PRINTER'S NO. 3388
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2273
Session of
2018
INTRODUCED BY DONATUCCI, McCLINTON, KINSEY, MURT, THOMAS,
KAVULICH, DRISCOLL, DAVIS, SCHWEYER AND J. McNEILL,
APRIL 18, 2018
REFERRED TO COMMITTEE ON COMMERCE, APRIL 18, 2018
AN ACT
Amending the act of July 2, 1984 (P.L.555, No.111), entitled "An
act creating a small business incubator program; providing
for grants, loans and loan guarantees to small business
incubators; specifying the conditions of and requirements for
grants and loans; providing for seed grants; and making
appropriations," further providing for definitions, for
creation of program, for incubator grants, loans and loan
guarantees and for responsibilities of local sponsors;
repealing provisions relating to challenge grants for seed
capital funds; further providing for general powers and
duties of the board and for indicators of program impact;
providing for funding; and repealing provisions relating to
time limit on approvals.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The definitions of "local sponsor" or "sponsor"
and "seed capital fund" in section 2 of the act of July 2, 1984
(P.L.555, No.111), known as the Small Business Incubators Act,
are amended and the section is amended by adding a definition to
read:
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
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context clearly indicates otherwise:
* * *
"Applicant." A local sponsor.
* * *
"Local sponsor" or "sponsor." An organization which enters
into a written agreement with the board to establish, operate
and administer a small business incubator facility or to provide
funding to an organization which operates such a facility,
including municipalities, local development districts of the
Appalachian Regional Commission, industrial and commercial
development authorities established pursuant to the act of
August 23, 1967 (P.L.251, No.102), known as the Industrial and
Commercial Development Authority Law, redevelopment authorities
established pursuant to the act of May 24, 1945 (P.L.991,
No.385), known as the Urban Redevelopment Law, municipal
authorities organized pursuant to the act of May 2, 1945
(P.L.382, No.164), known as the Municipality Authorities Act of
1945, or any private nonprofit or for-profit organization
approved by the board, including Ben Franklin Technology
Partners.
["Seed capital fund." A special investment vehicle which
provides equity and other capital to small businesses during the
earliest stages of business growth, including businesses in
incubators.]
* * *
Section 2. Sections 3, 4 and 5 of the act are amended to
read:
Section 3. Creation of program.
There is hereby established under the direction of the board
a Statewide grant, loan and loan guarantee program for the
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establishment, operation and administration of small business
incubators, to be known as the Small Business Incubator Program.
Section 4. Incubator grants, loans and loan guarantees.
(a) Application.--A local sponsor may submit an application
to the board to obtain a grant, loan or loan guarantee to
establish an incubator. Each application shall:
(1) Demonstrate that:
(I) A facility exists that can be transformed into
an incubator at a specified cost; or
(II) In the case of new and expansion construction,
appropriate existing facilities are not available within
the geographic area and an incubator facility will be
constructed or expanded at a specified cost. ((1) amended
July 9, 1987, P.L.233, No.41)
(2) Demonstrate the ability to directly provide or
arrange for the provision of business development services
for tenants of the incubator. These services shall include,
but not be limited to, financial consulting assistance,
management and marketing assistance and physical services.
(3) Demonstrate a potential for sustained use of the
incubator facility by eligible tenants, through a market
study or [other means] business plan that identifies
sustainability.
(4) Demonstrate the ability to manage and operate the
incubator facility in accordance with section 5, including
ongoing financial responsibilities.
(5) Include other information as the board may require
through guidelines.
(b) Review of application.--The board shall review and
accept applications based on the following criteria:
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(1) Ability of the local sponsor to carry out the
provisions of section 5.
(2) Economic impact of the incubator on the community.
(3) Conformance with areawide and local economic
development plans if such exist.
(4) Location of the incubator, in order to encourage
geographic distribution of incubators across the State.
(5) Such other criteria as may be established by the
board through guidelines.
(c) Grant and loan conditions.--
(1) Grants and loans awarded or guaranteed shall be used
only for the acquisition and leasing of land and buildings,
the construction, rehabilitation and expansion of buildings
or other facilities [and], the purchase of equipment and
furnishings and operational funds not to exceed 20% of the
award, which are necessary for the creation and operation of
the incubator.
(2) Grants, loans and loan guarantees may not exceed
[50%] 80% of total eligible project costs, or [$650,000]
$800,000, whichever is less. The maximum grant amount awarded
in any project may not exceed [$240,000. Grants shall be
provided only to projects located in municipalities
designated as distressed under the act of July 2, 1984
(P.L.520, No.105), known as the Business Infrastructure
Development Act] 20% of the award.
