Bill Text: MI HB4480 | 2013-2014 | 97th Legislature | Introduced
Bill Title: Economic development; Michigan strategic fund; chief compliance officer; modify. Amends secs. 9, 88c & 88i of 1984 PA 270 (MCL 125.2009 et seq.).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2014-12-31 - Assigned Pa 503'14 With Immediate Effect 2014 Addenda [HB4480 Detail]
Download: Michigan-2013-HB4480-Introduced.html
HOUSE BILL No. 4480
March 20, 2013, Introduced by Rep. Leonard and referred to the Committee on Commerce.
A bill to amend 1984 PA 270, entitled
"Michigan strategic fund act,"
by amending sections 9, 88c, and 88i (MCL 125.2009, 125.2088c, and
125.2088i), sections 9 and 88c as amended by 2012 PA 145 and
section 88i as added by 2005 PA 225.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec.
9. (1) The fund shall transmit to the each member of the
legislature, the governor, the clerk of the house of
representatives,
and the secretary of the senate annually
a status
report
of its activities. The report shall include, but not be
limited
to, information on name and location of all applicants,
amount
and type of financial assistance being requested, type of
project
or product being financed, number of net jobs created or
retained,
duration of financial assistance, amount of financial
support
other than state resources, and the status of any loans of
the
fund, excluding industrial development revenue loans, which are
in
default. The report shall be
transmitted not later than April 10
of each year for activities in the immediately preceding state
fiscal year. The report shall not include information exempt from
disclosure under section 5. The report shall include, but not be
limited to, all of the following for each program operated under
this act:
(a) A list of entities that received financial assistance.
(b) The type of project or product being financed.
(c) The type of financial assistance.
(d) The number of net jobs committed or retained.
(e) The duration of the financial assistance.
(f) The amount of financial support other than state
resources.
(g) Money or other revenue or property returned to the fund.
(h) The status of all loans of the fund, excluding industrial
development revenue loans, that are in default.
(i) A summary of the approximate administrative costs used to
administer the programs and activities authorized under this act.
(j) Any other information as required in this section.
(2) The auditor general or a certified public accountant
appointed by the auditor general annually shall conduct and remit
to the legislature an audit of the fund and, in the conduct of the
audit, shall have access to all records of the fund at any time,
whether or not confidential. Each audit required by this section
shall include a determination of whether the fund is likely to be
able to continue to meet its obligations, including a report on the
status of outstanding loans and agreements made by the fund.
(3)
The fund shall also transmit the status report described
in
subsection (1) and audit described
in subsection (2) to the
chairperson and minority vice-chairperson of the senate
appropriations subcommittee on general government and the house of
representatives appropriations subcommittee on general government.
The
fund shall make the status report and audit available to the
public on the fund's website.
(4) The report described in subsection (1) shall also contain
all of the following that are related to a 21st century investment
made by the fund board under chapter 8A:
(a) The amount of qualified venture capital fund investments,
qualified mezzanine fund investments, and qualified private equity
fund investments under management in this state, including year-to-
year growth.
(b) The value of loan enhancement program investments,
qualified private equity fund investments, qualified mezzanine fund
investments, and qualified venture capital investments in qualified
businesses, including year-to-year growth.
(c) A statement of the amount of money in each loan reserve
fund established under the small business capital access program
required under chapter 8A.
(5) The report described in subsection (1) shall also include,
but is not limited to, all of the following for all actions under
section 88r:
(a) The total actual amount of qualified investment attracted
under section 88r as reported to the fund.
(b) The total actual number of new jobs created under section
88r as reported to the fund.
(c) The actual amount of the grant, loan, or other economic
assistance made under section 88r separately for each qualified
business verified by the fund.
(d) 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.
(e) 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.
(6) The report described in subsection (1) shall also include,
but is not limited to, all of the following for all actions under
chapter 8B:
(a) For tourism promotion efforts, all of the following:
(i) An itemized list by market of how much was spent, when the
promotion occurred, and the types of media purchased.
(ii) The return on investment analysis that utilizes existing
baseline data and compares results with prior outcome evaluations
funded by Travel Michigan.
(b) For business development efforts, all of the following:
(i) An itemized list by market of how much was spent, when the
promotion occurred, and the types of media purchased.
(ii) A performance analysis that compares the program or
campaign objectives and outcome of the campaign or program.
(7) The report described in subsection (1) shall also include,
but is not limited to, all of the following for all actions under
section 90d:
(a) The total actual amount of private investment attracted
under section 90d as reported to the fund.
(b) The actual amount of the community revitalization
incentives made under chapter 8C separately for each project.
(c) The total actual amount of square footage revitalized or
added for each project approved under section 90d as reported to
the fund. When reporting square footage, the person must report the
square footage by category, including, but not limited to,
commercial, residential, or retail.
(d) The aggregate increase in taxable value of all property
subject to a written agreement under chapter 8C when established
and recorded by the local units of government and as reported to
the fund.
