec. 7.  (a) The director may also approve a grant for projects
19  including, but not limited to: Community public safety and human service
20  activities; street and public property lighting, recycling efforts, repair or
21  removal of dilapidated buildings, community beautification and cleanup,
22  historic preservation of buildings, park and open space developments,
23  increasing or preserving the availability of housing primarily serving low
24  or moderate income persons or other projects the director may deem
25  meritorious.
26    (b)  Grants awarded under this section shall not constitute more than
27  50% of the total cost of any proposed project. No eligible corporation
28  shall receive more than $50,000 in any fiscal year.
29    (c)  The director may adopt rules and regulations concerning the
30  awarding of matching grants, but such rules and regulations should in-
31  clude the following criteria:
32    (1)  The degree of community support measured by the amount of
33  participation in the project by volunteers;
34    (2)  the extent that the eligible corporation has participated with or
35  solicited input from other organizations that provide community and re-
36  gional assistance;
37    (3)  the amount of nonstate matching funds identified as available for
38  the project or activities; and
39    (4)  any other criteria the director determines necessary to carry out
40  the purposes of this section.
41    (d)  Eligible corporations may apply to the director for grants.  The
42  application must include a community and neighborhood development
43  organization plan that addresses the following:
HB 2457
                                     

 1    (1)  A geographic, social and economic description of the area served
 2  by the eligible organization;
 3    (2)  a description of why the project is required in the neighborhood
 4  or community;
 5    (3)  a detailed description of the objectives for which the grant money
 6  will be used;
 7    (4)  a description of the process used to encourage citizen involvement
 8  in determining the needs, objectives and the design of the project;
 9    (5)  an assessment of the strength and weaknesses of the neighbor-
10  hood or community;
11    (6)  A detailed description of the projects or activities that will be used
12  to implement the objectives;
13    (7)  a description of the expected outcomes of the project financed by
14  the grant;
15    (8)  identification of the source of the required matching funds; and
16    (9)  any other information the director determines necessary to award
17  the grants.
18    Sec. 8.  K.S.A. 1996 Supp. 9-1101 is hereby amended to read as fol-
19  lows: 9-1101. Any bank hereby is authorized to exercise by its board of
20  directors or duly authorized officers or agents, subject to law, all such
21  powers, including incidental powers, as shall be necessary to carry on the
22  business of banking, and:
23    (1)  To receive deposits and to pay interest thereon at rates which
24  need not be uniform. The state bank commissioner, with approval of the
25  state banking board, may by regulations of general application fix maxi-
26  mum rates of interest to be paid on deposit accounts other than accounts
27  for public moneys;
28    (2)  to buy and sell exchange, gold, silver, foreign coin, bullion, com-
29  mercial paper, bills of exchange, notes and bonds;
30    (3)  to buy and sell bonds, securities, or other evidences of indebt-
31  edness of the United States of America or those fully guaranteed, directly
32  or indirectly, by it, and general obligation bonds of the state of Kansas or
33  any municipality or quasi-municipality thereof, and of other states, and
34  of municipalities or quasi-municipalities in other states of the United
35  States of America. No bank shall invest an amount in excess of 15% of its
36  capital stock paid in and unimpaired and the unimpaired surplus fund of
37  such bank in bonds, securities or other evidences of indebtedness of any
38  municipality or quasi-municipality of any other state or states of the
39  United States of America: (a) If and when the direct and overlapping
40  indebtedness of such municipality or quasi-municipality is in excess of
41  10% of its assessed valuation, excluding therefrom all valuations on in-
42  tangibles and homestead exemption valuation; (b) or if any bond, security,
43  or evidence of indebtedness of any such municipality or quasi-munici-
HB 2457
                                     

