March 18, 2004, Introduced by Senators BISHOP, JOHNSON, THOMAS, GARCIA, BIRKHOLZ and ALLEN and referred to the Committee on Economic Development, Small Business and Regulatory Reform.
A bill to amend 1855 PA 105, entitled
"An act to regulate the disposition of the surplus funds in the
state treasury; to provide for the deposit of surplus funds in
certain financial institutions; to lend surplus funds pursuant to
loan agreements secured by certain commercial, agricultural, or
industrial real and personal property; to authorize the loan of
surplus funds to certain municipalities; to authorize the
participation in certain loan programs; to authorize an
appropriation; and to prescribe the duties of certain state
agencies,"
(MCL 21.141 to 21.147) by adding section 2g.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 Sec. 2g. (1) The state treasurer shall invest surplus funds
2 under the state treasurer's control in certificates of deposit or
3 other instruments of a financial institution qualified under this
4 act to receive deposits or investments of surplus funds for the
5 purpose of facilitating qualified business loans. The state
6 treasurer shall endeavor to make investments under this
7 subsection in financial institutions such that qualified business
1 loans will be conveniently available in all geographic regions in
2 this state. The state treasurer in consultation with the
3 Michigan economic development corporation may enter into an
4 investment agreement with a financial institution to provide for
5 the investment under this subsection. The investment agreement
6 shall contain all of the following:
7 (a) The term of the investment, which shall be not more than
8 15 years.
9 (b) A requirement that the interest accruing on the
10 investment shall not be more than the interest earned by the
11 financial institution on qualified business loans made after the
12 date of the investment.
13 (c) A requirement that the financial institution shall
14 provide good and ample security as the state treasurer requires
15 and shall identify the qualified business loans and the terms and
16 conditions of those loans that are made after the date of the
17 investment that are attributable to that investment together with
18 other information required by this act.
19 (d) A requirement that a qualified business loan made by the
20 financial institution that is attributable to the investment
21 shall be issued at a rate or rates of interest that are
22 established in the investment agreement.
23 (e) A requirement that a qualified business loan made by the
24 financial institution that is attributable to the investment
25 shall be made not later than 5 years after the effective date of
26 this section.
27 (f) A requirement that a qualified business loan made by the
1 financial institution that is attributable to the investment
2 shall be issued for a loan repayment period of not more than 15
3 years.
4 (g) A requirement that a qualified business loan made by the
5 financial institution that is attributable to the investment
6 shall not exceed $2,000,000.00 per applicant.
7 (h) A requirement that a qualified business loan made by the
8 financial institution that is attributable to the investment
9 shall not be released by the financial institution unless the
10 loan applicant has certified that it is an eligible business.
11 (i) A requirement that, to the extent the financial
12 institution has not made qualified business loans in an amount at
13 least equal to the amount of the investment within 90 days after
14 the investment, the rate of interest payable on that portion of
15 the outstanding investment shall be increased to a rate of
16 interest provided in the investment agreement, with the increase
17 in the rate of interest applied retroactively to the date on
18 which the state treasurer made the investment.
19 (j) Incentives for the early repayment of the investment and
20 for the acceleration of payments in the event of a state cash
21 shortfall as prescribed by the investment agreement, if required
22 by the state treasurer.
23 (k) A requirement that the financial institution use
24 generally accepted lending standards to determine the
25 creditworthiness of the eligible business.
26 (l) Other terms as prescribed by the state treasurer.
27 (2) An investment made under this section is for the purpose
1 of providing an incentive to make a qualified business loan to
2 retain business assets and jobs in this state and is found and
3 declared to be for a valid public purpose.
4 (3) The attorney general shall approve documentation for an
5 investment under this section as to legal form.
6 (4) The aggregate amount of investments made under this
7 section shall not exceed $20,000,000.00.
8 (5) Earnings from an investment made under this section that
9 are in excess of the average rate of interest earned during the
10 same period on other surplus funds, other than surplus funds
11 invested under section 1, shall be credited to the general fund
12 of this state. If interest from an investment made under this
13 section is below the average rate of interest earned during the
14 same period on other surplus funds, other than surplus funds
15 invested under section 1, the general fund shall be reduced by
16 the amount of the deficiency on an amortized basis over the
17 remaining term of the investment. A loss of principal from an
18 investment made under this section shall reduce the earnings of
19 the general fund by the amount of that loss on an amortized basis
20 over the remaining term of the investment.
21 (6) The state treasurer may take any necessary action to
22 ensure the successful operation of this section, including making
23 investments with financial institutions to cover the
24 administrative and risk-related costs associated with a qualified
25 business loan.
26 (7) Annually, each financial institution in which the state
27 treasurer has made an investment under this section shall file an
1 affidavit, signed by a senior executive officer of the financial
2 institution, stating that the financial institution is in
3 compliance with the terms of the investment agreement.
4 (8) The Michigan economic development corporation shall do
5 all of the following:
6 (a) Publicize the qualified business loan program described
7 in this section.
8 (b) Notify the business community, financial institutions,
9 potential eligible businesses, and bankruptcy trustees of the
10 qualified business loan program described in this section.
11 (9) The state treasurer and the Michigan economic development
12 corporation shall annually prepare and submit a report to the
13 legislature regarding the disposition of money invested for
14 purposes of facilitating qualified business loans under this
15 section. The report shall include all of the following
16 information:
17 (a) The total number of applicants and the total number of
18 eligible businesses that have received a qualified business
19 loan.
20 (b) By county, the total number and amounts of the qualified
21 business loans that were issued.
22 (c) The name of each financial institution participating in
23 the qualified business loan program and the amount invested in
24 each financial institution for purposes of the loan program.
25 (d) The total number of jobs that were created or retained.
26 (e) All efforts to publicize the qualified business loan
27 program described in this section.
1 (10) As used in this section:
2 (a) "Eligible business" means a business that commits to all
3 of the following as determined by the Michigan economic
4 development corporation:
5 (i) To purchase assets in this state and agrees to keep those
6 assets in this state.
7 (ii) To maintain or increase employment in this state using
8 the purchased assets.
9 (iii) That the business is not able to purchase the assets
10 without the qualified business loan under this section.
11 (b) "Michigan economic development corporation" means the
12 public body corporate created under section 28 of article VII of
13 the state constitution of 1963 and the urban cooperation act of
14 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512, by a
15 contractual interlocal agreement effective April 5, 1999 between
16 local participating economic development corporations formed
17 under the economic development corporations act, 1974 PA 338, MCL
18 125.1601 to 125.1636, and the Michigan strategic fund.
19 (c) "Qualified business loan" means a loan to an eligible
20 business to be used to purchase assets of another business
21 located in this state that is in bankruptcy proceedings or
22 otherwise insolvent.
23 (d) "Surplus funds" means, at any given date, the excess of
24 cash and other recognized assets that are expected to be resolved
25 into cash or its equivalent in the natural course of events and
26 with a reasonable certainty, over the liabilities and necessary
27 reserves at the same date.