To provide for the construction and renovation of child care facilities, and for other purposes.

February 25, 2003

Mrs. MCCARTHY of New York introduced the following bill; which was referred to the Committee on Financial Services

To provide for the construction and renovation of child care facilities, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Child Care Construction and Renovation Act'.

SEC. 2. USE OF COMMUNITY DEVELOPMENT BLOCK GRANTS TO ESTABLISH CHILD CARE FACILITIES.

Section 105(a) of the Housing and Community Development Act of 1974 (42 U.S.C. 5305(a)) is amended--

(1) in paragraph (22), by striking `and' at the end;

(2) in paragraph (23), by striking the period at the end and inserting a semicolon;

(3) in paragraph (24), by striking `and' at the end;

(4) in paragraph (25), by striking the period at the end and inserting `; and'; and

(5) by adding at the end the following:

`(26) the construction and renovation of child care facilities.'.

SEC. 3. INSURANCE FOR MORTGAGES ON NEW AND REHABILITATED CHILD CARE FACILITIES.

Title II of the National Housing Act (12 U.S.C. 1707 et seq.) is amended by adding at the end the following:

`SEC. 257. MORTGAGE INSURANCE FOR CHILD CARE FACILITIES.

`(a) DEFINITIONS- In this section:

`(1) CHILD CARE FACILITY- The term `child care facility'--

`(A) means a public or private facility that--

`(i) has as its purpose the care and development of--

`(I) children who are less than 16 years of age; or

`(II) school-age children and youth during non-school hours; and

`(ii) is operated in accordance with all applicable State and local laws and regulations; and

`(B) does not include any facility for school-age children that is primarily for use during normal school hours.

`(2) EQUIPMENT- The term `equipment' includes--

`(A) machinery, utilities, and built-in equipment, and any necessary enclosure or structure to house them; and

`(B) any other items necessary for the functioning of a particular facility as a child care facility, including necessary furniture, books, and curricular and program materials.

`(3) FIRST MORTGAGE- The term `first mortgage'--

`(A) means such classes of first liens as are commonly given to secure advances (including advances during construction) on, or the unpaid purchase price of, real estate under the laws of the State in which the real estate is located, together with the credit instrument or instruments (if any) secured thereby; and

`(B) includes any mortgage in the form of 1 or more trust mortgages or mortgage indentures or deeds of trust, securing notes, bonds, or other credit instruments, that, by the same instrument or by a separate instrument, creates a security interest in initial equipment, whether or not attached to the realty.

`(4) MORTGAGE- The term `mortgage' means a first mortgage on real estate in fee simple, or on the interest of either the lessor or lessee thereof under a lease having a period of not less than 7 years to run beyond the maturity date of the mortgage.

`(5) MORTGAGOR- The term `mortgagor' has the meaning given the term in section 207(a).

`(b) INSURANCE OF MORTGAGES- In order to facilitate the establishment and rehabilitation of child care facilities, the Secretary may--

`(1) insure a mortgage that is secured by a property or project that is--

`(A) a new child care facility, including a new addition to an existing child care facility (regardless of whether the existing facility is being rehabilitated); or

`(B) a substantially rehabilitated child care facility, including equipment to be used in the operation of the facility; and

`(2) make a commitment to insure any mortgage described in paragraph (1) before the date of execution or disbursement of the mortgage.

`(c) TERMS AND CONDITIONS-

`(1) ELIGIBLE CHILD CARE FACILITIES- Each mortgage insured under this section shall be secured by a child care facility for which a certification of compliance has been issued by the Secretary under section 258(c) during the 12-month period preceding the date on which the commitment to insure the mortgage is issued under this section.

`(2) APPROVED MORTGAGOR-

`(A) IN GENERAL- Each mortgage insured under this section shall be executed by a mortgagor approved by the Secretary.

`(B) REGULATION- The Secretary may--

`(i) require an approved mortgagor who executes a mortgage under subparagraph (A) to be regulated with respect to charges and methods of financing and, if the mortgagor is a corporate entity, with respect to capital structure and rate of return; and

`(ii) as an aid to the regulation of any mortgagor under clause (i), make such contracts with and acquire for not more than $100 such stock or interest in such mortgagor as the Secretary considers to be necessary.

`(C) STOCK OR INTEREST- Any stock or interest purchased under subparagraph (B)(ii) shall be--

`(i) paid for out of the General Insurance Fund; and

`(ii) redeemed by the mortgagor at par upon the termination of all obligations of the Secretary under the insurance.

