This chapter shall be known as, and may be cited as 'The George Wallace, Jr., Plan For Linked Deposits of 1988.'

The Treasurer shall prepare an annual report to the Legislature, not later than the tenth legislative day of each regular session, outlining the activities during the previous year, the results of the plan in terms of benefits, and a summary of findings based on the Treasurer's monitoring of the plan.

The provisions of this chapter shall become effective October 1, 1999; and shall terminate September 30, 2006, unless specifically continued by an act of the Legislature.

The legislative purpose and intent of this chapter is to create a plan for emergency interim deposits as herein defined and for linked deposits in this state in which the State Treasurer is authorized to deposit or invest a portion of the state's portfolio of investments with participating lending institutions in relatively low-yielding deposit accounts, certificates of deposit, or other authorized investments, where the institutions have made commitments to make available lower cost loans on the basis of these linked deposits for qualifying private farm and small business borrowers. The further legislative intent is that the lower cost loans will result in a significant contribution to the economic and agricultural growth and development of the state, and will assist in maintaining or improving business and agricultural profitability as well as preserving and creating jobs for Alabama citizens.

For purposes of this chapter, the following terms shall have the meaning hereinafter ascribed to them, unless the context clearly indicates otherwise:

(1) PLAN. The Wallace Plan for Linked Deposits, created in Section 5-21-4.

(2) TREASURER. The Treasurer for the State of Alabama.

(3) LENDING INSTITUTION or ELIGIBLE LENDING INSTITUTION or LENDER. All state banks, savings and loan associations, and any other lending institutions of this state which are or shall become a depository of state funds, which agree to participate in a linked deposit plan.

(4) LINKED DEPOSIT or LINKED DEPOSIT PLAN. An agreement between the Treasurer and an eligible lending institution whereby a deposit is placed with the institution at a rate of return two percent below the current market rate for such a deposit, provided the institution agrees to lend the equivalent value of the deposit to eligible agricultural and business operations at an interest rate two percent below the normal charge, as hereinafter provided.

(5) ELIGIBLE AGRICULTURAL OPERATION. Any person, corporation, partnership, or other entity which is engaged in the production of agricultural, livestock, poultry, timber, dairy, or fruit or other horticultural products and which:

a. Derives at least 70 percent of its gross income from such production;

b. Operates exclusively in Alabama; and

c. Has at the time its application is submitted debts equal to or greater than 25 percent of its assets.

(6) ELIGIBLE BUSINESS OPERATION. Any person, proprietor, corporation, partnership, or other entity which:

a. Is headquartered in Alabama;

b. Is organized for profit;

c. Maintains facilities exclusively in Alabama;

d. Has no more than 150 employees at the time it applies for a loan under the plan;

e. For loans of $250,000 or less, demonstrates to the lending institution that for every $15,000 loaned at least one job is sustained or created as a result of the loan;

f. For loans of from $250,000 to $500,000, demonstrates to the lending institution that for each $10,000 worth of loan proceeds approved, at least one new job is created within the state; and

g. Has at the time its application is submitted debts equal to or greater than 35 percent of its assets.

(7) EMERGENCY INTERIM DEPOSITS. Deposits discretionarily made by the Treasurer in support of loans made by eligible lending institutions to persons, businesses, organizations, or local governments which have suffered loss, and which are located in areas in which property loss has occurred due to fire, flood, tornado, hurricane, or other act of God, or other natural or man-made disaster.

(a) The Wallace Plan for Linked and Emergency Interim Deposits, hereinafter referred to as 'the plan' is created. The State Treasurer is authorized, effective October 1, 1999, and until September 30, 2006, to use up to 12 percent of the total amount of investment funds of the state portfolio for the plan as linked deposits for eligible loans or for emergency interim deposits, as herein defined, made at the Treasurer's discretion.

(b) The term of any emergency interim deposit shall not exceed one year, and the deposit shall be made at a rate of return two percent below the current market rate for such a deposit, as determined by the Treasurer, provided the institution agrees to lend the equivalent value of the deposit at a correspondingly reduced rate of interest.

(a) Pursuant to the plan, agricultural operations loans are limited to a maximum amount of one hundred thousand dollars ($100,000). Such loans shall be limited to a term of one year or less and the linked deposit on which any such loan is based shall have the same maturity date as the loan. In addition, an agricultural operation must qualify as an eligible agricultural operation, as defined in Section 5-21-3 hereof, in order to be eligible for such a loan. An eligible agricultural operation may receive up to one hundred thousand dollars ($100,000) per year in linked deposit loans over a period of four years.

(b) Pursuant to the plan, the maximum amount for a business operation loan is five hundred thousand dollars ($500,000). The linked deposit upon which any business operations loan is based shall not be for a term longer than two years. In the event that the lending institution and the borrower agree to a longer term for the loan, then the interest rate charged to the borrower for the term of the loan beyond the initial two-year period shall be agreed to by the lending institution and the borrower without restriction by this chapter. The proceeds of any such business loan may be used for either working capital or fixed asset financing.

(c) In addition to the requirements of this section and to those requirements of Section 5-21-3(6), an eligible business operations loan borrower must demonstrate to the lender that an overall expected benefit of the loan is the creation or sustaining of at least one job for every fifteen thousand dollars ($15,000) of loan proceeds for loans up to two hundred fifty thousand dollars ($250,000) and one job for every ten thousand dollars ($10,000) from loans of two hundred fifty thousand dollars ($250,000) to five hundred thousand dollars ($500,000).

Lenders shall not be entitled to charge any fee or service charge to the borrower for placing the loan in the linked deposit program, other than fees charged in the normal course of business.

The Treasurer shall determine the rate, term, method, and date of payment due the State of Alabama on each linked deposit. The rate of interest on a one-year linked deposit shall be two percent below the most recent weekly average one-year constant maturity yield, as published by the Board of Governors of the Federal Reserve System, but in no event shall the interest rate be less than one percent. The rate of interest on a two-year linked deposit shall be two percent below the most recent weekly average two-year constant maturity yield, as published by the Board of Governors of the Federal Reserve System, but in no event shall the interest rate be less than one percent. The lending institution sets the interest rate charged to the borrower, but the rate of interest charged on any linked deposit loan shall be two percent below the rate the lending institution would have charged the borrower had the linked deposit program not been used.

Any agreement entered into between the state and a participating eligible lending institution pursuant to the plan established by this chapter shall be in writing and shall include specifically all terms, conditions and requirements of this chapter.

The Treasurer shall establish procedures and other requirements for participation in the plan, and shall provide simplified rules and loan application forms to the participating lending institutions for linked deposit loans. The forms shall reflect the specific requests for information required by this chapter for eligible agricultural and business loans, respectively. Upon completion of any application for a loan pursuant to the plan, the lender shall send the application to the Treasurer who shall either approve or reject the application in a timely manner. If approved, the Treasurer shall deposit funds with the lender when the proceeds are loaned and the deposits shall be secured in accordance with Section 41-14-35.