| 1 | A bill to be entitled |
| 2 | An act relating to capital formation; creating s. |
| 3 | 288.9621, F.S.; providing a short title; providing |
| 4 | definitions; requiring the Office of Tourism, Trade, and |
| 5 | Economic Development to account for certain moneys |
| 6 | separately within the Economic Development Trust Fund; |
| 7 | requiring the office to make certain funds available for |
| 8 | investment by the State Board of Administration; providing |
| 9 | for deducting certain fees and expenses; requiring the |
| 10 | State Board of Administration to liquidate investments and |
| 11 | advance proceeds to the Florida Opportunity Fund for |
| 12 | certain purposes; providing investment requirements for |
| 13 | the State Board of Administration; providing operational |
| 14 | requirements for the Florida Opportunity Fund; requiring |
| 15 | Enterprise Florida, Inc., to organize the Florida |
| 16 | Opportunity Fund as a wholly owned private, not-for-profit |
| 17 | limited liability Florida-based company; requiring |
| 18 | Enterprise Florida, Inc., to annually evaluate the company |
| 19 | and report to the Governor and Legislature; providing for |
| 20 | a board of directors for the company; providing for |
| 21 | appointment and terms of board members; providing |
| 22 | requirements and limitations for board members; requiring |
| 23 | board members to serve without compensation; providing for |
| 24 | reimbursement of expenses of board members and company |
| 25 | officers and employees; specifying powers of the company; |
| 26 | authorizing the company to indemnify board members; |
| 27 | specifying a fiduciary duty of board members and company |
| 28 | officers and employees; subjecting the company to public |
| 29 | meetings and public records requirements; specifying |
| 30 | duties of the company; requiring the company to select a |
| 31 | Florida Opportunity Fund allocation manager; specifying |
| 32 | duties and requirements of the allocation manager; |
| 33 | requiring the company to guarantee private capital |
| 34 | investments in the company; providing requirements for |
| 35 | such guarantees; specifying investment requirements for |
| 36 | the company; specifying investment limitations and |
| 37 | prohibitions for the company; requiring the company to |
| 38 | issue an annual report to the Governor and the |
| 39 | Legislature; specifying report requirements; providing for |
| 40 | an independent audit; providing for a transfer of |
| 41 | nonrecurring funds in the General Revenue Fund to the |
| 42 | Economic Development Trust Fund for subsequent investment |
| 43 | in the Florida Opportunity Fund; providing for retention |
| 44 | of balances in the trust fund each year; providing for |
| 45 | continuing appropriation and use of such moneys for a |
| 46 | certain time period; providing for return of certain funds |
| 47 | to the General Revenue Fund; requiring the company to |
| 48 | continue administering investments for certain purposes; |
| 49 | providing for continuous reinvestment of certain funds by |
| 50 | the company; providing for reversion of assets and funds |
| 51 | of the company to the General Revenue Fund under certain |
| 52 | circumstances; prohibiting Enterprise Florida, Inc., from |
| 53 | selling or transferring ownership of the company; |
| 54 | providing an effective date. |
| 55 |
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| 56 | Be It Enacted by the Legislature of the State of Florida: |
| 57 |
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| 58 | Section 1. Parts X and XI of chapter 288, Florida |
| 59 | Statutes, are redesignated as parts XI and XII, respectively, |
| 60 | and a new part X, consisting of section 288.9621, Florida |
| 61 | Statutes, is added to that chapter to read: |
| 62 | 288.9621 Capital formation.-- |
| 63 | (1) SHORT TITLE.--This section may be cited as the |
| 64 | "Florida Capital Formation Act." |
| 65 | (2) DEFINITIONS.--As used in this section, the term: |
| 66 | (a) "Business unit" means an employing unit, as defined in |
| 67 | s. 443.036, which is registered with the Agency for Workforce |
| 68 | Innovation for purposes of unemployment compensation or a |
| 69 | subcategory or division of an employing unit that is accepted by |
| 70 | the agency as a reporting unit. |
| 71 | (b) "Certificate" means a contract between a company and a |
| 72 | designated investor evidencing the terms of a guarantee granted |
| 73 | to a designated investor of an investment of funds in the |
| 74 | company. |
| 75 | (c) "Company" means the Florida Opportunity Fund. |
| 76 | (d) "Designated investor" means a person, entity, or |
| 77 | lender who is a party to a certificate. |
| 78 | (e) "Florida Opportunity Fund allocation manager" or |
| 79 | "allocation manager" means one or more fund-of-funds investment |
| 80 | managers hired by the Florida Opportunity Fund to raise capital |
| 81 | and invest assets of the company in venture capital funds. |
| 82 | (f) "Florida-based" means operating in this state at a |
| 83 | permanent address and maintaining at least one business unit in |
| 84 | this state. |
| 85 | (g) "Office" means the Governor's Office of Tourism, |
| 86 | Trade, and Economic Development. |
| 87 | (3) FLORIDA CAPITAL INVESTMENT.-- |
| 88 | (a) The office shall account for moneys transferred under |
| 89 | this section separately within the Economic Development Trust |
| 90 | Fund created in s. 288.095. The office shall make all such funds |
| 91 | available for investments by the State Board of Administration |
| 92 | or its designated investment manager as requested by the State |
