BillCam

HB-6064, As Passed Senate, December 11, 2018

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 6064

A bill to amend 1984 PA 270, entitled

"Michigan strategic fund act,"

by amending section 90b (MCL 125.2090b), as amended by 2017 PA 239,

and by adding chapter 8E.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 90b. (1) The fund shall create and operate the Michigan

community revitalization program to provide community

revitalization incentives for eligible investments on eligible

property in this state. The fund shall develop and use a detailed

application, approval, and compliance process adopted by a

resolution of the board and published and available on the fund's

website. Program standards, guidelines, templates, or any other

forms used by the fund to implement the Michigan community

revitalization program shall be approved by the board.

(2) A person or 2 or more persons may apply to the fund for

approval of community revitalization incentives associated with a

project under this section. Community revitalization incentives

shall not be approved for any property that is not eligible

property.

(3) Funds appropriated for programs under this chapter must be

placed in the 21st century jobs trust fund created in the Michigan

trust fund act, 2000 PA 489, MCL 12.251 to 12.262.

(4) Subject to section 88c, the fund shall review all

applications for community revitalization incentives. As part of

the application, the applicant shall include documentation

establishing that the project is located on eligible property and a

project description that includes a project pro-forma. The fund

shall consider the following criteria to the extent reasonably

applicable as reasonably determined by the fund board or its

designee to the type of project proposed when approving a community

revitalization incentive:

(a) The importance of the project to the community in which it

is located.

(b) If the project will act as a catalyst for additional

revitalization of the community in which it is located.

the project.

(d) The applicant's financial need for a community

revitalization incentive.

(e) The extent of reuse of vacant buildings, reuse of historic

resources, and redevelopment of blighted property.

(f) Creation of jobs.

(g) The level of private sector and other contributions,

including, but not limited to, federal funds and federal tax

credits.

(h) Whether the project is financially and economically sound.

(i) Whether the project increases the density of the area.

(j) Whether the project promotes mixed-use development and

walkable communities.

(k) Whether the project converts abandoned public buildings to

private use.

(l) Whether the project promotes sustainable development.

(m) Whether the project involves the rehabilitation of a

historic resource.

(n) Whether the project addresses areawide redevelopment.

(o) Whether the project addresses underserved markets of

commerce.

(p) The level and extent of environmental contamination.

(q) If the rehabilitation of the historic resource will meet

the federal secretary of the interior's standards for

rehabilitation and guidelines for rehabilitating historic

buildings, 36 CFR 67, when applied after engaging in discussions

with the state historic preservation office.

(r) Whether the project will compete with or affect existing

Michigan businesses within the same industry.

(s) Any other additional criteria approved by the board that

are specific to each individual project and are consistent with the

findings and intent of this chapter.

(5) An application shall be approved or denied not more than

90 days after receipt of the application that is considered

administratively complete by the board or its designee. If the

application is neither approved nor denied within 90 days after

being considered administratively complete, it must be considered

by the fund board, or its president if delegated, for action at, or

by, the next regularly scheduled board meeting. If an application

is approved, the fund shall determine the amount of community

revitalization incentives for the project based on the fund's

review of the application and the criteria specified in subsection

(4).

(6) Except as otherwise provided in this subsection, the

amount of community revitalization incentives that the board may

approve for a single project shall not exceed 25% of a project's

eligible investment up to $10,000,000.00. However, in a city,

village, or township with a population of 15,000 or less based on

the most recent federal decennial census, the amount of community

revitalization incentives that the board may approve for a single

project shall not exceed 50% of a project's eligible investment up

to $10,000,000.00. A community revitalization loan shall not exceed

$10,000,000.00, and a community revitalization grant shall not

exceed $1,500,000.00. However, a combination of loans, grants, and

other economic assistance under this chapter shall not exceed

$10,000,000.00 per project. The board may not approve

$10,000,000.00 per project in community revitalization incentives

to more than 3 projects per fiscal year. The board shall approve

not less than 5 projects of $1,000,000.00 or less per project per

fiscal year. If, after reviewing all applications in a fiscal year,

the fund determines that less than 5 projects warranted an award of

$1,000,000.00 or less, this subsection does not apply.

