PRINTER'S NO. 2402
No. 1842 Session of 2003
INTRODUCED BY NICKOL AND TURZAI, JULY 10, 2003
REFERRED TO COMMITTEE ON FINANCE, JULY 10, 2003
AN ACT
1 Amending the act of August 23, 1967 (P.L.251, No.102), entitled,
2 as amended, "An act providing for the incorporation as public
3 instrumentalities of the Commonwealth and as bodies corporate
4 and politic of industrial and commercial development
5 authorities for municipalities, counties and townships;
6 prescribing the rights, powers and duties of such authorities
7 hereafter incorporated; authorizing such authorities to
8 acquire, by gift or purchase, to construct, improve and
9 maintain industrial, specialized, or commercial development
10 projects including projects for the elimination or prevention
11 of blight and the control of air and water pollution, and to
12 borrow money and issue bonds therefor; providing for the
13 payment of such bonds and giving security therefor, and
14 prescribing the rights of the holders of such bonds;
15 authorizing the lease or sale of industrial, specialized, or
16 commercial development projects to industrial, specialized,
17 or commercial enterprises; authorizing any county,
18 municipality or township to transfer or convey to such
19 authorities, any facilities or property available for
20 industrial, specialized, or commercial development projects;
21 exempting the property and securities of such authorities
22 from taxation; authorizing such authorities to enter into
23 contracts with and to accept grants from the Federal
24 Government or any agency thereof; and providing for approval
25 by the Secretary of Commerce of the proceedings relating to
26 industrial, specialized, or commercial development projects
27 of such authorities," further providing for definitions, for
28 financing authority indebtedness and financing and for
29 prohibitions; and establishing the New Ventures Investment
30 Guarantee Program and the Pennsylvania Opportunity Fund
31 Oversight Committee.
32 The General Assembly of the Commonwealth of Pennsylvania
1 hereby enacts as follows:
2 Section 1. The definitions of "department" and "secretary"
3 in section 3 of the act of August 23, 1967 (P.L.251, No.102),
4 known as the Economic Development Financing Law, amended
5 December 17, 1993 (P.L.490, No.74), are amended and the section
6 is amended by adding a definition to read:
7 Section 3. Definitions.--As used in this act:
8 * * *
9 "Department" means the Department of [Commerce] Community and
10 Economic Development of the Commonwealth.
11 * * *
12 "Oversight committee" means the Pennsylvania Opportunity Fund
13 Oversight Committee established in section 15.4.
14 * * *
15 "Secretary" means the Secretary of [Commerce] Community and
16 Economic Development of the Commonwealth.
17 * * *
18 Section 2. Sections 6.3(a), 6.4 and 15.2 of the act, amended
19 or added December 17, 1993 (P.L.490, No.74), are amended to
20 read:
21 Section 6.3. Financing Authority Indebtedness.--(a) The
22 financing authority shall have the power and is hereby
23 authorized to issue its limited obligation revenue bonds and
24 other types of financing as in the judgment of the financing
25 authority shall be necessary to provide sufficient funds for any
26 related or unrelated projects: (i) provided that the issuance by
27 the financing authority of taxable or tax-exempt bonds on behalf
28 of projects comprising industrial facilities, commercial
29 facilities, pollution control facilities, energy conversion
30 facilities, energy producing facilities and disaster relief
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1 project facilities, other than projects to be funded by the
2 oversight committee, shall have been authorized by an industrial
3 and commercial development authority or a group of industrial
4 and commercial development authorities or by an industrial
5 development agency or a group of industrial and development
6 agencies; (ii) further provided that the financing authority may
7 issue taxable or tax-exempt bonds on behalf of interagency
8 projects other than projects to be funded by the oversight
9 committee only if the applicant has first applied to the
10 Pennsylvania Infrastructure Investment Authority for financing
11 under the provisions of the act of March 1, 1988 (P.L.82,
12 No.16), known as the "Pennsylvania Infrastructure Investment
13 Authority Act," and the Pennsylvania Infrastructure Investment
14 Authority in writing refers the applicant to the financing
15 authority to finance all or part of the interagency project in
16 accordance with this act; and (iii) further provided that the
17 issuance by the financing authority of taxable or tax-exempt
18 bonds for a public facility other than projects to be funded by
19 the oversight committee, interagency projects and projects for
20 roads and transportation facilities and transportation systems
21 of every kind shall have been authorized by a municipality,
22 municipal authority or Commonwealth agency and only if both the
23 applicant and the financing authority have determined that the
24 cost of obtaining the financing for the public facility will be
25 reduced through the issuance of bonds through the financing
26 authority. For purposes of the determination required in this
27 subsection, any financing for a public facility that the
28 financing authority reasonably believes could have received a
29 rating of "A" or better from either Moody's Investors Service or
30 Standard & Poor's Corporation shall be presumed not to be
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1 eligible for financing by the financing authority. The financing
2 authority is authorized and empowered to use the proceeds of any
3 bonds issued for the making of loans, purchasing loans,
4 mortgages, security interests or loan participations and paying
5 all incidental expenses in connection therewith, paying expenses
6 of authorizing and issuing the bonds, paying interest on the
7 bonds until revenues thereof are available in sufficient amounts
8 and funding the reserves as the financing authority deems
9 necessary and desirable.
