HB-5099, As Passed House, June 25, 2009
June 16, 2009, Introduced by Rep. Clemente and referred to the Committee on New Economy and Quality of Life.
A bill to amend 1984 PA 270, entitled
"Michigan strategic fund act,"
by amending section 88k (MCL 125.2088k), as added by 2005 PA 215.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 88k. (1) The strategic economic investment and
commercialization board is created within the fund. The
commercialization board shall exercise its powers, duties, and
decision-making authority under this chapter independently of the
fund, the fund board, and the department of treasury.
(2)
The commercialization board shall may award grants and
loans
from the 21st century jobs trust
fund created in the Michigan
trust
fund act, 2000 PA 489, MCL 12.251 to 12.256 12.260,
and may
recommend loans, convertible loans, equity investments, and
warrants
from the investment fund only for
basic research, applied
research, university technology transfer, and commercialization of
products, processes, and services to encourage the development of
competitive edge technologies intended to create jobs in this
state. Loans, convertible loans, equity investments, and warrants
recommended by the commercialization board are subject to approval
by the fund board. The fund board shall establish a standard
process to review investments recommended by the commercialization
board under this subsection before approving any investment
considered appropriate by the fund board.
(3) Subject to subsection (2), the fund as determined by the
commercialization
board shall do all of the following and the fund
board may do either (a) or (b):
(a)
Establish a competitive process to award grants for
and
make
loans for recommend
investments in competitive edge
technologies.
The competitive process shall include, but is not
limited to, the following:
(i) A provision that the applications must be
peer-reviewed by
independent
peer review experts commercialization
board shall award
grants for and recommend investments in competitive edge
technologies by issuing a request for proposal. The
commercialization board shall establish a standard process to
evaluate proposals submitted as a result of a request for proposals
and appoint a committee to review the proposals. The applications
shall be reviewed, in addition to other criteria adopted by the
commercialization board, based on the scientific and technical
merit, personnel expertise, commercial merit, and the ability to
leverage additional funding of the application. Scientific and
technical
merit, personnel expertise, commercial merit, and the
ability to leverage additional funding, in addition to other
criteria adopted by the commercialization board, shall be given
equal
weight preference in the review and scoring process. If an
applicant is seeking a grant or investment under this chapter to
match federal funds for small business innovation research or small
business technology transfer programs, the review requirement under
this subsection is satisfied by the review conducted by the federal
agency awarding the federal funds.
(ii) A preference for proposals that can contribute to the
development of economic diversification or the creation of
employment opportunities in this state.
(iii) A provision that out-of-state business must have a
significant existing or proposed business presence in this state.
(iv) A provision that the program will utilize contracts with
measurable milestones, clear objectives, provisions to revoke
awards for breach of contract, and repayment provisions for loans
given to qualified businesses that leave Michigan within 3 years of
the execution of the contract or otherwise breach the terms of the
contract.
(v) A provision that the applicant leverage other resources as
a
condition of the grant or loan investment. If an applicant is
seeking
a grant or a loan an
investment under this chapter to match
federal funds for small business innovation research or small
business technology transfer programs or other research programs
supported
by federal funds, the grant or loan investment under this
chapter
shall not exceed 25% of the federal funds. and must
leverage
third-party commercialization funding at both the phase I
and
phase II levels.
(vi) Limit A limitation of overhead
rates for recipients of
grants
and loans investments to reflect actual overhead but not
greater than 15% of the grant or loan.
(vii) Except as provided in subparagraph (v), a provision that
grants can only be awarded to Michigan institutions of higher
education, Michigan nonprofit research institutions, and Michigan
nonprofit corporations.
(viii) A preference for collaborations between institutions of
higher education, Michigan nonprofit research institutions,
Michigan nonprofit corporations, and qualified businesses.
(ix) A provision authorizing the award of grants to
institutions of higher education to serve as match to promote or
secure the award and receipt of competitively awarded federal
research grants related to competitive edge technologies. A
matching grant shall not exceed 10% of the amount of the
competitively awarded federal research grants received.
