SB-0556, As Passed Senate, October 6, 2011

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

SENATE BILL NO. 556

 

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1984 PA 270, entitled

 

"Michigan strategic fund act,"

 

by amending sections 5, 88b, and 88h (MCL 125.2005, 125.2088b, and

 

125.2088h), section 5 as amended by 2008 PA 224, section 88b as

 

amended by 2011 PA 3, and section 88h as added by 2005 PA 225, and

 

by adding section 88r.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 5. (1) There is created by this act a public body

 

corporate and politic to be known as the Michigan strategic fund.

 

The fund shall be within the department of treasury and shall

 

exercise its prescribed statutory powers, duties, and functions

 

independently of the state treasurer. The statutory authority,

 

powers, duties, functions, records, personnel, property, unexpended

 

balances of appropriations, allocations, and other funds of the


 

fund, including the functions of budgeting, procurement, personnel,

 

and management-related functions, shall be retained by the fund,

 

and the fund shall be an autonomous entity within the department of

 

treasury in the same manner as the Michigan employment security

 

commission was designated an autonomous entity within the Michigan

 

department of labor under section 379 of the executive organization

 

act of 1965, 1965 PA 380, MCL 16.479.

 

     (2) Except as otherwise provided in this act, the purposes,

 

powers, and duties of the Michigan strategic fund are vested in and

 

shall be exercised by a board of directors.

 

     (3) Except as provided in subsection (4), the board shall

 

consist of the director of the department of labor and economic

 

growth licensing and regulatory affairs or his or her designee from

 

within the department of labor and economic growth, licensing and

 

regulatory affairs, the state treasurer or his or her designee from

 

within the department of treasury, the chief executive officer of

 

the MEDC, and 6 other members with knowledge, skill, and experience

 

in the academic, business, or financial field, who shall be

 

appointed by the governor with the advice and consent of the

 

senate. None of the 6 members appointed under this section shall be

 

employees of this state. Not less than 5 members of the board

 

appointed under this subsection shall be members of the private

 

sector. Five of the 6 members appointed under this subsection shall

 

serve for fixed terms. Upon completion of each fixed term expiring

 

after December 30, 2005, a member shall be appointed for a term of

 

4 years. Of the private sector members appointed by the governor

 

for a fixed term, 1 shall be appointed from a list of 3 or more


 

nominees of the speaker of the house of representatives

 

representing persons within the private sector with experience in

 

private equity or venture capital investments, commercial lending,

 

or commercialization of technology and 1 shall be appointed from a

 

list of 3 or more nominees of the senate majority leader

 

representing persons within the private sector with experience in

 

private equity or venture capital investments, commercial lending,

 

or commercialization of technology. A member appointed under this

 

subsection or subsection (4) shall serve until a successor is

 

appointed, and a vacancy shall be filled for the balance of the

 

unexpired term in the same manner as the original appointment. The

 

member appointed under this subsection and serving without a fixed

 

term shall serve at the pleasure of the governor. Of the members

 

appointed under this subsection and subsection (4), there shall be

 

minority, female, and small business representation. After December

 

31, 2005, at least 2 of the members of the board shall have

 

experience in private equity or venture capital investments, at

 

least 1 of the members shall have experience in commercial lending,

 

and at least 1 of the members of the board shall have experience in

 

commercialization of technology.

 

     (4) In addition to the 9 members of the board under subsection

 

(3), not later than December 15, 2005, the governor shall appoint,

 

with the advice and consent of the senate, 2 additional members to

 

the board for terms expiring December 31, 2007. After the initial

 

appointments under this subsection, members appointed under this

 

subsection shall be appointed for a term of 4 years. The members

 

appointed under this subsection shall be from the private sector


 

and shall have experience in private equity or venture capital

 

investments, commercial lending, or commercialization of

 

technology. From the date of the appointment of the members under

 

this subsection until December 31, 2015, the board shall have 11

 

members. After December 31, 2015, the board shall have 9 members

 

and no members shall be appointed under this subsection.

