CENTERS OF ENERGY EXCELLENCE S.B. 1380:
SUMMARY AS ENACTED
[Please see the PDF version of this analysis, if available, to view this image.]
Senate Bill 1380 (as enacted) PUBLIC ACT 175 of 2008
Sponsor: Senator Jason E. Allen
Senate Committee: Commerce and Tourism
House Committee: New Economy and Quality of Life
Date Completed: 1-27-09
CONTENT
The bill amended Chapter 8A (21st Century Investment Programs and Activities) of the Michigan Strategic Fund Act to do all of the following:
-- Allow the Michigan Strategic Fund (MSF) to create and operate a Centers of Energy Excellence Program to promote the development, acceleration, and sustainability of "energy excellence sectors" in Michigan.
-- Allow the MSF board to enter into agreements with "qualified entities" for the designation and operation of a center of energy excellence.
-- Allow the MSF board to spend up to $45.0 million from the 21st Century Jobs Fund appropriations on the Centers of Energy Excellence Program.
-- Allow grants for the Program to be awarded only to for-profit companies for certain purposes.
-- Require at least 50% of the funds allocated for the Program to be used to match foundation funding, Federal funding, or international investments.
-- Prohibit more than 15% of any grant from being used for administrative costs or overhead.
-- Require the MSF board to establish an application evaluation process and appoint a committee to assist in reviewing applications.
-- Specify factors the MSF board must consider in determining whether to enter into an agreement with a qualified entity.
-- Specify information that an agreement must include.
-- Allow the MSF board to select a centers manager to assist in the administration of the Program.
-- Specify the centers manager's responsibilities.
-- Reduce the minimum expenditure the commercialization board must authorize in fiscal year (FY) 2008-09 through FY 2011-12 for competitive edge technology grants and loans.
-- Prohibit the MSF or its board from appointing any person to a review committee if he or she has a conflict of interest with any potential vendor.
The bill took effect on July 8, 2008.
Under the bill, "energy excellence sectors" means new and developing industry sectors in the energy field in Michigan where the MSF has determined the State has a competitive advantage and there are barriers to the commercialization of technology within the new and developing industry sector. "Energy field" means alternative energy technology, energy efficiency technology, technologies that contribute to energy security and independence, other advanced energy technologies, or water technology related to the development of energy excellence sectors.
"Qualified entity" means a qualified business, an institution of higher education, a Michigan nonprofit corporation, or a political subdivision of the State. (Under the
Act, "qualified business" means a business entity located in Michigan.)
Centers of Energy Excellence Program
Creation & Operation. The bill allows the MSF to create and operate a Centers of Energy Excellence Program to promote the development, acceleration, and sustainability of energy excellence sectors in Michigan. The MSF may enter into agreements with one or more qualified entities for the designation and operation of a center of energy excellence. Before entering into such an agreement, one or more qualified entities may apply to the MSF for an agreement for designation and operation of a center of energy excellence. The application must be in a form determined by the MSF and include information it determines necessary and appropriate.
The MSF board may not spend more than $45.0 million of the money appropriated for programs authorized under Chapter 8A from the 21st Century Jobs Trust Fund created in the Michigan Trust Fund Act for the Centers of Energy Excellence Program.
Grants. Program grants may be awarded only to for-profit companies for one of the following purposes:
-- Providing a match for foundation funding, Federal funding, or international investments of up to 50% of the total project costs.
-- Supplementing in-kind contributions provided by a person or entity other than the State.
-- Accelerating the commercialization of a new energy technology or process that will be ready to market within three years of the agreement's effective date.
-- Activities of the center, including workforce development and technology demonstration.
At least 50% of the funds allocated to the Program must be used to match foundation funding, Federal funding, or international investments. The MSF board may authorize investment terms in qualified entities as part of any agreement. Not more than 15% of any grant awarded may be used for administrative costs or overhead by the grantee or an subcontractor hired to implement any portion of the agreement. Grants must be disbursed pursuant to a timeline and progress disbursement schedule included as part of an agreement.
