S T A T E O F N E W Y O R K ________________________________________________________________________ 8452 2011-2012 Regular Sessions I N A S S E M B L Y June 16, 2011 ___________ Introduced by M. of A. SCHIMMINGER, SCARBOROUGH, LUPARDO, GABRYSZAK, MORELLE -- Multi-Sponsored by -- M. of A. BRONSON, RAMOS, REILLY, ROBERTS, RUSSELL, SPANO, ZEBROWSKI -- (at request of the Empire State Development) -- read once and referred to the Committee on Economic Development AN ACT to amend the New York state urban development corporation act, in relation to the capital access program and to provide for a new Inno- vate NY fund; and making appropriations for the support of government THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: 1 Section 1. Section 16-k of section 1 of chapter 174 of the laws of 2 1968, constituting the New York state urban development corporation act, 3 as added by section 1 of part J of chapter 413 of the laws of 1999, is 4 amended to read as follows: 5 S 16-k. Capital access program. 1. Definitions. For the purposes of 6 this section: 7 (a) "Financial institution", means any bank, trust company, savings 8 bank, savings and loan association or cooperative bank chartered by the 9 state or any national banking association, federal savings and loan 10 association or federal savings bank OR ANY COMMUNITY DEVELOPMENT FINAN- 11 CIAL INSTITUTION OR COMMUNITY-BASED LENDING ORGANIZATION; provided, 12 however, that the financial institution has its principal office located 13 in the state. 14 (b) "Participating financial institution" shall mean any financial 15 institution participating in the program established by this section. 16 (c) "Small business" shall have the same meaning as set forth in 17 section 131 of the economic development law, whose primary place of 18 business is in New York state. 19 2. (a) The corporation, or its agent, shall establish a capital access 20 program to provide a loan loss reserve to assist small businesses that 21 otherwise find it difficult to obtain regular bank financing. EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. A LBD13170-01-1 A. 8452 2 1 (b)(i) Assistance [from this] UNDER THE CAPITAL ACCESS program shall 2 be provided for a capital access program under which the corporation or 3 its agent shall be authorized to assist small businesses that otherwise 4 find it difficult to obtain regular OR SUFFICIENT bank financing. Such 5 assistance shall take the form of deposits by the corporation or its 6 agent in the reserve funds in participating financial institutions to 7 fund loan loss reserves for loans made to such small businesses. 8 (ii) Any financial institution desiring to become a participating 9 financial institution shall execute an agreement in such form as the 10 corporation or its agent may prescribe, which agreement shall contain 11 the terms and provisions set forth in paragraph (c) of this subdivision 12 and such other terms and provisions as the corporation or its agent may 13 deem necessary or appropriate. 14 (c) A participating financial institution originating a loan to a 15 small business pursuant to this section shall: 16 (i) provide a plan to the corporation or its agent for the marketing 17 of the capital access program TO SMALL BUSINESSES, INCLUDING THOSE in 18 highly distressed areas and to minority- and women-owned businesses, 19 with appropriate lending objectives identified by the financial institu- 20 tion for such areas and businesses; 21 (ii) disperse funds for the purposes of expansion, facility/technology 22 upgrading, start-up and working capital; 23 (iii) not disperse funds which exceed an amount greater than five 24 hundred thousand dollars; 25 (iv) set aside an amount, specified OR AGREED TO by the corporation or 26 its agent, [but which shall not be] FROM BOTH THE PARTICIPATING FINAN- 27 CIAL ORGANIZATION AND THE SMALL BUSINESS, NOT less than [one and one- 28 half] THREE percent nor more than [three and one-half] SEVEN percent