June 23, 2005, Introduced by Reps. Huizenga and Dillon and referred to the Committee on Commerce.
A bill to create the 21st century jobs fund authority; to
create a board; to create funds and accounts; to prescribe the
powers and duties of the authority; to create and operate certain
programs; and to make loans and investments.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "21st
century jobs fund authority act".
Sec. 2. As used in this act:
(a) "Authority" means the 21st century jobs fund authority
created under section 3.
(b) "Board" means the board of directors of the authority.
(c) "Competitive edge technology" means that term as defined
in the Michigan strategic fund act, 1984 PA 270, MCL 125.2001 to
125.2093.
(d) "Financial institution" means a state or nationally
chartered bank or a state or federally chartered savings and loan
association, savings bank, or credit union whose deposits are
insured by an agency of the United States government and that
maintains a principal office or branch office located in this state
under the laws of this state or the United States.
(e) "Fund" means the 21st century investment fund created in
section 11.
(f) "Investment" means the provision of capital in any manner
permissible by law.
(g) "Person" means an individual, corporation, limited or
general partnership, joint venture, or limited liability company or
a governmental entity.
(h) "Qualified business" means a business located in this
state.
(i) "Qualified private equity fund" means a firm engaged in
investing in or acquiring businesses with revenues greater than
$10,000,000.00, that is managed by 2 or more individuals with no
less than 5 years of direct experience in private equity, and that
holds investment capital from investors other than the authority.
(j) "Qualified venture capital fund" means a firm engaged in
investing in or acquiring early stage businesses that have not yet
demonstrated consistent profitability or a proven business model,
that is managed by 2 or more individuals with not less than 5 years
of direct experience in venture capital, and that holds investment
capital from investors other than the authority.
(k) "Small business" means a business entity formed or doing
business in this state, including the affiliates of the business
concern, which business entity is independently owned and operated
and employs fewer than 250 full-time employees or has gross annual
sales of less than $6,000,000.00.
(l) "21st century investments" means investments in 1 or more
of the following:
(i) Commercial loan guarantees under a commercial loan
guarantee program operated by the authority.
(ii) Private equity investments under a private equity
investment program operated by the authority.
(iii) Venture capital investments under a venture capital
investment program operated by the authority.
(iv) Commercialization of competitive edge technology.
Sec. 3. (1) The 21st century jobs fund authority is a
permanent fund described in section 19 of article IX of the state
constitution of 1963 and is created as a public body corporate and
politic within the department of treasury.
(2) The authority shall do all of the following:
(a) Create and operate a commercial loan guarantee program.
(b) Create and operate a private equity investment program.
(c) Create and operate a venture capital investment program.
(d) Make grants and loans for the commercialization of
competitive edge technology as provided in the Michigan strategic
fund act, 1984 PA 270, MCL 125.2001 to 125.2093.
(e) Establish standards to ensure that all 21st century
investments made under this act will result in economic benefit to
this state and ensure that a major share of the business activity
resulting from the investments occurs in this state.
(3) The authority shall not make any other investment except
as provided in this act.
(4) From the money received from 21st century investment
returns, the authority shall give priority to funding grants and
loans for the commercialization of competitive edge technology as
provided in the Michigan strategic fund act, 1984 PA 270, MCL
125.2001 to 125.2093.
Sec. 4. The authority shall exercise its duties independently
of the state treasurer. The budgeting, procurement, and related
administrative functions of the authority shall be performed under
the direction and supervision of the state treasurer.
Sec. 5. (1) The authority shall exercise its powers and duties
through its board of directors. The board shall consist of 9
members, as provided under subsections (2) and (3).
(2) The board shall include each of the 2 following voting ex
officio members:
(a) The state treasurer or his or her designee from within the
department of treasury.
(b) The director of the department of labor and economic
growth or his or her designee from within the department of labor
and economic growth.
