00 SENATE BILL NO. 173 01 "An Act repealing statutes pertaining to the Alaska Science and Technology Foundation 02 and transferring money in the foundation's endowment; repealing statutes relating to 03 the BIDCO assistance program; repealing statutes pertaining to the international trade 04 and business endowment and transferring money in the international trade and business 05 endowment; transferring oversight administration of outstanding Alaska Science and 06 Technology Foundation loans and grants to the Alaska Industrial Development and 07 Export Authority; establishing an Alaska BIDCO assistance program to be 08 administered by the Department of Community and Economic Development; making 09 conforming amendments; and providing for an effective date." 10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 11 * Section 1. The uncodified law of the State of Alaska is amended by adding a new section 12 to read: 01 FINDINGS. The legislature finds that it is in the best interest of the state to 02 (1) eliminate the Alaska Science and Technology Foundation, transfer the 03 oversight administration of outstanding foundation grants provided to foundation grantees 04 before the effective date of this Act to the Alaska Industrial Development and Export 05 Authority, and transfer the balance of the money in the foundation endowment fund to the 06 general fund; 07 (2) transfer the oversight administration of outstanding BIDCO assistance 08 loans and grants provided to borrowers and grantees before the effective date of this Act to 09 the Alaska Industrial Development and Export Authority; 10 (3) establish the Alaska BIDCO assistance program, to be administered by the 11 Department of Community and Economic Development; and 12 (4) eliminate the international trade and business endowment and transfer the 13 balance of the money in that fund to the general fund. 14 * Sec. 2. AS 10.13.040(b) is amended to read: 15 (b) Unless the BIDCO receives a loan under AS 37.17.500 - 37.17.690 16 [AS 37.17.200 - 37.17.390], the department may not establish a minimum net worth 17 for a BIDCO under this section of less than $1,500,000. If the BIDCO, as part of its 18 initial capitalization, receives a loan under AS 37.17.500 - 37.17.690 [AS 37.17.200 - 19 37.17.390], the minimum net worth of the BIDCO may be $500,000, excluding 20 organization costs paid for or owed by the BIDCO. 21 * Sec. 3. AS 10.13.930(c) is amended to read: 22 (c) Notwithstanding (a) of this section, the department may furnish 23 information that is confidential under (a) of this section to the Alaska Industrial 24 Development and Export Authority [SCIENCE AND TECHNOLOGY 25 FOUNDATION ESTABLISHED UNDER AS 37.17.010] if the information is related 26 to a BIDCO that has received assistance under former AS 37.17.200 - 37.17.390 [OR 27 TO A PERSON WHO IS SEEKING ASSISTANCE UNDER AS 37.17.200 - 28 37.17.390]. 29 * Sec. 4. AS 37.10.085(d) is amended to read: 30 (d) This section does not apply to 31 (1) the financial assistance program established under AS 37.17.500 - 01 37.17.690 [AS 37.17.200 - 37.17.390]; or 02 (2) investments of the assets of the public employees' retirement 03 system established under AS 39.35 or the teachers' retirement system established 04 under AS 14.25, to the extent the investments are made in the stocks, bonds, and other 05 securities of 06 (A) a corporation licensed under AS 10.13; or 07 (B) a corporation attempting to become licensed under 08 AS 10.13 if the corporation intends to use the proceeds to fulfill the tasks 09 necessary to become licensed under AS 10.13. 10 * Sec. 5. AS 37.17 is amended by adding new sections to read: 11 Article 5. Alaska BIDCO Assistance Program. 12 Sec. 37.17.500. Purposes of Alaska BIDCO assistance program. The 13 purposes of AS 37.17.500 - 37.17.690 include 14 (1) administering the Alaska BIDCO assistance program related to 15 loans and other financial assistance made or provided under AS 37.17.500 - 16 37.17.690; 17 (2) assisting in the formation and capitalization of one or more 18 BIDCOs that have a highly qualified management team and a good business plan, and 19 that are designed to operate in a profit-oriented, market-disciplined manner, with 20 excellent prospects for long-term financial success and viability; 21 (3) promoting economic development by providing a new source of 22 risk capital and management assistance for businesses, especially small and medium 23 sized businesses, in geographic areas throughout the state, including businesses in 24 rural areas and distressed areas, and including minority owned businesses; 25 (4) using state resources to attract other capital resources; and 26 (5) promoting the successful operation of BIDCOs. 27 Sec. 37.17.510. Alaska BIDCO fund. The Alaska BIDCO fund is 28 established in the general fund. The fund consists of appropriations made to the fund 29 by the legislature and repayments of loans made under AS 37.17.500 - 37.17.690. The 30 fund is administered by the department under AS 37.17.500 - 37.17.690. 