 1  pality has been in default in the payment of principal or interest within
 2  10 years prior to the time that any bank acquires any such bonds, security
 3  or evidence of indebtedness;
 4    (4)  to make all types of loans, including loans on real estate, subject
 5  to the loan limitations contained in this act. Every real estate loan shall
 6  be secured by a mortgage or other instrument constituting a lien, or the
 7  full equivalent thereof, upon the real estate securing the loan, according
 8  to any lawful or well recognized practice, which is best suited to the
 9  transaction. The mortgage may secure future advances. The lien of such
10  mortgage shall attach upon its execution and have priority from time of
11  recording as to all advances made thereunder until such mortgage is re-
12  leased of record. The lien of such mortgage shall not exceed at any one
13  time the maximum amount stated in the mortgage;
14    (5)  to discount and negotiate bills of exchange, negotiable notes and
15  notes not negotiable;
16    (6)  to buy and sell investment securities which are evidences of in-
17  debtedness. The buying and selling of investment securities shall be lim-
18  ited to buying and selling without recourse marketable obligations evi-
19  dencing indebtedness of any person, copartnership, association,
20  corporation, or state or federal agency, including revenue bonds issued
21  pursuant to K.S.A. 76-6a15, and amendments thereto, or the state armory
22  board in the form of bonds, notes or debentures or both, commonly
23  known as investment securities, under such further definition of the term
24  ``investment securities'' as prescribed by the board, but the total amount
25  of such investment securities of any one obligor or maker held by such
26  bank shall at no time exceed 15% of the capital stock paid in and unim-
27  paired and the unimpaired surplus fund of such bank except that this
28  limit shall not apply to obligations of the United States government or
29  any agency thereof. If the obligor is a state agency including any agency
30  issuing revenue bonds pursuant to K.S.A. 76-6a15, and amendments
31  thereto, or the state armory board, the total amount of such investment
32  securities shall at no time exceed 25% of the capital stock paid in and
33  unimpaired and the unimpaired surplus fund of such bank;
34    (7)  to subscribe to, buy and own such stock of the federal national
35  mortgage association as required by title 3, section 303 of the federal act
36  known as the national housing act as amended by section 201 of public
37  law No. 560, of the United States (68 Stat. 613-615), known as the housing
38  act of 1954, or amendments thereto;
39    (8)  to subscribe to, buy and own stock in one or more small business
40  investment companies in Kansas as otherwise authorized by federal law,
41  except that in no event shall any bank acquire shares in any small business
42  investment company if, upon the making of that acquisition the aggregate
43  amount of shares in small business investment companies then held by
HB 2457
                                     

 1  the bank would exceed 5% of its capital and surplus. Nothing in this act
 2  contained shall prohibit any bank from holding and disposing of such real
 3  estate and other property as it may acquire in the collection of its assets;
 4    (9)  to subscribe to, buy and own stock in any agricultural credit cor-
 5  poration or livestock loan company, or its affiliate, organized pursuant to
 6  the provisions of the laws of the United States providing for the infor-
 7  mation and operation of agricultural credit corporations and livestock loan
 8  companies, in an amount not exceeding either the undivided profits or
 9  10% of the capital stock and surplus and undivided profits from such
10  bank, whichever is greater;
11    (10)  to subscribe to, buy and own stock in minbanc capital corpora-
12  tion, a company formed for the purpose of providing capital to minority-
13  owned banks. No bank's investment in such stock shall exceed 2% of its
14  capital and surplus;
15    (11)  to buy, hold, and sell any type of investment securities not enu-
16  merated in this section with approval of the commissioner and upon such
17  conditions and under such regulations as are prescribed by the state bank-
18  ing board;
19    (12)  to act as escrow agent;
20    (13)  to subscribe to, acquire, hold and dispose of stock of a corpo-
21  ration having as its purpose the acquisition, holding and disposition of
22  loans secured by real estate mortgages, and to acquire, hold and dispose
23  of the debentures and capital notes of such corporation. No bank's in-
24  vestment in such stock, debentures and capital notes shall exceed 2% of
25  its capital stock, surplus and undivided profits and such investment shall
26  be carried on the books of the bank as directed by the commissioner;
27    (14)  to purchase and sell securities and stock without recourse solely
28  upon the order, and for the account, of customers;
29    (15)  to subscribe to, acquire, hold and dispose of any class of stock,
30  debentures and capital notes of MABSCO agricultural services, inc. or
31  any similar corporation having as its purpose the acquisition, holding and
32  disposition of agricultural loans originated by Kansas banks. No bank's
33  investment in such stock, debentures and capital notes shall exceed 2%
34  of its capital stock, surplus and undivided profits. Such investment shall
35  be carried on the books of the bank as directed by the commissioner;
36    (16)  to buy, hold and sell mortgages, stock, obligations and other se-
37  curities which are issued or guaranteed by the federal home loan mort-
38  gage corporation under sections 305 and 306 of the federal act known as
39  the federal home loan mortgage corporation act (P.L. 91-351);
40    (17)  to buy, hold and sell obligations or other instruments or securi-
41  ties, including stock, issued or guaranteed by the student loan marketing
42  association created by (P.L. 92-318) of the United States;
43    (18)  to engage in financial future contracts on United States govern-
HB 2457
                                     

