A2687

ASSEMBLY, No. 2687

STATE OF NEW JERSEY

INTRODUCED JANUARY 29, 1997

By Assemblymen MALONE, ASSELTA, Assemblywomen Heck, J. Smith, Assemblymen Kelly, Wolfe, Azzolina, Corodemus, Geist, Blee, Augustine, Arnone, T. Smith, Gregg, Holzapfel, Cottrell, Moran, Gibson, DeCroce, LeFevre, Assemblywoman Crecco, Assemblymen Romano, Doria and Garcia

An Act to provide for the availability of seed capital for leveraging certain private monies and amending the "Export Financing Opportunities Act," approved August 14, 1995 (P.L.1995, c.209, C.34:1B-93 et seq.), and the "New Capital Sources Partnership Act," approved December 22, 1995 (P.L.1995, c.293, C.34:1B-107 et seq.), and making an appropriation therefor.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 2 of P.L.1995, c.209 (C.34:1B-94) is amended to read as follows:

2. The Legislature finds and declares that:

a. Currently, despite the existence of banks with active international export departments, small and medium-sized businesses in New Jersey find it difficult to obtain pre-export financing and other export finance services needed to defray the costs of potentially profitable orders.

b. Although there is currently a State-sponsored export working capital program for small and medium-sized businesses and an export loan guarantee program offered in conjunction with participating banks, relatively few transactions have been approved under these programs.

c. The public interest calls for encouraging the growth of exports [and] of small and medium-sized businesses as well as providing stimulation to the economy and to employment by the creation of an export financing company supported by both public and private funds.

d. The public funding of an export financing company shall be accomplished by the purchase of stock in the company by the New Jersey Economic Development Authority and other public entities involved in international export markets, such purchases to be specifically limited as to the percentage of participation.

e. The capitalization of the export financing company would be so structured that the New Jersey Economic Development Authority and other public entities would incur minimal risk on their investment, with private investors assuming most of the risk and earning more of the profits should the new venture prove successful.

f. The Legislature further finds and declares that the Assembly Task Force on Business Retention, Expansion and Export Opportunities recommended certain initiatives in August 1994 that were passed by the Legislature and signed into law by the Governor in 1995.

g. In furtherance of the purposes of one of those initiatives, the "Export Financing Opportunities Act," P.L.1995, c.209, (C.34:1B-93 et seq.), it is in the public interest to use public monies from the State "Unclaimed Personal Property Trust Fund" to provide matching public capital to further leverage private monies to provide specialized export financing for small or medium-sized firms, which would not otherwise be available through traditional lending institutions or public agencies.

(cf: P.L.1995, c.209, s.2)

2. Section 4 of P.L.1995, c.209 (C.34:1B-96) is amended to read as follows:

4. The authority is authorized, notwithstanding any law to the contrary, to invest such moneys from the "Economic Recovery Fund," established pursuant to section 3 of P.L.1992, c.16 (C.34:1B-7.12), [or] from other export or business assistance programs administered by the authority, or any other monies as may be available and which the authority deems appropriate for the purposes of this act, in an export financing company, hereinafter "the company," to be incorporated pursuant to the provisions of this act, which, together with those investments which may be made in the stock of the company by other public entities involved in international export markets that may include, but not necessarily be limited to, the Delaware River Port Authority and the Port Authority of New York and New Jersey, shall be at a minimum amount to be determined by the Export Finance Company Advisory Council established pursuant to section 7 of this act. The moneys shall be used for the purchase of stock in the company, provided that the class of stock purchased by the authority and other public entities shall be of such type and character as to require the company to repay the investment of funds from the authority and other public entities prior to the repayment of funds from private sources, but in no event shall the amount of such stock purchased by the authority and other public entities exceed 49% of the total outstanding stock of the company. The authority is authorized in its discretion to sell or otherwise dispose of the stock purchased by the authority as shall be in the interest of the authority but the authority shall sell or otherwise dispose of the stock no later than three years after the date of purchase.

(cf: P.L.1995, c.209, s.4)

3. (New section) There is appropriated $6,000,000 from the General Fund to the New Jersey Economic Development Authority for the purpose of investing such money in an export finance company, pursuant to the provisions of section 4 of P.L.1995, c.209 (C.34:1B-96). This amount shall be charged to amounts required to be transferred to the General Fund from the Unclaimed Personal Property Trust Fund pursuant to R.S.46:30B-74.

4. Section 2 of P.L.1995, c.293 (C.34:1B-108) is amended to read as follows:

2. The Legislature finds and declares that:

a. Businesses with a small capital investment are an essential part of the economy of the State in terms of products and services and as employers;

b. While New Jersey is a "capital rich" State, the connection of capital with those seeking equity investment has not readily taken place;

c. At various times in the past, efforts have been made to raise capital for the purpose of making equity investments in small capital businesses;

d. In its report issued in August of 1994, the Assembly Task Force on Business Retention, Expansion, and Export Opportunities specifically called for greater use of Small Business Investment Companies and identified the development of private sources of small business equity capital as a major need for the State. Then in October of 1994, the New Jersey Economic Development Authority (EDA) issued a Request for Proposal seeking a Fund Manager to serve as a General Partner for the development and implementation of a well diversified venture capital pool for investment in small business growth, encouraged use of Small Business Investment Companies and pledged an initial investment to this pool from the EDA of $2.5 million;

e. Efforts such as that currently initiated by the EDA with the commitment of government funds have had difficulty in the past in gaining private investor support and thus, for the most part, have not provided much assistance in the way of small business development and expansion.

f. The Legislature further finds that the Assembly Task Force on Business Retention, Expansion and Export Opportunities recommended certain initiatives in August 1994 that were passed by the Legislature and signed into law by the Governor in 1995.

g. The Legislature therefore determines that the establishment of a private partnership to act as a source of new private capital to be used as equity capital for small capital businesses is necessary, that the partnership initially should be formed with individuals who are willing to commit private capital for equity investments, and that the partnership should be enlarged by seeking commitments from financial institutions and other entities seeking to encourage the development and expansion of small capital businesses in this State, by cooperation with State entities engaged in similar efforts and, where appropriate, by gaining the commitment of State funds to match private investor funds.

h. The Legislature further determines that, in furtherance of the purposes of one of these 1995 initiatives, the "New Capital Sources Partnership Act," P.L.1995, c.293, (C.34:1B-107 et seq.), it is in the public interest to use public monies from the State "Unclaimed Personal Property Trust Fund" to provide matching seed capital to further leverage private monies in the financing of business growth and expansion transactions, which would not otherwise be available through traditional lending institutions or public agencies.

