SB-1168, As Passed House, September 14, 2006

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1168

     A bill to amend 2000 PA 322, entitled

"Julian-Stille value-added act,"

by amending the title and section 2 (MCL 285.302).

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

TITLE

     An act to create certain committees; to create certain funds

from certain sources and to provide for the disposition of money

from the funds; to provide for the creation of certain funds by

certain private entities; to create incentives and to locate and

maintain value-added agricultural processing, commercialization of

agriculture, and production ventures within this state; to provide

for grants,  and loans, and loan guarantees to certain private and

governmental entities for  environmental  certain purposes; to

provide for certain powers and duties for certain private entities,

state agencies, commissions, and departments; to authorize loans,

loan guarantees, expenditures, and grants from the funds; and to

finance the development of certain programs.

     Sec. 2. (1) As used in this section and sections 2a and 2b:

     (a) "Agricultural processing" means 1 or more of the

operations that transform, package, sort, or grade livestock or

livestock products, agricultural commodities, or plant or plant

products into goods that are used for the intermediate or final

consumption including goods for nonfood use.

     (b) "Commercialization" means the transition from research to

the actions necessary to achieve market entry and general market

competitiveness of new innovative technologies, processes, and

products and the services that support, assist, equip, finance, or

promote a person or an entity with that transition.

(c)  (b) "Department" means the Michigan department of

agriculture.

     (d) "Eligible grantee" means a person able to receive a grant

under this section and includes, but is not limited to,

individuals, farmer owned cooperatives, partnerships, limited

liability companies, private or public corporations, and local

units of government.

(e)  (c) "Fund" means the agricultural development fund

created in  this section 2a.

     (f) "Joint evaluation committee" means a committee selected by

the commission of agriculture with appropriate expertise to conduct

an independent, unbiased, objective, and competitive evaluation of

grant proposals. The committee shall include at least 3 producers,

including 1 plant agricultural producer, 1 animal agricultural

producer, and another producer at large, an individual with a

scientific agriculture education, and an agricultural financial

lender.

     (g) "Qualified agricultural loan" means a loan for projects

designed to establish, retain, attract, or develop value-added

agricultural processing and related agricultural production

operations in this state.

     (h) "Specialty crops" means any agricultural commodity except

wheat, feed grains, oil seeds, cotton, rice, peanuts, and tobacco,

as well as products derived from these agricultural commodities.

(i)  (d) "Value-added" means the enhancement or improvement

of the overall value of an agricultural commodity or of an animal

or plant product into a product of higher value. The enhancement or

improvement includes, but is not limited to, marketing,

agricultural processing, transforming, or packaging.

     (2) The agricultural development fund is created within the

department of treasury to be administered by the department. Money

in the fund at the close of the fiscal year shall remain in the

fund and shall not lapse to the general fund. The department may

utilize up to 5% of the fund for administrative purposes. The state

treasurer shall credit to the fund money from the following

sources:

     (a) Appropriations.

     (b) Money or other assets from any source for deposit into the

fund, including federal money, other state revenues, gifts,

bequests, donations, as well as money from any other source

provided by law.

     (3) The department of treasury shall deposit not less than

$5,000,000.00 of the revenue available within the Michigan clean

air fund under section 3(2) into the agricultural development fund

under section 2(2).

(2)  (4) The department shall  use the fund to make grants to

qualified grantees who apply for such grants and who submit

proposals demonstrating feasibility for development of value-added

agricultural processing and agricultural production ventures

consistent with the purposes described in this act. Grantees may

include individuals, farmer-owned cooperatives, partnerships,

limited liability companies, private or public corporations, and

local units of government for projects designed to establish,

retain, expand, attract, or develop value-added agricultural

processing and related agricultural production operations in this

state. Grant money shall be used only for land, buildings,

equipment, and property acquisition and assembly, demolition, site

development, utility modifications and improvements, transportation

improvements, infrastructure improvements, telecommunications

infrastructure, technical assistance, marketing research, business

plan development, and utilization of technology designed to

establish, retain, expand, attract, or develop value-added

agricultural processing and related agricultural production

operations in this state.  establish and administer an agricultural

value-added grant program. The commission of agriculture shall

award grants from the fund created in section 2a only for projects

designed to establish, retain, expand, attract, or develop value-

added agricultural processing and related agricultural production

operations in this state. In approving a grant under this

subsection, the commission of agriculture shall state the specific

objective reasons supporting the selection of the applicant over

competing applicants. The joint evaluation committee shall assist

and provide recommendations to the commission of agriculture in

identifying high-quality projects for funding based upon the

selection criteria and scoring system approved by the commission of

agriculture. The recommendations shall include all materials and

decision documents used by the joint evaluation committee in making

the recommendations.