Application Review. The MSF board must establish a standard process to evaluate applications for an agreement and appoint a committee of board members to assist in the review of applications. The MSF or its board may not appoint or designate any person paid or unpaid to a committee to review applications if he or she has a conflict of interest with any potential applicants, as determined by the Office of the Chief Compliance Officer. When determining whether to enter into an agreement under the bill, the MSF board must consider all of the following:
-- The potential that in the absence of an agreement the development, acceleration, and sustainability of energy excellence sectors addressed by the proposed center of energy excellence will occur in a location other than Michigan.
-- The extent to which the proposed center will promote the development of energy excellence sectors in Michigan.
-- The extent to which the proposed center will promote economic development or job creation in Michigan.
-- The extent to which the proposed center may attract private investment or encourage commercialization in energy excellence sectors in Michigan.
-- The extent to which the proposed center may leverage skills or resources in which Michigan possesses a competitive advantage, including workers' skills, intellectual property, and natural resources.
-- The extent to which the proposed center may encourage collaboration on commercialization and technology transfer among qualified entities in Michigan.
-- The extent to which the proposed center may attract additional Federal funding to Michigan or people or entities within Michigan.
-- The financial viability of the proposed center and the proposed business plan for it, including commitments of financial and other support for the center and the potential availability of Federal funding for it.
-- The financial resources available to the MSF board for operation of the Program.
-- Any recommendations from the centers manager.
Agreements. If the MSF board enters into an agreement with one or more qualified entities for the operation of a center of energy excellence, the agreement must include participation by at least one qualified business and at least one institution of higher education. An agreement must include all of the following:
-- The roles and responsibilities of the MSF and the qualified entities participating in the agreement.
-- A governance structure for the center.
-- The responsibilities of the MSF and the participating qualified entities, including financial resources, technology, real property, personal property, or other resources contributed by the parties to the agreement.
-- A commitment by the participating qualified entities to collaborate on commercialization and technology transfer opportunities in energy excellence sectors in Michigan.
-- A commitment to locate and retain commercialization opportunities resulting from the agreement or center within Michigan.
-- A business plan for the center that identifies clear and measurable objectives, timelines, and deliverables for the center.
-- The duration of the agreement and a mechanism for the dissolution of the center and the disposition of any assets.
-- Provision for repayment of grants from the MSF in the event a qualified entity fails to comply with the agreement.
The agreement also must include a commitment by qualified entities that are institutions of higher education to provide incentives for faculty who participate in technology transfer and commercialization activities in energy excellence sectors and expansion of business formation efforts related to energy excellence sectors to increase the number of institution of higher education-related start-up companies.
The agreement may provide for representation of the MSF in the center's governance.
The MSF board may revoke an agreement for the designation and operation of a center of energy excellence if a qualified entity that is a party to the agreement does not comply with it.
Centers Manager. The MSF board may select a person or entity as a centers manager to assist it in the administration of the Centers of Energy Excellence Program. Costs associated with the administration of the Program are subject to Section 88b(5) (under which the amount used for administering programs and activities authorized under Chapter 8A may not exceed 4% of the annual appropriation from the 21st Century Jobs Trust Fund).
The centers manager must do all of the following, as determined by the MSF board:
-- Provide administrative services related to the Program.
-- Act as contract manger on behalf of the MSF for any agreement establishing a center of energy excellence.
-- Recommend to the MSF board a plan for managing the Program and implement any plan authorized by the board.
-- Assist centers in developing a supply chain for energy excellence sectors.
-- Evaluate and report to the MSF board on the Program and progress made toward commercialization of technology in energy excellence sectors in Michigan.
-- Review applications submitted for agreements and make recommendations to the board for approval or disapproval of the applications.
-- Perform other functions related to the Program as the board considers necessary and appropriate.
