July 13, 2011, Introduced by Senator PAPPAGEORGE and referred to the Committee on Economic Development.
A bill to amend 1984 PA 270, entitled
"Michigan strategic fund act,"
by amending sections 5, 88c, and 88h (MCL 125.2005, 125.2088c, and
125.2088h), section 5 as amended by 2008 PA 224 and sections 88c
and 88h as added by 2005 PA 225.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 5. (1) There is created by this act a public body
corporate and politic to be known as the Michigan strategic fund.
The fund shall be within the department of treasury and shall
exercise its prescribed statutory powers, duties, and functions
independently of the state treasurer. The statutory authority,
powers, duties, functions, records, personnel, property, unexpended
balances of appropriations, allocations, and other funds of the
fund, including the functions of budgeting, procurement, personnel,
and management-related functions, shall be retained by the fund,
and the fund shall be an autonomous entity within the department of
treasury in the same manner as the Michigan employment security
commission was designated an autonomous entity within the Michigan
department of labor under section 379 of the executive organization
act of 1965, 1965 PA 380, MCL 16.479.
(2) Except as otherwise provided in this act, the purposes,
powers, and duties of the Michigan strategic fund are vested in and
shall be exercised by a board of directors.
(3) Except as provided in subsection (4), the board shall
consist of the director of the department of labor and economic
growth or his or her designee from within the department of labor
and economic growth, the state treasurer or his or her designee
from within the department of treasury, the chief executive officer
of the MEDC, and 6 other members with knowledge, skill, and
experience in the academic, business, or financial field, who shall
be appointed by the governor with the advice and consent of the
senate. None of the 6 members appointed under this section shall be
employees of this state. Not less than 5 members of the board
appointed under this subsection shall be members of the private
sector. Five of the 6 members appointed under this subsection shall
serve for fixed terms. Upon completion of each fixed term expiring
after December 30, 2005, a member shall be appointed for a term of
4 years. Of the private sector members appointed by the governor
for a fixed term, 1 shall be appointed from a list of 3 or more
nominees of the speaker of the house of representatives
representing persons within the private sector with experience in
private equity or venture capital investments, commercial lending,
or commercialization of technology and 1 shall be appointed from a
list of 3 or more nominees of the senate majority leader
representing persons within the private sector with experience in
private equity or venture capital investments, commercial lending,
or commercialization of technology. A member appointed under this
subsection or subsection (4) shall serve until a successor is
appointed, and a vacancy shall be filled for the balance of the
unexpired term in the same manner as the original appointment. The
member appointed under this subsection and serving without a fixed
term shall serve at the pleasure of the governor. Of the members
appointed under this subsection and subsection (4), there shall be
minority, female, and small business representation. After December
31, 2005, at least 2 of the members of the board shall have
experience in private equity or venture capital investments, at
least 1 of the members shall have experience in commercial lending,
and at least 1 of the members of the board shall have experience in
commercialization of technology.
(4) In addition to the 9 members of the board under subsection
(3), not later than December 15, 2005, the governor shall appoint,
with the advice and consent of the senate, 2 additional members to
the board for terms expiring December 31, 2007. After the initial
appointments under this subsection, members appointed under this
subsection shall be appointed for a term of 4 years. The members
appointed under this subsection shall be from the private sector
and shall have experience in private equity or venture capital
investments, commercial lending, or commercialization of
technology. From the date of the appointment of the members under
this subsection until December 31, 2015, the board shall have 11
members. After December 31, 2015, the board shall have 9 members
and no members shall be appointed under this subsection.
(5) The governor shall designate 1 member of the board to
serve as its chairperson. The governor shall designate 1 member of
the board to serve as president of the fund and may designate 1
member to serve as vice-president of the fund. The chairperson,
president, and vice-president, if a vice-president is designated,
shall serve as those officers at the pleasure of the governor.
(6) Members of the board shall serve without compensation for
their membership on the board, except that members of the board may
receive reasonable reimbursement for necessary travel and expenses.
(7) The board may delegate to its president, vice-president,
staff, or others those functions and authority that the board deems
necessary or appropriate, which may include the oversight and
supervision of employees of the fund. However, responsibilities
specifically vested in the board under chapter 8A shall be
performed by the board and shall not be transferred to the MEDC,
except that community revitalization incentives under chapter 8C of
$1,000,000.00 or less can be authorized by the president of the
fund.
(8) A majority of the members of the board appointed and
serving constitutes a quorum for the transaction of business at a
meeting, or the exercise of a power or function of the fund,
notwithstanding the existence of 1 or more vacancies. The board may
act only by resolution approved by a majority of board members
appointed and serving. Voting upon action taken by the board shall
be conducted by majority vote of the members appointed and serving.
