HB 0029E 2003
1	A bill to be entitled
2	An act relating to the Florida Economic Development Act;
3	providing a popular name; providing a purpose; providing
4	definitions; providing for application and designation of
5	a manager; providing manager applicant requirements and
6	criteria; providing duties and requirements of the Office
7	of Tourism, Trade, and Economic Development; providing for
8	a fund allocation date; providing duties and
9	responsibilities of the manager; providing certain
10	economic development project investment requirements;
11	providing for forfeit of certain fees under certain
12	circumstances; requiring payment of certain funds into the
13	Special Disability Trust Fund; providing certain fund
14	investment and profits distribution limitations; providing
15	for certain investor offsets against certain assessments;
16	providing offset requirements, criteria, and limitations;
17	specifying that the general revenue service charge payable
18	to the Special Disability Trust Fund not be reduced by
19	offsets; requiring certain reports by the manager;
20	providing report requirements; requiring an annual audited
21	financial statement by the manager; providing for act
22	nonapplicability to the manager under certain
23	circumstances; providing an effective date.
24
25	Be It Enacted by the Legislature of the State of Florida:
26
27	Section 1. Popular name.--This is the “Florida Economic
28	Development Act.”
29	Section 2. Purpose.--The purpose of the Florida Economic
30	Development Act is to provide assistance in the formation and
31	expansion of new and existing businesses which create jobs in
32	this state by providing for the availability of venture capital
33	financing to entrepreneurs, managers, inventors, and other
34	individuals for the development and operation of qualified
35	businesses in this state.
36	Section 3. Definitions.—-As used in this section:
37	(1) “Affiliate” means, with respect to any person:
38	(a) A person who directly or indirectly:
39	1. Beneficially owns at least 10 percent of the
40	outstanding voting securities or other ownership interests of
41	the other person, whether through rights, options, convertible
42	interests, or otherwise; or
43	2. Controls or holds power to vote at least 10 percent of
44	the outstanding voting securities or other ownership interests
45	of the other person;
46	(b) A person with at least 10 percent of the outstanding
47	voting securities or other ownership interests, of which are
48	directly or indirectly:
49	1. Beneficially owned by the other person, whether through
50	rights, options, convertible interest, or otherwise; or
51	2. Controlled or held with power to vote by the other
52	person;
53	(c) A partnership in which the other person is a general
54	partner; or
55	(d) An officer, employee, or agent of the other person or
56	an immediate family member of the officer, employee, or agent.
57	(2) “Assessments" means the assessments required pursuant
58	to s. 440.49, Florida Statutes.
59	(3) “Conversion cost" means, for each FEDA manager, all
60	costs and expenses of closing its FEDA fund, including, without
61	limitation, legal, accounting, and trustee fees and expenses and
62	any costs of insuring the obligations of the FEDA manager to the
63	investing investors incurred in connection with the FEDA fund or
64	any original issue discount in connection with the obligations.
65	(4) “Economic development project” means a project or
66	business that has been approved by the FEDA investment board and
67	that meets requirements of the Small Business Administration or
68	the following criteria at the time of the investment:
69	(a) The project or business is headquartered in this state
70	and its principal operations are located in this state, at least
71	50 percent of the employees of the project or business are
72	employed in this state, or the project or business has committed
73	in writing to move at least 50 percent of its employees into
74	this state as a condition of the investment.
75	(b) The project or business fosters economic development
76	in this state as determined by the FEDA investment board.
77	(c) There are sufficient resources or the forecast or
78	business plan for the project or business projects that the
79	project or business will have sufficient resources to meet any
80	obligations due to the FEDA manager as a result of the
81	investment.
82	(5) “FEDA” means the Florida Economic Development Act.
83	(6) “FEDA costs” means:
84	(a) The bona fide costs and expenses of managing and
85	operating the FEDA manager, including, without limitation,
86	professional expenses and an annual management fee that is not
87	to exceed 2.5 percent of the full offset amount.
88	(b) Distributions to direct or indirect parent entities of
89	the FEDA manager, if the FEDA is taxed as a partnership, equal
90	to any projected increase in federal or state income taxes of
91	such entities, resulting from the earnings of the FEDA manager,
92	without regard to any revenues or expenses from other operations
93	of affiliates of the FEDA manager, to the extent that the
94	increase is related to the ownership, management, or operations
95	of the FEDA manager.
96	(7) “FEDA fund” means the full offset amount less
97	conversion costs and the structuring fee.
98	(8) “FEDA investment board” means a representative from
99	the office, a representative from the FEDA manager, and a third
100	member chosen by the two designated members.
101	(9) “FEDA investment pool” means the fund created through
102	the assessment offsets granted in section 5, which must be
103	invested in economic development projects by the FEDA manager in
104	accordance with this act.
105	(10) “FEDA manager” means an entity designated pursuant to
106	this act to receive investment funds from investors and invest
107	such funds in economic development projects.