 

     (5) The governor shall designate 1 member of the board to

 

serve as its chairperson. The governor shall designate 1 member of

 

the board to serve as president of the fund and may designate 1

 

member to serve as vice-president of the fund. The chairperson,

 

president, and vice-president, if a vice-president is designated,

 

shall serve as those officers at the pleasure of the governor.

 

     (6) Members of the board shall serve without compensation for

 

their membership on the board, except that members of the board may

 

receive reasonable reimbursement for necessary travel and expenses.

 

     (7) The board may delegate to its president, vice-president,

 

staff, or others those functions and authority that the board deems

 

necessary or appropriate, which may include the oversight and

 

supervision of employees of the fund. However, responsibilities

 

specifically vested in the board under chapter 8A shall be

 

performed by the board and shall not be transferred to the MEDC,

 

except that grants, loans, or other economic assistance under

 

section 88r of $1,000,000.00 or less can be authorized by the

 

president of the fund.

 

     (8) A majority of the members of the board appointed and

 

serving constitutes a quorum for the transaction of business at a

 

meeting, or the exercise of a power or function of the fund,


 

notwithstanding the existence of 1 or more vacancies. The board may

 

act only by resolution approved by a majority of board members

 

appointed and serving. Voting upon action taken by the board shall

 

be conducted by majority vote of the members appointed and serving.

 

Members of the board may be present in person at a meeting of the

 

board or, if authorized by the bylaws of the board, by use of

 

telecommunications or other electronic equipment. The fund shall

 

meet at the call of the chair and as may be provided in the bylaws

 

of the fund. Meetings of the fund may be held anywhere within the

 

state of Michigan.

 

     (9) The business of the board shall be conducted at a public

 

meeting of the board 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 the meeting shall be given in the manner required by

 

the open meetings act, 1976 PA 267, MCL 15.261 to 15.275, and shall

 

also be provided on an internet website operated by the fund. A

 

record or portion of a record, material, or other data received,

 

prepared, used, or retained by the fund or any of its centers in

 

connection with an application to or with a project or product

 

assisted by the fund or any of its centers or with an award, grant,

 

loan, or investment under chapter 8A 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.

 

The disclosure of a record concerning investment information

 

described in section 88c under the freedom of information act, 1976


 

PA 442, MCL 15.231 to 15.246, is subject to the limitations

 

provided in section 88c. The board may also meet in closed session

 

pursuant to the open meetings act, 1976 PA 267, MCL 15.261 to

 

15.275, to make a determination of whether it 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

 

board determines that information submitted to the fund is

 

financial or proprietary information and is confidential, the board

 

shall release a written statement, subject to disclosure under the

 

freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, that

 

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 board

 

to be confidential as financial or proprietary information.

 

     (c) A broad nonspecific overview of the financial or

 

proprietary information determined to be confidential.

 

     (10) The fund shall not disclose financial or proprietary

 

information not subject to disclosure pursuant to subsection (9)

 

without consent of the applicant submitting the information.

 

     (11) Any document to which the fund is a party evidencing a

 

loan, insurance, mortgage, lease, venture, or other type of

 

agreement the fund is authorized to enter into shall not be

 

considered financial or proprietary information that may be exempt


 

from disclosure under subsection (9).

 

     (12) For purposes of subsections (9), (10), and (11),

 

"financial or proprietary information" means information that has

 

not been publicly disseminated or which is unavailable from other

 

sources, the release of which might cause the applicant significant

 

competitive harm.

 

     Sec. 88b. (1) The fund shall create and operate programs

 

authorized under this chapter. The fund board shall determine the

 

annual allocation of money for programs authorized under this

 

chapter and make authorized expenditures or investments from the

 

investment fund of the 21st century jobs trust fund created in the

 

Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.260, as

 

authorized under this chapter for programs and activities

 

authorized under this chapter.