`(3) PRINCIPAL OBLIGATION- Each mortgage insured under this section shall involve a principal obligation in an amount not to exceed 90 percent of the estimated value of the property or project, or 95 percent of the estimated value of the property or project in the case of a mortgagor that is a private nonprofit corporation or association (as defined pursuant to section 221(d)(3)), including--

`(A) equipment to be used in the operation of the facility when the proposed improvements are completed and the equipment is installed; or

`(B) a solar energy system (as defined in subparagraph (3) of the last paragraph of section 2(a)) or residential energy conservation measures (as defined in subparagraphs (A) through (G) and (I) of section 210(11) of the National Energy Conservation Policy Act), in cases in which the Secretary determines that such measures are in addition to those required under the minimum property standards and will be cost-effective over the life of the measure.

`(4) AMORTIZATION AND INTEREST- Each mortgage insured under this section shall--

`(A) provide for complete amortization by periodic payments under such terms as the Secretary shall prescribe;

`(B) have a maturity date satisfactory to the Secretary, but in no event longer than 25 years; and

`(C) bear interest at such rate as may be agreed upon by the mortgagor and the mortgagee, and the Secretary shall not issue any regulations or establish any terms or conditions that interfere with the ability of the mortgagor and mortgagee to determine the interest rate.

`(5) RELEASE- The Secretary may consent to the release of a part or parts of the mortgaged property or project from the lien of any mortgage insured under this section upon such terms and conditions as the Secretary may prescribe.

`(6) MORTGAGE INSURANCE TERMS- Subsections (d), (e), (g), (h), (i), (j), (k), (l), and (n) of section 207 apply to any mortgage insured under this section, except that all references in such subsections to section 207 shall be construed, for purposes of mortgage insurance under this section, to refer to this section.

`(d) MORTGAGE INSURANCE FOR FIRE SAFETY EQUIPMENT LOANS-

`(1) AUTHORITY- The Secretary may, upon such terms and conditions as the Secretary may prescribe, make commitments to insure and insure loans made by financial institutions or other approved mortgagees to child care facilities to provide for the purchase and installation of fire safety equipment necessary for compliance with the 1967 edition of the Life Safety Code of the National Fire Protection Association (or any subsequent edition specified by the Secretary of Health and Human Services).

`(2) LOAN REQUIREMENTS- To be eligible for insurance under this subsection a loan shall--

`(A) not exceed the estimate by the Secretary of the reasonable cost of the equipment fully installed;

`(B) bear interest at such rate as may be agreed upon by the mortgagor and the mortgagee;

`(C) have a maturity date satisfactory to the Secretary;

`(D) be made by a financial institution or other mortgagee approved by the Secretary as eligible for insurance under section 2 or a mortgagee approved under section 203(b)(1);

`(E) comply with other such terms, conditions, and restrictions as the Secretary may prescribe; and

`(F) be made with respect to a child care facility for which a certification of compliance has been issued by the Secretary under section

258(c) during the 12-month period preceding the date on which the commitment to insure is issued under this subsection.

`(3) INSURANCE REQUIREMENTS-

`(A) SECTION 2- Subsections (c), (d), and (h) of section 2 shall apply to any loan insured under this subsection, except that all references in such subsections to `this section' or `this title' shall be construed, for purposes of this subsection, to refer to this subsection.

`(B) SECTION 220- Paragraphs (5), (6), (7), (9), and (10) of section 220(h) shall apply to any loan insured under this subsection, except that all references in such paragraphs to home improvement loans shall be construed, for purposes of this subsection, to refer to loans under this subsection.

`(e) SCHEDULES AND DEADLINES- The Secretary shall establish schedules and deadlines for the processing and approval (or provision of notice of disapproval) of applications for mortgage insurance under this section.

`(f) LIMITATION ON INSURANCE AUTHORITY-

`(1) TERMINATION- No mortgage may be insured under this section or section 223(h) after September 30, 2005, except pursuant to a commitment to insure issued on or before such date.

`(2) AGGREGATE PRINCIPAL AMOUNT LIMITATION-

`(A) IN GENERAL- The aggregate principal amount of mortgages for which the Secretary enters into commitments to insure under this section or section 223(h) on or before the date described in paragraph (1) may not exceed $2,000,000,000.