of 29 the principal amount of the loan, WHEREBY THE AMOUNT CONTRIBUTED BY THE 30 SMALL BUSINESS DOES NOT EXCEED FIFTY PERCENT OF THE TOTAL AMOUNT 31 CONTRIBUTED BY THE SMALL BUSINESS AND THE FINANCIAL INSTITUTION, into a 32 loan loss reserve which the institution shall maintain, applicable to 33 all such loans by said institution to small businesses pursuant to this 34 section; AND 35 (v) [obtain from the small business an amount equal to the reserve 36 contribution made by the participating financial institution with 37 respect to such loan; 38 (vi) set aside such amount into said loan loss reserve maintained by 39 the participating financial institution applicable to all loans pursuant 40 to this section; and 41 (vii)] certify to the corporation or its agent in such a fashion and 42 with such supporting information as the corporation or its agent shall 43 prescribe, that it has made such loan and has set aside its contribution 44 and the [equal] contribution of the small business. 45 (d) The corporation or its agent shall after such certification as 46 provided in subparagraph [(vii)] (V) of paragraph (c) of this subdivi- 47 sion, transfer to the participating financial institution an amount 48 equal to the total of the contributions of the participating financial 49 institution and the small business or such additional amount up to one 50 hundred fifty percent of such contributions as determined by the corpo- 51 ration or its agent. The participating financial institution shall set 52 aside such amount so received into said loan loss reserve. 53 (e) In the event the participating financial institution suffers a 54 loss on any such loan, it may in its discretion draw upon the funds in 55 such loan loss reserve to repay the loan in whole or in part. A. 8452 3 1 (f) All amounts set aside by the participating financial institution 2 into said loan loss reserve shall be in an account at said institution. 3 (g) Earnings or interest from the principal of said loan loss reserve 4 accounts shall be: 5 (i) maintained in the account and held as additional loan loss 6 reserves; and 7 (ii) available to the corporation or its agent at any time and from 8 time to time, to be used to defray the costs of administering the 9 program or to replenish the loan loss reserve account of the corporation 10 or its agent. 11 (H) THE CORPORATION SHALL ASSURE ADEQUATE GEOGRAPHIC DISTRIBUTION OF 12 PARTICIPATING FINANCIAL INSTITUTIONS THROUGHOUT THE STATE TO THE EXTENT 13 FEASIBLE. 14 3. Administration of the capital access program. (a) The corporation 15 is hereby authorized to do the following: 16 (i) enter into a contract with A THIRD PARTY FINANCIAL INSTITUTION, 17 WHICH MAY BE the New York business development corporation, [hereinafter 18 referred to as NYBDC,] established under section 210 of the banking law, 19 to act as the agent of the corporation with respect to the adminis- 20 tration of the program, PROVIDED THAT THE SELECTION OF A THIRD PARTY 21 OTHER THAN THE NEW YORK BUSINESS DEVELOPMENT CORPORATION SHALL BE MADE 22 PURSUANT TO A COMPETITIVE PROCESS; 23 (ii) conduct an annual review and assessment of the performance of the 24 [NYBDC] THIRD PARTY in its capacity as agent for the corporation to 25 determine whether the contract referenced in subparagraph (i) of this 26 paragraph should be renewed for an additional two year period. The 27 review shall be based on whether the [NYBDC] THIRD PARTY AGENT has 28 satisfactorily met the terms and conditions of the contract; 29 (iii) where an initial determination finds that the [NYBDC's] THIRD 30 PARTY AGENT'S performance is unsatisfactory, allow the [NYBDC] THIRD 31 PARTY AGENT the opportunity to take corrective action; 32 (iv) where a final review of the [NYBDC's] THIRD PARTY AGENT'S 33 performance continues to conclude that the [NYBDC's] THIRD PARTY AGENT'S 34 performance is unsatisfactory, submit to the speaker of the assembly and 35 the temporary president of the senate its recommendation