This is our starting text

SB-0533, As Passed Senate, November 10, 2005

HOUSE SUBSTITUTE FOR SENATE SUBSTITUTE FOR HOUSE SUBSTITUTE FOR

SENATE BILL NO. 533

A bill to amend 1984 PA 270, entitled

"Michigan strategic fund act,"

(MCL 125.2001 to 125.2093) by adding sections 88k, 88l, 88m, 88n,

and 88o.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 88k. (1) The strategic economic investment and

commercialization board is created within the fund. The

commercialization board shall exercise its powers, duties, and

decision-making authority under this chapter independently of the

fund, the fund board, and the department of treasury.

(2) The commercialization board shall award grants and loans

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

fund act, 2000 PA 489, MCL 12.251 to 12.256, and the investment

fund only for basic research, applied research, university

technology transfer, and commercialization of products, processes,

and services to encourage the development of competitive edge

technologies to create jobs in this state.

(3) Subject to subsection (2), the fund as determined by the

commercialization board shall do all of the following:

(a) Establish a competitive process to award grants and make

loans for competitive edge technologies. The competitive process

shall include, but is not limited to, the following:

(i) A provision that the applications must be peer-reviewed by

independent peer review experts based on the scientific and

technical merit, personnel expertise, commercial merit, and the

ability to leverage additional funding of the application.

Scientific and technical merit, personnel expertise, commercial

merit, and the ability to leverage additional funding shall be

given equal weight in the review and scoring process.

(ii) A preference for proposals that can contribute to the

development of economic diversification or the creation of

employment opportunities in this state.

(iii) A provision that out-of-state business must have a

significant existing or proposed business presence in this state.

(iv) A provision that the program will utilize contracts with

measurable milestones, clear objectives, provisions to revoke

awards for breach of contract, and repayment provisions for loans

given to qualified businesses that leave Michigan within 3 years of

the execution of the contract or otherwise breach the terms of the

contract.

Senate Bill No. 533 (H-5) as amended November 10, 2005 (1 of 2)

(v) A provision that the applicant leverage other resources as

a condition of the grant or loan. If an applicant is seeking a

grant or a loan under this chapter to match federal funds for small

business innovation research or small business technology transfer

programs, the grant or loan under this chapter shall not exceed 25%

of the federal funds and must leverage third party

commercialization funding at both the phase I and phase II levels.

(vi) Limit overhead rates for recipients of grants and loans to

reflect actual overhead but not greater than 15% of the grant or

loan.

(vii) Except as provided in subparagraph (v), a provision that

grants can only be awarded to Michigan institutions of higher

education, Michigan nonprofit research institutions, and Michigan

nonprofit corporations.

(viii) A preference for collaborations between institutions of

higher education, Michigan nonprofit research institutions,

Michigan nonprofit corporations, and qualified businesses.

(ix) A provision authorizing the award of grants to

institutions of higher education to serve as match to promote or

secure the award and receipt of competitively awarded federal

research grants related to competitive edge technologies. A

matching grant shall not exceed 10% of the amount of the

competitively awarded federal research grants received.

(x) A provision encouraging the redevelopment of existing

scientific wet lab space for the commercialization of life science

technology.

[(xi) A preference for proposals that meet 1 or more of the following:

(A) Forecast revenues within 2 years.

(B) Have outside investments from investors with experience and management teams with experience in the industry targeted by the proposal.

(b) The fund shall contract with independent peer review

experts selected by the commercialization board to assist the

commercialization board with its responsibilities under this

chapter.

(4) The commercialization board shall establish standards to

ensure that money expended under this chapter will result in

economic benefit to this state and ensure that a major share of the

business activity resulting from the expenditures occurs in this

state.

(5) The commercialization board shall ensure that a recipient

of money expended under this chapter 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, the Initiated Law of

1996, 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.

(6) The commercialization board shall establish requirements

to ensure that money expended under this section shall not be used

for any of the following:

(a) Grants or loans 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, then 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.

(b) Grants or loans 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, then 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.

business to leave this state.