 1  ment and agency securities subject to such rules and regulations as the
 2  state bank commissioner may prescribe pursuant to K.S.A. 9-1713, and
 3  amendments thereto, to promote safe and sound banking practices;
 4    (19)  to subscribe to, buy and own stock in a state or federally char-
 5  tered bankers' bank or a one bank holding company which owns or con-
 6  trols such a bankers' bank, except no bank's investment in such stock shall
 7  exceed 10% of its capital stock, surplus and undivided profits;
 8    (20)  subject to such rules and regulations as the state bank commis-
 9  sioner may adopt pursuant to K.S.A. 9-1713, and amendments thereto,
10  to promote safe and sound banking practices, upon recorded prior ap-
11  proval by the board of directors of the initial investment in a specific
12  company and pursuant to an investment policy approved by the board of
13  directors which specifically provides for such investments to buy, hold
14  and sell shares of an open-end investment company registered with the
15  federal securities and exchange commission under the federal investment
16  company act of 1940 and the federal securities act of 1933 and of a pri-
17  vately offered company sponsored by an affiliated commercial bank, the
18  shares of which are purchased and sold at par and the assets of which
19  consist solely of securities which may be purchased by the bank for its
20  own account. Such shares may be purchased without limit if the assets of
21  the company consist solely of and are limited to obligations that are eli-
22  gible for purchase by the bank without limit. If the assets of the company
23  include securities which may be purchased by the bank subject to limi-
24  tation, such shares may be purchased subject to the limitation applicable
25  to purchase by the bank of such securities;
26    (21)  subject to the prior approval of the state bank commissioner and
27  the state banking board and subject to such rules and regulations as are
28  adopted by the state bank commissioner pursuant to K.S.A. 9-1713, and
29  amendments thereto, to promote safe and sound banking practices, a
30  bank may establish a subsidiary which engages in the following securities
31  activities: (a) selling or distributing stocks, bonds, debentures, notes, mu-
32  tual funds and other securities, (b) issuing and underwriting municipal
33  bonds, (c) organizing, sponsoring and operating mutual funds, (d) acting
34  as a securities broker-dealer;
35    (22)  to subscribe to, acquire, hold and dispose of stock of any class
36  of the federal agricultural mortgage corporation, a corporation having as
37  its purpose the acquisition, holding and disposition of loans secured by
38  agricultural real estate mortgages. No bank's investment in such corpo-
39  ration shall exceed 5% of its capital stock, surplus and undivided profits
40  and such investment shall be carried on the books of the bank as directed
41  by the commissioner;
42    (23)  to subscribe to, buy and own stock in an insurance company
43  incorporated prior to 1910, under the laws of Kansas, with corporate
HB 2457
                                     

 1  headquarters in this state, which only provides insurance to financial in-
 2  stitutions. The investment in such stock shall not exceed 2% of the bank's
 3  capital stock, surplus and undivided profits;
 4    (24)  to purchase and hold an interest in life insurance policies on the
 5  life of its executive officers and directors, and to purchase life insurance
 6  policies for the sole purpose of providing employee deferred compensa-
 7  tion and benefit plans subject to the limitations listed herein. If the bank
 8  has the authority to direct the investments of the cash surrender value of
 9  the policy, those investments shall be limited solely to assets which may
10  be directly purchased by the bank for its own account. The limitations
11  set forth in paragraphs (a) and (b) of this subsection do not apply to any
12  such life insurance policies in place before July 1, 1993. Funding for the
13  payment of employee compensation and benefit plans as well as the ben-
14  efits derived may be made or split in a joint manner between the bank,
15  employee or bank holding company as in ``split dollar'' or other insurance
16  plans:
17    (a)  Life insurance purchased and held on the life of executive officers
18  and directors are subject to the following limitations:
19    (i)  The cash surrender value of any life insurance policy on an exec-
20  utive officer or director underwritten by any one life insurance company
21  cannot at any time exceed 15% of the bank's capital stock, surplus, un-
22  divided profits, loan loss reserve, capital notes and debentures and reserve
23  for contingency, unless the bank has obtained the prior approval of the
24  state bank commissioner;
25    (ii)  the cash surrender value of life insurance policies on executive
26  officers or directors, in the aggregate from all companies, cannot at any
27  time exceed 25% of the bank's capital stock, surplus, undivided profits,
28  loan loss reserve, capital notes and debentures and reserve for contin-
29  gency, unless the bank has obtained the prior approval of the state bank
30  commissioner;
31    (iii)  the authority to hold life insurance on any executive officer ceases
32  if the executive officer is no longer employed by the bank or no longer
33  meets the definition of an executive officer;
34    (iv)  the authority to hold life insurance on a director ceases when that
35  director is no longer a member of the board of directors;
36    (v)  the bank's board of directors must approve and document the
37  purchase of any life insurance, including the reasonableness of such pur-
38  chase; and
39    (vi)  except as part of a reasonable compensation or benefit plan, a
40  bank is not authorized to purchase life insurance as an estate management
41  device for the benefit of officers, directors or employees who are also
42  controlling shareholders of the bank.
43    (b)  Life insurance purchased for the sole purpose of providing de-
HB 2457
                                     