(3) The board shall include the following 7 members appointed
by the governor with, except for the individuals described in
subdivisions (d) and (e), the advice and consent of the senate:
(a) One member with knowledge, skill, or experience in
commercial lending.
(b) One member with knowledge, skill, or experience in private
equity investments.
(c) One member with knowledge, skill, or experience in venture
capital investments.
(d) One member appointed from a list of 2 or more individuals
selected by the majority leader of the senate representing
business, technological, or financial experience related to 21st
century investments.
(e) One member appointed from a list of 2 or more individuals
selected by the speaker of the house of representatives
representing business, technological, or financial experience
related to 21st century investments.
(f) Two members with business, technological, or financial
experience related to 21st century investments.
(4) Of the members of the board initially appointed under
subsection (3), 2 members shall be appointed for terms expiring on
December 31, 2006, 2 members shall be appointed for terms expiring
on December 31, 2007, 2 members shall be appointed for terms
expiring on December 31, 2008, and 1 member shall be appointed for
a term expiring on December 31, 2009. After the expiration of the
initial appointment terms provided for by this subsection, members
of the board shall be appointed for terms of 4 years.
(5) For members of the board appointed under subsection (3), a
vacancy on the board occurring other than by expiration of a term
shall be filled in the same manner as the original appointment for
the balance of the unexpired term. A member of the board shall hold
office until a successor has been appointed and qualified. A member
of the board is eligible for reappointment. State employees are not
eligible to serve as members appointed under subsection (3).
(6) The governor shall designate 1 of the members of the board
to serve as its chairperson at the pleasure of the governor. The
board shall select from among its members a member to serve as
vice-chairperson and a member to serve as secretary.
(7) Upon appointment to the board under this section and upon
the taking and filing of the constitutional oath of office
prescribed in section 1 of article XI of the state constitution of
1963, a member shall enter the office and exercise the duties of
the office.
(8) Members of the board shall serve without compensation, but
may be reimbursed for actual and necessary expenses.
(9) Upon the initial appointment of members under this
section, the board shall organize and adopt its own policies,
procedures, schedule of regular meetings, and a regular meeting
date, place, and time.
(10) The board may act only by resolution approved by a
majority of board members appointed and serving. A majority of the
members of the board then in office shall constitute a quorum for
the transaction of business. The board shall meet in person or by
means of electronic communication devices that enable all
participants in the meeting to communicate with each other.
(11) The board shall conduct all business at public meetings
held in compliance with the open meetings act, 1976 PA 267, MCL
15.261 to 15.275. Public notice of the time, date, and place of
each meeting shall be given in the manner required by the open
meetings act, 1976 PA 267, MCL 15.261 to 15.275, and shall be
published on the internet.
Sec. 6. (1) A record prepared, owned, used, in the possession
of, or retained by the board in the performance of an official
function under this act shall be available to the public in
compliance with the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246, unless otherwise provided by law.
(2) A record or portion of a record, material, or other data
received, prepared, used, or retained by the board in connection
with an investment under this act that relates to financial or
proprietary information submitted by the applicant that is
considered by the applicant and acknowledged by the board 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.
A designee of the board shall make the determination as to whether
the board acknowledges as confidential any financial or proprietary
information submitted by the applicant and considered by the
applicant as confidential. Unless considered proprietary
information, the board shall not acknowledge routine financial
information as confidential. If the designee of the board
determines that information submitted to the board is financial or
proprietary information and is confidential, the designee of the
board shall release a written statement, subject to disclosure
under the freedom of information act, 1976 PA 442, 15.231 to
15.246, which states all of the following:
(a) The name and business location of the person requesting
that the information submitted be confidential as financial or
proprietary information.
(b) That the information submitted was determined by the
designee of the board to be confidential as financial or
proprietary information.
(c) A broad nonspecific overview of the financial or
proprietary information determined to be confidential.
(3) Unless otherwise required by law, the board shall not
disclose financial or proprietary information exempt from
disclosure as provided by law without the consent of the person
submitting the information.