| 93 | Board of Administration. The State Board of Administration or |
| 94 | its designated investment manager shall invest and reinvest the |
| 95 | moneys in accordance with s. 215.47 and subject to the terms of |
| 96 | any trust agreement between the State Board of Administration |
| 97 | and the office. Fees and expenses incurred by the State Board of |
| 98 | Administration for investing the moneys shall be deducted as |
| 99 | provided in a trust agreement. Upon request of the office, the |
| 100 | State Board of Administration shall liquidate investments and |
| 101 | advance the proceeds to the company as required to fund |
| 102 | certificate obligations pursuant to this section as well as the |
| 103 | company's reasonable and necessary operational expenses. The |
| 104 | exercise by the State Board of Administration or its designated |
| 105 | investment manager of powers conferred by this section is deemed |
| 106 | the performance of essential public purposes. |
| 107 | (b) The State Board of Administration or its designated |
| 108 | investment manager shall invest and reinvest any funds returned |
| 109 | by the company in accordance with s. 215.47 and subject to the |
| 110 | terms of any trust agreement between the State Board of |
| 111 | Administration and the office. The company shall maintain |
| 112 | necessary working capital moneys; obtain funding from the trust |
| 113 | fund for certificate obligations, reasonable and necessary |
| 114 | operating costs, or replenishment of working capital balances; |
| 115 | and return for liquidity investment any moneys received in |
| 116 | excess of the company's working capital needs. |
| 117 | (4) FLORIDA OPPORTUNITY FUND; CREATION; POWERS AND |
| 118 | DUTIES.-- |
| 119 | (a) Enterprise Florida, Inc., shall organize the Florida |
| 120 | Opportunity Fund as a wholly owned, private, not-for-profit, |
| 121 | limited liability Florida-based company. Enterprise Florida, |
| 122 | Inc., shall be the company's sole owner. The Florida Opportunity |
| 123 | Fund is not a public company or instrumentality of the state. |
| 124 | Enterprise Florida, Inc., shall annually evaluate and report to |
| 125 | the Governor, the President of the Senate, and the Speaker of |
| 126 | the House of Representatives whether the company is being |
| 127 | operated and state funds are being obligated in the best |
| 128 | interest of the state. |
| 129 | (b) The Florida Opportunity Fund shall be governed by a |
| 130 | board of directors consisting of five members who have expertise |
| 131 | in the area of the selection and supervision of early-stage |
| 132 | investment managers or in the fiduciary management of investment |
| 133 | funds or who have expertise in other areas considered |
| 134 | appropriate by the appointment committee. The vice chair of |
| 135 | Enterprise Florida, Inc., shall select from among its board of |
| 136 | directors a five-person appointment committee to appoint the |
| 137 | company's initial board of directors. After appointment of the |
| 138 | initial board of directors, vacancies on the board of directors |
| 139 | shall be filled by appointment by Enterprise Florida, Inc. The |
| 140 | board of directors shall be appointed to serve staggered 3-year |
| 141 | terms in accordance with the company's organizational documents. |
| 142 | Members of the board of directors and officers and employees of |
| 143 | the company are subject to any restrictions on conflicts of |
| 144 | interest specified in the organizational documents of the |
| 145 | company and may not have an interest in the Florida Opportunity |
| 146 | Fund allocation manager or in any investments made by the |
| 147 | company. Members of the board of directors shall serve without |
| 148 | compensation, but board members and officers and employees of |
| 149 | the company may be reimbursed for all reasonable, necessary, and |
| 150 | actual expenses, as determined by the board and approved by |
| 151 | Enterprise Florida, Inc. |
| 152 | (c) The company has all of the powers specified under |
| 153 | chapter 608 for limited liability companies and may indemnify |
| 154 | members of the board of directors to the broadest extent |
| 155 | permissible under the laws of this state. However, board members |
| 156 | and officers and employees of the company have a fiduciary duty |
| 157 | with respect to the management of company assets and selection |
| 158 | and oversight of the company's allocation manager and shall |
| 159 | discharge those duties in the best interest of the state. |
| 160 | (d) The company is subject to chapter 119, relating to |
| 161 | public meetings, and s. 286.011, relating to public records. |
| 162 | (e) The company shall select a Florida Opportunity Fund |
| 163 | allocation manager for the raising and investing of capital by |
| 164 | the company. The allocation manager shall demonstrate expertise |
| 165 | in the successful management and fund allocation of investments |
| 166 | in venture capital funds. In selecting an allocation manager, |
| 167 | the company shall consider, among other pertinent factors, each |
| 168 | candidate's level of experience, probability of success in |
| 169 | fundraising, quality of management performance, investment |
| 170 | philosophy and process, prior investment fund results, and |
| 171 | potential for achieving the purposes of this section. |
| 172 | (f) The company shall guarantee private capital |
| 173 | investments in the company pursuant to this section and shall |
| 174 | issue certificates to designated investors evidencing the terms |
| 175 | of a guarantee. The company shall invest on a fund-of-funds |