(x) A provision encouraging the redevelopment of existing
scientific wet lab space for the commercialization of life science
technology.
(xi) A preference for proposals that meet 1 or more of the
following:
(A) Forecast revenues within 2 years.
(B) Have outside investments from investors with experience
and management teams with experience in the industry targeted by
the proposal.
(C) Have outside directors with expertise in the industry
targeted by the proposal.
(b)
The fund shall contract with independent peer review
experts
selected by the commercialization board to assist the
commercialization
board with its responsibilities under this
chapter.
(b) Establish a process to recommend investments to the fund
in qualified venture capital funds to establish accelerator funds
that will invest in qualified businesses that engage in competitive
edge technologies. The process shall include, but is not limited
to, the following:
(i) A provision that the commercialization board shall select
qualified venture capital funds by issuing a request for proposals.
At a minimum, the request for proposals shall require a responding
entity to disclose any conflict of interest, disclose any criminal
convictions, or disclose any investigations by the internal revenue
service or the securities and exchange commission, or any other
federal or state taxing or securities regulatory body, or court, or
pertinent litigation regarding the conduct of the person or entity.
The commercialization board shall establish a standard process to
evaluate proposals submitted as a result of a request for proposals
and appoint a committee to review the proposals.
(ii) A provision that a qualified venture capital fund is not
eligible to participate unless it operates or enters into an
agreement for the operation of a business development office in
this state staffed with at least 1 full-time equivalent person 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 fund's investment as
determined by the commercialization board.
(iii) A provision that a qualified venture capital fund is not
eligible to participate unless it agrees to establish an
accelerator fund and collaborate with an institution of higher
education.
(iv) A preference for proposals that can contribute to the
development of economic diversification or the creation of
employment opportunities in this state.
(v) A provision that the applicant leverage other resources as
a condition of the investment.
(vi) A provision that not more than 15% of any investment
awarded can be used for administrative costs or overhead,
including, but not limited to, personnel, by the awardee, or its
accelerator fund.
(vii) Investments authorized under this subsection shall
include repayment provisions in the event the qualified venture
capital fund or accelerator fund fails to comply with the
agreement.
(c) As used in this subsection, "accelerator fund" means an
investment fund targeted at early stage technology companies.
(4) The commercialization board shall establish standards to
ensure that money expended under this chapter will result in
economic benefit to this state and ensure that a major share of the
business activity resulting from the expenditures occurs in this
state.
(5) The commercialization board shall ensure that a recipient
of money expended under this chapter agrees as a condition of
receiving the money not to use the money for any of the following:
(a) The development of a stadium or arena for use by a
professional sports team.
(b) The development of a casino regulated by this state under
the
Michigan gaming control and revenue act, the Initiated Law of
1996 IL 1, MCL 432.201 to 432.226, a casino at which gaming is
conducted under the Indian gaming regulatory act, Public Law 100-
497,
102 Stat. 2467, or property associated or affiliated with the
operation of either type of casino described in this subdivision,
including, but not limited to, a parking lot, hotel, motel, or
retail store.
(6) The commercialization board shall establish requirements
to ensure that money expended under this section shall not be used
for any of the following:
(a)
Grants, or loans, convertible loans, equity investments,
or warrants to a person who has been convicted of a criminal
offense incident to the application for or performance of a state
contract or subcontract. As used in this subdivision, if a person
is a business entity, then person includes affiliates,
subsidiaries, officers, directors, managerial employees, and any
person who, directly or indirectly, holds a pecuniary interest in
that business entity of 20% or more. A director or officer of a
nonprofit entity may satisfy the requirements of this subdivision
if he or she files an affidavit with the fund affirming that he or
she has not been convicted of a criminal offense incident to the
application for or performance of a state contract or subcontract.