Notwithstanding any other limitation in this subsection, each year,

of the community revitalization projects approved by the board, the

board may approve up to 3 single projects that shall not exceed 50%

of a project's eligible investment up to $10,000,000.00 for

community revitalization loans and grants for the specific purpose

of historic preservation. Beginning for the 2017-2018 fiscal year

and through the 2021-2022 fiscal year, except as otherwise provided

in subsection (9), not less than 5% of community revitalization

incentives shall be awarded to neighborhood and commercial corridor

food initiatives.

(7) When the board approves an application and determines the

amount of community revitalization incentives, the board shall

enter into a written agreement with the applicant. The written

agreement must provide in a clear and concise manner all of the

conditions imposed, including specific time frames, on the

applicant to receive the community revitalization incentive under

this chapter. The written agreement must provide for the secured

status of any loan, repayment, and penalties if the applicant fails

to comply with the provisions of the written agreement as

determined by the board. The applicant shall agree to provide the

data described in the written agreement that is necessary for the

fund to report to the legislature under this chapter.

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

by law from the 21st century jobs trust fund established in the

Michigan trust fund act, 2000 PA 489, MCL 12.251 to 12.262, 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 the community

revitalization incentive authorized 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.

(9) The application process for community revitalization

incentives for neighborhood and commercial corridor food

initiatives must provide that applications for neighborhood and

commercial corridor food initiatives must be received on or before

June 1 for that fiscal year. If there are insufficient approved

applications in a fiscal year for community revitalization

incentives for neighborhood and commercial corridor food

initiatives, then the remaining allocated funds may be used for

community revitalization incentives that are not for neighborhood

and commercial corridor food initiatives as determined by the

board. In addition, a new neighborhood and commercial corridor food

initiative, as determined by the board, is not eligible for a

community revitalization incentive if it is located within 1 mile

of an existing retail supermarket, grocery store, or produce

market, as determined by the board, that offers unprocessed USDA-

inspected meat and poultry products or meat products that carry the

USDA organic seal, fresh fruits and vegetables, and dairy products

for sale to the public.

(10) The legislature finds and declares that funding

authorized under this section is intended to encourage

diversification of the economy, to encourage capital investment in

this state, to promote the creation of qualified new jobs in this

state, and to promote the investment in brownfield and historic

preservation projects that reclaim previously used property that is

less likely to be revitalized without the investment.

CHAPTER 8E

Sec. 90l. As used in this chapter:

(a) "Affiliate" means an entity that, directly or indirectly,

through 1 or more intermediaries, controls, is controlled by, or is

under common control with another entity. For the purposes of this

subdivision, an entity is controlled by another entity if the

controlling entity holds, directly or indirectly, the majority

voting or ownership interest in the controlled entity or has

control over the day-to-day operations of the controlled entity by

contract or law.

(b) "Closing date" means the date on which a rural jobs and

capital investment fund has received a grant, loan, or other type

of economic assistance.

factor 1 jobs with an hourly wage rate of at least 125% of the

federal minimum wage, $15,000.00 for factor 2 jobs with an hourly

wage rate of at least 150% of the federal minimum wage, $25,000.00

for factor 3 jobs with an hourly wage rate of at least 200% of the

federal minimum wage, and $35,000.00 for factor 4 jobs with an

hourly wage rate of at least 125% of the federal minimum wage and

employ veterans, senior citizens, ex-offenders, citizens with

disabilities, or any citizen concurrently in a Michigan department

of health and human services assistance program.

(d) "Full-time equivalent employees" means the number of

salaried employment positions plus the quotient obtained by

dividing the total number of hours for which employees with an

hourly wage rate of at least 150% of the federal minimum wage were

compensated for employment over the preceding 12-month period by

2,080 with respect to hourly employees.

(e) "Growth investment" means any capital or equity investment

in a qualified business or any loan to a qualified business with a

stated maturity at least 1 year after the date of issuance.A

secured loan or the provision of a revolving line of credit to a

qualified business is a growth investment only if the rural jobs

and capital investment fund obtains an affidavit from the president

or chief executive officer or equivalent position of the qualified

business attesting that the qualified business sought and was

denied similar financing from a commercial bank.