10 * * *
11 Section 6.4. Financing Authority Loans.--(a) The financing
12 authority shall ascertain to its satisfaction that:
13 (1) Firm commitments satisfactory to the financing authority
14 have been obtained from responsible financial sources, which may
15 include a Federal agency, project applicant or the project user,
16 for the portion of project costs in excess of any loan or other
17 financing requested from the financing authority.
18 (2) [A] Except for projects to be funded by the oversight
19 committee, a firm commitment satisfactory to the financing
20 authority from the project applicant or project user has been
21 obtained to lease or use the project after acquisition is
22 completed.
23 (3) [The] Except for projects to be funded by the oversight
24 committee, the project user may reasonably be expected to comply
25 with the terms of such lease or use.
26 (4) [The] Except for projects to be funded by the oversight
27 committee, the project complies with all rules and regulations
28 of the financing authority, if any.
29 (b) In addition to other provisions of this section limiting
30 the power of the financing authority to make loans or provide
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1 other financing in respect to a particular project, no funds of
2 the financing authority shall be used in respect of any project
3 if the financing authority would be required to operate, service
4 or maintain the project pursuant to any lease or other agreement
5 except upon foreclosure or except upon the occurrence of a
6 default in the payment or terms of any loan made. Nothing shall
7 prevent the financing authority from transferring such property
8 to the project applicant, project user or either of their
9 designees at the end of the term of such financing.
10 Section 15.2. Prohibition.--(a) Except as provided herein,
11 no Commonwealth agency under the control of the executive branch
12 shall be a project applicant under this act[. Operating expenses
13 of any Commonwealth agency under the control of the executive
14 branch are not an eligible project cost.] except that the
15 department may be a project applicant for a project funded by
16 the oversight committee.
17 (b) The Department of Public Welfare may be a project
18 applicant to provide for the conversion of medical assistance
19 services from a fee-for-service basis to a prepaid managed-care
20 basis subject to prior approval of this conversion mechanism by
21 the Health Care Financing Agency of the Federal Department of
22 Health and Human Services and prior notice of project details
23 and Federal approval to the chairman and minority chairman of
24 the Senate Appropriations Committee and the chairman and
25 minority chairman of the House Appropriations Committee. Maximum
26 term of the bonds, notes or other evidences of indebtedness
27 issued for this project shall be five years.
28 Section 3. The act is amended by adding sections to read:
29 Section 15.3. New Ventures Investment Guarantee Program.--
30 (a) The New Ventures Investment Guarantee Program shall provide
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1 a guarantee on investments made by a venture capital limited
2 partnership, or comparable investment entity, through
3 acquisition of equity interest or a combination of debt and
4 equity interest in Pennsylvania-related companies that are in
5 the early stage or midstage of development, expect to grow
6 substantially in the future and in which the expected returns on
7 investment are to come predominantly from increases in value of
8 the equity interests and are not interests in or secured by real
9 estate.
10 (b) A venture capital limited partnership may submit an
11 application to the oversight committee requesting a guarantee of
12 principal on investments made in qualifying Pennsylvania-related
13 companies. The application shall be in a form required by the
14 oversight committee.
15 (c) The oversight committee shall review the application to
16 determine the following:
17 (1) If the applicant meets the minimum criteria for the
18 program:
19 (i) The applicant is the general partner of a venture
20 capital partnership whose previous funds have performance
21 rankings in the top quartile of funds nationwide when compared
22 to other funds with similar investments made over the same
23 period of time.
24 (ii) The investment guidelines and strategies of the venture
25 capital partnership require that at least twenty-five million
26 dollars ($25,000,000) in principal will be invested in
27 qualifying Pennsylvania-related companies, regardless of what
28 other investments the fund may make in other in-State or out-of-
29 State companies.
30 (iii) A commitment that the Commonwealth will receive
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1 carried interest equaling no less than 2.5% of all positive
2 returns on qualifying investments in Pennsylvania-related
3 companies generated by the venture capital partnership.
4 (iv) The authority shall be notified by the venture capital
5 partnership of all advisory/valuation committee meetings and
6 annual meetings, permitted to attend such meetings and
7 reimbursed for expenses.