`(B) REPORT- If, on the date described in paragraph (1), the aggregate insurance authority provided under this paragraph has not been fully used, the Secretary of the Treasury shall submit to Congress a report evaluating the need for continued mortgage insurance under this section.

`(g) NONDISCRIMINATION REQUIREMENT-

`(1) IN GENERAL- A child care facility receiving assistance under this title may not discriminate on the basis of race, color, or national origin (to the extent provided in title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.)), religion (subject to subparagraph (B)), national origin, sex (to the extent provided in title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.)), or disability (to the extent provided in section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794)), under any program or activity receiving Federal financial assistance under this title.

`(2) FACILITIES OF RELIGIOUS ORGANIZATIONS- The prohibition with respect to religion under paragraph (1) shall not apply to a child care facility that is controlled by, or that is closely identified with, the tenets of a particular religious organization, if the application of this paragraph would not be consistent with the religious tenets of such organization.

`(h) LIABILITY INSURANCE- A child care provider operating a child care facility assisted under this section or section 223(h) shall obtain and maintain liability insurance in such amounts and subject to such requirements as the Secretary considers to be appropriate.

`(i) SMALL PURPOSE LOANS-

`(1) IN GENERAL- To the extent that amounts are made available pursuant to subsection (l), the Secretary shall make loans, directly or indirectly, to providers of child care facilities for reconstruction or renovation of such facilities, in accordance with this subsection.

`(2) REQUIREMENTS- A loan under this subsection--

`(A) may be made only for a child care facility that is financially and operationally viable, as determined under standards established by the Secretary;

`(B) may not have a term to maturity exceeding 7 years;

`(C) shall bear interest at a rate established by the Secretary; and

`(D) shall be subject to such other terms and conditions as the Secretary may establish by regulation.

`(3) AGGREGATE LOAN AMOUNT- The aggregate amount of loans under this subsection to a single provider may not exceed $30,000.

`(j) NOTIFICATION- The Secretary shall take such actions as may be necessary to publicize the availability of the programs for mortgage insurance under this section and section 223(h), and the loan program under subsection (i) of this section, in a manner that ensures that information concerning such programs will be available to child care providers throughout the United States.

`(k) REGULATIONS- The Secretary shall--

`(1) issue any regulations necessary to carry out this section; and

`(2) in carrying out paragraph (1), consult with the Secretary of Health and Human Services with respect to any aspects of the regulations regarding child care facilities.

`(l) AUTHORIZATION OF APPROPRIATIONS- There is authorized to be appropriated to carry out this section $30,000,000 for fiscal year 2004, to remain available until expended, of which not more than 10 percent may be used for loans under subsection (i).'.

SEC. 4. INSURANCE FOR MORTGAGES FOR ACQUISITION OR REFINANCING DEBT OF EXISTING CHILD CARE FACILITIES.

(a) IN GENERAL- Section 223 of the National Housing Act (12 U.S.C. 1715n) is amended by adding at the end the following:

`(h) MORTGAGE INSURANCE FOR PURCHASE OR REFINANCING OF EXISTING CHILD CARE FACILITIES-

`(1) DEFINITIONS- In this subsection, the terms that are defined in section 257(a) have the same meanings as in that section.

`(2) AUTHORITY- Notwithstanding any other provision of this Act, the Secretary may insure under any section of this title a mortgage executed in connection with--

`(A) the purchase or refinancing of an existing child care facility;

`(B) the purchase of a structure to serve as a child care facility; or

`(C) the refinancing of existing debt of an existing child care facility.

`(3) PURCHASE OF EXISTING FACILITIES AND STRUCTURES- In the case of the purchase under this subsection of an existing child care facility or purchase of an existing structure to serve as such a facility, the Secretary shall prescribe any terms and conditions that the Secretary considers necessary to ensure that--

`(A) the facility or structure purchased continues to be used as a child care facility; and

`(B) the facility receives a certification of compliance under section 258(c).

`(4) REFINANCING OF EXISTING FACILITIES- In the case of refinancing of an existing child care facility, the Secretary shall prescribe any terms and conditions that the Secretary considers necessary to ensure that--

`(A) the refinancing is used to lower the monthly debt service costs (taking into account any fees or charges connected with such refinancing) of the existing facility;

`(B) the proceeds of any refinancing will be employed only to retire the existing indebtedness and pay the necessary cost of refinancing on the existing facility;

`(C) the existing facility is economically viable; and

`(D) the facility receives a certification of compliance under section 258(c).