to terminate 36 the contract with the [NYBDC] THIRD PARTY AGENT and transfer the 37 contract to another agent; and 38 (v) promulgate rules and regulations with respect to the implementa- 39 tion of the capital access program established by this section and any 40 other rules and regulations necessary to fulfill the purposes of this 41 section, in accordance with the state administrative procedure act, and 42 WHICH shall be consistent with the program plan required by subdivision 43 19 of section 100 of the economic development law. 44 (b) Any contract entered into pursuant to subparagraph (i) of para- 45 graph (a) of this subdivision shall: 46 (i) be for a period of two years and shall be renewed for an addi- 47 tional two year period subject to requirements of subparagraph (ii) of 48 paragraph (a) of this subdivision; and 49 (ii) provide for compensation for expenses incurred by the [NYBDC] 50 THIRD PARTY AGENT in connection with its services as agent and for such 51 other services as the corporation may deem appropriate including, but 52 not limited to the use of the premises, personnel and personal property 53 of the [NYBDC] THIRD PARTY AGENT. 54 S 2. Section 1 of chapter 174 of the laws of 1968, constituting the 55 New York state urban development corporation act, is amended by adding a 56 new section 16-u to read as follows: A. 8452 4 1 S 16-U. INNOVATE NY FUND. 1. THE INNOVATE NY FUND IS HEREBY CREATED. 2 THE PURPOSE OF THE INNOVATE NY FUND IS TO MAKE AVAILABLE STATE FUNDS TO 3 ELIGIBLE APPLICANTS TO SUPPORT EMERGING BUSINESS IDEAS AND PRODUCTS THAT 4 RESULT IN THE GROWTH OF BUSINESS WITHIN THE STATE AND THE CONCOMITANT 5 CREATION OF JOBS AND TAX REVENUES FOR THE STATE. 6 2. ELIGIBLE APPLICANTS FOR INNOVATE NY FUNDS MAY INCLUDE REGIONAL AND 7 LOCAL ECONOMIC DEVELOPMENT ORGANIZATIONS, TECHNOLOGY DEVELOPMENT ORGAN- 8 IZATIONS, RESEARCH UNIVERSITIES, AND INVESTMENT FUNDS THAT PROVIDE 9 SEED-STAGE INVESTMENTS IN NEW YORK STATE COMPANIES. 10 3. FUNDING FROM THE INNOVATE NY FUND MAY BE MADE AVAILABLE TO THE 11 APPLICANT FOR INVESTMENT IN BENEFICIARY COMPANIES. IN ORDER TO BE ELIGI- 12 BLE FOR AN INVESTMENT THAT INCLUDES INNOVATE NY INVESTMENT FUNDS, A 13 BENEFICIARY COMPANY MUST: (A) BE, OR AGREE IN WRITING TO BE, LOCATED IN 14 NEW YORK STATE; (B) BE IN THE SEED-STAGE OF DEVELOPMENT, AS DEFINED BY 15 THE CORPORATION; (C) DEMONSTRATE A POTENTIAL FOR SUBSTANTIAL GROWTH AND 16 JOB DEVELOPMENT IN AN EMERGING TECHNOLOGY FIELD, AS DEFINED IN SECTION 17 THIRTY-ONE HUNDRED TWO-E OF THE PUBLIC AUTHORITIES LAW OR IN REGULATIONS 18 AS ADOPTED BY THE CORPORATION; AND (D) HAVE THE POTENTIAL TO GENERATE 19 ADDITIONAL ECONOMIC ACTIVITY IN NEW YORK STATE. INVESTMENT PRIORITY 20 SHALL BE GIVEN TO BENEFICIARY COMPANIES INVOLVED IN COMMERCIALIZATION OF 21 RESEARCH AND DEVELOPMENT OR HIGH TECHNOLOGY MANUFACTURING. 22 4. THE CORPORATION SHALL ESTABLISH A COMPETITIVE PROCESS FOR THE EVAL- 23 UATION OF APPLICANTS FOR THE INNOVATE NY INVESTMENT FUND. APPLICANTS 24 SHALL BE EVALUATED ON CRITERIA INCLUDING, BUT NOT LIMITED TO, THE APPLI- 25 CANT'S: (A) TRACK RECORD OF SUCCESS IN RAISING INVESTMENT FUNDS AND 26 SUCCESSFULLY INVESTING THEM; (B) CAPACITY TO PERFORM DUE DILIGENCE AND 27 TO PROVIDE MANAGEMENT EXPERTISE AND OTHER VALUE-ADDED SERVICES TO BENE- 28 FICIARY COMPANIES; (C) FINANCIAL RESOURCES FOR IDENTIFYING AND INVESTING 29 IN SEED-STAGE COMPANIES; (D) ABILITY TO SECURE NON-STATE MATCHING 30 PROGRAM INVESTMENT FUNDS AT A RATIO THAT IS EQUAL TO OR GREATER THAN ONE 31 TO ONE (1:1); (E) ABILITY TO EVALUATE THE COMMERCIAL POTENTIAL OF EMERG- 32 ING TECHNOLOGIES; (F) ABILITY TO SECURE PARTNERSHIPS WITH LOCAL OR 33 REGIONAL INVESTORS; (G) ADOPTION OF CONFLICT OF INTEREST PROVISIONS 34 ACCEPTABLE TO THE CORPORATION; AND (H) OTHER CRITERIA THAT THE CORPO- 35 RATION DETERMINES IS RELEVANT TO MAKING INVESTMENT DECISIONS CONSISTENT 36 WITH THE PURPOSES OF THE FUND AS SET FORTH IN SUBDIVISION ONE OF THIS 37 SECTION. WHEN AWARDING FUNDS PURSUANT TO THIS SUBDIVISION, THE CORPO- 38 RATION SHALL ASSURE THAT THE APPLICANTS DEMONSTRATE THE NEED FOR SEED 39 CAPITAL IN THE AREAS SERVED BY THE APPLICANT AND PROVIDE FOR ADEQUATE 40 GEOGRAPHIC DISTRIBUTION OF AWARDS TO BENEFICIARY COMPANIES THROUGHOUT 41 THE STATE TO THE EXTENT FEASIBLE. THE CORPORATION SHALL DISTRIBUTE 42 FUNDS PROMPTLY PURSUANT TO A DISBURSEMENT PROCESS AGREED TO BETWEEN THE 43 CORPORATION AND APPLICANT TO ENABLE THE APPLICANT TO FULFILL COMMITMENTS 44 TO BENEFICIARY COMPANIES IN A TIMELY MANNER. 