(b)
Grants, or loans, convertible loans, equity investments,
or warrants to a person who has been convicted of a criminal
offense, or held liable in a civil proceeding, that negatively
reflects on the person's business integrity, based on a finding of
embezzlement, theft, forgery, bribery, falsification or destruction
of records, receiving stolen property, or violation of state or
federal antitrust statutes. As used in this subdivision, if a
person is a business entity, then person includes affiliates,
subsidiaries, officers, directors, managerial employees, and any
person who, directly or indirectly, holds a pecuniary interest in
that business entity of 20% or more. A director or officer of a
nonprofit entity may satisfy the requirements of this subdivision
if he or she files an affidavit with the fund affirming that he or
she has not been convicted of a criminal offense, or held liable in
a civil proceeding, that negatively reflects on the person's
business integrity, based on a finding of embezzlement, theft,
forgery, bribery, falsification or destruction of records,
receiving stolen property, or violation of state or federal
antitrust statutes.
(c)
Grants, or loans, convertible loans, equity investments,
or warrants to induce a qualified business or a small business to
leave this state.
(d)
Grants, or loans, convertible loans, equity investments,
or warrants that would contribute to the violation of
internationally recognized workers rights, as defined in section
507(4) of the trade act of 1974, 19 USC 2467(4), of workers in a
country other than the United States, including any designated zone
or area in that country.
(e)
Grants, or loans, convertible loans, equity investments,
or warrants to a corporation or an affiliate of the corporation
incorporated in a tax haven country after September 11, 2001, but
with the United States as the principal market for the public
trading of the corporation's stock. As used in this section, "tax
haven country" includes a country with tax laws that facilitate
avoidance by a corporation or an affiliate of the corporation of
United States tax obligations, including Barbados, Bermuda, British
Virgin Islands, Cayman Islands, Commonwealth of the Bahamas,
Cyprus, Gibraltar, Isle of Man, the Principality of Liechtenstein,
the Principality of Monaco, and the Republic of the Seychelles.
(7)
When the commercialization board approves a grant, or
a
loan, convertible loan, equity investment, or warrant is approved
under
this chapter, the commercialization board approving the
grant, loan, convertible loan, equity investment, or warrant shall
state the specific objective reasons the applicant was selected
over
other applicants. for a grant or loan under this chapter.
(8)
After March 31, 2006, before adopting a resolution that
establishes
or substantially changes a program operated by the
commercialization
board, including any fees, charges, or penalties
attached
to that program, the commercialization board shall give
notice
of the proposed resolution to the governor, to the secretary
of
the senate, to the clerk of the house of representatives, to
members
of the senate and house of representatives standing
committees
on appropriations, and to each person who requested from
the
fund in writing or electronically to be notified regarding
proposed
resolutions. The notice and proposed resolution and all
attachments
shall be published on the fund's internet website. The
commercialization
board shall hold a public hearing not sooner than
14
days and not longer than 30 days from the date notice of a
proposed
resolution is given and offer a person an opportunity to
present
data, views, questions, and arguments. Commercialization
board
members or 1 or more persons designated by the
commercialization
board who have knowledge of the subject matter of
the
proposed resolution shall be present at the public hearing and
shall
participate in the discussion of the proposed resolution. The
commercialization
board may act on the proposed resolution no
sooner
than 14 days after the public hearing. The commercialization
board
shall produce a final decision document that describes the
basis
for its decision. The final resolution and all attachments
and
the decision document shall be provided to the governor, to the
secretary
of the senate, to the clerk of the house of
representatives,
and to members of the senate and house of
representatives
standing committees on appropriations and shall be
published
on the fund's internet website.
(9)
The notice described in subsection (8) shall include all
of
the following:
(a)
A copy of the proposed resolution and all attachments.
(b)
A statement that the addressee may express any data,
views,
or arguments regarding the proposed resolution.
(c)
The address to which written comments may be sent and the
date
by which comments must be mailed or electronically
transmitted,
which date shall not be before the date of the public
hearing.
(d)
The date, time, and place of the public hearing.