S T A T E O F N E W Y O R K
________________________________________________________________________
8452
2011-2012 Regular Sessions
I N A S S E M B L Y
June 16, 2011
___________
Introduced by M. of A. SCHIMMINGER, SCARBOROUGH, LUPARDO, GABRYSZAK,
MORELLE -- Multi-Sponsored by -- M. of A. BRONSON, RAMOS, REILLY,
ROBERTS, RUSSELL, SPANO, ZEBROWSKI -- (at request of the Empire State
Development) -- read once and referred to the Committee on Economic
Development
AN ACT to amend the New York state urban development corporation act, in
relation to the capital access program and to provide for a new Inno-
vate NY fund; and making appropriations for the support of government
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 16-k of section 1 of chapter 174 of the laws of
1968, constituting the New York state urban development corporation act,
as added by section 1 of part J of chapter 413 of the laws of 1999, is
amended to read as follows:
S 16-k. Capital access program. 1. Definitions. For the purposes of
this section:
(a) "Financial institution", means any bank, trust company, savings
bank, savings and loan association or cooperative bank chartered by the
state or any national banking association, federal savings and loan
association or federal savings bank OR ANY COMMUNITY DEVELOPMENT FINAN-
CIAL INSTITUTION OR COMMUNITY-BASED LENDING ORGANIZATION; provided,
however, that the financial institution has its principal office located
in the state.
(b) "Participating financial institution" shall mean any financial
institution participating in the program established by this section.
(c) "Small business" shall have the same meaning as set forth in
section 131 of the economic development law, whose primary place of
business is in New York state.
2. (a) The corporation, or its agent, shall establish a capital access
program to provide a loan loss reserve to assist small businesses that
otherwise find it difficult to obtain regular bank financing.
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
A LBD13170-01-1
A. 8452 2
(b)(i) Assistance [from this] UNDER THE CAPITAL ACCESS program shall
be provided for a capital access program under which the corporation or
its agent shall be authorized to assist small businesses that otherwise
find it difficult to obtain regular OR SUFFICIENT bank financing. Such
assistance shall take the form of deposits by the corporation or its
agent in the reserve funds in participating financial institutions to
fund loan loss reserves for loans made to such small businesses.
(ii) Any financial institution desiring to become a participating
financial institution shall execute an agreement in such form as the
corporation or its agent may prescribe, which agreement shall contain
the terms and provisions set forth in paragraph (c) of this subdivision
and such other terms and provisions as the corporation or its agent may
deem necessary or appropriate.
(c) A participating financial institution originating a loan to a
small business pursuant to this section shall:
(i) provide a plan to the corporation or its agent for the marketing
of the capital access program TO SMALL BUSINESSES, INCLUDING THOSE in
highly distressed areas and to minority- and women-owned businesses,
with appropriate lending objectives identified by the financial institu-
tion for such areas and businesses;
(ii) disperse funds for the purposes of expansion, facility/technology
upgrading, start-up and working capital;
(iii) not disperse funds which exceed an amount greater than five
hundred thousand dollars;
(iv) set aside an amount, specified OR AGREED TO by the corporation or
its agent, [but which shall not be] FROM BOTH THE PARTICIPATING FINAN-
CIAL ORGANIZATION AND THE SMALL BUSINESS, NOT less than [one and one-
half] THREE percent nor more than [three and one-half] SEVEN percent of
the principal amount of the loan, WHEREBY THE AMOUNT CONTRIBUTED BY THE
SMALL BUSINESS DOES NOT EXCEED FIFTY PERCENT OF THE TOTAL AMOUNT
CONTRIBUTED BY THE SMALL BUSINESS AND THE FINANCIAL INSTITUTION, into a
loan loss reserve which the institution shall maintain, applicable to
all such loans by said institution to small businesses pursuant to this
section; AND
(v) [obtain from the small business an amount equal to the reserve
contribution made by the participating financial institution with
respect to such loan;
(vi) set aside such amount into said loan loss reserve maintained by
the participating financial institution applicable to all loans pursuant
to this section; and
(vii)] certify to the corporation or its agent in such a fashion and
with such supporting information as the corporation or its agent shall
prescribe, that it has made such loan and has set aside its contribution
and the [equal] contribution of the small business.