(f) "Investment authority" means the amount stated on the

certificate under section 90m certifying the rural jobs and capital

investment fund. A rural jobs and capital investment fund's

investment authority shall be composed of equal amounts of grants,

loans, or other types of economic assistance by the fund and

private contributions.

(g) "New full-time equivalent employees" means the number of

jobs performed by an individual who is employed for consideration

for at least 35 hours of work each week based in this state and for

whom the company, an employee leasing company, or a professional

employer organization on behalf of the company, or other entity

authorized under this act, withholds income and United States

Social Security taxes.

(h) "Principal business operations" means the operations of a

business are located at the place or places where at least 60% of

its employees work or where employees that are paid at least 60% of

its payroll work. A business that has agreed to relocate or hire

new employees using the proceeds of a growth investment to

establish its principal business operations in a qualified rural

local governmental unit in the state shall be considered to have

its principal business operations in this new location provided it

satisfies this definition within 180 days after receiving the

growth investment, unless the fund agrees to a later date. A

business located in this state that has agreed to hire new

employees in a qualified rural local governmental unit using the

proceeds of a growth investment to establish its principal business

operations in that qualified rural local governmental unit shall be

considered to have its principal business operations in a qualified

rural local governmental unit provided it hires the necessary

employees within 180 days after receiving the growth investment or

a later date, if agreed to by the fund.

(i) "Private contributions" means an investment of cash in a

rural jobs and capital investment fund to match dollar-for-dollar

the grants, loans, or other types of economic assistance up to the

investment authority of the rural jobs and capital investment fund.

A rural jobs and capital investment fund's private contributions

shall be composed of not less than 10% of equity investments.

(j) "Qualified business" means an operating business that, at

the time of the initial investment in the business by a rural jobs

and capital investment fund, has fewer than 150 employees and is

engaged in industries assigned a North American Industry

Classification System code within sectors 11, 21, 23, 31 through

33, 42, 48, 49, 54, except 541110 through 541219, 56, 62, and 81

or, if not engaged in any of these industries, the fund determines

that the investment will be beneficial to the rural area, the

economic growth of this state, and the industry is not assigned a

North American Industry Classification System code within sector

51.

(k) "Qualified rural local governmental unit" means a county

in this state with a population of 225,000 or less.

(l) "Repayment amount" means an amount equal to 50% of a rural

jobs and capital investment fund's investment authority, minus the

sum of the product of new full-time equivalent employees reported

to the fund for each of the rural jobs and capital investment

fund's annual reports submitted pursuant to section 90p and the

appropriate earned job factor rate.

(m) "Rural jobs and capital investment fund" means an entity

approved by the fund under section 90m that meets all of the

following:

(i) The entity or its affiliate meets all of the following:

(A) Is a rural business investment company under 7 USC 2009cc

or a small business investment company under 15 USC 68.

(B) Is registered as an investment adviser under 15 USC 80b-1

to 80b-21.

(ii) As of the date of the application, the entity or its

affiliates have invested at least $100,000,000.00 in nonpublic

companies located in counties throughout the United States with a

population less than 50,000.

(iii) As of the date of the application, the entity or its

affiliates have received equity investments from investors who are

not affiliates of the applicant in an amount equal to least

$100,000,000.00.

Sec. 90m. (1) Beginning 90 days after the effective date of

the amendatory act that added this chapter, and in each subsequent

year through 2029, the fund shall accept applications for approval

as a rural jobs and capital investment fund. The application shall

include all of the following:

(a) The total investment authority sought by the applicant.

(b) A copy of the applicant's license showing that the entity

or its affiliate is a rural business investment company under 7 USC

2009cc or a small business investment company under 15 USC 68.

entity or its affiliates have invested at least $100,000,000.00 in

nonpublic companies located in counties throughout the United

States with a population less than 50,000.

(d) Evidence that as of the date of the application, the

entity or its affiliates have received equity investments from

investors who are not affiliates of the applicant in an amount

equal to least $100,000,000.00.

(e) A nonrefundable application fee of $10,000.00.