| 176 | basis in seed and early-state venture capital funds having |
| 177 | experienced managers or management teams with demonstrated |
| 178 | experience and expertise and a successful history in the |
| 179 | investment of venture capital funds, focusing on opportunities |
| 180 | in this state. The company may not make direct investments in |
| 181 | individual businesses. While not precluded from investing in |
| 182 | venture capital funds that have investments outside this state, |
| 183 | the company must require a venture capital fund to show a record |
| 184 | of successful investment in this state, to be based in this |
| 185 | state, or to have an office in this state staffed with a full- |
| 186 | time, professional venture investment executive in order to be |
| 187 | eligible for investment. The company may negotiate any terms and |
| 188 | conditions for its investments, including the clawback of |
| 189 | management fees and other provisions that maximize investment in |
| 190 | seed and early-state Florida-based companies. The company may |
| 191 | charge fees and earn a rate of return for its guarantees such |
| 192 | that the company can pay for its operational expenses and |
| 193 | reinvest in venture capital funds to create new businesses and |
| 194 | jobs in this state and further diversify the economy of this |
| 195 | state. |
| 196 | (g) The company may not invest in a venture capital fund |
| 197 | unless that venture capital fund has raised capital from other |
| 198 | sources in an amount at least equal to the investment of the |
| 199 | company, such that the total invested in Florida-based companies |
| 200 | by the receiving venture capital fund totals at least twice the |
| 201 | investment of the company. Investments must be made in Florida- |
| 202 | based companies, including, without limitation, enterprises in |
| 203 | life sciences, information technology, advanced manufacturing |
| 204 | processes, aviation and aerospace, and homeland security and |
| 205 | defense, as well as other strategic technologies. |
| 206 | (5) ANNUAL REPORT.--The company shall submit an annual |
| 207 | report of its activities to the Governor, the President of the |
| 208 | Senate, and the Speaker of the House of Representatives within 3 |
| 209 | months after the end of the company's fiscal year. The annual |
| 210 | report must include a copy of an independent audit of the |
| 211 | company and a valuation of the assets of the company, a review |
| 212 | of the progress of the Florida Opportunity Fund allocation |
| 213 | manager in implementing the allocation manager's investment |
| 214 | plan, the rate of return, and the benefits to the state |
| 215 | resulting from this program, including the amount of capital |
| 216 | raised and deployed and the amount of investment. The annual |
| 217 | report must also include a list of venture capital funds in |
| 218 | which investments were made and the number of Florida-based |
| 219 | businesses created and their associated industry. |
| 220 | Section 2. (1) For the 2006-2007 fiscal year, the sum of |
| 221 | $300,000 is appropriated from the General Revenue Fund to the |
| 222 | Economic Development Trust Fund in the Office of Tourism, Trade, |
| 223 | and Economic Development to be used for startup activities |
| 224 | necessary to implement s. 288.9621, Florida Statutes, including |
| 225 | creation of the Florida Opportunity Fund and the solicitation |
| 226 | and related due diligence required for contracting the services |
| 227 | of the Florida Opportunity Fund allocation manager. |
| 228 | (2) For the 2006-2007 fiscal year, the sum of $15 million |
| 229 | is appropriated from nonrecurring moneys in the General Revenue |
| 230 | Fund to the Economic Development Trust Fund in the Office of |
| 231 | Tourism, Trade, and Economic Development for subsequent |
| 232 | investment in the Florida Opportunity Fund pursuant to s. |
| 233 | 288.9621, Florida Statutes. Notwithstanding s. 216.301, Florida |
| 234 | Statutes, any balance remaining in the trust fund at the end of |
| 235 | any fiscal year shall remain in the trust fund and shall be |
| 236 | available for carrying out the purposes of s. 288.9621, Florida |
| 237 | Statutes. The transferred amount and any earnings on such amount |
| 238 | are appropriated and may be used for the purposes of s. |
| 239 | 288.9621, Florida Statutes, until July 1, 2020, at which time |
| 240 | the sum of $15 million or the balance of funds in the trust |
| 241 | fund, whichever is less, shall be returned to the General |
| 242 | Revenue Fund and any obligated funds for outstanding |
| 243 | certificates shall remain until these certificates expire or are |
| 244 | terminated. The Florida Opportunity Fund shall continue to |
| 245 | administer its investments after July 1, 2020, until such |
| 246 | investments are liquidated. Proceeds from liquidation of |
| 247 | investments and any proceeds in excess of $15 million may be |
| 248 | retained for continuous reinvestment by the Florida Opportunity |
| 249 | Fund, if an amount of not less than $15 million has been |
| 250 | returned to the General Revenue Fund on or before July 1, 2020. |
| 251 | If at any time Enterprise Florida, Inc., dissolves the Florida |
| 252 | Opportunity Fund, all assets of the Florida Opportunity Fund and |
| 253 | any funds remaining for the purpose of this section shall revert |
| 254 | to the General Revenue Fund. Enterprise Florida, Inc., may not |
| 255 | sell or transfer ownership of the company. |
| 256 | Section 3. This act shall take effect July 1, 2006. |