 

     (2) Money transferred or appropriated by law to the fund for

 

the purposes of carrying out this chapter or chapter 8C shall be

 

expended or invested by the fund as authorized by law for the

 

following purposes:

 

     (a) 21st century investments.

 

     (b) Grants and loans approved by the commercialization board

 

under section 88k.

 

     (c) Other programs or activities authorized under this

 

chapter.

 

     (d) For promotion of tourism in this state. For fiscal year

 

2010-2011 only, $20,000,000.00 for the promotion of tourism in this

 

state from funds appropriated in the jobs for Michigan investment

 

program - 21st century jobs fund line in section 109 of 2010 PA 191


 

with not less than $1,500,000.00 to be used for the 2010-2011

 

winter advertisement buy. For all funds used for promotion of

 

tourism in this state under this subdivision, the fund shall report

 

to the legislature at the same time and in the same manner as

 

provided in section 89d.

 

     (e) Grants, loans, or other economic assistance under section

 

88r and community revitalization incentives under chapter 8C.

 

     (3) Except for the appropriations described in section 88j(3)

 

and as otherwise provided in section 88q, for fiscal years other

 

than the 2008-2009 and 2009-2010 fiscal years the fund board shall

 

not expend more than the following amounts each year from the 21st

 

century jobs trust fund created in the Michigan trust fund act,

 

2000 PA 489, MCL 12.251 to 12.260, for the following purposes:

 

     (a) 25% for the loan enhancement program.

 

     (b) 40% for the private equity investment program, the venture

 

capital investment program, and the mezzanine investment program

 

combined.

 

     (c) 70% for competitive edge technology grants and loans under

 

section 88k. The commercialization board shall not authorize the

 

expenditure of more than $100,000,000.00 of the amount described in

 

this subdivision for basic research over the life of the program.

 

     (3) (4) Not more than 4% of the annual appropriation as

 

provided by law from the 21st century jobs trust fund created in

 

the Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.260, may

 

be used for the purposes of administering the programs and

 

activities authorized under this chapter. However, the fund and the

 

fund board shall not use more than 3% of the annual appropriation


 

for administering the programs and activities authorized under this

 

chapter unless the fund board by a 2/3 vote authorizes the

 

additional 1% for administration. The MEDC may charge actual and

 

reasonable fees for costs associated with loans under this chapter.

 

These fees are in addition to an amount of the appropriation used

 

for administering the programs and activities authorized under this

 

chapter.

 

     (4) (5) Not more than 5% of the annual appropriation as

 

provided by law from the 21st century jobs trust fund created in

 

the Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.260, may

 

be used for business development and business marketing costs. Not

 

less than 80% of the funds committed for business development and

 

business marketing costs shall be targeted to persons or entities

 

outside of this state. No funds may be used for any business

 

development and business marketing effort that includes a reference

 

to or the image or voice of an elected state officer or a candidate

 

for elective state office and that is targeted to a media market in

 

Michigan. The fund board shall select all vendors for all marketing

 

expenditures under this chapter by issuing a request for proposal.

 

At a minimum, the request for proposal shall require the responding

 

entities to disclose any conflict of interest, disclose any

 

criminal convictions, disclose any investigations by the internal

 

revenue service or any other federal or state taxing body or court,

 

disclose any pertinent litigation regarding the conduct of the

 

entity, and maintain records and evidence pertaining to work

 

performed. The fund board shall establish a standard process to

 

evaluate proposals submitted as a result of a request for proposal


 

and appoint a committee to review the proposals. The fund or the

 

fund board shall not appoint or designate any person paid or unpaid

 

to a committee to review proposals if that person has a conflict of

 

interest with any potential vendors as determined by the office of

 

the chief compliance officer established in section 88i.