(2) The fund shall make application determinations within 60

business days from the receipt of an administratively complete

application as determined by the fund, in the order in which the

applications are received.The fund shall consider applications

received on the same day to have been received simultaneously. The

fund shall not approve more than $30,000,000.00 in investment

authority in a calendar year, through 2029. If requests for

investment authority received simultaneously would result in the

limitation provided in this subsection being exceeded, the fund

shall proportionally allot the investment authority and grants,

loans, or other types of economic assistance among the approved

applications. Upon approval of an application, the fund and the

rural jobs and capital investment fund shall execute a written

agreement setting forth the terms and conditions of the grants,

loans, or other types of economic assistance.

(3) The fund may deny an application submitted under this

section only for the following reasons:

(a) The applicant does not satisfy all the criteria described

in this section.

(b) The fund has already approved the maximum amount of

investment authority allowed under this section.

(4) If the fund denies an application, the applicant may

provide additional information to the fund within 5 days of the

notice of denial. The fund shall review and reconsider the

application and additional information within 30 days.A

reconsidered application shall retain the original date of receipt

provided under this section for purposes of priority.

(5) A rural jobs and capital investment fund shall do all of

the following:

(a) Within 60 days after receiving the approval issued under

this section, collect private contributions equal to 50% of the

rural jobs and capital investment fund's investment authority.

(b) Within 65 days after receiving the approval issued under

this section, send to the fund documentation sufficient to prove

that the amounts described in subdivision (a) have been collected.

(6) If the rural jobs and capital investment fund fails to

fully comply with subsection (5), the rural jobs and capital

investment fund's approval is forfeited, and the fund shall first

award the corresponding investment authority to existing applicants

who received investment authority lower than the amount requested

under this section and then to new applicants.

(7) The fund shall disperse the grants, loans, or other types

of economic assistance to the rural jobs and capital investment

fund upon receipt and approval of the documentation described in

subsection (5)(b) within 21 business days.

Sec. 90n. (1) The rural jobs and capital investment creation

fund is created within the state treasury.

(2) The state treasurer may receive money or other assets from

any source for deposit into the rural jobs and capital investment

creation fund. The state treasurer shall direct the investment of

the rural jobs and capital investment creation fund. The state

treasurer shall credit to the rural jobs and capital investment

creation fund interest and earnings from rural jobs and capital

investment creation fund investments.

(3) Money in the rural jobs and capital investment creation

fund at the close of the fiscal year shall remain in the rural jobs

and capital investment creation fund and shall not lapse to the

general fund.

(4) The fund shall be the administrator of the rural jobs and

capital investment creation fund for auditing purposes.

(5) The fund shall expend money from the rural jobs and

capital investment creation fund, upon appropriation, only to make

grants, loans, or other types of economic assistance to rural jobs

and capital investment funds in this state.

Sec. 90o. (1) The fund shall demand immediate repayment of the

grants, loans, or other types of economic assistance issued under

this chapter if any of the following occurs with respect to the

rural jobs and capital investment fund before it is certified to

exit the program as provided in this chapter:

(a) The rural jobs and capital investment fund does not invest

all its investment authority in growth investments in this state

within 3 years of the closing date with 100% of its investment

authority invested in growth investments in qualified businesses

with principal business operations located in qualified rural local

governmental units.

(b) The rural jobs and capital investment fund, after

satisfying subdivision (a), fails to maintain growth investments at

the levels required by subdivision (a) until the sixth anniversary

of the closing date. For the purposes of this subdivision, an

investment is maintained even if the investment is sold or repaid

so long as the rural jobs and capital investment fund reinvests an

amount equal to the capital returned or recovered by the rural jobs

and capital investment fund from the original investment, exclusive

of any profits realized, in other growth investments in this state

within 12 months of the receipt of that capital. Amounts received

by a rural jobs and capital investment fund pursuant to periodic

repayments shall be treated as continually invested in growth

investments if the amounts are reinvested in 1 or more growth

investments by the end of the following calendar year. A rural jobs

and capital investment fund is not required to reinvest capital

returned from growth investments after the fifth anniversary of the

closing date, and those growth investments shall be considered held

continuously by the rural jobs and capital investment fund through

the sixth anniversary of the closing date.

the program in accordance with this chapter, makes a distribution

or payment that results in the rural jobs and capital investment

fund having less than 100% of its investment authority invested in

growth investments in this state or available for investment in

growth investments and held in cash and other marketable

securities.