45 5. AT THE TIME THE APPLICANT HAS INVESTED FIFTY PERCENT OF THE INNO- 46 VATE NY FUNDS COMMITTED TO SUCH APPLICANT AND ANNUALLY THEREAFTER, 47 AGGREGATE INVESTMENTS OF INNOVATE NY FUNDS BY SUCH APPLICANT IN BENEFI- 48 CIARY COMPANIES SHALL BE LEVERAGED WITH PRIVATE SOURCES OF CAPITAL 49 EXCLUDING INVESTMENTS AFTER THE INITIAL FUNDING ROUND AT A RATIO EQUAL 50 TO OR GREATER THAN TWO TO ONE (2:1). 51 6. THE INNOVATE NY FUND SHALL NOT INVEST AN AMOUNT IN ANY SINGLE BENE- 52 FICIARY COMPANY THAT EXCEEDS FIVE HUNDRED THOUSAND DOLLARS, OR SEVEN 53 HUNDRED FIFTY THOUSAND DOLLARS IN THE CASE OF ANY INDIVIDUAL BIOTECHNOL- 54 OGY-RELATED BENEFICIARY, AT ANY ONE TIME, SUBJECT TO CERTAIN EXCEPTIONS 55 TO BE ESTABLISHED BY RULES AND REGULATIONS OF THE CORPORATION. A. 8452 5 1 7. NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, THE CORPO- 2 RATION MAY ESTABLISH A PROGRAM FUND FOR PROGRAM USE AND PAY INTO SUCH 3 FUND ANY ELIGIBLE FUNDS AVAILABLE TO THE CORPORATION FROM ANY SOURCE, 4 INCLUDING MONEYS APPROPRIATED BY THE STATE. 5 8. THE CORPORATION SHALL SUBMIT A REPORT ANNUALLY ON DECEMBER THIRTY- 6 FIRST TO THE DIRECTOR OF THE BUDGET, THE TEMPORARY PRESIDENT OF THE 7 SENATE, THE SPEAKER OF THE ASSEMBLY, THE MINORITY LEADER OF THE SENATE 8 AND THE MINORITY LEADER OF THE ASSEMBLY DETAILING (A) THE TOTAL AMOUNT 9 OF FUNDS COMMITTED TO EACH APPLICANT THAT RECEIVES FUNDS AND THE AMOUNT 10 OF SUCH FUNDS THAT HAS BEEN INVESTED BY EACH SUCH APPLICANT; (B) THE 11 AMOUNT OF INNOVATE NY AND PRIVATE FUNDS INVESTED IN EACH BENEFICIARY 12 COMPANY; (C) THE TYPE OF PRODUCT OR TECHNOLOGY BEING DEVELOPED OR 13 PRODUCED BY EACH BENEFICIARY COMPANY; (D) THE LOCATION OF EACH BENEFICI- 14 ARY COMPANY; (E) THE NUMBER OF JOBS PROJECTED TO BE CREATED OR RETAINED; 15 AND (F) SUCH OTHER INFORMATION AS THE CORPORATION DEEMS NECESSARY. 16 9. THE CORPORATION IS HEREBY AUTHORIZED TO PROMULGATE RULES AND REGU- 17 LATIONS IN ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT AS ARE 18 NECESSARY TO FULFILL THE PURPOSES OF THIS SECTION, INCLUDING WITH 19 RESPECT TO REASONABLE MANAGEMENT FEES, PROMOTES, SHARE OF RETURN AND 20 OTHER FEES AND CHARGES OF APPLICANTS THAT RECEIVE FUNDS, AND TO PROVIDE 21 FOR THE REPAYMENT OF FUNDS RECEIVED BY THE BENEFICIARY COMPANY IF THE 22 BENEFICIARY COMPANY LEAVES NEW YORK STATE WITHIN A PERIOD OF TIME TO BE 23 ESTABLISHED BY THE CORPORATION. 24 10. IN ACCORDANCE WITH THE RULES AND REGULATIONS TO BE PROMULGATED BY 25 THE CORPORATION, THE CORPORATION MAY IMPOSE FEES, ESTABLISH REPAYMENT 26 TERMS AND PROVIDE FOR EQUITY PARTICIPATION BY THE CORPORATION IN 27 CONNECTION WITH INVESTMENTS FROM THE INNOVATE NY FUND. 28 11. THE PROVISIONS OF SECTION TEN AND SUBDIVISION TWO OF SECTION 29 SIXTEEN OF THIS ACT SHALL NOT APPLY TO ASSISTANCE PROVIDED UNDER THIS 30 SECTION. 31 S 3. a) The several amounts specified in this act for aid to locali- 32 ties, or so much thereof as shall be sufficient to accomplish the 33 purposes designated by the appropriations, are hereby appropriated and 34 authorized to be paid as hereinafter provided, to the respective public 35 officers and for the several purposes specified. 36 b) Where applicable, appropriations made by this act for expenditures 37 from federal grants for aid to localities may be allocated for spending 38 from federal grants for any grant period beginning, during, or prior to, 39 the state fiscal year beginning on April 1, 2011 except as otherwise 40 provided. 