(d) The corporation or its agent shall after such certification as
provided in subparagraph [(vii)] (V) of paragraph (c) of this subdivi-
sion, transfer to the participating financial institution an amount
equal to the total of the contributions of the participating financial
institution and the small business or such additional amount up to one
hundred fifty percent of such contributions as determined by the corpo-
ration or its agent. The participating financial institution shall set
aside such amount so received into said loan loss reserve.
(e) In the event the participating financial institution suffers a
loss on any such loan, it may in its discretion draw upon the funds in
such loan loss reserve to repay the loan in whole or in part.
A. 8452 3
(f) All amounts set aside by the participating financial institution
into said loan loss reserve shall be in an account at said institution.
(g) Earnings or interest from the principal of said loan loss reserve
accounts shall be:
(i) maintained in the account and held as additional loan loss
reserves; and
(ii) available to the corporation or its agent at any time and from
time to time, to be used to defray the costs of administering the
program or to replenish the loan loss reserve account of the corporation
or its agent.
(H) THE CORPORATION SHALL ASSURE ADEQUATE GEOGRAPHIC DISTRIBUTION OF
PARTICIPATING FINANCIAL INSTITUTIONS THROUGHOUT THE STATE TO THE EXTENT
FEASIBLE.
3. Administration of the capital access program. (a) The corporation
is hereby authorized to do the following:
(i) enter into a contract with A THIRD PARTY FINANCIAL INSTITUTION,
WHICH MAY BE the New York business development corporation, [hereinafter
referred to as NYBDC,] established under section 210 of the banking law,
to act as the agent of the corporation with respect to the adminis-
tration of the program, PROVIDED THAT THE SELECTION OF A THIRD PARTY
OTHER THAN THE NEW YORK BUSINESS DEVELOPMENT CORPORATION SHALL BE MADE
PURSUANT TO A COMPETITIVE PROCESS;
(ii) conduct an annual review and assessment of the performance of the
[NYBDC] THIRD PARTY in its capacity as agent for the corporation to
determine whether the contract referenced in subparagraph (i) of this
paragraph should be renewed for an additional two year period. The
review shall be based on whether the [NYBDC] THIRD PARTY AGENT has
satisfactorily met the terms and conditions of the contract;
(iii) where an initial determination finds that the [NYBDC's] THIRD
PARTY AGENT'S performance is unsatisfactory, allow the [NYBDC] THIRD
PARTY AGENT the opportunity to take corrective action;
(iv) where a final review of the [NYBDC's] THIRD PARTY AGENT'S
performance continues to conclude that the [NYBDC's] THIRD PARTY AGENT'S
performance is unsatisfactory, submit to the speaker of the assembly and
the temporary president of the senate its recommendation to terminate
the contract with the [NYBDC] THIRD PARTY AGENT and transfer the
contract to another agent; and
(v) promulgate rules and regulations with respect to the implementa-
tion of the capital access program established by this section and any
other rules and regulations necessary to fulfill the purposes of this
section, in accordance with the state administrative procedure act, and
WHICH shall be consistent with the program plan required by subdivision
19 of section 100 of the economic development law.
(b) Any contract entered into pursuant to subparagraph (i) of para-
graph (a) of this subdivision shall:
(i) be for a period of two years and shall be renewed for an addi-
tional two year period subject to requirements of subparagraph (ii) of
paragraph (a) of this subdivision; and
(ii) provide for compensation for expenses incurred by the [NYBDC]
THIRD PARTY AGENT in connection with its services as agent and for such
other services as the corporation may deem appropriate including, but
not limited to the use of the premises, personnel and personal property
of the [NYBDC] THIRD PARTY AGENT.
S 2. Section 1 of chapter 174 of the laws of 1968, constituting the
New York state urban development corporation act, is amended by adding a
new section 16-u to read as follows:
A. 8452 4
S 16-U. INNOVATE NY FUND. 1. THE INNOVATE NY FUND IS HEREBY CREATED.