(3) Funds loaned shall be secured by lien positions on
collateral at the highest level of priority which can
accommodate the borrower's ability to raise sufficient debt
and equity capital. When the obligation of a local sponsor is
guaranteed, the financial institution holding the obligation
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shall be required to adequately secure the obligation.
(4) Grants, loans and loan guarantees for an incubator
in which the facility is currently leased shall only be made
if the applicant intends to buy the facility. These loans
shall be secured by a leasehold mortgage.
(5) Payment of interest and principal on loans may be
deferred at the discretion of the board.
(6) Interest on all loans shall be determined by the
secretary and published as a notice in the Pennsylvania
Bulletin and shall not be required to be equal throughout
this Commonwealth.
(7) Funds may be lent for a maximum of ten years or the
useful life of the property, as established by the United
States Department of Treasury, whichever is greater.
(8) If a business operating within an incubator that is
administered by a local sponsor relocates outside of this
Commonwealth or transfers an ownership interest to an entity
located outside of this Commonwealth, the business shall
repay the local sponsor the full value of services and
assistance the business has received that were funded by
grants, loans or guaranteed loans received by the local
sponsor under this act. If the local sponsor does not utilize
repaid funds to provide services to other businesses in the
incubator, the local sponsor shall return the funds to the
board. If a local sponsor transfers ownership of an incubator
to an entity located outside of this Commonwealth, the local
sponsor shall return all grant funds awarded under this act
to the board.
Section 5. Responsibilities of local sponsors.
A local sponsor, or the organization receiving assistance
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through the local sponsor, shall have the following
responsibilities and duties in establishing and operating an
incubator with assistance from this program:
(1) Secure title on the facility or a lease with the
intent to secure title to the facility.
(2) Manage the physical development of the incubator
facility, including the provision of common conference or
meeting space.
(3) Furnish and equip the facility to provide business
services to the tenants.
(4) Market the facility and secure eligible tenants.
(5) Provide financial consulting, marketing and
management assistance services or arrange for the provision
of these services for tenants of the incubator, including
assistance in accessing private financial markets.
(6) Set rental and service fees.
(7) Encourage the sharing of ideas between tenants and
otherwise aid the tenants in an innovative manner while they
are within the incubator.
[(8) Establish policies and criteria for the acceptance
of tenants into the incubator. Retail enterprises, not-for-
profit enterprises (except not-for-profit enterprises engaged
in research and development), wholesale enterprises and
personal service enterprises are not permitted as tenants in
incubators funded through this act. Up to 20% of the useful
square footage of such a facility shall be occupied by an
anchor tenant who does not meet these eligibility
requirements.
(9) Establish a local advisory committee to assist in
the performance of these functions.]
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Section 3. Section 6 of the act is repealed:
[Section 6. Challenge grants for seed capital funds.
(a) Purpose.--The board is authorized to award challenge
grants for the purposes of establishing seed capital funds to
assist young small businesses, including businesses in
incubators, to create new jobs in this Commonwealth.
(b) Application.--Advanced technology centers or other
organizations approved by the board may submit applications to
receive challenge grants to assist in establishing seed capital
funds. Each application shall:
(1) Describe the purposes of the proposed seed capital
fund, including the types of businesses to receive
investments and the types of investments to be made,
consistent with subsection (c).
(2) Explain the need for the challenge grant in
attracting private investment to the proposed seed capital
fund.
(3) Present a plan for establishing the proposed seed
capital fund, including the amount of private investment
sought, the strategy for obtaining such investments and the
persons or organizations who may manage the fund.
(4) List private investment commitments obtained to
date.
(c) Use of funds.--The board may award challenge grants to
eligible applicants following receipt of an application
consistent with the criteria specified in this act. Recipients
of grants shall not expend any of the funds awarded unless and
until the board has assured itself that the following conditions
hold:
(1) Either:
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(i) at least $3 of private investment has been
committed to the proposed seed capital fund for every $1
of the challenge grant awarded and at least $3,000,000 of
total investment, including the challenge grant, has been
committed to the proposed fund; or
(ii) at least $1 of private investment has been
committed to the proposed seed capital fund for every $1
of the challenge grant awarded; at least $1.5 million of
total investment, including the challenge grant, has been
committed to the seed capital fund; and no investment is
to be made from the fund in a small business project
without an equal or greater investment from private
sources other than the fund in the same small business
project, such that, in total, at least $3 of private
investment has been committed to an individual small
business project for every $1 of challenge grant funds
invested.