(d) Grants or loans 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) Grants or loans to a corporation or an affiliate of the

corporation incorporated in a tax haven country after September 11,

2001, but with 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.

(7) When the commercialization board approves a grant or a

loan under this chapter, the commercialization board shall state

the specific objective reasons the applicant was selected over

other applicants for a grant or loan under this chapter.

(8) After March 31, 2006, before adopting a resolution that

establishes or substantially changes a program operated by the

commercialization board, including any fees, charges, or penalties

attached to that program, the commercialization board shall give

notice of the proposed resolution to the governor, to the secretary

of the senate, to the clerk of the house of representatives, to

members of the senate and house of representatives standing

committees on appropriations, 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. The

commercialization board shall hold a public hearing not sooner than

14 days and not longer than 30 days from the date notice of a

proposed resolution is given and offer a person an opportunity to

present data, views, questions, and arguments. Commercialization

board members or 1 or more persons designated by the

commercialization 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

commercialization board may act on the proposed resolution no

sooner than 14 days after the public hearing. The commercialization

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

secretary of the senate, to the clerk of the house of

representatives, and to members of the senate and house of

representatives standing committees on appropriations and shall be

published on the fund's internet website.

(9) The notice described in subsection (8) 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.

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.

Sec. 88l. (1) The commercialization board shall consist of 19

members, as provided under subsections (2) and (3).

(2) The commercialization board shall include each of the 2

following voting ex officio members:

(a) The director of the department of labor and economic

growth or his or her designee from within the department of labor

and economic growth.

(b) The state treasurer or his or her designee from within the

department of treasury.

(3) The commercialization board shall include the following 17

members appointed by the governor with, except for the individuals

described in subdivisions (c) and (d), the advice and consent of

the senate:

(a) Seven members representing business with expertise,

knowledge, skill, or experience in venture capital investments,

business finance, bringing competitive edge technology products to

market, or representing a qualified business.

(b) A member representing the Van Andel institute, a Michigan

charitable trust, MICS 13607, or a successor organization.

selected by the majority leader of the senate representing

qualified businesses or persons with business, technological, or

financial experience related to competitive edge technology.

(d) One member appointed from a list of 2 or more individuals

selected by the speaker of the house of representatives

representing qualified businesses or persons with business,

technological, or financial experience related to competitive edge

technology.

(e) A member representing Michigan state university.

(f) A member representing the university of Michigan.

(g) A member representing Wayne state university.

(h) A member representing western Michigan university.

(i) A member representing Michigan technological university.

(j) A member representing a public university in Michigan

other than Michigan state university, the university of Michigan,

Wayne state university, western Michigan university, or Michigan

technological university.

(k) A member representing automation alley, a Michigan

nonprofit corporation incorporated on May 21, 1998, or a successor

organization.

(4) Of the members of the commercialization board initially

appointed under subsection (3), 5 members shall be appointed for

terms expiring on December 31, 2006, 5 members shall be appointed

for terms expiring on December 31, 2007, 5 members shall be

appointed for terms expiring on December 31, 2008, and 2 members

shall be appointed for terms expiring on December 31, 2009. After

the expiration of the initial appointment terms provided for by

this subsection, members of the commercialization board shall be

appointed for terms of 4 years.

(5) For members of the commercialization board appointed under

subsection (3), a vacancy on the commercialization board occurring

other than by expiration of a term shall be filled in the same

manner as the original appointment for the balance of the unexpired

term. A member of the commercialization board shall hold office

until a successor has been appointed and qualified. A member of the

commercialization board is eligible for reappointment. State

employees are not eligible to serve as members appointed under

subsection (3). As used in this subsection, "state employees" does

not include an officer or employee of a state institution of higher

education.

(6) The governor shall designate 1 of the members of the

commercialization board to serve as its chairperson at the pleasure

of the governor. The commercialization board shall select from

among its members a member to serve as vice-chairperson and a

member to serve as secretary.

(7) Upon appointment to the commercialization board under this

section and upon the taking and filing of the constitutional oath

of office prescribed in section 1 of article XI of the state

constitution of 1963, a member shall enter the office and exercise

the duties of the office.

