SB-0270, As Passed Senate, December 19, 2014

 

 

 

 

 

 

 

 

 

 

 

HOUSE SUBSTITUTE FOR

 

SENATE BILL NO. 270

 

 

 

 

 

 

 

 

 

 

     A bill to amend 1984 PA 270, entitled

 

"Michigan strategic fund act,"

 

by amending sections 88a, 88b, and 89c (MCL 125.2088a, 125.2088b,

 

and 125.2089c), section 88a as amended by 2011 PA 22, section 88b

 

as amended by 2012 PA 145, and section 89c as added by 2008 PA 98.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 88a. As used in this chapter:

 

     (a) "Advanced automotive, manufacturing, materials,

 

information, and agricultural processing technology" means any

 

technology that involves 1 or more of the following:

 

     (i) Materials with engineered properties created through the

 

development of specialized process and synthesis technology.

 

     (ii) Nanotechnology, including materials, devices, or systems

 

at the atomic, molecular, or macromolecular level, with a scale

 

measured in nanometers.


 

     (iii) Microelectromechanical systems, including devices or

 

systems integrating microelectronics with mechanical parts and a

 

scale measured in micrometers.

 

     (iv) Improvements to vehicle safety, vehicle performance,

 

vehicle production, or environmental impact, including, but not

 

limited to, vehicle equipment and component parts.

 

     (v) A new technology, device, or system that enhances or

 

improves the manufacturing process of wood, timber, or

 

agricultural-based products.

 

     (vi) Any technology that involves an alternative energy vehicle

 

or its components, as alternative energy vehicle is defined under

 

section 2 of the Michigan next energy authority act, 2002 PA 593,

 

MCL 207.822.

 

     (vii) Advanced computing or electronic device technology

 

related to technology described under this subdivision.

 

     (viii) Design, engineering, testing, or diagnostics related to

 

technology described under this subdivision.

 

     (ix) Product research and development related to technology

 

described under this subdivision.

 

     (b) "Advanced computing" means any technology used in the

 

design and development of 1 or more of the following:

 

     (i) Computer hardware and software.

 

     (ii) Data communications.

 

     (iii) Information technologies.

 

     (c) "Alternative energy technology" means applied research or

 

commercialization of new or next generation technology in 1 or more

 

of the following:


 

     (i) Alternative energy technology as that term is defined in

 

section 2 of the Michigan next energy authority act, 2002 PA 593,

 

MCL 207.822.

 

     (ii) Devices or systems designed and used solely for the

 

purpose of generating energy from agricultural crops, residue and

 

waste generated from the production and processing of agricultural

 

products, animal wastes, or food processing wastes, not including a

 

conventional gasoline or diesel fuel engine or retrofitted

 

conventional gasoline or diesel fuel engine.

 

     (iii) A new technology, product, or system that permits the

 

utilization of biomass for the production of specialty, commodity,

 

or foundational chemicals or of novel or economical commodity

 

materials through the application of biotechnology that minimizes,

 

complements, or replaces reliance on petroleum for the production.

 

Alternative energy technology also includes a new technology,

 

product, or system that utilizes wind energy.

 

     (iv) Advanced computing or electronic device technology related

 

to technology described under this subdivision.

 

     (v) Design, engineering, testing, or diagnostics related to

 

technology described under this subdivision.

 

     (vi) Product research and development related to a technology

 

described under this subdivision.

 

     (d) "Applied research" means translational research conducted

 

with the objective of attaining a specific benefit or to solve a

 

practical problem, or other research activity that seeks to

 

utilize, synthesize, or apply existing knowledge, information, or

 

resources to the resolution of a specified problem, question, or


 

issue, with high potential for commercial application to create

 

jobs in this state.

 

     (e) "Basic research" means any original investigation for the

 

advancement of scientific or technological knowledge that will

 

enhance the research capacity of this state in a way that increases

 

the ability to attract to or develop companies, jobs, researchers,

 

or students in this state.

 

     (f) "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.

 

     (g) "Competitive edge technology" means 1 or more of the

 

following:

 

     (i) Life sciences technology.

 

     (ii) Advanced automotive, manufacturing, materials,

 

information, and agricultural processing technology.

 

     (iii) Homeland security and defense technology.

 

     (iv) Alternative energy technology.

 

     (v) Any other innovative technology as determined by the fund

 

board.