(4) As used in this section, "financial or proprietary
information" means information that has not been publicly
disseminated or is unavailable from other sources, the release of
which might cause the person significant competitive harm.
Sec. 7. (1) The commercial loan guarantee program created and
operated by the authority shall do all of the following:
(a) Provide a guarantee to financial institutions located in
this state that provide commercial loans to qualified businesses.
(b) Provide that the guarantee not exceed 40% of the amount of
all outstanding loans from the financial institution to the
qualified business immediately preceding the making of a loan under
this program.
(c) Provide that the financial institution charge a higher
rate of interest for the amount of the loan covered by the
guarantee.
(d) Provide that the financial institution pay the authority a
closing fee of up to 1% of the amount guaranteed by the authority
plus an annual percentage rate of interest of up to 2% on the
amount of the guarantee which amounts shall be paid to the
authority on the same terms and conditions as the borrower pays to
the financial institution.
(e) Provide that a qualified business is only eligible for a
loan guarantee under this section if it has a documented growth
opportunity. As used in this subdivision, "documented growth
opportunity" means a plant expansion, capital equipment investment,
or the hiring of new employees to meet or satisfy a new business
opportunity.
(f) Provide that a qualified business that engages primarily
in retail sales is not eligible for a loan guarantee under this act
unless the board makes a specific finding that the loan supports a
new concept that has significant growth potential.
(2) As a separate and distinct part of the commercial loan
guarantee program, the authority shall reestablish the capital
access program that was operated by the Michigan strategic fund
under the Michigan strategic fund act, 1984 PA 270, MCL 125.2001 to
125.2093, for small businesses.
(3) There are no annual minimum or maximum amounts of
investments under the commercial loan guarantee programs operated
under this section.
Sec. 8. The private equity investment program created and
operated by the authority shall invest only in or alongside a
qualified private equity fund. The private equity investment
program shall do all of the following:
(a) Provide that the return on investment that is sought is
greater than the return on investment under the commercial loan
guarantee program to reflect the greater risk.
(b) Provide that the qualified private equity fund will have
an amount at risk greater than the authority's.
(c) Provide that a qualified private equity fund is not
eligible to participate in the private equity investment program
unless it opens a marketing office in this state staffed with at
least 1 full-time equivalent employee who is actively seeking
opportunities for investments in businesses located in this state
unless the investment opportunity requested by the qualified
private equity fund is targeted to a specific transaction that will
save jobs and will not occur without the authority's investment as
determined by the board.
(d) Provide that a qualified private equity fund is not
eligible to participate in the private equity investment program
unless it agrees to make investments in this state at a percentage
rate that is not less than the percentage rate that the authority's
investment in the qualified private equity fund bears to the total
amount in the qualified private equity fund.
(e) Provide that a qualified private equity fund is not
eligible to participate in the private equity investment program if
its investment strategy provides for the break up and liquidation
of businesses. The board shall make sure that the agreements with a
private equity fund have the appropriate provisions to prohibit the
actions described in this subdivision.
(f) Provide that there are no annual minimum or maximum
amounts of investments under the private equity investment program.
Sec. 9. The venture capital investment program created and
operated by the authority shall invest only in, or alongside, a
qualified venture capital fund that invests primarily in businesses
that have yearly revenues of $10,000,000.00 or less. The venture
capital investment program shall do all of the following:
(a) Provide that the return on investment that is sought is
greater than the return on investment under the commercial loan
guarantee program to reflect the greater risk.
(b) Provide that the qualified venture capital fund will have
an amount at risk greater than the authority's.
(c) Provide that a qualified venture capital fund is not
eligible to participate in the venture capital investment program
unless it opens a marketing office in this state staffed with at
least 1 full-time equivalent employee who is actively seeking
opportunities for venture capital investments in businesses located
in this state unless the investment opportunity requested by the
qualified venture capital fund is targeted to a specific
transaction involving a competitive edge technology that will not
occur without the authority's investment as determined by the
board.