8 (v) The venture capital partnership must commit to issue to
9 the authority audited financial statements on the basis of
10 generally accepted accounting principles.
11 (vi) A commitment by the venture capital partnership to open
12 an office in Pennsylvania.
13 (2) Any other criteria that may be established by the
14 oversight committee, including, but not limited to:
15 (i) The financial commitment of the general partners to the
16 venture capital fund.
17 (ii) The background, experience and expertise of any
18 managers that will be assuming responsibility for investments in
19 Pennsylvania.
20 (iii) Any recent changes in the principals or managers of
21 the venture capital partnership that might impact on the success
22 of the investment entity.
23 (iv) Data on past performance on investments in early stage
24 and midstage companies.
25 (d) Before any project is approved under this section, the
26 oversight committee shall develop written guidelines.
27 (e) Award.--Upon being satisfied that all requirements have
28 been met, the oversight committee may approve an application and
29 make commitments of investment guarantees equal to the return of
30 the principal of up to fifty million dollars ($50,000,000) to no
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1 more than ten (10) venture capital limited partnerships. In
2 aggregate, awards under this program may not exceed five hundred
3 million dollars ($500,000,000).
4 (f) Guarantee.--The investment guarantee shall be equal to
5 the return of the principal on all investments made by the
6 venture capital limited partnership in qualifying Pennsylvania-
7 related companies. The oversight committee shall negotiate with
8 the applicant a schedule for the periodic reconciliation of
9 amounts payable under the guarantee commencing no earlier than
10 seven years after the first investment is made by the venture
11 capital partnership, with clawback provisions for recovery of
12 any payments later offset by positive returns on qualifying
13 investments.
14 (g) Financing.--Upon being notified that a venture capital
15 limited partnership has a claim subject to a guarantee of
16 principal invested under this program, the financing authority
17 shall finance the full cost of the guarantee.
18 (h) Debt authorization.--The financing authority is
19 authorized on a continuing basis to incur debt supported by the
20 Economic Enhancement Fund to finance guarantees to venture
21 capital limited partnerships awarded under this section. All
22 payments for the debt resulting from investment guarantees made
23 under this section shall be paid from the Economic Enhancement
24 Fund.
25 (i) Contract proceeds.--Any money received from
26 participation with a venture capital limited partnership under
27 this program shall be deposited in the Economic Enhancement
28 Fund.
29 (j) Fiduciary status.--The financing authority in the
30 selection of venture capital limited partnership and issuance of
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1 investment guarantees for this program, along with their
2 professional personnel, shall stand in a fiduciary relationship
3 to the Commonwealth and its citizens regarding the guarantees
4 and shall not profit, either directly or indirectly, with
5 respect thereto.
6 (k) Definitions.--As used in this section:
7 "Pennsylvania-related company" means a company located in
8 Pennsylvania, or a company willing to locate significant
9 business operations to Pennsylvania.
10 Section 15.4. Oversight Committee.--(a) There is
11 established in the financing board the Pennsylvania Opportunity
12 Fund Oversight Committee. The oversight committee shall consist
13 of the following:
14 (1) The Secretary of Community and Economic Development.
15 (2) Four members of the General Assembly appointed as
16 follows:
17 (i) One member appointed by the President pro tempore of the
18 Senate.
19 (ii) One member appointed by the Minority Leader of the
20 Senate.
21 (iii) One member appointed by the Speaker of the House of
22 Representatives.
23 (iv) One member appointed by the Minority Leader of the
24 House of Representatives.
25 (b) Members under subsection (a)(2) shall serve at the
26 pleasure of the appointing authority.
27 (c) Members of the oversight committee shall serve without
28 compensation but shall be reimbursed for actual and reasonable
29 expenses incurred in the performance of their official duties.
30 (d) The Secretary of Community and Economic Development
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1 shall serve as chairperson of the oversight committee, or the
2 Governor may designate another member to serve as chairperson.
3 The members of the oversight committee shall select one member
4 to serve as secretary.
5 (e) A designee designated by a member under subsection
6 (a)(2) may vote and otherwise act on behalf of the member. The
7 designation must be in writing and be delivered to the oversight
8 committee. The designation shall continue in effect until
9 revoked or amended in writing.
10 (f) Four of the members of the oversight committee then
11 serving shall constitute a quorum of the oversight committee.
12 Only a member or a designee who is physically present at a
13 meeting or able to participate fully in the deliberations by
14 appropriate telecommunications means shall count toward a quorum
15 of the oversight committee.
16 (g) An application shall be approved when four of the five
17 members vote to approve the application.
18 Section 4. This act shall take effect immediately.
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