31 Sec. 37.17.520. Use of money in Alaska BIDCO fund. (a) From the money 01 in the Alaska BIDCO fund, the department may make loans or other financial 02 assistance, as authorized under AS 37.17.520 - 37.17.690, to assist in the formation, 03 capitalization, and operation of corporations that are licensed under AS 10.13. 04 (b) The department may not authorize new financial assistance under 05 AS 37.17.500 - 37.17.690 without the approval of the legislature. 06 Sec. 37.17.530. BIDCO capitalization loans. Subject to AS 37.17.520(b), a 07 BIDCO capitalization loan for the initial capitalization of a BIDCO shall be made 08 under the terms and conditions that the department determines to be appropriate and 09 that are consistent with AS 37.17.500 - 37.17.690. 10 Sec. 37.17.540. Loan commitment conditions. (a) When issuing a 11 commitment to make a BIDCO capitalization loan, the department shall make the loan 12 closing contingent on 13 (1) the BIDCO receiving a license under AS 10.13, which may occur 14 simultaneously with the loan closing; 15 (2) the BIDCO satisfying the capitalization requirements of 16 AS 37.17.550; and 17 (3) other conditions that the department may impose. 18 (b) The department may not issue a loan commitment under this section unless 19 the department determines that the prospective BIDCO satisfies high quality 20 evaluation standards as determined by the department. The evaluation standards must 21 include the following findings: 22 (1) the loan is likely to substantially promote the purposes of 23 AS 37.17.500 - 37.17.690; 24 (2) the BIDCO's prospective management team is highly qualified to 25 manage the BIDCO; 26 (3) the BIDCO's business plan is a good business plan that, together 27 with the management team, promotes confidence in the prospects for the long-term 28 financial success and viability of the BIDCO; and 29 (4) if the department issues a loan commitment to the BIDCO, it is 30 probable that the BIDCO will be able to satisfy the capitalization requirements of 31 AS 37.17.550. 01 Sec. 37.17.550. Initial capitalization of BIDCO. (a) Subject to 02 AS 37.17.520(b), the initial capitalization of a BIDCO to which the department makes 03 a BIDCO capitalization loan must include 04 (1) at least $500,000 in equity investment in the BIDCO, in addition to 05 any organization costs paid for or owed by the BIDCO; 06 (2) the BIDCO capitalization loan; and 07 (3) additional capital in an amount required by the department and on 08 terms and conditions acceptable to the department; the additional capital may be in the 09 form of debt, grants, equity investment in addition to the minimum equity investment 10 requirement of $500,000 under (1) of this subsection, or a combination of debt, grants, 11 and the equity investment. 12 (b) The minimum equity investment under (a)(1) of this section must be fully 13 received by the BIDCO before or at closing of the BIDCO capitalization loan. The 14 BIDCO capitalization loan shall be fully disbursed to the BIDCO at closing. The 15 additional capital shall also be fully disbursed at closing; however, if the department is 16 satisfied that there is a firm commitment for the additional capital on terms acceptable 17 to the department, that the source for the additional capital will deliver on the firm 18 commitment, and that the documents evidencing the additional capital have been 19 executed and include terms acceptable to the department, the additional capital may be 20 disbursed to the BIDCO on a phased-in basis on terms acceptable to the department. 21 Sec. 37.17.560. Subordination of BIDCO capitalization loan. A BIDCO 22 capitalization loan may be subordinated to the additional capital required under 23 AS 37.17.550(a)(3). 24 Sec. 37.17.570. BIDCO capitalization loan repayment and interest. (a) A 25 BIDCO capitalization loan must be structured so that the full amount of the principal 26 is due in a lump sum at the end of the loan term. 27 (b) Interest on a BIDCO capitalization loan accrues during the loan term and 28 is due at the end of the loan term. 29 Sec. 37.17.580. BIDCO capitalization loan credits. (a) A BIDCO 30 capitalization loan must include a formula that allows the BIDCO to earn credits to 31 reduce the interest and principal owed on the loan. The formula shall be based on 01 increasing jobs and sales in some or all of the businesses financed by the BIDCO and 02 on sustaining the increases. To the extent the department determines appropriate, the 03 department may also provide credits in situations where the BIDCO clearly 04 demonstrates to the department that jobs would have been lost if the BIDCO had not 05 provided financing assistance. 06 (b) The department shall establish procedures and guidelines for the 07 certification by the department of credits earned by a BIDCO under this section, 08 including the circumstances under which the department may deny the credits. Within 09 the guidelines, the specific decisions regarding the granting or denial of the credits are 10 left to the discretion of the department. 11 Sec. 37.17.590. Implementation of BIDCO capitalization loan program. 