THE PURPOSE OF THE INNOVATE NY FUND IS TO MAKE AVAILABLE STATE FUNDS TO
ELIGIBLE APPLICANTS TO SUPPORT EMERGING BUSINESS IDEAS AND PRODUCTS THAT
RESULT IN THE GROWTH OF BUSINESS WITHIN THE STATE AND THE CONCOMITANT
CREATION OF JOBS AND TAX REVENUES FOR THE STATE.
2. ELIGIBLE APPLICANTS FOR INNOVATE NY FUNDS MAY INCLUDE REGIONAL AND
LOCAL ECONOMIC DEVELOPMENT ORGANIZATIONS, TECHNOLOGY DEVELOPMENT ORGAN-
IZATIONS, RESEARCH UNIVERSITIES, AND INVESTMENT FUNDS THAT PROVIDE
SEED-STAGE INVESTMENTS IN NEW YORK STATE COMPANIES.
3. FUNDING FROM THE INNOVATE NY FUND MAY BE MADE AVAILABLE TO THE
APPLICANT FOR INVESTMENT IN BENEFICIARY COMPANIES. IN ORDER TO BE ELIGI-
BLE FOR AN INVESTMENT THAT INCLUDES INNOVATE NY INVESTMENT FUNDS, A
BENEFICIARY COMPANY MUST: (A) BE, OR AGREE IN WRITING TO BE, LOCATED IN
NEW YORK STATE; (B) BE IN THE SEED-STAGE OF DEVELOPMENT, AS DEFINED BY
THE CORPORATION; (C) DEMONSTRATE A POTENTIAL FOR SUBSTANTIAL GROWTH AND
JOB DEVELOPMENT IN AN EMERGING TECHNOLOGY FIELD, AS DEFINED IN SECTION
THIRTY-ONE HUNDRED TWO-E OF THE PUBLIC AUTHORITIES LAW OR IN REGULATIONS
AS ADOPTED BY THE CORPORATION; AND (D) HAVE THE POTENTIAL TO GENERATE
ADDITIONAL ECONOMIC ACTIVITY IN NEW YORK STATE. INVESTMENT PRIORITY
SHALL BE GIVEN TO BENEFICIARY COMPANIES INVOLVED IN COMMERCIALIZATION OF
RESEARCH AND DEVELOPMENT OR HIGH TECHNOLOGY MANUFACTURING.
4. THE CORPORATION SHALL ESTABLISH A COMPETITIVE PROCESS FOR THE EVAL-
UATION OF APPLICANTS FOR THE INNOVATE NY INVESTMENT FUND. APPLICANTS
SHALL BE EVALUATED ON CRITERIA INCLUDING, BUT NOT LIMITED TO, THE APPLI-
CANT'S: (A) TRACK RECORD OF SUCCESS IN RAISING INVESTMENT FUNDS AND
SUCCESSFULLY INVESTING THEM; (B) CAPACITY TO PERFORM DUE DILIGENCE AND
TO PROVIDE MANAGEMENT EXPERTISE AND OTHER VALUE-ADDED SERVICES TO BENE-
FICIARY COMPANIES; (C) FINANCIAL RESOURCES FOR IDENTIFYING AND INVESTING
IN SEED-STAGE COMPANIES; (D) ABILITY TO SECURE NON-STATE MATCHING
PROGRAM INVESTMENT FUNDS AT A RATIO THAT IS EQUAL TO OR GREATER THAN ONE
TO ONE (1:1); (E) ABILITY TO EVALUATE THE COMMERCIAL POTENTIAL OF EMERG-
ING TECHNOLOGIES; (F) ABILITY TO SECURE PARTNERSHIPS WITH LOCAL OR
REGIONAL INVESTORS; (G) ADOPTION OF CONFLICT OF INTEREST PROVISIONS
ACCEPTABLE TO THE CORPORATION; AND (H) OTHER CRITERIA THAT THE CORPO-
RATION DETERMINES IS RELEVANT TO MAKING INVESTMENT DECISIONS CONSISTENT
WITH THE PURPOSES OF THE FUND AS SET FORTH IN SUBDIVISION ONE OF THIS
SECTION. WHEN AWARDING FUNDS PURSUANT TO THIS SUBDIVISION, THE CORPO-
RATION SHALL ASSURE THAT THE APPLICANTS DEMONSTRATE THE NEED FOR SEED
CAPITAL IN THE AREAS SERVED BY THE APPLICANT AND PROVIDE FOR ADEQUATE
GEOGRAPHIC DISTRIBUTION OF AWARDS TO BENEFICIARY COMPANIES THROUGHOUT
THE STATE TO THE EXTENT FEASIBLE. THE CORPORATION SHALL DISTRIBUTE
FUNDS PROMPTLY PURSUANT TO A DISBURSEMENT PROCESS AGREED TO BETWEEN THE
CORPORATION AND APPLICANT TO ENABLE THE APPLICANT TO FULFILL COMMITMENTS
TO BENEFICIARY COMPANIES IN A TIMELY MANNER.