(d) Provide that a qualified venture capital fund is not
eligible to participate in the venture capital investment program
unless it agrees to make venture capital investments in this state
at a percentage rate that is not less than the percentage rate that
the authority's investment in the qualified venture capital fund
bears to the total amount in the qualified venture capital fund.
(e) Provide that a qualified venture capital fund is not
eligible to participate in the venture capital investment program
if its investment strategy provides for the break up and
liquidation of businesses. The board shall make sure that the
agreements with a venture capital fund have the appropriate
provisions to prohibit the actions described in this subdivision.
(f) Provide that there are no annual minimum or maximum
amounts of investments under the venture capital investment
program.
Sec. 10. The powers of the authority shall include all those
necessary to carry out and effectuate the purposes of this act,
including, but not limited to, all of the following:
(a) To create and operate programs relating to 21st century
investments.
(b) To invest any money of the authority as provided in this
act and to name and use depositories for its money.
(c) To receive and distribute federal, state, or local funding
including grants, loans, and appropriations.
(d) To procure insurance against any loss in connection with
the operation of the authority.
(e) To sue and be sued, to have a seal, and to make, execute,
and deliver contracts, conveyances, and other instruments necessary
to the exercise of the authority's powers.
(f) To make and amend bylaws.
(g) To indemnify and procure insurance indemnifying any
members of the board of the authority from personal liability by
reason of their service as a board member.
(h) To hire an executive director to facilitate the operation
of the authority as determined by the board. The executive director
is exempt from the classified state civil service and shall be paid
a salary and bonus comparable to what an individual in a comparable
position with similar responsibilities would be paid in the private
sector. The executive director shall have not less than 10 years'
experience in commercial lending, private equity, or venture
capital.
Sec. 11. (1) The 21st century investment fund is created
within the state treasury.
(2) The state treasurer may receive money or other assets from
any source for deposit into the fund. The state treasurer shall
direct the investment of the fund. The state treasurer shall credit
to the fund interest and earnings from fund investments.
(3) Money in the fund at the close of the fiscal year shall
remain in the fund and shall not lapse to the general fund.
(4) The board shall expend money from the fund, upon
appropriation, only for a 21st century investment.
(5) For the initial allocations, the board shall not expend
more than the following amounts from the fund for the following
purposes:
(a) 30% for the commercial loan guarantee program.
(b) 30% for the private equity investment program.
(c) 30% for the venture capital investment program.
(d) 30% for the commercialization of competitive edge
technology as provided in the Michigan strategic fund act, 1984 PA
270, MCL 125.2001 to 125.2093.
Sec. 12. The authority may provide tax vouchers and tax
credits, as provided by law, to businesses selected by qualified
venture capital firms or to businesses that are receiving loans or
grants for the commercialization of competitive edge technology as
provided in the Michigan strategic fund act, 1984 PA 270, MCL
125.2001 to 125.2093.
Sec. 13. Not later than May 15, 2007 and each subsequent May
15, the auditor general shall conduct a performance post audit of
the board and the fund and a post audit of financial transactions
and accounts of the board and the fund. The results of the
performance post audit and the post audit of financial transactions
and accounts shall be published on the internet and disseminated by
other means in a manner determined by the board to advise the
citizens of this state of the result of the audits. Copies of the
audits shall be provided to the governor, the clerk of the house of
representatives, and the secretary of the senate.
Sec. 14. Not later than March 1 of each year, the board and
the fund shall report to the governor, the clerk of the house of
representatives, and the secretary of the senate. The report shall
contain all of the following for the immediately preceding fiscal
year that are related to a 21st century investment made by the
board:
(a) A list of entities that received funding, the amount
received, and the type of funding.
(b) The number of new start-up businesses operating in this
state.
(c) The number of new jobs created and projected new job
growth.