     (3) All scoring sheets, meetings, and other decisions made by

the joint evaluation committee shall be open to the public and

considered public documents. A record or portion of a record,

material, or other data received, prepared, used, or retained by

the department in connection with an application to or with a

project or product assisted by the department or with an award,

grant, loan, or investment relating to financial or proprietary

information submitted by the applicant that is considered by the

applicant and acknowledged by the department as confidential shall

not be subject to the disclosure requirements of the freedom of

information act, 1976 PA 442, MCL 15.231 to 15.246.

     (4) Subject to subsection (2), the department shall do all of

the following:

     (a) Establish a competitive process to award grants. The

competitive process shall include, but is not limited to, the

following:

     (i) A provision that the applications must be reviewed by the

joint evaluation committee. Scientific and technical merit,

commercial merit, and the ability to leverage additional funding

shall be given equal weight in the review and scoring process.

     (ii) A preference for proposals that demonstrate a high level

of innovation for value-added agricultural processing and related

agricultural production ventures to benefit producers in this

state.

     (iii) A preference for proposals that are attempting to secure a

license for agricultural-related intellectual property to be

produced in Michigan.

     (iv) A provision that the program will utilize contracts with

measurable milestones, clear objectives, and provisions to revoke

awards for breach of contract.

     (v) Provide for a cash match of at least 10% of the grant by

the applicant.

     (vi) Limit overhead rates for recipients of grants to reflect

actual overhead but not greater than 15% of the grant.

     (vii) A preference for proposals whose business plan forecasts

revenues within 2 years or that have outside investments from

investors with experience and management teams with experience in

the area targeted by the proposal, or both.

(b)  (5) The director of the department shall have final

approval of grants made under this act. The department shall

prepare  Prepare a request for proposals on at least an annual

basis for grants for eligible grantees from the fund. Grants are

contingent upon the availability of funds.

     (5) Subject to subsection (4)(a)(i), an application for a grant

submitted under this section shall be evaluated and ranked

according to selection criteria and a scoring or point system

approved by the director of the department. The selection criteria

and the scoring or point system shall be reviewed and approved by

the commission of agriculture. In developing such a system, the

department shall seek the assistance of the Michigan economic

development corporation, any institution of higher education, the

United States department of agriculture--rural development agency,

the rural development council of Michigan, agricultural producers,

and other industry and professional organizations as determined by

the director of the department.

     (6) The commission of agriculture shall ensure that a

recipient of a grant under this section agrees that, as a condition

of receiving the grant, that recipient shall not use the money for

the development of a casino regulated under the Michigan gaming

control and revenue act, the Initiated Law of 1996, MCL 432.201 to

432.226, a casino regulated under the Indian gaming regulatory act,

Public Law 100-497, 102 Stat. 2467, or any other gaming enterprise.

     (7) The department, in cooperation with the department of

treasury and Michigan financial institutions, shall establish a

low-interest loan program in a manner similar to the qualified

agricultural loan program established in section 2a of 1855 PA 105,

MCL 21.142a, or a loan guarantee program to provide qualified

agricultural loans. The department of treasury shall give the

department any necessary assistance required to establish a low-

interest loan or loan guarantee program. The department shall work

with Michigan financial institutions to establish a certification

system to verify that loan applicants are requesting qualified

agricultural loans. As part of the low-interest loan program, the

department shall do the following:

     (a) Work with the department of treasury to establish

agreements with participating financial institutions.

     (b) Ensure that an investment or new investment utilizing the

21st century jobs fund in which a qualified agricultural loan is

attributed is not made pursuant to this section after June 1, 2008.

     (c) Ensure that the terms of a qualified agricultural loan

under this section are for a term of not more than 5 years and that

the first payment made by the recipient occurs not later than 24

months after the date of the loan.

     (d) Ensure that the interest rate charged by participating

financial institutions does not exceed 50% of prime in Michigan

plus 1%.

     (e) Ensure that participating financial institutions do not

refinance prior debt.

     (f) Require a participating financial institution to certify

compliance with the Sarbanes-Oxley act of 2002, Public Law 107-204,

or prohibit an officer, director, or principal shareholder of a

participating financial institution, or his or her immediate family

members, from receiving an agricultural value-added low-interest

loan from the financial institution.

     (g) Require the recipient of a qualified agricultural loan

under this section to agree that, as a condition of receiving the

loan, that the recipient shall not use the money for the

development of a casino regulated under the Michigan gaming control

and revenue act, the Initiated Law of 1996, MCL 432.201 to 432.226,

a casino regulated under the Indian gaming regulatory act, Public

Law 100-497, 102 Stat. 2467, or any other gaming enterprise.

     (8) As part of a loan guarantee program, the department shall

do the following:

     (a) Work with the department of treasury to establish

agreements with participating financial institutions.

     (b) Ensure that participating financial institutions require

adequate collateral and fully liquidate all collateral before

calling on the loan guarantees.

     (c) Establish a loan guarantee of not more than 90% of the

financial institution's loss after all alternatives to collect have

been exhausted.

     (d) Ensure that participating financial institutions do not

refinance prior debt.