(2) Investments from the seed capital fund will be made
exclusively in small businesses located in this Commonwealth,
including, but not limited to, tenants of incubators. For the
purposes of this section, small businesses shall not include
businesses of a mercantile or services related nature, but
shall include international export related services,
international export related mercantile ventures and advanced
technology or computer related ventures which will increase
the Commonwealth's share of domestic or international
markets.
(3) Total investments in a small business using seed
capital funds should ordinarily be less than $250,000 during
any round of financing for a small business.
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(4) The grant recipient shall serve as a limited partner
or coinvestor with limited liability in the proposed fund and
returns on investment of challenge grant funds shall be
reinvested in the seed capital fund.
In the event that recipients of funds cannot demonstrate these
conditions by June 30, 1986, the grants, or the portions thereof
for which the conditions are not satisfied, shall be rescinded
by the board and shall be available to the board to use for
loans and loan guarantees to incubators consistent with section
4.]
Section 4. Sections 7 and 8 of the act are amended to read:
Section 7. General powers and duties of the board.
The board shall:
(1) Adopt such rules, statements of policy, procedures,
forms and guidelines as may be necessary for the
implementation of this act, including the encouragement of
incubators in economically distressed areas such as State or
federally designated enterprise zones[, municipalities which
meet criteria for distress as identified in section 6 of the
act of July 2, 1984 (P.L.520, No.105), known as the Business
Infrastructure Development Act,] and urban renewal areas
designated in conformity with the act of May 24, 1945
(P.L.991, No.385), known as the Urban Redevelopment Law:
Provided, That it is not the intent of this act to limit the
establishment of incubators to such economically distressed
areas.
(2) Make loans and loan guarantees or grants or a
combination of loans and grants to local sponsors for
incubators [and award seed capital challenge grants] and, in
the sole discretion of the board, provide for the conversion
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of any liens [issued on or after November 1, 1985,] into
grants or into a combination of grants and loans.
(3) Ensure that local sponsors receiving loans or loan
guarantees and recipients of [challenge] grants meet the
conditions of this act.
(4) Receive and evaluate annual reports from local
sponsors. The annual reports shall include, but not be
limited to, a financial statement for the incubator, evidence
that all tenants in the facility are eligible under the terms
of the legislation and a list of companies in the incubator.
[(5) Receive and evaluate annual reports from recipients
of seed capital challenge grants. The reports shall include,
but not be limited to, the policies and procedures of the
seed capital fund, the amount of private investment in the
fund and the number, types and amounts of investment in small
firms by the fund.]
Section 8. Indicators of program impact.
On or before March 1 of each year, the board shall provide a
report to both the Chief Clerk of the House of Representatives
and the Secretary of the Senate which shall include, but not be
limited to:
(1) The number of applications for incubators submitted
to the board.
(2) The number of applications for incubators approved
by the board.
(3) The number of incubators created through this
program.
(4) The number of tenants occupying each incubator.
(5) The number of jobs provided by each incubator and
tenants of each incubator.
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(6) The occupancy rate of each incubator.
(7) The number of firms still operating in the
Commonwealth after leaving incubators and the number of jobs
they have provided. The board shall attempt to identify the
reasons why any companies have left the Commonwealth after
starting in an incubator.
[(8) The number of seed capital funds established with
challenge grants, the amount of private investment in the
funds and the number, types and amounts of investments in
small firms by the funds.]
Section 5. The act is amended by adding a section to read:
Section 10. Funding sources.
Notwithstanding 64 Pa.C.S. Ch. 15 (relating to Commonwealth
Financing Authority) to the contrary, the following shall apply:
(1) The Commonwealth Financing Authority shall have the
authority to incur indebtedness of up to $20,000,000 under 64
Pa.C.S. § 1543 (relating to indebtedness) for programs
established in this act.
(2) Indebtedness incurred by the authority under 64
Pa.C.S. § 1543(a) for the program established in 64 Pa.C.S. §
1556 (relating to Tax Increment Financing Guarantee Program)
shall not exceed $80,000,000 in the aggregate.
(3) The following apply to proceeds of the indebtedness
authorized under paragraph (1):
(i) The proceeds shall be transferred from the
authority to the board to be used for programs
established in this act.
(ii) The proceeds are hereby appropriated to the
board, on a continuing basis, to be used for programs
established in this act. This appropriation shall not
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lapse at the end of any fiscal year.
Section 6. Section 12 of the act is repealed.
[Section 12. Time limit on approvals.
No assistance under section 4 shall be approved by the board
after June 30, 1990.]
Section 7. This act shall take effect in 60 days.
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