(d) The rural jobs and capital investment fund makes a growth

investment in a qualified business that directly or indirectly

through an affiliate owns, has the right to acquire an ownership

interest, makes a loan to, or makes an investment in the rural jobs

and capital investment fund, an affiliate of the rural jobs and

capital investment fund, or an investor in the rural jobs and

capital investment fund. This section does not apply to investments

in public-traded securities. For purposes of this subdivision, a

rural jobs and capital investment fund will not be considered an

affiliate of a business solely because of its growth investment.

(e) The rural jobs and capital investment fund invests in any

industry assigned a North American Industry Classification System

code within sector 51.

(2) No more than $5,000,000.00 in growth investments in a

qualified business, including growth investments in affiliates of

the qualified business, shall count toward the requirements of

subsection (1)(a) and (b).

(3) Before demanding repayment under this section, the fund

shall notify the rural jobs and capital investment fund of the

reasons for the pending repayment. The rural jobs and capital

investment fund shall have 90 days from the date the notice was

dispatched to correct any violation outlined in the notice to the

satisfaction of the fund and avoid repayment of the grants, loans,

or other types of economic assistance.

Sec. 90p. (1) A rural jobs and capital investment fund shall

submit an annual report to the fund on or before the last day of

February of each year until the rural jobs and capital investment

fund has exited the program in accordance with this chapter. The

annual report shall provide documentation as to the rural jobs and

capital investment fund's growth investments and include all of the

following:

(a) A bank statement evidencing each growth investment.

(b) The name, location, and industry of each qualified

business receiving a growth investment, including either the

determination letter set forth in section 90o or evidence that the

business was a qualified business at the time the growth investment

was made.

corresponding earned job factor at the qualified business in this

state.

(d) The number of full-time equivalent employees at the

qualified business on the date of receipt of the initial growth

investment in this state.

(e) Any other information required by the fund.

(2) Within 60 days of receipt of an annual report, the fund

shall provide written confirmation to the rural jobs and capital

investment fund of the new full-time equivalent employees the rural

jobs and capital investment fund has been credited for that year.

(3) By the fifth business day after the third anniversary of

the closing date, a rural jobs and capital investment fund shall

submit a report to the fund evidencing its compliance with the

investment requirements of this chapter.

(4) The fund may adopt rules necessary to implement this

chapter.

(5) The fund shall submit an annual report to each house of

the legislature on or before April 1, 2020. The annual report shall

include all of the following:

(a) The name and number of all the rural jobs and capital

investment funds approved to participate in the program.

(b) The amount of investment authority awarded to each rural

jobs and capital investment fund.

investment funds, including the location of the investments.

(d) Whether the rural jobs and capital investment funds are in

compliance with this chapter.

(e) Any other information required by the fund.

Sec. 90q. (1) The fund shall charge an annual fee of 0.5% of

the investment authority authorized for that rural jobs and capital

investment fund.

(2) The initial annual fee is due and payable to the fund

within 1 business day of receipt of a grant, loan, or other type of

economic assistance. After the initial annual fee, an annual fee is

due and payable to the fund on or before that last day of February

of each year.

(3) An annual fee is not required once a rural jobs and

capital investment fund has exited the program in accordance with

this chapter.

Sec. 90r. (1) On or after the sixth anniversary of the closing

date, a rural jobs and capital investment fund may exit the program

and no longer be subject to the provisions of this chapter. The

fund shall respond to the application within 30 days of receipt and

include a calculation of any repayment amount due.

(2) No distributions other than those permitted by section

90o(1)(b) may be made with respect to the equity interests of the

rural jobs and capital investment fund more than the sum of the

amount of equity capital invested into the rural jobs and capital

investment fund with respect to the equity interests and an amount

equal to any projected increase in the federal or state tax

liability of holders of those interests related to the ownership of

the rural jobs and capital investment fund until the rural jobs and

capital investment fund has made payments to the fund equal to the

repayment amount.