(e) The total actual number of residential units revitalized
or added for each project approved under section 90d as reported to
the fund.
(f) Each project that received a community revitalization
incentive outside the fund program standards and guidelines and why
the variance was given.
(g) A summary of the projected and actual aggregated taxpayer
return on investment for each eligible investment that received a
distribution in the reporting period.
(8) Beginning on and after January 1, 2012, on a monthly basis
the fund shall provide exact copies of all information regarding
all actions under chapter 8C that is provided to board members of
the fund for the purpose of monthly board meetings, subject to
confidentiality under section 5, to each of the following and post
that information on the fund's website:
(a) The chairperson and minority vice-chairperson of the house
commerce committee.
(b) The chairperson and minority vice-chairperson of the house
appropriations subcommittee on general government.
(c) The chairperson and minority vice-chairperson of the
senate economic development committee.
(d) The chairperson and minority vice-chairperson of the
senate appropriations subcommittee on general government.
(9) The report described in subsection (1) shall also include
the actual administrative costs and the actual administrative costs
as a percentage of total costs used to administer the programs
described in the following sections:
(a) Section 88b.
(b) Section 88h.
(c) Section 90d(8).
(10) As used in this section, "financial assistance" means
grants, loans, other economic assistance, and any other incentives
or assistance under this act.
Sec. 88c. (1) The fund board shall exercise the duties of a
fiduciary with respect to 21st century investments consistent with
the purposes of this chapter. The prudent investor rule shall be
applied by the fund board and any agent of the fund board in the
management of 21st century investments. The prudent investor rule
as applied to 21st century investments means that in making 21st
century investments, the fund board shall exercise the judgment and
care under the circumstances then prevailing that an institutional
investor of ordinary prudence, discretion, and intelligence would
exercise in similar circumstances in a like position. The fund
board shall maintain a reasonable diversification among 21st
century investments consistent with the requirements of this
chapter.
(2) The fund board shall select qualified private equity
funds, qualified venture capital funds, and qualified mezzanine
funds by issuing a request for proposal. At a minimum, the request
for proposal shall require a responding entity to disclose any
conflict of interest, disclose any criminal convictions, disclose
any investigations by the internal revenue service, 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 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.
(3) The fund board shall ensure that a recipient of money
under sections 88d, 88e, 88f, 88g, 88q, and 88r and chapter 8C
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, 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.
(4)
The fund, board shall establish requirements to ensure
that
money expended under sections 88d, 88e, 88f, 88g, 88q, and 88r
and
chapter 8C shall not be used for any of the following: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
applicant applying for a grant, loan, other economic assistance, or
any other incentives or assistance under this act.
(a)
Provision of money 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, person includes affiliates,
subsidiaries,
officers, directors, managerial employees as
determined
by the board, and any person who, directly or
indirectly,
holds a pecuniary interest in that business entity of
20%
or more.
(b)
Provision of money 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, 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.
(c)
Provision of money to a business enterprise to induce
qualified
businesses or small businesses to leave this state.
(d)
Provision of money 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)
Provision of money to a corporation or an affiliate of the
corporation
who is incorporated in a tax haven country after
September
11, 2001, while maintaining 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.
(5) Before adopting a resolution that establishes or
substantially changes a 21st century investment program, including
any fees, charges, or penalties attached to that program, the fund
board shall give notice of the proposed resolution to the governor,
to the clerk of the house of representatives, to the secretary of
the senate, to members of the senate and house of representatives
appropriation committees, 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 at least 10 days
prior to the date that the proposed resolution is considered by the
fund board. The fund board shall hold a public hearing and offer a
person an opportunity to present data, views, questions, and
arguments. Members of the fund board or 1 or more persons
designated by the fund 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 fund board may act on the proposed resolution on
the day of the public hearing. The fund 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 clerk of the house of
representatives, to the secretary of the senate, and to members of
the senate and house of representatives appropriation committees
and shall be published on the fund's internet website.
(6) The notice described in subsection (5) 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.
(7) The fund board shall employ or contract with a fund
manager or other persons it considers necessary to implement this
section. The person employed or contracted under this subsection
shall have not less than 10 years' experience in commercial
lending, private equity, mezzanine funding, or venture capital. The
person employed or contracted under this section shall exercise the
duties of a fiduciary toward investments from the investment fund
under this section. Management fees payable by the fund and other
investors in a qualified private equity fund, a qualified mezzanine
fund, or a qualified venture capital fund shall be considered an
investment expense and not an administrative cost incurred by the
fund.
(8) Subject to subsection (9), a record received, prepared,
used, or retained by an investment fiduciary in connection with an
investment or potential investment of the investment fund that
relates to investment information pertaining to a portfolio company
in which the investment fiduciary has invested or has considered an
investment that is considered by the portfolio company and
acknowledged by the investment fiduciary as confidential, or that
relates to investment information whether prepared by or for the
investment fiduciary regarding loans and assets directly owned by
the investment fiduciary and acknowledged by the investment
fiduciary as confidential, is exempt from the disclosure
requirements of the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246, if at least annually the fund provides to the
fund board, and makes available to the public, a report of fund
investments during the prior state fiscal year that includes all of
the following:
(a) The name of each portfolio company in which the investment
fund invested during the reporting period.