 

     (h) "Electronic device technology" means any technology that

 

involves microelectronics, semiconductors, electronic equipment,

 

and instrumentation, radio frequency, microwave, and millimeter

 

electronics; optical and optic-electrical devices; or data and

 

digital communications and imaging devices.

 

     (i) "Fund board" means the board of the Michigan strategic


 

fund described in section 5.

 

     (j) "Homeland security and defense technology" means

 

technology that assists in the assessment of threats or damage to

 

the general population and critical infrastructure, protection of,

 

defense against, or mitigation of the effects of foreign or

 

domestic threats, disasters, or attacks, or support for crisis or

 

response management, including, but not limited to, 1 or more of

 

the following:

 

     (i) Sensors, systems, processes, or equipment for

 

communications, identification and authentication, screening,

 

surveillance, tracking, and data analysis.

 

     (ii) Advanced computing or electronic device technology related

 

to technology described under this subdivision.

 

     (iii) Aviation technology, including, but not limited to,

 

avionics, airframe design, sensors, early warning systems, and

 

services related to technology described under this subdivision.

 

     (iv) Design, engineering, testing, or diagnostics related to

 

technology described under this subdivision.

 

     (v) Product research and development related to technology

 

described under this subdivision.

 

     (k) "Independent peer review expert" means a person or persons

 

selected by the commercialization board with appropriate expertise

 

to conduct an independent, unbiased, objective, and competitive

 

evaluation of activities funded under section 88k. The person or

 

persons shall demonstrate the capability and experience, as

 

appropriate or necessary for the particular activity funded, to do

 

all of the following:


 

     (i) Conduct a highly competitive and intensive, independent,

 

multiphased, peer-review-based evaluation process.

 

     (ii) Employ personnel with appropriate business, scientific,

 

technical, commercial, or other specialized expertise to carry out

 

each aspect of the evaluation process.

 

     (iii) Provide recommendations to or assist the commercialization

 

board in identifying high-quality activities for funding that are

 

likely to result in the development and commercialization of

 

competitive edge technology and job creation in this state. The

 

recommendations shall include all materials used by the independent

 

peer review expert in making the recommendation.

 

     (iv) Assure that any peer review process developed maintains a

 

high level of integrity.

 

     (l) "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.

 

     (m) "Jobs for Michigan investment fund" or "investment fund"

 

means the jobs for Michigan investment fund created in section 88h.

 

     (n) "Life sciences" means science for the examination or

 

understanding of life or life processes, including, but not limited

 

to, all of the following:

 

     (i) Bioengineering.

 

     (ii) Biomedical engineering.

 

     (iii) Genomics.


 

     (iv) Proteomics.

 

     (v) Molecular and chemical ecology.

 

     (vi) Biotechnology, including any technology that uses living

 

organisms, cells, macromolecules, microorganisms, umbilical cord

 

blood, or substances from living organisms to make or modify a

 

product for useful purposes. Biotechnology or life sciences does

 

not include any of the following:

 

     (A) Activities prohibited under section 2685 of the public

 

health code, 1978 PA 368, MCL 333.2685.

 

     (B) Activities prohibited under section 2688 of the public

 

health code, 1978 PA 368, MCL 333.2688.

 

     (C) Activities prohibited under section 2690 of the public

 

health code, 1978 PA 368, MCL 333.2690.

 

     (D) Activities prohibited under section 16274 of the public

 

health code, 1978 PA 368, MCL 333.16274.

 

     (E) Stem cell research with human embryonic tissue.

 

     (o) "Life sciences technology" means any technology derived

 

from life sciences intended to improve human health or the overall

 

quality of human life, including, but not limited to, systems,

 

processes, or equipment for drug or gene therapies, biosensors,

 

testing, medical devices or instrumentation with a therapeutic or

 

diagnostic value, a pharmaceutical or other product that requires

 

United States food and drug administration approval or registration

 

prior to its introduction in the marketplace and is a drug or

 

medical device as defined by the federal food, drug, and cosmetic

 

act, 21 USC 301 to 399a, or 1 or more of the following:

 

     (i) Advanced computing or electronic device technology related


 

to technology described under this subdivision.

 

     (ii) Design, engineering, testing, or diagnostics related to

 

technology or the commercial manufacturing of technology described

 

under this subdivision.

 

     (iii) Product research and development related to technology

 

described under this subdivision.

 

     (p) "Qualified business" means a business entity located in

 

this state.