108	(11) “Full offset amount” means the full face amount of
109	any permitted debt instruments offered to the FEDA manager,
110	issued by its investors evidencing such investors' investment
111	with the FEDA manager.
112	(12) “Fund allocation date” means the date on which the
113	FEDA manager receives the investments from its investors in the
114	form of a permitted debt instrument that entitles its investors
115	to receive an allocation of the full offset amount authorized by
116	this act for such FEDA manager.
117	(13) “Investor” means any insurer authorized to transact
118	insurance in this state with a liability for assessments under
119	s. 440.49, Florida Statutes.
120	(14) “Note receivable” means a debt instrument which:
121	(a) Has a stated final maturity date of not more than 10
122	years from the date on which the FEDA manager receives the note
123	receivable.
124	(b) Is amortized at rate of at least 10 percent per year.
125	(15) “Office” means the Office of Tourism, Trade, and
126	Economic Development.
127	(16) “Permitted debt instrument” means a debt instrument
128	issued to the FEDA manager, in the form of a note receivable
129	from one or more investors that do not own any voting equity
130	interest in the FEDA manager, which:
131	(a) Is issued in exchange for the investment by the
132	investors of cash in the FEDA manager and for no other
133	consideration.
134	(b) Is repayable with interest to the FEDA manager, only
135	by the availability of offsets to the investor earned as a
136	result of the investor's investment in the FEDA manager.
137	(c) Does not entitle the investor to any consideration or
138	compensation based upon the profits, income, or other operation
139	of the FEDA manager.
140	(d) May not be prepaid by the investor without the consent
141	of the FEDA manager.
142	(17) ”Person” means any natural person, corporation,
143	limited liability company, partnership, joint venture, trust,
144	incorporated or unincorporated association, joint stock company,
145	government, or agency or political subdivision of the
146	government, or other entity of any kind.
147	(18) “Principal” means:
148	(a) A senior officer or director of a corporation;
149	(b) An individual manager of a limited liability company
150	or a principal of any entity manager;
151	(c) An individual general partner of a partnership or
152	limited partnership or a principal of any entity that serves as
153	a general partner; or
154	(d) An individual in a position of similar authority in an
155	entity not specifically named in this subsection.
156	(19) “Structuring fee” means a fee paid to the FEDA
157	manager for converting the assessment fee offsets into the FEDA
158	fund in an amount that shall not exceed 5 percent of the full
159	offset amount.
160	Section 4. FEDA manager application and designation; fund
161	allocation date.--
162	(1) Within 150 days after the effective date of this act,
163	the office shall designate a single FEDA manager to be the
164	exclusive FEDA manager for all purposes under this act in
165	accordance with the laws of this state. The office may adopt
166	such regulations as are necessary to effectuate such
167	designation.
168	(2) Within 90 after the effective date of this act, the
169	office shall issue a request for a proposal for the designation
170	of the FEDA manager for all purposes under this act and shall
171	include a statement of the services sought, the time and date
172	for the receipt of the proposals and of the public opening, and
173	all of the terms and conditions applicable to the designation of
174	the FEDA manager, including the criteria contained in subsection
175	(3).
176	(3) The FEDA manager applicant shall demonstrate in its
177	response to the request for a proposal that it meets the
178	following criteria:
179	(a) The FEDA manager applicant, together with its
180	affiliates, has raised at least $40 million in the aggregate for
181	investment in small and emerging businesses within the past 5
182	calendar years.
183	(b) The FEDA manager applicant must have at least two
184	principals who each have had at least 5 years' experience in
185	either the venture capital industry or the investment banking
186	industry.
187	(c) The FEDA manager applicant must demonstrate that it
188	has successfully managed similar portfolios with aggregate
189	losses of no more than 4 percent of the total capital under
190	management.
191	(d) No director, officer, or senior manager of the FEDA
192	manager applicant shall have been guilty of a crime involving
193	fraud, theft, embezzlement, or moral turpitude.
194	(e) The FEDA manager applicant shall be a bankruptcy-
195	remote, special purpose entity that has no purpose other than
196	participation under this act and all related activities.
197	(f) No investor or affiliate of an investor shall own any
198	voting equity securities in the FEDA manager or any affiliate of
199	the FEDA manager.
200	(4) The FEDA manager fund allocation date shall be 60 days
201	following the FEDA manager designation.
202	Section 5. Investment milestones and penalties.--
203	(1) The FEDA manager shall:
204	(a) Within 36 months after the fund allocation date,
205	invest at least 30 percent of the FEDA investment pool in
206	economic development projects.
207	(b) Within 60 months after the fund allocation date,
208	invest at least 50 percent of the FEDA investment pool in
209	economic development projects.
210	(c) Within 84 months after the fund allocation date,
211	invest at least 70 percent of the FEDA investment pool in
212	economic development projects.
213	(d) Within 120 months after the fund allocation date,
214	invest 100 percent of the FEDA investment pool in economic
215	development projects.