Members of the board may be present in person at a meeting of the
board or, if authorized by the bylaws of the board, by use of
telecommunications or other electronic equipment. The fund shall
meet at the call of the chair and as may be provided in the bylaws
of the fund. Meetings of the fund may be held anywhere within the
state of Michigan.
(9) The business of the board shall be conducted at a public
meeting of the board 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 the meeting shall be given in the manner required by
the open meetings act, 1976 PA 267, MCL 15.261 to 15.275, and shall
also be provided on an internet website operated by the fund. A
record or portion of a record, material, or other data received,
prepared, used, or retained by the fund or any of its centers in
connection with an application to or with a project or product
assisted by the fund or any of its centers or with an award, grant,
loan, or investment under chapter 8A that relates to financial or
proprietary information submitted by the applicant that is
considered by the applicant and acknowledged by the board as
confidential shall not be subject to the disclosure requirements of
the freedom of information act, 1976 PA 442, MCL 15.231 to 15.246.
The disclosure of a record concerning investment information
described in section 88c under the freedom of information act, 1976
PA 442, MCL 15.231 to 15.246, is subject to the limitations
provided in section 88c. The board may also meet in closed session
pursuant to the open meetings act, 1976 PA 267, MCL 15.261 to
15.275, to make a determination of whether it acknowledges as
confidential any financial or proprietary information submitted by
the applicant and considered by the applicant as confidential.
Unless considered proprietary information, the board shall not
acknowledge routine financial information as confidential. If the
board determines that information submitted to the fund is
financial or proprietary information and is confidential, the board
shall release a written statement, subject to disclosure under the
freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, that
states all of the following:
(a) The name and business location of the person requesting
that the information submitted be confidential as financial or
proprietary information.
(b) That the information submitted was determined by the board
to be confidential as financial or proprietary information.
(c) A broad nonspecific overview of the financial or
proprietary information determined to be confidential.
(10) The fund shall not disclose financial or proprietary
information not subject to disclosure pursuant to subsection (9)
without consent of the applicant submitting the information.
(11) Any document to which the fund is a party evidencing a
loan, insurance, mortgage, lease, venture, or other type of
agreement the fund is authorized to enter into shall not be
considered financial or proprietary information that may be exempt
from disclosure under subsection (9).
(12) For purposes of subsections (9), (10), and (11),
"financial or proprietary information" means information that has
not been publicly disseminated or which is unavailable from other
sources, the release of which might cause the applicant significant
competitive harm.
Sec. 88c. (1) The fund board shall exercise the duties of a
fiduciary with respect to 21st century investments consistent with
the purposes of this chapter. The prudent investor rule shall be
applied by the fund board and any agent of the fund board in the
management of 21st century investments. The prudent investor rule
as applied to 21st century investments means that in making 21st
century investments, the fund board shall exercise the judgment and
care under the circumstances then prevailing that an institutional
investor of ordinary prudence, discretion, and intelligence would
exercise in similar circumstances in a like position. The fund
board shall maintain a reasonable diversification among 21st
century investments consistent with the requirements of this
chapter.
(2) The fund board shall select qualified private equity
funds, qualified venture capital funds, and qualified mezzanine
funds by issuing a request for proposal. At a minimum, the request
for proposal shall require a responding entity to disclose any
conflict of interest, disclose any criminal convictions, disclose
any investigations by the internal revenue service, the securities
and exchange commission, or any other federal or state taxing or
securities regulatory body, or court, or pertinent litigation
regarding the conduct of the person or entity. The fund board shall
establish a standard process to evaluate proposals submitted as a
result of a request for proposal and appoint a committee to review
the proposals.
(3) The fund board shall ensure that a recipient of money
under
sections 88d, 88e, 88f, and 88g,
88r, and chapter 8C 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 IL 1, 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.
(4) The fund board shall establish requirements to ensure that
money
expended under sections 88d, 88e, 88f, and 88g, 88r, and
chapter 8C shall not be used for any of the following:
(a) Provision of money 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, 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) Provision of money 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, 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.
(c) Provision of money to a business enterprise to induce
qualified businesses or small businesses to leave this state.
(d) Provision of money 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) Provision of money to a corporation or an affiliate of the
corporation who is incorporated in a tax haven country after
September 11, 2001, while maintaining 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.