5. AT THE TIME THE APPLICANT HAS INVESTED FIFTY PERCENT OF THE INNO-
VATE NY FUNDS COMMITTED TO SUCH APPLICANT AND ANNUALLY THEREAFTER,
AGGREGATE INVESTMENTS OF INNOVATE NY FUNDS BY SUCH APPLICANT IN BENEFI-
CIARY COMPANIES SHALL BE LEVERAGED WITH PRIVATE SOURCES OF CAPITAL
EXCLUDING INVESTMENTS AFTER THE INITIAL FUNDING ROUND AT A RATIO EQUAL
TO OR GREATER THAN TWO TO ONE (2:1).
6. THE INNOVATE NY FUND SHALL NOT INVEST AN AMOUNT IN ANY SINGLE BENE-
FICIARY COMPANY THAT EXCEEDS FIVE HUNDRED THOUSAND DOLLARS, OR SEVEN
HUNDRED FIFTY THOUSAND DOLLARS IN THE CASE OF ANY INDIVIDUAL BIOTECHNOL-
OGY-RELATED BENEFICIARY, AT ANY ONE TIME, SUBJECT TO CERTAIN EXCEPTIONS
TO BE ESTABLISHED BY RULES AND REGULATIONS OF THE CORPORATION.
A. 8452 5
7. NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, THE CORPO-
RATION MAY ESTABLISH A PROGRAM FUND FOR PROGRAM USE AND PAY INTO SUCH
FUND ANY ELIGIBLE FUNDS AVAILABLE TO THE CORPORATION FROM ANY SOURCE,
INCLUDING MONEYS APPROPRIATED BY THE STATE.
8. THE CORPORATION SHALL SUBMIT A REPORT ANNUALLY ON DECEMBER THIRTY-
FIRST TO THE DIRECTOR OF THE BUDGET, THE TEMPORARY PRESIDENT OF THE
SENATE, THE SPEAKER OF THE ASSEMBLY, THE MINORITY LEADER OF THE SENATE
AND THE MINORITY LEADER OF THE ASSEMBLY DETAILING (A) THE TOTAL AMOUNT
OF FUNDS COMMITTED TO EACH APPLICANT THAT RECEIVES FUNDS AND THE AMOUNT
OF SUCH FUNDS THAT HAS BEEN INVESTED BY EACH SUCH APPLICANT; (B) THE
AMOUNT OF INNOVATE NY AND PRIVATE FUNDS INVESTED IN EACH BENEFICIARY
COMPANY; (C) THE TYPE OF PRODUCT OR TECHNOLOGY BEING DEVELOPED OR
PRODUCED BY EACH BENEFICIARY COMPANY; (D) THE LOCATION OF EACH BENEFICI-
ARY COMPANY; (E) THE NUMBER OF JOBS PROJECTED TO BE CREATED OR RETAINED;
AND (F) SUCH OTHER INFORMATION AS THE CORPORATION DEEMS NECESSARY.
9. THE CORPORATION IS HEREBY AUTHORIZED TO PROMULGATE RULES AND REGU-
LATIONS IN ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT AS ARE
NECESSARY TO FULFILL THE PURPOSES OF THIS SECTION, INCLUDING WITH
RESPECT TO REASONABLE MANAGEMENT FEES, PROMOTES, SHARE OF RETURN AND
OTHER FEES AND CHARGES OF APPLICANTS THAT RECEIVE FUNDS, AND TO PROVIDE
FOR THE REPAYMENT OF FUNDS RECEIVED BY THE BENEFICIARY COMPANY IF THE
BENEFICIARY COMPANY LEAVES NEW YORK STATE WITHIN A PERIOD OF TIME TO BE
ESTABLISHED BY THE CORPORATION.