12 (a) The department shall implement the program for making BIDCO capitalization 13 loans under AS 37.17.500 - 37.17.690 in a manner designed to encourage financing 14 assistance by BIDCOs to businesses throughout the state. Through the use of one or 15 more formulas designed under AS 37.17.580, the department shall provide special 16 incentives to encourage the financing of businesses located in distressed areas, 17 including distressed rural areas, and the financing of minority owned businesses. In 18 this subsection, 19 (1) "minority owned business" means a business that is owned, 20 controlled, and operated by an individual who is a member of a minority and in which 21 more than 50 percent of the net profit or loss attributable to the business accrues to a 22 member of a minority; 23 (2) "member of a minority" includes a person who is black, Hispanic, 24 or Alaska Native. 25 (b) When determining under (a) of this section whether an area is distressed or 26 how distressed an area is, the department may use, individually or in combination, 27 factors that may include unemployment, poverty, lack of access to the state highway 28 system, lack of access to a marine transportation system, or other factors the 29 department determines to be appropriate. 30 Sec. 37.17.600. Terms of BIDCO capitalization loans. When determining 31 the amount or range of amount for a BIDCO capitalization loan, the term to maturity 01 of the loan, the interest rate for the loan, the additional capital requirements for the 02 loan, and the formula for earning credits under the loan, the department shall consider 03 the following objectives: 04 (1) that the BIDCO will have adequate capitalization to support a 05 highly qualified management team, to implement a business plan that, when combined 06 with the management team, will promote confidence in the prospects of the BIDCO 07 for long-term financial success and viability, and to otherwise promote the purposes of 08 AS 37.17.500 - 37.17.690; 09 (2) that the additional capital requirement is in an amount that 10 encourages the BIDCO to raise as much capital as feasible from sources other than the 11 BIDCO capitalization loan, without unduly hindering the ability of the BIDCO to 12 become operational; 13 (3) that the formula for earning credits under AS 37.17.580, combined 14 with the other terms and conditions of the loan, will be designed so that with a 15 reasonable performance by the BIDCO, the BIDCO will be able to earn sufficient 16 credits to reduce the amount of principal and interest owed on the loan to zero by or 17 before the end of the loan term; and 18 (4) that the formula for earning credits under AS 37.17.580, combined 19 with the other terms and conditions of the loan, is sufficiently challenging that the 20 special incentives provided by the credits allowed under AS 37.17.580 remain in 21 effect for the longest feasible time during the loan term as is consistent with meeting 22 the other objectives identified in this section. 23 Sec. 37.17.610. Access to meetings and information. While a BIDCO loan 24 is outstanding and the obligations of the BIDCO to the department remain 25 undischarged, the BIDCO shall allow the department to have a representative present 26 at all meetings of the BIDCO's board of directors and of the BIDCO's shareholders, to 27 receive all notices and information sent to the board of directors or the shareholders, to 28 have the same access to information about the BIDCO as the directors have and as the 29 shareholders have, and to receive additional reports or information from the BIDCO 30 that the department reasonably requests. 31 Sec. 37.17.620. BIDCO operation limitation. While a BIDCO loan is 01 outstanding and the obligations of the BIDCO to the department remain undischarged, 02 the BIDCO may not provide financing assistance to businesses located outside the 03 state. If a business assisted by the BIDCO has multi-state or multi-national operations, 04 the location of the business is where the largest economic benefit of the financing 05 assistance transaction made by the BIDCO to the business is likely to occur. 06 Sec. 37.17.630. Surrender of BIDCO license. While a BIDCO loan is 07 outstanding and the obligations of the BIDCO to the department are not discharged, 08 the BIDCO may not surrender its license under AS 10.13 without the written consent 09 of the department. 10 Sec. 37.17.640. Closing assistance. If determined by the department to be 11 advisable, the department may use money in the Alaska BIDCO fund to provide 12 assistance to a person to complete the tasks necessary for the person to achieve a 13 closing on a BIDCO capitalization loan. The department may provide the assistance 14 on the terms and conditions that the department determines appropriate. 15 Sec. 37.17.650. Confidentiality. In order to promote the purposes of 16 AS 37.17.500 - 37.17.690, the department may establish policies under which it will 17 keep confidential proprietary information submitted to the department by an applicant 18 for a loan or other financial assistance under AS 37.17.500 - 37.17.690 and by a 19 BIDCO that has received a loan or other financial assistance under AS 37.17.500 - 20 37.17.690. The information that is determined to be confidential under this section is 21 not a public record under AS 40.25.110 - 40.25.220. 