(5) Before adopting a resolution that establishes or
substantially changes a 21st century investment program, including
any fees, charges, or penalties attached to that program, the fund
board shall give notice of the proposed resolution to the governor,
to the clerk of the house of representatives, to the secretary of
the senate, to members of the senate and house of representatives
appropriation committees, 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 fund 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. Members of the fund board or 1 or more
persons designated by the fund 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 fund board may act on the proposed
resolution no sooner than 14 days after the public hearing. The
fund 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 clerk of the house of representatives, to the
secretary of the senate, and to members of the senate and house of
representatives appropriation committees and shall be published on
the fund's internet website.
(6) The notice described in subsection (5) 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.
(c) The address to which written comments may be sent and the
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.
(7) The fund board shall employ or contract with a fund
manager or other persons it considers necessary to implement this
section. The person employed or contracted under this subsection
shall have not less than 10 years' experience in commercial
lending, private equity, mezzanine funding, or venture capital. The
person employed or contracted under this section shall exercise the
duties of a fiduciary toward investments from the investment fund
under this section. Management fees payable by the fund and other
investors in a qualified private equity fund, a qualified mezzanine
fund, or a qualified venture capital fund shall be considered an
investment expense and not an administrative cost incurred by the
fund.
(8) Subject to subsection (9), a record received, prepared,
used, or retained by an investment fiduciary in connection with an
investment or potential investment of the investment fund that
relates to investment information pertaining to a portfolio company
in which the investment fiduciary has invested or has considered an
investment that is considered by the portfolio company and
acknowledged by the investment fiduciary as confidential, or that
relates to investment information whether prepared by or for the
investment fiduciary regarding loans and assets directly owned by
the investment fiduciary and acknowledged by the investment
fiduciary as confidential, is exempt from the disclosure
requirements of the freedom of information act, 1976 PA 442, MCL
15.231 to 15.246, if at least annually the fund provides to the
fund board, and makes available to the public, a report of fund
investments during the prior state fiscal year that includes all of
the following:
(a) The name of each portfolio company in which the investment
fund invested during the reporting period.
(b) The aggregate amount of money invested by the investment
fund in portfolio companies during the reporting period.
(c) The rate of return realized during the reporting period on
the investments of the investment fund in portfolio companies.
(d) The source of any public funds invested by the investment
fund in portfolio companies during the reporting period.
(9) If a record described in subsection (8) is an agreement or
instrument to which an investment fiduciary is a party, only those
parts of the record that contain investment information are exempt
from the disclosure requirements of the freedom of information act,
1976 PA 442, MCL 15.231 to 15.246.
(10) As used in subsections (8) and (9):
(a) "Investment fiduciary" means a person who exercises any
discretionary authority or control over an investment of the
investment fund or renders investment advice for the fund for a fee
or other direct or indirect compensation.
(b) "Investment information" means information that has not
been publicly disseminated or that is unavailable from other
sources, the release of which might cause a portfolio company or an
investment fiduciary significant competitive harm. Investment
information includes, but is not limited to, financial performance
data and projections, financial statements, list of coinvestors and
their level of investment, product and market data, rent rolls, and
leases.
(c) "Portfolio company" means an entity in which an investment
fiduciary has made or considered an investment on behalf of the
investment fund.
(d) "Record" means all or part of a writing, as that term is
defined in section 2 of the freedom of information act, 1976 PA
442, MCL 15.232.
Sec. 88h. (1) The jobs for Michigan investment fund is created
within the fund as a permanent fund authorized by section 19 of
article IX of the state constitution of 1963. Money in the
investment fund at the close of the fiscal year shall remain in the
investment fund and shall not lapse to the general fund. Money in
the investment fund shall not be transferred to another
governmental entity or a separate legal entity and public body
corporate established under the urban cooperation act of 1967, 1967
(Ex Sess) PA 7, MCL 124.501 to 124.512, except as authorized in
this chapter.
(2) Money or other assets deposited in the investment fund
shall be held as permanent funds as provided under section 19 of
article IX of the state constitution of 1963 and invested only as
authorized under this chapter, including, but not limited to,
investments in the stock of a company, association, or corporation.
(3) The investment fund shall be invested as authorized under
this chapter for the benefit of the people of the state of Michigan
and for the purpose of creating incentives for the following in
this state:
(a) Diversifying the economy.
(b) Retaining or creating jobs.
(c) Increasing capital investment activity.
(d) Increasing commercial lending activity.
(e) Encouraging the development and commercialization of
competitive edge technologies.
(f) Revitalizing Michigan communities.
(4) Funds or other assets of the investment fund also may be
invested in debt instruments or debt obligations for loans or
guarantees authorized under this chapter.