(8) Members of the commercialization board shall serve without

compensation, but may be reimbursed for actual and necessary

expenses.

(9) Upon the initial appointment of members under this

section, the commercialization board shall organize and adopt its

own policies, procedures, schedule of regular meetings, and a

regular meeting date, place, and time.

(10) The commercialization board may act only by resolution

approved by a majority of commercialization board members appointed

and serving. A majority of the members of the commercialization

board appointed and serving shall constitute a quorum for the

transaction of business. The commercialization board shall meet in

person or by means of electronic communication devices that enable

all participants in the meeting to communicate with each other.

(11) The commercialization board shall conduct all business at

public meetings held in compliance with the open meetings act, 1976

PA 267, MCL 15.261 to 15.275. Public notice of the time, date, and

place of each meeting shall be given in the manner required by the

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

published on the fund's internet website.

Sec. 88m. (1) Notwithstanding section 3(1) of 1968 PA 317, MCL

15.323, members of the commercialization board are considered

public servants subject to 1968 PA 317, MCL 15.321 to 15.330, and

public officers subject to 1973 PA 196, MCL 15.341 to 15.348. An

officer or an employee of a state institution of higher education

may at the same time also hold the public office of member of the

commercialization board as authorized under section 88l(3)(d) and

the officer or employee shall not be deemed to hold 2 or more

incompatible offices at the same time. A member of the

commercialization board shall discharge the duties of the position

in a nonpartisan manner, in good faith, in the best interests of

this state, and with the degree of diligence, care, and skill that

a fiduciary would exercise under similar circumstances in a like

position. In discharging duties of the office, a member of the

commercialization board when acting in good faith may rely upon the

report of an independent expert or independent peer review expert

or upon financial statements of the commercialization board

represented to the member of the commercialization board by the

officer of the commercialization board having charge of its books

or accounts or stated in a written report by the auditor general.

(2) A member of the commercialization board shall not make or

participate in making, or in any way attempt to use his or her

position as a member of the commercialization board to influence, a

matter before the fund board or the commercialization board

regarding a loan, grant, or other expenditure under this chapter to

his or her employer.

(3) An independent peer review expert shall not have any

financial interest in a recipient of investment fund proceeds under

this chapter.

(4) A member, employee, or agent of the commercialization

board shall not engage in any conduct that constitutes a conflict

of interest and shall immediately advise the commercialization

board in writing of the details of any incident or circumstances

that may present the existence of a conflict of interest with

respect to the performance of the commercialization board-related

work or duty of the member, employee, or agent of the

commercialization board.

(5) A member of the commercialization board who has a conflict

of interest related to any matter before the commercialization

board shall disclose the conflict of interest before the

commercialization board takes any action with respect to the

matter, which disclosure shall become a part of the record of the

commercialization board's official proceedings. The member with the

conflict of interest shall refrain from doing all of the following

with respect to the matter that is the basis of the conflict of

interest:

(a) Voting in the commercialization board's proceedings

related to the matter.

(b) Participating in the commercialization board's discussion

of and deliberation on the matter.

deliberation, and voting on the matter take place.

(d) Discussing the matter with any other commercialization

board member.

(6) Failure of a member to comply with subsection (5)

constitutes misconduct in office subject to removal under section

94.

(7) When authorizing expenditures and investments under this

act, the commercialization board shall not consider whether a

recipient has made a contribution or expenditure under the Michigan

campaign finance act, 1976 PA 388, MCL 169.201 to 169.282.

Sec. 88n. (1) In addition to any audit requirements under

section 9, not later than May 1, 2007 and each subsequent May 1,

the auditor general shall conduct and report a financial postaudit

of the commercialization board, the fund, and the investment fund

for the immediately preceding fiscal year. Not less than once every

3 years beginning not later than October 1, 2007, the auditor

general shall conduct and report a performance post audit of the

commercialization board, the fund, and the investment fund. The

results of the performance post audit and the post audit of

financial transactions and accounts shall be published on the

internet and disseminated by other means in a manner determined by

the fund to advise the citizens of this state of the result of the

audits. Copies of the audits shall be provided to the governor, the

clerk of the house of representatives, the secretary of the senate,

and the chairpersons of the senate and house of representatives

standing committees on appropriations.