`(5) LIMITATION ON INSURANCE AUTHORITY- The authority of the Secretary to enter into commitments to insure mortgages under this subsection is subject to section 257(f).'.

SEC. 5. STUDY OF AVAILABILITY OF SECONDARY MARKETS FOR MORTGAGES ON CHILD CARE FACILITIES.

(a) STUDY- The Secretary of the Treasury shall conduct a study of the secondary mortgage markets to determine--

(1) whether such a market exists for purchase of mortgages eligible for insurance under sections 223(h) and 257 of the National Housing Act (as added by this Act);

(2) whether such a market would affect the availability of credit available for development of child care facilities or would lower development costs of such facilities; and

(3) the extent to which such a market or other activities to provide credit enhancement for loans for child care facilities is needed to meet the demand for such facilities.

(b) REPORT- Not later than 2 years after the date of enactment of this Act, the Secretary of the Treasury shall submit to Congress a report regarding the results of the study conducted under this section.

SEC. 6. TECHNICAL AND FINANCIAL ASSISTANCE GRANTS.

(a) DEFINITIONS- In this section:

(1) CHILD CARE FACILITY- The term `child care facility' has the meaning given that term in section 257(a) of the National Housing Act, as added by section 3.

(2) ELIGIBLE INTERMEDIARY- The term `eligible intermediary' means a private, nonprofit intermediary organization that has demonstrated experience in--

(A) financing the construction and renovation of physical facilities;

(B) providing technical and financial assistance to child care providers or other similar entities;

(C) working with small businesses; and

(D) securing private sources for capital financing; and

(3) ELIGIBLE RECIPIENT- The term `eligible recipient' means any--

(A) existing or start-up center-based or home-based child care provider; and

(B) organization in the process of establishing a center-based or home-based child care program or otherwise seeking to provide child care services.

(4) EQUIPMENT- The term `equipment' has the meaning given that term in section 257(a) of the National Housing Act, as added by section 3.

(b) GRANT AUTHORITY- The Secretary of Housing and Urban Development, in consultation with the Secretary of Health and Human Services, may award grants on a competitive basis in accordance with this section to eligible intermediaries for use in accordance with subsections (e) and (f).

(c) APPLICATIONS- To be eligible to receive a grant under this section an eligible intermediary shall submit to the Secretary an application, in such form and containing such information as the Secretary may require.

(d) PRIORITY- In awarding grants under this section the Secretary shall give a priority to applicants under subsection (c) that serve low-income or rural areas.

(e) USE OF FUNDS-

(1) REVOLVING LOAN FUND- Each eligible intermediary that receives a grant under this section shall deposit the grant amount into a child care revolving loan fund established by the eligible intermediary.

(2) PAYMENTS FROM FUND- Subject to subsection (f), from amounts deposited into the revolving loan fund under paragraph (1), each eligible intermediary shall provide technical and financial assistance (in the form of loans, grants, investments, guarantees, interest subsidies, and other appropriate forms of assistance) to eligible recipients for the acquisition or improvement of child care facilities or equipment.

(3) LOAN REPAYMENTS AND INVESTMENT PROCEEDS- Any amount received by an eligible intermediary from an eligible recipient in the form of a loan repayment or investment proceeds shall be deposited into the child care revolving fund of the eligible intermediary for redistribution to other eligible recipients in accordance with this section.

(f) ALLOCATION OF FUNDS- Of the amounts distributed from the revolving loan fund of an eligible intermediary under subsection (e)(2) in each fiscal year--

(1) not less than 50 percent shall be used for the renovation or construction of child care facilities or the acquisition of equipment by eligible recipients, except that the amount made available to any eligible recipient under this paragraph may not exceed 40 percent of the total costs incurred by the eligible recipient in connection with such renovation, construction, or acquisition; and

(2) the amount remaining after distribution under paragraph (1), shall be used to provide direct assistance to eligible recipients in obtaining public or private financing for the renovation or construction of child care facilities and the acquisition of equipment, including developing and implementing financing resources, options, and plans for those recipients.

(g) DAVIS BACON ACT- The Act of March 3, 1931 (popularly known as the Davis-Bacon Act) shall apply to actions taken under this Act.

(h) AUTHORIZATION OF APPROPRIATIONS- There is authorized to be appropriated to carry out this section $10,000,000 for each of fiscal years 2004 through 2008.

END