Section 5-13-12-8 - Economic development obligation or credit enhancement obligation guarantees; limitation; conditions; claims, losses, or debts(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;(iii) combination of security agreements and mortgages under items (i) and (ii); or(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.Amended by P.L. 189-2018,SEC. 37, eff. 7/1/2018.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.