 

     (5) (6) The fund shall not use any money appropriated or

 

transferred for purposes authorized under this chapter to acquire

 

interests in or improve real property. The restriction under this

 

subsection does not prohibit the fund from taking a security

 

interest in real property. The restriction under this subsection

 

applies only to the fund and not to recipients of expenditures or

 

investments under this chapter.

 

     Sec. 88h. (1) The jobs for Michigan investment fund is created

 

within the fund as a permanent fund authorized by section 19 of

 

article IX of the state constitution of 1963. Money in the

 

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

 

investment fund and shall not lapse to the general fund. Money in

 

the investment fund shall not be transferred to another

 

governmental entity or a separate legal entity and public body

 

corporate established under the urban cooperation act of 1967, 1967

 

(Ex Sess) PA 7, MCL 124.501 to 124.512, except as authorized in

 

this chapter.

 

     (2) Money or other assets deposited in the investment fund

 

shall be held as permanent funds as provided under section 19 of

 

article IX of the state constitution of 1963 and invested only as

 

authorized under this chapter, including, but not limited to,

 

investments in the stock of a company, association, or corporation.


 

     (3) The investment fund shall be invested as authorized under

 

this chapter for the benefit of the people of the state of Michigan

 

and for the purpose of creating incentives for the following in

 

this state:

 

     (a) Diversifying the economy.

 

     (b) Retaining or creating jobs.

 

     (c) Increasing capital investment activity.

 

     (d) Increasing commercial lending activity.

 

     (e) Encouraging the development and commercialization of

 

competitive edge technologies.

 

     (4) Funds or other assets of the investment fund also may be

 

invested in debt instruments or debt obligations for loans or

 

guarantees authorized under this chapter.

 

     (5) The investment fund shall consist of all of the following:

 

     (a) Any funds appropriated to, transferred to, or deposited in

 

the investment fund from the 21st century jobs trust fund under the

 

Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.256.12.260.

 

     (b) Earnings, royalties, return on investments, return of

 

principal, payments made, or other money received by or payable to

 

the fund under agreements related to grants, loans, investments, or

 

expenditures by the fund under this chapter.

 

     (c) Assets, property, money, earnings, royalties, return on

 

investments, return of principal, payments made, or other money

 

owed, received by, or payable to the fund or the Michigan economic

 

development corporation under agreements related to grants, loans,

 

investments, or other payments funded by appropriations from the

 

state general fund or tobacco settlement revenue under 1 or more of


 

the following:

 

     (i) Section 418 of 1999 PA 120, commonly known as the health

 

and aging research and development initiative or the Michigan life

 

sciences corridor initiative, or any successor program.

 

     (ii) Section 410 of 2000 PA 292, commonly known as the health

 

and aging research and development initiative or the Michigan life

 

sciences corridor initiative, or any successor program.

 

     (iii) Section 410 of 2001 PA 80, commonly known as the health

 

and aging research and development initiative or the Michigan life

 

sciences corridor initiative, or any successor program.

 

     (iv) Section 410 of 2002 PA 517, commonly known as the Michigan

 

life sciences corridor initiative, or any successor program.

 

     (v) Section 410 of 2003 PA 169, commonly known as the Michigan

 

life sciences and technology tri-corridor initiative, or any

 

successor program.

 

     (vi) Section 510 of 2004 PA 354, commonly known as the Michigan

 

technology tri-corridor and life sciences initiative, or any

 

successor program.

 

     (vii) Section 801 of 2005 PA 11, commonly known as the

 

technology tri-corridor and life sciences initiative, or any

 

successor program.

 

     (viii) Section 381(1)(c) of 2003 PA 173, providing for payments

 

to the life sciences commercial development fund.

 

     (d) Money or assets received by the state treasurer or the

 

fund from any source for deposit in the investment fund.

 

     (e) Interest and earnings on any funds or other assets

 

deposited in the investment fund or other net income of the


 

investment fund.

 

     (f) Any other funds appropriated for programs under this

 

chapter.