10. IN ACCORDANCE WITH THE RULES AND REGULATIONS TO BE PROMULGATED BY
THE CORPORATION, THE CORPORATION MAY IMPOSE FEES, ESTABLISH REPAYMENT
TERMS AND PROVIDE FOR EQUITY PARTICIPATION BY THE CORPORATION IN
CONNECTION WITH INVESTMENTS FROM THE INNOVATE NY FUND.
11. THE PROVISIONS OF SECTION TEN AND SUBDIVISION TWO OF SECTION
SIXTEEN OF THIS ACT SHALL NOT APPLY TO ASSISTANCE PROVIDED UNDER THIS
SECTION.
S 3. a) The several amounts specified in this act for aid to locali-
ties, or so much thereof as shall be sufficient to accomplish the
purposes designated by the appropriations, are hereby appropriated and
authorized to be paid as hereinafter provided, to the respective public
officers and for the several purposes specified.
b) Where applicable, appropriations made by this act for expenditures
from federal grants for aid to localities may be allocated for spending
from federal grants for any grant period beginning, during, or prior to,
the state fiscal year beginning on April 1, 2011 except as otherwise
provided.
c) No moneys appropriated by this act shall be available for payment
until a certificate of approval has been issued by the director of the
budget, who shall file such certificate with the department of audit and
control, the chairperson of the senate finance committee and the chair-
person of the assembly ways and means committee.
d) The appropriation contained within this section is based on the
amount of federal moneys estimated to become available within the funds
for which this appropriation provides. Disbursements from this appropri-
ation shall be limited to the actual amounts received in such funds from
the federal government.
e) The appropriations contained in this act shall be available for the
fiscal year beginning on April 1, 2011 except as otherwise provided.
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DEPARTMENT OF ECONOMIC DEVELOPMENT
SMALL BUSINESS CREDIT INITIATIVE PROGRAM .................... 55,351,534
Special Revenue Funds - Federal
Federal Operating Grant Fund
Small Business Credit Initiative Account
For programs and activities authorized
pursuant to section sixteen-f of the new
york state urban development corporation
act, including any services and costs
associated with administration of such
programs and activities, subject to the
limitations imposed by federal funding
requirements. Notwithstanding any
provision of law to the contrary, such
moneys shall be paid by the department of
economic development to the new york state
urban development corporation from federal
operating grant moneys deposited in the
state treasury for the federal state small
business credit initiative. Provided
further that, notwithstanding any incon-
sistent provision of law, subject to the
approval of the director of the budget,
funds appropriated herein may be inter-
changed with any other item of appropri-
ation to be funded from the small business
credit initiative account ................... 10,405,173
For programs and activities authorized
pursuant to section sixteen-k of the new
york state urban development corporation
act, including any services and costs
associated with administration of such
programs and activities, subject to the
limitations imposed by federal funding
requirements. Notwithstanding any
provision of law to the contrary, such
moneys shall be paid by the department of
economic development to the new york state
urban development corporation from federal
operating grant moneys deposited in the
state treasury for the federal state small
business credit initiative. Provided
further that, notwithstanding any incon-
sistent provision of law, subject to the
approval of the director of the budget,
funds appropriated herein may be inter-
changed with any other item of appropri-
ation to be funded from the small business
credit initiative account ................... 18,994,204
For programs and activities authorized
pursuant to section sixteen-u of the new
york state urban development corporation
A. 8452 7
act, including any services and costs
associated with administration of such
programs and activities, subject to the
limitations imposed by federal funding
requirements. Notwithstanding any
provision of law to the contrary, such
moneys shall be paid by the department of
economic development to the new york state
urban development corporation from federal
operating grant moneys deposited in the
state treasury for the federal state small
business credit initiative. Provided
further that, notwithstanding any incon-
sistent provision of law, subject to the
approval of the director of the budget,
funds appropriated herein may be inter-
changed with any other item of appropri-
ation to be funded from the small business
credit initiative account ................... 25,952,157
S 4. This act shall take effect immediately.