22 Sec. 37.17.660. Subsequent loans. Subject to the provisions of 23 AS 37.17.520(b), if the department determines that a BIDCO, after receiving a 24 BIDCO capitalization loan, has performed well financially and in promoting the 25 purposes of AS 37.17.500 - 37.17.690, and if more than four years have elapsed since 26 the loan was made, the department may make an additional loan to the BIDCO, on the 27 terms and conditions that the department considers appropriate. 28 Sec. 37.17.690. Definitions. In AS 37.17.500 - 37.17.690, 29 (1) "additional capital" means the additional capital required under 30 AS 37.17.550(a)(3); 31 (2) "BIDCO" means a corporation licensed under AS 10.13; 01 (3) "BIDCO capitalization loan" means a loan made under 02 AS 37.17.530 for the initial capitalization of a BIDCO; 03 (4) "BIDCO loan" means a BIDCO capitalization loan or a subsequent 04 loan made under AS 37.17.660; 05 (5) "department" means the Department of Community and Economic 06 Development. 07 * Sec. 6. AS 44.33.020 is amended by adding a new paragraph to read: 08 (44) administer the Alaska BIDCO assistance program under 09 AS 37.17.500 - 37.17.690 and adopt regulations to carry out the provisions of those 10 statutes. 11 * Sec. 7. AS 44.88.080 is amended by adding new paragraphs to read: 12 (27) to oversee the administration of outstanding grants awarded by the 13 Alaska Science and Technology Foundation under former AS 37.17.010 - 37.17.110; 14 (28) to oversee the administration of outstanding BIDCO assistance 15 grants and loans made by the Alaska Science and Technology Foundation under 16 former AS 37.17.200 - 37.17.390. 17 * Sec. 8. AS 37.17.010, 37.17.020, 37.17.030, 37.17.040, 37.17.050, 37.17.060, 37.17.070, 18 37.17.080, 37.17.090, 37.17.100, 37.17.110, 37.17.200, 37.17.210, 37.17.220, 37.17.225, 19 37.17.230, 37.17.240, 37.17.250, 37.17.260, 37.17.270, 37.17.280, 37.17.290, 37.17.300, 20 37.17.310, 37.17.320, 37.17.330, 37.17.340, 37.17.350, 37.17.360, 37.17.390, 37.17.400, 21 37.17.410, 37.17.420, 37.17.430, 37.17.440; AS 39.25.110(25); and AS 44.99.030(a)(11) are 22 repealed. 23 * Sec. 9. Subject to appropriation, the money in the Alaska science and technology 24 endowment established in former AS 37.17.020 is transferred to the general fund. 25 * Sec. 10. Subject to appropriation, the money in the international trade and business 26 endowment established in former AS 37.17.440 is transferred to the general fund. 27 * Sec. 11. The uncodified law of the State of Alaska is amended by adding a new section to 28 read: 29 TRANSITION PROVISIONS. (a) Notwithstanding the amendment or repeal of a 30 statute by this Act, regulations that were adopted under authority of those statutes and that 31 were in effect on the day before the effective date of this Act remain in effect and may 01 (1) be implemented and enforced by the Department of Community and 02 Economic Development as necessary to carry out the functions assigned to it by this Act, until 03 regulations adopted by that department to implement this Act take effect; 04 (2) continue to be implemented and enforced by the Alaska Industrial 05 Development and Export Authority as necessary to carry out the functions assigned to it by 06 this Act. 07 (b) AS 37.17.090(g) and (i), as those statutes appeared on the day before the effective 08 date of this Act, continue to apply to a grant and a grantee under former AS 37.17.010 - 09 37.17.110 until those former statutes by their own terms would no longer apply to the grant or 10 grantee. However, the fair and reasonable return required to be paid by a grantee under 11 former AS 37.17.090(g) and under the terms of the respective grant agreement shall be paid 12 into the general fund. On the effective date of this Act, any security interest or ownership 13 interest acquired under former AS 37.17.090(g) is transferred from the Alaska Science and 14 Technology Foundation to the Alaska Industrial Development and Export Authority as 15 successor in interest. 16 (c) AS 37.17.090(g), 37.17.230 - 37.17.330, 37.17.350, and 37.17.390, as those 17 statutes appeared on the day before the effective date of this Act, continue to apply to a 18 BIDCO that received a loan or other financial assistance under former AS 37.17.200 - 19 37.17.390 before the effective date of this Act until those former statutes by their own terms 20 no longer would apply to that BIDCO. However, the fair and reasonable return required to be 21 paid by a BIDCO grantee under former AS 37.17.090(g), former AS 37.17.225, and under the 22 terms of the respective grant agreement shall be paid into the general fund. 23 (d) Contracts, rights, liabilities, and obligations created by or under a law amended or 24 repealed by this Act, and in effect on the day before the effective date of this Act, remain in 25 effect notwithstanding this Act's taking effect. 26 * Sec. 12. This Act takes effect July 1, 2003.