HOUSE BILL REPORT

E2SSB 6220

As Amended by the House

BYSenate Committee on Ways & Means (originally sponsored by Senators Anderson, Halsan, Deccio, Owen, Saling, Smitherman, Stratton, DeJarnatt, Warnke, Lee, Cantu, West, McMullen, Fleming, Williams, Conner, Hayner and Garrett)

Changing provisions relating to business and industrial development corporations.

House Committe on Trade & Economic Development

Majority Report:  Do pass with amendments.  (17)

      Signed by Representatives Vekich, Chair; Wineberry, Vice Chair; Amondson, Beck, Cantwell, Doty, Fox, Grant, Hargrove, Holm, Kremen, McLean, Moyer, Rasmussen, Schoon, B. Williams and J. Williams.

Minority Report:  Do not pass.  (1)

      Signed by Representative Heavey.

House Staff:Stephen Hodes (786-7092)

Rereferred House Committee on Ways & Means

Majority Report:  Do pass with amendments by Committee on Ways & Means without amendments by Committee on Trade & Economic Development.  (24)

      Signed by Representatives Grimm, Chair; Bristow, Vice Chair; Appelwick, Basich, Belcher, Braddock, Brekke, Dellwo, Ebersole, Fuhrman, Grant, Hine, Holland, Locke, McLean, Nealey, Peery, Rust, Sayan, H. Sommers, Spanel, Sprenkle, Valle and Wang.

House Staff:      Susan Kavanaugh (786-7136)

AS PASSED HOUSE MARCH 3, 1988

BACKGROUND:

Business and industrial development corporations (BIDCOs) are financial institutions which provide intermediate-term debt to finance new product development or market expansion.  BIDCOs are private financial institutions, authorized and regulated by state governments, supplementing existing financial institutions, which can offer a wide range of financing assistance to businesses. BIDCOs may utilize the federal Small Business Administration's loan guarantee programs.  BIDCOs have been authorized in recent years in other states, most notably in California and Michigan.  Other states, including Massachusetts and Maine, have established state-chartered, privately capitalized institutions to respond to the need for intermediate-term debt by local businesses.

SUMMARY:

The Industrial Development Corporation Act of 1963 is amended.  The requirement that financial institutions be members and have voting control is eliminated.  Business and industrial development corporations' (BIDCO) investments are to be in firms with a majority of their work force in Washington state.  Fewer people are required to form a corporation and they are given greater flexibility in operation.

BIDCOs must be certified by the state Supervisor of Banking, in consultation with the directors of the Departments of Trade and Economic Development and Community Development.  Such certification may be revoked if the BIDCO fails to act in a safe and sound manner or fails to make moderate risk capital available to firms.  Certification requirements include minimum equity capital of $1,000,000 and $1,000,000 in lendable funds.  A $3,000 certification fee is required.  The Supervisor is directed to examine BIDCOs at least once every eighteen months and to make quarterly reports as to their condition.  Reserve requirements for BIDCOs may be established by the Supervisor of Banking.

The Department of Trade and Economic Development and the Department of Community Development are authorized to provide technical assistance to persons forming BIDCOs.  Industrial development corporations currently in operation are permitted to continue to operate under provisions of law in effect before the effective date of the act.

Fiscal Note:      Requested February 16, 1988.

House Committee ‑ Testified For:    (Trade & Economic Development)  Senator Halsan; Penny Peabody, Seattle-King County Economic Development Council; Tom Newton, Lewis County Economic Development Council; Bob Cooper, Spokane Economic Development Council; Allen Schmelzer, Greater Spokane Business Development Association; Don White, Washington Public Ports Association; Bob Levin, Clallam County Economic Development Council.

(Ways & Means)  Senator Anne Anderson, Prime Sponsor; Representative Pete Kremen, Ron Fowler.

House Committee - Testified Against:      (Trade & Economic Development)  None Presented.

(Ways & Means)  None Presented.

House Committee - Testimony For:    (Trade & Economic Development)  Emphasis in the bill is on mid-risk lending.  Broad technical assistance is provided for BIDCOs investing in distressed areas.  There is a real need for growing firms to have access to mid-risk financing.  New tool for assisting businesses.  A BIDCO could be created in Spokane by the end of the year.  BIDCOs complement existing financial institutions.  Meets the need of firms which need the help most and are best able to take advantage of it.

(Ways & Means)  BIDCOs are successful economic development tools in other states.  Tax credits are needed as an initial incentive for investment.  BIDCOs are needed for use of Small Business Administration loan guarantee programs.

House Committee - Testimony Against:      (Trade & Economic Development)  None Presented.

(Ways & Means)  None Presented.

VOTE ON FINAL PASSAGE:

      Yeas 96; Nays 1; Excused 1

Voting Nay: Representative Appelwick

Excused:    Representative McLean