SENATE BILL REPORT

EHB 1124

BYRepresentatives Day, Vekich, Schoon, McMullen, B. Williams, Jesernig, P. King, Ferguson and Holm

Revising provisions on industrial development corporations.

House Committe on Trade & Economic Development

Senate Committee on Commerce & Labor

Senate Hearing Date(s):April 2, 1987

Majority Report:  Do pass.

      Signed by Senators Warnke, Chairman; Smitherman, Vice Chairman; Vognild, West, Williams, Wojahn.

Senate Staff:Jack Brummel (786-7428)

                  April 2, 1987

AS REPORTED BY COMMITTEE ON COMMERCE & LABOR, APRIL 2, 1987

BACKGROUND:

The Industrial Development Corporation Act of 1963 was intended to stimulate the Washington economy via equity investments and loans through the creation of industrial development corporations.  Only two such corporations have been formed, neither of which are currently operating in the state.  The need for an effective program to increase investment in Washington businesses is underscored by the low rate of new business incorporation in the state and the difficulty in obtaining capital experienced by Washington firms that don't meet current commercial bank or venture capital criteria.

SUMMARY:

The Industrial Development Corporation (IDC) Act of 1963 is amended.  The requirement that financial institutions be members and have voting control is eliminated.  Industrial development corporation investments are to be in firms with a majority of their workforce in Washington state and with fewer than 250 employees.  Fewer people are required to form an industrial development corporation and they are given greater flexibility in operations.

The amount of capital necessary to start an industrial development corporation is increased to $2 million.  The amount of earned surplus required is changed from one-half of the capital stock to one-quarter, which serves as a reserve to cover losses.  The main loan limitations placed on financial institutions in the 1963 Act remain unchanged.  The limitations protect the depositors and stockholders of those companies from excessive risk taking.  The reporting requirements on industrial development corporations are increased.  Existing industrial development corporations are permitted to incorporate under the provisions of 31.24.020 in force when articles of incorporation were filed or under new provisions.

Local counties, cities, and towns are authorized to create a county seed capital pool to operate within their boundaries.  Such pools shall provide funds in the form of loans or the purchase of qualified securities to finance new enterprises or to assist in the development of new products.  Local seed capital pools shall be governed by seven-member boards appointed by the local governing body.  Board members shall be local citizens with expertise in small business, new business development, and business finance, and shall include members of the general public.  County commissions in contiguous counties may combine to form multi-county seed capital pools.  Procedures for determining the eligibility of corporations for local seed capital pool investments shall be determined by local governing bodies.

Local governing bodies may request utilities providing water distribution and sewerage collection services to include printed materials in their billings to consumers providing for consumer check-off of at least one dollar per month to finance local seed capital pools.  Consumers shall permit consumers to denote the amount of funds to be donated monthly, if any.  Water and sewer utilities shall collect such sums as consumers indicate they want to donate, and shall forward monies to local seed capital pools.  Utilities are permitted to charge local seed capital pools up to 3 percent of the funds collected to defray billing and processing costs.

Fiscal Note:      available

Senate Committee - Testified: No one