216	(2) If the FEDA manager fails to meet the investment
217	targets of subsection (1), the FEDA manager shall forfeit its
218	management fee for that year.
219	(3) Within 90 days after the expiration of 10 years after
220	the fund allocation date, the FEDA manager shall pay to the
221	Special Disability Trust Fund a sum equal to 50 percent of the
222	full offset amount granted to investors under section 5.
223	(4) Until the FEDA manager has invested the FEDA
224	investment pool in economic development projects, money in the
225	FEDA fund shall be used only for short-term investments, which
226	can be liquidated within 1 year, approved by the FEDA investment
227	board and FEDA costs.
228	(5) No distributions of profits from investments of the
229	FEDA investment pool shall be made until the FEDA manager has
230	invested the entire FEDA investment pool in economic development
231	projects, except for the tax effect of said profits.
232	Section 6. FEDA investor assessment offsets.--
233	(1) Each investor that makes an investment in the FEDA
234	manager shall earn vested offsets against future assessments
235	under s. 440.49, Florida Statutes, equal to the face amount of
236	the permitted debt instrument offered to the FEDA manager,
237	issued by the investors and evidencing their investment of cash
238	in the FEDA manager. The full offset amount available to
239	investors in the form of FEDA manager permitted debt instruments
240	shall be $200 million. Assessment offsets shall be vested on the
241	fund allocation date and shall be available to the investor
242	annually, contingent only upon the FEDA manager’s compliance
243	with the investment milestones in section 5 and the investor’s
244	compliance with the terms of the note receivable.
245	(2) Each investor investing in the FEDA manager may:
246	(a) Take the vested assessment offsets against investor
247	assessments each year in accordance with the terms of the note
248	receivable, beginning with the annual return filed in the year
249	following the fund allocation date and continuing for the next
250	nine consecutive years.
251	(b) Reduce its estimated payments of assessment liability
252	for each year for which offsets are available to offset
253	assessment liability by the same percentage as the percentage
254	payment due on each estimated payment date.
255	(3) The offsets against assessments that are used by an
256	investor with respect to any year shall not exceed the full
257	assessment liability of the investor for that year.
258	(4) Any offsets against assessments that an investor is
259	permitted to use under subsections (1) and (2), but is unable to
260	use because of subsection (3) may be carried forward
261	indefinitely and used to offset the investor's assessment
262	liability in any subsequent year in which the investor has
263	sufficient assessment liability, including a year in which the
264	investor also uses assessment offsets that are allocated to that
265	year pursuant to subsection (2).
266	(5) An investor that has invested in the FEDA manager is
267	not required to reduce the amount of assessment included by the
268	investor in connection with the ratemaking for any insurance
269	contract written because of a reduction in the investor's
270	assessment derived from the offsets granted under this act.
271	(6) If the assessments that an investor does not pay by
272	virtue of the offsets earned under this act would constitute a
273	credit against another tax or assessment if paid, the investor
274	shall continue to earn the credit as though the offset
275	assessments were paid by cash.
276	(7) An investor may transfer the offsets it earns under
277	this act to another investor provided the transferor delivers to
278	the Director of the Office of Insurance Regulation of the
279	Financial Services Commission within 30 days after the transfer
280	a written notice indicating the name of the transferee, the
281	amount of offsets being transferred, and the year or years to
282	which such offsets are allocable as provided in subsection (2).
283	(8) The general revenue service charge payable by the
284	Special Disability Trust Fund shall not be reduced by the
285	offsets taken under this act.
286	Section 7. FEDA manager reports.--
287	(1) Within 30 days after the fund allocation date, the
288	FEDA manager shall report to the office and the Office of
289	Insurance Regulation:
290	(a) The name of each investor from which an investment was
291	received, including the investor's identification number.
292	(b) The amount of each investor's investment.
293	(c) The date on which the note receivable was received.
294	(2) Within 90 days after an economic development project
295	investment made by the FEDA manager, the FEDA manager shall
296	report to the department:
297	(a) The name and address of each project receiving the
298	investment and a description of its business.
299	(b) The amount of the investment and a brief description
300	of the terms.
301	(c) The date on which the money was received.
302	(d) Any other information required by the office.
303	(3) Not later than each anniversary of the original fund
304	allocation date, the FEDA manager shall report to the office the
305	amount the FEDA manager has invested in economic development
306	projects during the previous year, the percentage of the FEDA
307	investment pool invested along with a copy of the material
308	documentation pertaining to the investment, and any other
309	information required by the office.
310	(4) Not later than April 30 of each year, the FEDA manager
311	shall provide to the office an annual audited financial
312	statement for the FEDA manager that includes the opinion of an
313	independent accountant.
314	(5) Upon investments in economic development projects
315	equaling the FEDA investment pool and payment of the sums
316	required under subsection (3) of section 5, the FEDA manager
317	shall no longer be subject to the provisions of this act.
318	Section 8. This act shall take effect upon becoming a law.