     (e) Require a participating financial institution to certify

compliance with the Sarbanes-Oxley act of 2002, Public Law 107-204,

or prohibit an officer, director, or principal shareholder of a

participating financial institution, or his or her immediate family

members, from receiving an agricultural value-added loan guarantee

from the financial institution.

     (f) Require the recipient of a qualified agricultural loan

under this section to agree that, as a condition of receiving the

loan guarantee, that the recipient shall not use the money for the

development of a casino regulated under the Michigan gaming control

and revenue act, the Initiated Law of 1996, MCL 432.201 to 432.226,

a casino regulated under the Indian gaming regulatory act, Public

Law 100-497, 102 Stat. 2467, or any other gaming enterprise.

     (g) Maintain a list of financial institutions that will

participate in the loan guarantee program.

(9)  (6) The director of the department may impose fiduciary

obligations upon a recipient of a grant, including performance

bonding, and may impose conditions upon the receipt and expenditure

of the grant money.

     (7) A cash match of at least 10% of the grant by the applicant

or other repayment guarantee with a dedicated funding source is

required before a grant can be awarded.

     (8) An application for a grant submitted under this section

shall be evaluated and ranked according to selection criteria and a

scoring or point system approved by the director of the department.

The selection criteria and the scoring or point system shall be

reviewed and approved by the commission of agriculture. In

developing such a system, the department shall seek the assistance

of the Michigan economic development corporation, Michigan state

university, the United States department of agriculture--rural

development agency, the rural development council of Michigan, 3

producers including 1 plant agricultural producer, 1 animal

agricultural producer, and another producer at large, and other

industry and professional organizations as determined appropriate

by the director of the department.

     (9) The selection criteria shall give primary consideration to

the ability of the proposed project to provide sound agricultural

economic development in a given geographical area of this state

with demonstrated economic and social benefits and the analysis of

the proposed project in terms of and relative to risk, business and

market planning, financial soundness, and credit-worthiness.

Special consideration shall be given to those projects meeting the

considerations described in this subsection and that demonstrate a

high level of innovation and initiative for value-added

agricultural processing and related agricultural production

ventures to benefit producers in this state.

     (10) Notwithstanding section 3(1) of 1968 PA 317, MCL 15.323,

members of the commission of agriculture and the joint evaluation

committee are subject to 1968 PA 317, MCL 15.321 to 15.330. As used

in this subsection, "substantial conflict of interest" means that

the pecuniary interest is of such importance as to either

materially influence the judgment of the member in the actual

performance of his or her duty under the act or to foreseeably and

materially influence the judgment of a reasonable person with

similar knowledge and experience acting under similar circumstances

and in a like position as the member. For purposes of this section,

members of the commission of agriculture and the joint evaluation

committee shall do the following:

     (a) Discharge the duties of the position in a nonpartisan

manner, in good faith, in the best interests of this state, and

with the degree of diligence, care, and skill that a fiduciary

would exercise under similar circumstances in a like position. In

discharging duties of the office, the commission of agriculture

when acting in good faith may rely upon the report of the joint

evaluation committee or upon financial statements of the department

represented to the commission of agriculture by the officer having

charge of its books or accounts or stated in a written report by

the auditor general.

     (b) Not make or participate in making, or in any way attempt

to use his or her position to influence a matter before the

department regarding, a loan, loan guarantee, grant, or other

expenditure under this act.

     (c) Not have any financial interest in a recipient of proceeds

under this act and shall not engage in any conduct that constitutes

a substantial conflict of interest.

     (d) Immediately advise the commission of agriculture in

writing of the details of any incident or circumstances that may

present the existence of a substantial conflict of interest with

respect to the performance of his or her duty under this act.

     (e) Disclose a substantial conflict of interest related to any

matter before the department or the commission of agriculture takes

any action with respect to the matter, which disclosure shall

become a part of the record of the official proceedings.

     (f) Refrain from doing all of the following with respect to

the matter that is a basis of a substantial conflict of interest:

     (i) Voting in the proceedings related to the matter.

     (ii) Participating in the discussion or deliberation of the

matter.

     (iii) Being present at the meeting when the discussion,

deliberation, and voting on the matter takes place.

     (iv) Discussing the matter with any other member of the

commission of agriculture or the joint evaluation committee.

Senate Bill No. 1168 (H-4) as amended September 13, 2006

(11)  (10) An application for a grant from the fund shall be

made on a form or format prescribed by the department. The

department may require the applicant to provide information

reasonably necessary to allow the department to make a

determination required under this section.

(12)  (11) The department shall promulgate rules under the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, to implement this section.

[(13) The amendatory act that added subsection (5) shall not affect any grants awarded under this act prior to the effective date of the amendatory act that added subsection (5).]

     Enacting section 1. This amendatory act does not take effect

unless all of the following bills of the 93rd Legislature are

enacted into law:

     (a) Senate Bill No. 1167.

     (b) Senate Bill No. 1169.