(cf: P.L.1995, c.293, s.2)

5. Section 4 of P.L.1995, c.293 (C.34:1B-110) is amended to read as follows:

4. a. There is established a New Capital Sources Board in, but not of, the Department of Commerce and Economic Development. The board shall be made up of eleven members: one shall be the Commissioner of Commerce and Economic Development, or his designee; one shall be the Chairman of the New Jersey Economic Development Authority, or his designee; three public members shall be appointed by the Governor; three public members shall be appointed by the President of the Senate; and three public members shall be appointed by the Speaker of the General Assembly, one of whom shall be designated as chair of the board. The appointment of the members shall take place within 45 days of the effective date of this act. The appointee of the Speaker of the General Assembly designated as chair of the board shall convene the board as soon as is practicable following the appointment of at least six public members to the board. The members appointed to this board shall consist of individuals with extensive experience in banking and venture capital financing.

b. The members of the board shall serve without compensation.

c. The board is authorized, empowered and directed to:

(1) Develop a form of organization and a plan of operation for the New Capital Sources Partnership consistent with the purposes of that partnership as set forth pursuant to section 5 of this act. In so doing the board shall consider, but not be limited to, the form of organization, plan of operation and experiences of the Massachusetts Business Development Corporation and the experience of the Michigan Strategic Fund in the formation of private financial institutions in the Commonwealth of Massachusetts and the State of Michigan, respectively, for business development purposes.

(2) Seek out and gain commitments from persons, natural and otherwise, to be initial investors in and incorporators of the New Capital Sources Partnership.

(3) Cooperate and coordinate its efforts at gaining a private source of equity capital for small business development in this State with the Department of Commerce and Economic Development, and any private sector nonprofit entity designated by the department, which may include a nonprofit corporation organized to implement the recommendations of the New Jersey Economic Master Plan Commission established pursuant to Executive Order No. 1 issued by the Governor on January 18, 1994.

d. The Department of Commerce and Economic Development, the New Jersey Economic Development Authority and all other departments and agencies of the State which are engaged in economic development shall cooperate with the board to assist it in the accomplishment of its mission including technical, financial or other assistance.

e. Within one year of the effective date of this act, the board shall provide the Governor and the Legislature with the results of its accomplishments under subsection c. of this section, including information on the incorporation of the New Capital Sources Partnership.

f. Nothing in this act shall prohibit public members of the board from being among those investors who form the New Capital Sources Partnership.

g. The board shall expire at the end of 13 months from the effective date of this act.

(cf: P.L.1995, c.293, s.4)

6. a. (New section) There is appropriated $5,000,000 from the General Fund to the New Jersey Economic Development Authority for the authority to apply to the pooling of funds to be created by the New Capital Sources Partnership Board to be incorporated as the New Capital Sources Partnership, pursuant to the provisions of section 4 of P.L.1995, c.293 (C.34:1B-110). This amount shall be charged to amounts required to be transferred to the General Fund from the Unclaimed Personal Property Trust Fund pursuant to R.S.46:30B-74.

b. Within 60 days of the incorporation of the New Capital Sources Partnership pursuant to section 4 of P.L.1995, c.293 (C.34:1B-110), the authority shall pay over the funds to the New Capital Sources Partnership pursuant to subsection a. of this section.

7. This act shall take effect immediately.

STATEMENT

This bill provides for the availability of seed capital which will be used to leverage private monies for the purposes of the "Export Financing Opportunities Act" and the "New Capital Sources Partnership Act."

Specifically, the legislation makes an appropriation of $11 million from the State General Fund, from amounts required to be transferred to that fund from the "Unclaimed Personal Property Trust Fund," to be used by the New Jersey Economic Development Authority for the purposes of: 1) purchasing stock in the proposed export finance company, established pursuant to the "Export Financing Opportunities Act," and 2) investing in the "New Capital Sources Partnership," a private partnership program to finance business growth and expansion, established pursuant to the "New Capital Sources Partnership Act." These monies will leverage private monies.

The source of funds directed to these two aforementioned programs represent a very small portion of the unclaimed bank accounts, securities and other property held in the "Unclaimed Personal Property Trust Fund" for a certain period of time and then transferred to the General Fund, as specified under the "Uniform Unclaimed Property Act." Approximately $50 million is transferred to the State every year from the Trust Fund.

The Assembly Task Force on Business Retention, Expansion and Export Opportunities recommended the establishment of a private, for-profit, State-sponsored export finance company to finance export transactions on the basis of the merits of an export project, not the collateral of small or medium-sized firms in their developing stages, thereby making the process more user friendly. The Task Force also recommended the creation of the New Capital Sources Partnership to act as a source of equity capital for business start-ups and small business growth and expansion. This partnership will supplement other ongoing efforts with similar purposes.

Provides for availability of seed capital to leverage private monies for purposes of "Export Financing Opportunities Act" and "New Capital Sources Partnership Act;" appropriates $11 million.