 

     (6) The net income of the investment fund may be expended by

 

the fund only for purposes authorized under this chapter pursuant

 

to an appropriation authorized by law. As used in this section, the

 

net income of the investment fund shall be computed annually as of

 

the last day of the state fiscal year in accordance with generally

 

accepted accounting principles, excluding any unrealized gains or

 

losses.

 

     (7) The fund board shall be the trustees of the investment

 

fund and shall direct the investment and reinvestment of the funds

 

and assets of the investment fund as provided under, and consistent

 

with the objectives of, this chapter.

 

     (8) The fund board may establish restricted subaccounts within

 

the investment fund as necessary to administer the investment fund.

 

The fund board may contract with the state treasurer to assist the

 

fund board in administering the investment fund. The fund board may

 

authorize money in the investment fund not invested as authorized

 

under sections 88d, 88e, 88f, and 88g to be managed by the state

 

treasurer as part of the common cash fund of this state under 1967

 

PA 55, MCL 12.51 to 12.53. Money managed by the state treasurer

 

under this subsection shall be separately accounted for by the

 

state treasurer. When authorized under this subsection, the state

 

treasurer may invest the funds or assets of the investment fund in

 

any investment authorized under 1855 PA 105, MCL 21.141 to 21.147,

 

for surplus funds of this state, in obligations issued by any state


 

or political subdivision or instrumentality of the United States,

 

or in any obligation issued, assumed, or guaranteed by a solvent

 

entity created or existing under the laws of the United States or

 

of any state, district, or territory of the United States, which

 

are not in default as to principal or interest.

 

     (9) A member of the fund board or officer of the fund shall

 

not gain from any investment of funds or assets of the investment

 

fund. A member of the fund board or officer of the fund shall not

 

have any direct or indirect interest in an investment of funds or

 

assets of the investment fund. A member of the fund board or person

 

connected with the investment fund directly or indirectly, for

 

himself or herself, or as an agent or partner of others, shall not

 

borrow any of the funds or assets of the investment fund or in any

 

manner use funds or assets of the investment fund except as

 

authorized under this chapter. A member of the fund board or

 

officer of the fund shall not become an endorser or surety or

 

become in any manner an obligor for money loaned by or borrowed

 

from the investment fund. Failure to comply with this subsection

 

constitutes misconduct in office subject to removal under section

 

94.

 

     Sec. 88r. (1) The fund shall create and operate the Michigan

 

business development program to provide grants, loans, and other

 

economic assistance to qualified businesses that make qualified

 

investments in this state or provide qualified new jobs in this

 

state.

 

     (2) The Michigan business development program shall provide

 

for all of the following:


 

     (a) Grants, loans, and other economic assistance to assist

 

qualified businesses in making qualified investments and providing

 

new jobs in this state, with preference given to qualified

 

businesses that need additional assistance for deal-closing and for

 

second stage company gap financing.

 

     (b) A detailed application, approval, and compliance process

 

published and available on the fund's website. The detailed

 

application, approval, and compliance process shall, at a minimum,

 

contain the following:

 

     (i) A qualified business may apply for a grant, loan, or other

 

economic assistance in a form and manner determined by the fund.

 

     (ii) After receipt of an application, the fund may enter into a

 

written agreement with the qualified business if the qualified

 

business agrees to make certain qualified investments or create a

 

certain number of new jobs in this state.

 

     (iii) The written agreement shall provide in a clear and concise

 

manner all of the conditions imposed, including specific time

 

frames, on the qualified business to receive a grant, loan, or

 

other economic assistance under this section.

 

     (iv) The written agreement shall provide for a repayment

 

provision of any grants, loans, or other economic assistance if the

 

qualified business fails to comply with the provisions of the

 

written agreement.

 

     (v) The written agreement shall provide for an audit provision

 

that requires the fund to verify that established milestones for

 

the project have been met.