41 c) No moneys appropriated by this act shall be available for payment 42 until a certificate of approval has been issued by the director of the 43 budget, who shall file such certificate with the department of audit and 44 control, the chairperson of the senate finance committee and the chair- 45 person of the assembly ways and means committee. 46 d) The appropriation contained within this section is based on the 47 amount of federal moneys estimated to become available within the funds 48 for which this appropriation provides. Disbursements from this appropri- 49 ation shall be limited to the actual amounts received in such funds from 50 the federal government. 51 e) The appropriations contained in this act shall be available for the 52 fiscal year beginning on April 1, 2011 except as otherwise provided. A. 8452 6 1 DEPARTMENT OF ECONOMIC DEVELOPMENT 2 SMALL BUSINESS CREDIT INITIATIVE PROGRAM .................... 55,351,534 3 Special Revenue Funds - Federal 4 Federal Operating Grant Fund 5 Small Business Credit Initiative Account 6 For programs and activities authorized 7 pursuant to section sixteen-f of the new 8 york state urban development corporation 9 act, including any services and costs 10 associated with administration of such 11 programs and activities, subject to the 12 limitations imposed by federal funding 13 requirements. Notwithstanding any 14 provision of law to the contrary, such 15 moneys shall be paid by the department of 16 economic development to the new york state 17 urban development corporation from federal 18 operating grant moneys deposited in the 19 state treasury for the federal state small 20 business credit initiative. Provided 21 further that, notwithstanding any incon- 22 sistent provision of law, subject to the 23 approval of the director of the budget, 24 funds appropriated herein may be inter- 25 changed with any other item of appropri- 26 ation to be funded from the small business 27 credit initiative account ................... 10,405,173 28 For programs and activities authorized 29 pursuant to section sixteen-k of the new 30 york state urban development corporation 31 act, including any services and costs 32 associated with administration of such 33 programs and activities, subject to the 34 limitations imposed by federal funding 35 requirements. Notwithstanding any 36 provision of law to the contrary, such 37 moneys shall be paid by the department of 38 economic development to the new york state 39 urban development corporation from federal 40 operating grant moneys deposited in the 41 state treasury for the federal state small 42 business credit initiative. Provided 43 further that, notwithstanding any incon- 44 sistent provision of law, subject to the 45 approval of the director of the budget, 46 funds appropriated herein may be inter- 47 changed with any other item of appropri- 48 ation to be funded from the small business 49 credit initiative account ................... 18,994,204 50 For programs and activities authorized 51 pursuant to section sixteen-u of the new 52 york state urban development corporation A. 8452 7 1 act, including any services and costs 2 associated with administration of such 3 programs and activities, subject to the 4 limitations imposed by federal funding 5 requirements. Notwithstanding any 6 provision of law to the contrary, such 7 moneys shall be paid by the department of 8 economic development to the new york state 9 urban development corporation from federal 10 operating grant moneys deposited in the 11 state treasury for the federal state small 12 business credit initiative. Provided 13 further that, notwithstanding any incon- 14 sistent provision of law, subject to the 15 approval of the director of the budget, 16 funds appropriated herein may be inter- 17 changed with any other item of appropri- 18 ation to be funded from the small business 19 credit initiative account ................... 25,952,157 20 S 4. This act shall take effect immediately.