 

     (q) "Qualified mezzanine fund" means a person or entity

 

primarily engaged in making loans or investments ranging in size

 

from $250,000.00 to $6,000,000.00 that is managed by 2 or more

 

individuals with no less than 5 years' direct experience in

 

mezzanine lending or capital investments and that holds investment

 

capital or has commitments from investors other than the fund and

 

at least 2 financial institutions.

 

     (r) "Qualified private equity fund" means a firm principally

 

or primarily engaged in investing in or acquiring businesses that

 

is managed by 2 or more individuals with no less than 5 years of

 

direct experience in private equity investments, and that holds

 

investment capital from investors other than the fund.

 

     (s) "Qualified venture capital fund" means a firm principally

 

or primarily engaged in investing in or acquiring early stage

 

businesses with growth potential 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 capital from

 

investors other than the fund.


 

     (t) "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.

 

     (u) "21st century investments" means investments in 1 or more

 

of the following:

 

     (i) Commercial loan guarantees under a loan enhancement program

 

operated by the fund.

 

     (ii) Private equity investments under a private equity

 

investment program operated by the fund.

 

     (iii) Venture capital investments under a venture capital

 

investment program operated by the fund.

 

     (iv) Mezzanine investments under a mezzanine investment program

 

operated by the fund.

 

     (v) "Strategic economic investment and commercialization

 

board" or "commercialization board" means, except as otherwise

 

provided in this subdivision, the strategic economic investment and

 

commercialization board created in section 88k. Beginning October

 

18, 2010, the strategic economic investment and commercialization

 

board or the commercialization board means the fund board.

 

     (w) "University technology transfer" means innovative methods

 

to accelerate the creation of start-up companies affiliated with

 

institutions of higher education or the transfer of competitive

 

edge technology research from an institution of higher education to

 

a qualified business in Michigan.

 

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


 

authorized under this chapter. act. The fund board shall determine

 

the annual allocation of money for programs authorized under this

 

chapter act 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 act for programs and activities

 

authorized under this chapter.act.

 

     (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 as long as those investments

 

provide for repayment for breach of the written agreement or the

 

failure to meet measurable outcomes.

 

     (b) Grants and loans approved by the commercialization board

 

under section 88k as long as those grants and loans provide for

 

repayment for breach of the written agreement or the failure to

 

meet measurable outcomes.

 

     (c) Other programs or activities authorized under this

 

chapter, any other chapter of this act, or as provided in an

 

appropriation act as long as those programs or activities provide

 

for repayment for breach of the written agreement or the failure to

 

meet measurable outcomes.

 

     (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 as

 

long as those grants, loans, other economic assistance, and

 

community revitalization incentives provide for repayment for

 

breach of the written agreement or the failure to meet measurable

 

outcomes.

 

     (3) 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, grants, or other

 

economic assistance 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) 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.

 

     (5) 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.

 

     (6) The fund board may select all vendors for all expenditures

 

and for program awards under this chapter by issuing a request for

 

proposal or an alternative competitive process as determined by the

 

fund board. 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 litigation involving 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.

 

     (7) Application fees received for programs and activities

 

authorized under this chapter or chapter 8C may be used by the fund

 

for administering the programs and activities authorized under this

 

chapter or chapter 8C. The restrictions on expenditures under

 

subsection (3) do not apply to expenditure of application fee

 

revenue under this subsection.

 

     (8) Funds appropriated by law to the fund board or the fund

 

may be expended by the fund board or fund without further

 

appropriation regardless of the source of those funds.

 

     Sec. 89c. (1) The fund board shall select vendors for Michigan

 

promotion program expenditures under this chapter exceeding

 

$250,000.00 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 for at least 5 years. 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. Members of any committee or individuals working on

 

behalf of the Michigan strategic fund, paid or unpaid, shall have


 

no conflict of interest as determined by the office of the chief

 

compliance officer established in section 88i. This subsection does

 

not apply to a contract that was in existence on March 25, 2008 or

 

to the extension of a contract in which the right to extend was in

 

existence on or before March 25, 2008.

 

     (2) Not less than 75% of the funds appropriated under this

 

chapter shall be targeted to persons or entities outside of this

 

state. No funds may be used for any Michigan promotion program

 

effort that includes a reference to or the image or voice of an

 

elected official, appointed state employee, state employee governed

 

by a senior executive service limited term employment agreement, or

 

a candidate for elective office, and that is targeted to a media

 

market in this state.