(5) The investment fund shall consist of all of the following:
(a) Any funds appropriated to, transferred to, or deposited in
the investment fund from the 21st century jobs trust fund under the
Michigan
trust fund act, 2000 PA 489, MCL 12.251 to 12.256.12.260.
(b) Earnings, royalties, return on investments, return of
principal, payments made, or other money received by or payable to
the fund under agreements related to grants, loans, investments, or
expenditures by the fund under this chapter or chapter 8C.
(c) Assets, property, money, earnings, royalties, return on
investments, return of principal, payments made, or other money
owed, received by, or payable to the fund or the Michigan economic
development corporation under agreements related to grants, loans,
investments, or other payments funded by appropriations from the
state general fund or tobacco settlement revenue under 1 or more of
the following:
(i) Section 418 of 1999 PA 120, commonly known as the health
and aging research and development initiative or the Michigan life
sciences corridor initiative, or any successor program.
(ii) Section 410 of 2000 PA 292, commonly known as the health
and aging research and development initiative or the Michigan life
sciences corridor initiative, or any successor program.
(iii) Section 410 of 2001 PA 80, commonly known as the health
and aging research and development initiative or the Michigan life
sciences corridor initiative, or any successor program.
(iv) Section 410 of 2002 PA 517, commonly known as the Michigan
life sciences corridor initiative, or any successor program.
(v) Section 410 of 2003 PA 169, commonly known as the Michigan
life sciences and technology tri-corridor initiative, or any
successor program.
(vi) Section 510 of 2004 PA 354, commonly known as the Michigan
technology tri-corridor and life sciences initiative, or any
successor program.
(vii) Section 801 of 2005 PA 11, commonly known as the
technology tri-corridor and life sciences initiative, or any
successor program.
(viii) Section 381(1)(c) of 2003 PA 173, providing for payments
to the life sciences commercial development fund.
(d) Money or assets received by the state treasurer or the
fund from any source for deposit in the investment fund.
(e) Interest and earnings on any funds or other assets
deposited in the investment fund or other net income of the
investment fund.
(f) Any other funds appropriated for programs under chapter 8C
and any repayments of loans under chapter 8C.
(6) The net income of the investment fund may be expended by
the fund only for purposes authorized under this chapter or chapter
8C pursuant to an appropriation authorized by law. As used in this
section, the net income of the investment fund shall be computed
annually as of the last day of the state fiscal year in accordance
with generally accepted accounting principles, excluding any
unrealized gains or losses.
(7) The fund board shall be the trustees of the investment
fund and shall direct the investment and reinvestment of the funds
and assets of the investment fund as provided under, and consistent
with the objectives of, this chapter or chapter 8C.
(8) The fund board may establish restricted subaccounts within
the investment fund as necessary to administer the investment fund.
The fund board may contract with the state treasurer to assist the
fund board in administering the investment fund. The fund board may
authorize money in the investment fund not invested as authorized
under
sections 88d, 88e, 88f, and 88g,
88r, and chapter 8c to be
managed by the state treasurer as part of the common cash fund of
this state under 1967 PA 55, MCL 12.51 to 12.53. Money managed by
the state treasurer under this subsection shall be separately
accounted for by the state treasurer. When authorized under this
subsection, the state treasurer may invest the funds or assets of
the investment fund in any investment authorized under 1855 PA 105,
MCL 21.141 to 21.147, for surplus funds of this state, in
obligations issued by any state or political subdivision or
instrumentality of the United States, or in any obligation issued,
assumed, or guaranteed by a solvent entity created or existing
under the laws of the United States or of any state, district, or
territory of the United States, which are not in default as to
principal or interest.
(9) A member of the fund board or officer of the fund shall
not gain from any investment of funds or assets of the investment
fund. A member of the fund board or officer of the fund shall not
have any direct or indirect interest in an investment of funds or
assets of the investment fund. A member of the fund board or person
connected with the investment fund directly or indirectly, for
himself or herself, or as an agent or partner of others, shall not
borrow any of the funds or assets of the investment fund or in any
manner use funds or assets of the investment fund except as
authorized under this chapter. A member of the fund board or
officer of the fund shall not become an endorser or surety or
become in any manner an obligor for money loaned by or borrowed
from the investment fund. Failure to comply with this subsection
constitutes misconduct in office subject to removal under section
94.
Enacting section 1. This amendatory act does not take effect
unless all of the following bills of the 96th Legislature are
enacted into law:
(a) Senate Bill No. 568.
(b) Senate Bill No. 567.