Technology Grants & Loans
Under the Act, the Strategic Economic Investment and Commercialization Board (the Commercialization Board) is created within the MSF. Responsibilities of the Board include awarding grants and loans from the 21st Century Jobs Trust Fund.
The Act required the Commercialization Board to authorize the expenditure of at least the following amounts for competitive edge technology grants and loans:
-- $40.0 million in FY 2005-06.
-- $50.0 million in FY 2006-07.
-- $30.0 million in FY 2007-08 through FY 2011-12.
Under the bill, the Commercialization Board must authorize the expenditure of not less than $30.0 million in FY 2007-08 and at least $25.0 million in FY 2008-09 through FY 2011-12.
Conflict of Interest
The Act requires the MSF board to select all vendors for all marketing expenditures under Chapter 8A by issuing a request for proposal (RFP). At a minimum, the RFP must require responding entities to disclose certain information, including any conflict of interest. The MSF board must establish a standard process to evaluate proposals and appoint a committee to review them.
The bill prohibits the MSF or its board from appointing or designating any person, paid or unpaid, to a review committee if the person has a conflict of interest with any potential vendors, as determined by the Office of the Chief Compliance Officer.
MCL 125.2088b et al.
Legislative Analyst: Patrick Affholter
FISCAL IMPACT
The bill creates a new program under the 21st Century Jobs Trust Fund and reduces a statutory allocation to an existing program for FY 2008-09 through FY 2011-12.
The 21st Century Jobs Trust Fund program received an appropriation of $75.0 million in FY 2007-08. The statute and the appropriations bill for this program include earmarks totaling $38,150,000. These consist of $30.0 million for Competitive Edge Technology Grants and Loans, $3.0 for administration, $3,750,000 for business development and marketing, and $1.4 million for the Small Business Technology Development Centers to administer the Small Business Innovation Research/Small Business Technology Transfer (SBIR/STTR) Federal matching grant programs. In addition, the MSF board allocated $18,750,000 in FY 2007-08 for the Choose Michigan Fund, a new loan enhancement program that, pursuant to Public Act 80 of 2008, part of the film industry package, is required to include the Michigan Film and Digital Media Investment Loan Program. This brought the total of earmarks and allocations in FY 2007-08 to $56.9 million. The unallocated balance of the $75.0 million appropriated in FY 2007-08 was $18.1 million. The Michigan Economic Development Corporation proposed using that balance for a Centers of Excellence Program. The bill creates a Centers of Energy Excellence Program specifically to provide grants to companies that collaborate with universities to commercialize alternative energy technology.
The bill reduces the earmark for the Competitive Edge Technology Grants and Loans program from $30.0 million to $25.0 million for FY 2008-09 through FY 2011-2012. This will reduce funding for this program, which is administered by the Strategic Economic Investment and Commercialization Board, by $5.0 million per year. In addition, the bill permits up to $45.0 million to be used for the Centers of Energy Excellence. This will reduce the amount of funds available for other authorized programs and boilerplate allocations.
For FY 2008-09, Public Act 261 of 2008 (House Bill 5816), the appropriation bill that includes funding for the Michigan Strategic Fund, provides $62.0 million for 21st Century Jobs Trust Fund programs. This funds the statutory earmarks for Competitive Edge Technology Grants and Loans, administration and business development and marketing, and a boilerplate allocation of $1.4 million for SBIR/STTR grant match. Of the remaining funds, the MSF board allocated $23.0 million to Centers of Energy Excellence and $6,910,000 for the Choose Michigan Fund.
The creation of the Centers of Energy Excellence Program will increase the administrative responsibilities of the Michigan Strategic Fund. Any additional administrative costs related to this Program will be funded by the 4.0% statutory earmark for administrative expenses, which amounts to $2,480,000 in FY 2008-09.
Fiscal Analyst: Elizabeth Pratt
Maria TyszkiewiczAnalysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent. sb1380/0708