(b) The aggregate amount of money invested by the investment
fund in portfolio companies during the reporting period.
(c) The rate of return realized during the reporting period on
the investments of the investment fund in portfolio companies.
(d) The source of any public funds invested by the investment
fund in portfolio companies during the reporting period.
(9) If a record described in subsection (8) is an agreement or
instrument to which an investment fiduciary is a party, only those
parts of the record that contain investment information are exempt
from the disclosure requirements of the freedom of information act,
1976 PA 442, MCL 15.231 to 15.246.
(10) As used in subsections (8) and (9):
(a) "Investment fiduciary" means a person who exercises any
discretionary authority or control over an investment of the
investment fund or renders investment advice for the fund for a fee
or other direct or indirect compensation.
(b) "Investment information" means information that has not
been publicly disseminated or that is unavailable from other
sources, the release of which might cause a portfolio company or an
investment fiduciary significant competitive harm. Investment
information includes, but is not limited to, financial performance
data and projections, financial statements, list of coinvestors and
their level of investment, product and market data, rent rolls, and
leases.
(c) "Portfolio company" means an entity in which an investment
fiduciary has made or considered an investment on behalf of the
investment fund.
(d) "Record" means all or part of a writing, as that term is
defined in section 2 of the freedom of information act, 1976 PA
442, MCL 15.232.
Sec. 88i. (1) The office of the chief compliance officer is
created
within the fund. department
of treasury. The office shall
exercise its powers and duties under this section independently of
the fund.
(2) The office shall assist the fund board with the creation,
implementation, monitoring, and enforcement of policies and
procedures to prevent illegal, unethical, or improper conduct on
the part of fund board members, commercialization board members and
employees, or agents of the fund board and commercialization board
in carrying out their duties under this chapter.
(3) The principal executive officer of the office is the chief
compliance
officer. The state administrative board department of
treasury shall be the appointing authority of the chief compliance
officer.
(4) A person may not interfere with, prevent, or prohibit the
chief compliance officer from carrying out his or her duties as
established in this section and set by the state administrative
board. The chief compliance officer is an employee for purposes of
the whistleblowers' protection act, 1980 PA 469, MCL 15.361 to
15.369.
(5) All departments, state agencies, committees,
commissioners, or officers of this state, the MEDC, and any
political subdivision of this state, so far as is compatible with
their duties, shall give the chief compliance officer any necessary
assistance required by the chief compliance officer in the
performance of the duties of the chief compliance officer. All
departments, state agencies, committees, commissioners, or officers
of this state, the MEDC, and any political subdivision of this
state shall provide the chief compliance officer free access to any
book, record, or document in their custody, relating to the matters
within the scope of the chief compliance officer in the performance
of his or her duties.
(6) The chief compliance officer shall do all of the
following:
(a) Recommend policies and procedures, including, but not
limited to, a conflict of interest policy, an investment policy,
and an ethics policy to the fund board and the commercialization
board that shall protect the state's assets consistent with the
requirements of this chapter and applicable state and federal law.
The chief compliance officer shall also assist in the design of the
policies and procedures that will prevent violations from
occurring, detect violations that have occurred, and correct such
violations promptly.
(b) Assist employees and agents of the board and the
commercialization board to ensure that they are in compliance with
internal policies and procedures and with applicable state and
federal law.
(c) Provide guidance to the board, the commercialization
board, and employees of the board and the commercialization board
on matters related to compliance with internal policies and
procedures and with applicable state and federal law.
(d) Make recommendations to the board, the commercialization
board, and employees of the board and the commercialization board
regarding the appropriate evaluation, investigation, and resolution
of issues and concerns regarding compliance with internal policies
and procedures and with applicable state and federal law.
(e) Review and evaluate compliance with internal policies and
procedures and with applicable state and federal law.
(f) Cooperate with the office of the auditor general as the
auditor general carries out his or her duties.
(g) Report quarterly to the fund board and the state
administrative board regarding compliance with internal policies
and procedures and with applicable state and federal law.
(h) Contact persons receiving awards, investments, grants, and
loans under this chapter to the extent necessary to carry out
responsibilities under this chapter.
(i) Prepare a written annual report that evaluates compliance
with internal policies and procedures and with applicable state and
federal law, explains any compliance matters that arose during the
previous year, and suggests revisions to agency policies and
procedures. Copies of the report shall be provided to the governor,
the clerk of the house of representatives, the secretary of the
senate, the chairpersons of the senate and house of representatives
committees on commerce, and the chairpersons of the senate and
house of representatives committees on appropriations. The annual
report shall also be published on the fund's internet website.
(j) Do all other things necessary to carry out the chief
compliance officer's responsibilities under this section.
(7) As used in this section, "office" means the office of the
chief compliance officer.