(2) The auditor general may employ an independent public

accounting firm to conduct the audits described in this section.

The costs of the auditor general or of the independent public

accounting firm in conducting the audits described in this chapter

shall be funded by money in the 21st century jobs trust fund

created in the Michigan trust fund act, 2000 PA 489, MCL 12.251 to

12.256, as provided in an appropriation. Prior to employing the

services of an independent public accounting firm under this

section, the auditor general shall require the entity to disclose

any conflict of interest, criminal convictions, investigations by

the internal revenue service or other federal or state taxing body

or court, and any pertinent litigation regarding the conduct of the

entity.

(3) All contracts approved by the fund for 21st century

investments and all contracts approved by the commercialization

board for grants or loans under this chapter shall contain a

provision that the auditor general has access to the books and

records, including financial records and all other information and

data relevant to the terms of the contract related to the use of

the grant, loan, or 21st century investment.

(4) If the fund board or the commercialization board has a

reasonable belief that a breach of contract has occurred, the fund

has the right to have the recipient's annual financial statements

separately audited by an independent certified public accountant at

its sole cost and expense. If the audit reveals that a breach of

contract has occurred, the recipient shall reimburse the fund for

the fees and expenses incurred to perform the audit.

(5) In addition to any reporting requirements under section 9,

not later than March 31, 2007 and each subsequent March 31, the

commercialization board and the fund shall report to the governor,

the clerk of the house of representatives, the secretary of the

senate, and the chairpersons of the senate and house of

representatives standing committees on appropriations. The report

shall contain all of the following for the immediately preceding

fiscal year that are related to a grant or loan made by the fund as

determined by the commercialization board:

(a) A list of entities that received funding, the amount

received, and the type of funding.

(b) The number of new patents, copyrights, or trademarks

applied for and issued.

(d) The number of new jobs and projected new job growth.

(e) Amounts of other funds leveraged.

(f) Money or other revenue or property returned to the

investment fund.

(g) The total number of new licensing agreements by

institution and the number of new licensing agreements entered into

with Michigan based firms.

(h) Products commercialized.

(6) Not later than March 31, 2007 and each subsequent March

31, the fund shall report to the governor, the clerk of the house

of representatives, the secretary of the senate, and the

chairpersons of the senate and house of representatives standing

committees on appropriations. The report shall contain all of the

following for the immediately preceding fiscal year that are

related to a 21st century investment made by the fund board:

(a) A list of entities that received funding, the amount

received, and the type of funding.

(b) 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.

qualified private equity fund investments, qualified mezzanine fund

investments, and qualified venture capital investments in qualified

businesses, including year-to-year growth.

(d) A statement of the amount of money received by or returned

to the investment fund under this chapter.

(e) A statement of the loan enhancement activity of the fund

board under this chapter.

(f) A statement of the amount of money in each loan reserve

fund established under the small business capital access program

required under this chapter.

(g) Any recommendations for needed changes and any other

information the board believes would be of interest to the

governor, the legislature, and the public.

(7) As a condition of receiving funding under this chapter,

the fund shall require a recipient to agree to provide to the fund

the information necessary for the fund to produce the reports

required under this section.

Sec. 88o. The fund shall create and operate a program to

assist institutions of higher education with university technology

transfer, including, but not limited to, the transfer of

competitive edge technology research to the private sector for

commercialization.

Enacting section 1. This amendatory act does not take effect

unless all of the following bills of the 93rd Legislature are

enacted into law:

(a) Senate Bill No. 298.

(b) Senate Bill No. 359.

(d) Senate Bill No. 633.

(e) House Bill No. 4342.

(f) House Bill No. 4972.

(g) House Bill No. 4973.

(h) House Bill No. 5047.

(i) House Bill No. 5048.

(j) House Bill No. 5108.

(k) House Bill No. 5109.