 

     (c) In any fiscal year, a qualified business shall not receive


 

more than $10,000,000.00 for a project funded under this section.

 

     (3) The fund shall not enter into a written agreement with a

 

qualified business unless all of the following are met:

 

     (a) The municipality makes a staff, financial, or economic

 

commitment to the project as determined by the fund.

 

     (b) The qualified business provides a business plan or

 

demonstrates the need for the grant, loan, or other economic

 

assistance.

 

     (c) The qualified business agrees to provide the data

 

described in the written agreement necessary for the fund to report

 

to the legislature under this act.

 

     (4) The fund shall post on its website or post on the website

 

of the Michigan economic development corporation the name and

 

location of each qualified business that received a grant, loan, or

 

other economic assistance awarded under this section and the amount

 

of the grant, loan, or other economic assistance.

 

     (5) The fund, with assistance from the Michigan economic

 

development corporation and the office of the chief compliance

 

officer, shall establish policies and procedures to conduct

 

background checks on each qualified business applying for a grant,

 

loan, or other economic assistance under this section.

 

     (6) Beginning November 1, 2012 and each year thereafter, the

 

fund shall report to each house of the legislature on the

 

activities of the fund under this section that occurred in the

 

previous fiscal year. The report shall be made available in an

 

electronic format. The report shall include, but is not limited to,

 

all of the following:


 

     (a) The total proposed amount of qualified investment

 

attracted under this section.

 

     (b) The total actual amount of qualified investment attracted

 

under this section as reported to the fund.

 

     (c) The total committed number of new jobs created under this

 

section.

 

     (d) The total actual number of new jobs created under this

 

section as reported to the fund.

 

     (e) The total number of new written agreements.

 

     (f) The amount of the grant, loan, or other economic

 

assistance awarded under this section separately for each qualified

 

business.

 

     (g) The actual amount of the grant, loan, or other economic

 

assistance made under this section separately for each qualified

 

business verified by the fund.

 

     (h) For each qualified business, whether it is a new business,

 

whether it is an expansion of an existing business, or whether it

 

relocated from outside of this state.

 

     (i) An evaluation of the aggregate return on investment that

 

this state realizes on the actual qualified new jobs and actual

 

qualified investment made by qualified businesses.

 

     (j) A report on the individuals hired by the qualified

 

business that includes the number of individuals hired by the

 

qualified business, their educational attainment, including, but

 

not limited to, high school diploma or equivalent, higher education

 

certificate or degree, or advanced degree or training, and the

 

number of individuals hired by the qualified business who relocated


Senate Bill No. 556 as amended October 5, 2011

 

to this state <<AS REPORTED TO THE FUND>>.

 

     (7) Beginning February 1, 2012 and not less than every 3

 

months thereafter, the fund shall post on its internet website the

 

name and location of a qualified business that received approval of

 

a grant, loan, or other economic assistance under this section in

 

the immediately preceding 3-month period.

 

     (8) The legislature finds and declares that funding authorized

 

under this section to encourage diversification of the economy, to

 

encourage capital investment in this state, and to promote the

 

creation of qualified new jobs in this state is a public purpose

 

and of paramount concern in the interest of the health, safety, and

 

general welfare of the citizens of this state.

 

     (9) As used in this section:

 

     (a) "Other economic assistance" means any other form of

 

assistance allowed under this act that is not a grant or a loan.

 

     (b) "Qualified business" means a business that is located in

 

or operates in this state or will locate or will operate in this

 

state as determined by the fund.

 

     (c) "Qualified investment" means investment in this state

 

related to a project subject to a written agreement under this

 

section.

 

     (d) "Qualified new job" means a job performed by an individual

 

who is a resident of this state whose Michigan income taxes are

 

withheld by an employer, or an employee leasing company or

 

professional employer organization on behalf of the employer, that

 

is in excess of the number of jobs maintained by the qualified

 

business maintained in this state prior to the expansion or


 

location, as determined and verified by the fund.