 1  ferred compensation and benefit plans are subject to the following limi-
 2  tations:
 3    (i)  The bank may purchase individual or group policies for the sole
 4  purpose of providing deferred compensation agreements entered into
 5  with its officers and employees;
 6    (ii)  the bank may purchase policies on directors to fund a deferred
 7  directors fees program;
 8    (iii)  the board of directors must approve and document such deferred
 9  plans including the reasonableness of the plans;
10    (iv)  the bank is not authorized to hold the policies unless specifically
11  approved by the state banking board if no liability exists under the de-
12  ferred compensation plans;
13    (v)  the cash surrender value of any life insurance policy purchased
14  for the sole purpose of providing deferred compensation and benefit
15  plans, underwritten by any one life insurance company, cannot exceed at
16  any time, 15% of the bank's capital stock, surplus, undivided profits, loan
17  loss reserve, capital notes and debentures and reserve for contingency,
18  unless the bank has obtained the prior approval of the state bank com-
19  missioner; and
20    (vi)  the cash surrender value of life insurance policies purchased for
21  the sole purpose of providing deferred compensation and benefit plans,
22  in the aggregate from all companies, cannot at any time exceed 25% of
23  the bank's capital stock, surplus, undivided profits, loan loss reserve, cap-
24  ital notes and debentures and reserve for contingency, unless the bank
25  has obtained the prior approval of the state bank commissioner;
26    (25)  subject to such rules and regulations as the state bank commis-
27  sioner may adopt pursuant to K.S.A. 9-1713 and amendments thereto to
28  promote safe and sound banking practices, to act as an agent and receive
29  deposits, renew time deposits, close loans, service loans, and receive pay-
30  ments on loans and other obligations for any company which is a subsid-
31  iary, as defined in subsection (d) of K.S.A. 9-519 and amendments thereto
32  of the bank holding company which owns the bank. Nothing in this sub-
33  section shall authorize a bank to conduct activities as an agent which the
34  bank or the subsidiary would be prohibited from conducting as a principal
35  under any applicable federal or state law. Any bank which enters or ter-
36  minates any agreement pursuant to this subsection shall within 30 days
37  of the effective date of the agreement or termination provide written
38  notification to the commissioner which details all parties involved and
39  services to be performed or terminated;
40    (26)  to make loans to the bank's stockholders or the stockholders of
41  the bank's controlling bank holding company on the security of the shares
42  of the bank or shares of the bank's controlling bank holding company,
43  with the limitation that this may occur only if the bank would have ex-
HB 2457
                                     

 1  tended credit to such stockholder on exactly the same terms without the
 2  shares pledged as collateral, and provided the shares pledged are not a
 3  director's qualifying shares per K.S.A. 9-1117, and amendments thereto;
 4  and
 5    (27)  to make investments in and loans to community development
 6  corporations (CDCs) and community development projects (CD pro-
 7  jects) as defined in K.S.A. 9-701 and amendments thereto, subject to the
 8  limitations prescribed by the comptroller of the currency as interpreted
 9  by rules and regulations which shall be adopted by the state bank com-
10  missioner as provided by K.S.A. 9-1713 and amendments thereto.; and
11    (28)  to subscribe to, buy and own stock in or make loans to a com-
12  munity development corporation organized pursuant to the community
13  development corporation assistance act.
14    Sec. 9.  K.S.A. 1996 Supp. 9-1101 is hereby repealed.
15    Sec. 10.  This act shall take effect and be in force from and after its
16  publication in the statute book.