SB-1168, As Passed Senate, May 4, 2006

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) "Institution of higher education" means an institution of

higher education or a community or junior college described in

section 4, 5, 6, or 7 of article viii of the state constitution of

1963 or an independent nonprofit degree-granting institution of

postsecondary education in this state that is approved by the state

board of education.

     (g) "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

activities funded.

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

wheat, corn, soybeans, other feed grains, oil seeds, cotton, rice,

peanuts, and tobacco.

(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, loan, and loan guarantee program. The commission

of agriculture shall award grants, loans, and loan guarantees 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. As part of the grant, loan, and loan

guarantee program, the commission of agriculture shall establish a

low-interest loan program in cooperation with Michigan financial

institutions in a manner similar to the qualified agricultural loan

program established in section 2a of 1855 PA 105, MCL 21.142a. The

program shall ensure that participating financial institutions do

not refinance prior debt and shall prohibit an officer, director,

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. Loan

applications may be considered by the commission of agriculture at

any time. The joint evaluation committee shall provide

recommendations to or assist 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. The committee shall include at least 3

producers, including 1 plant agricultural producer, 1 animal

agricultural producer, and another producer at large.

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

the following:

     (a) Establish a competitive process to award grants and make

loans and loan guarantees. 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 value-added technology through an

institution of higher education.

     (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 or other repayment guarantee with a dedicated funding

source identified before the grant is awarded.

     (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 that forecast revenues within

2 years or 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.

     (4) In approving a grant, loan, or loan guarantee under this

section, the commission of agriculture shall state the specific

objective reasons supporting the selection of the applicant over

competing applicants.

     (5) Subject to subsection (3)(a)(i), an application for a

grant, loan, or loan guarantee 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, loan, or loan guarantee under this section

agrees that, as a condition of receiving the grant, loan, or loan

guarantee, 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 432.101 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)  (6) The director of the department may impose fiduciary

obligations upon a recipient of a grant, loan, or loan guarantee,

including performance bonding, and may impose conditions upon the

receipt and expenditure of the grant, loan, or loan guarantee

money. For purposes of this section, the commission of agriculture

shall 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. A member of the commission of agriculture or

the joint evaluation committee shall 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. A member of

the commission of agriculture or the joint evaluation committee

shall not have any financial interest in a recipient of proceeds

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

a conflict of interest. In such case, a member of the commission of

agriculture or the joint evaluation committee shall immediately

advise the commission of agriculture in writing of the details of

any incident or circumstances that may present the existence of a

conflict of interest with respect to the performance of his or her

duty under this act. A member of the commission of agriculture or

the joint evaluation committee having a conflict of interest

related to any matter before the department shall disclose the

conflict of interest before the department or commission of

agriculture takes any action with respect to the matter, which

disclosure shall become a part of the record of the official

proceedings. A member of the commission of agriculture or the joint

evaluation committee with the conflict of interest shall refrain

from doing all of the following with respect to the matter that is

the basis of the conflict of interest:

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

     (b) Participating in the discussion of and deliberation on the

matter.

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

deliberation, and voting on the matter take place.

     (d) Discussing the matter with any other peer review expert.

     (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.

(8)  (10) An application for a grant, loan, or loan guarantee

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.

(9)  (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.

     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.