SENATE BILL REPORT

E2SSB 5398

BYSenate Committee on Ways & Means (originally sponsored by Senators Halsan, Fleming, Sellar, Warnke, Lee, Cantu, Tanner, Smitherman, Anderson and Wojahn)

Changing provisions relating to industrial development corporations.

Senate Committee on Commerce & Labor

Senate Hearing Date(s):February 23, 1987; March 2, 1987

Majority Report:  That Substitute Senate Bill No. 5398 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

      Signed by Senators Warnke, Chairman; Smitherman, Vice Chairman; Anderson, Sellar, Vognild, West.

Senate Staff:Jack Brummel (786-7428)

                  March 3, 1987

Senate Committee on Ways & Means

Senate Hearing Date(s):March 5, 1987

Majority Report:  That Second Substitute Senate Bill No. 5398 be substituted therefor, and the second substitute bill do pass.

      Signed by Senators McDermott, Chairman; Gaspard, Vice Chairman; Bauer, Fleming, Kreidler, Owen, Rinehart, Talmadge, Vognild, Warnke, Williams, Wojahn.

Senate Staff:Stephen Rose (786-7443)

                  March 23, 1987

AS PASSED SENATE, MARCH 19, 1987

BACKGROUND:

The 1963 Industrial Development Corporation Act was intended to stimulate the Washington economy via equity investments and loans made by industrial development corporations.  Only two such corporations have been formed, neither of which are currently operating.  The need for an effective program to increase investment in Washington businesses is underscored by the state's low rate of new business incorporations 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 Act of 1963 is amended.  The requirement that financial institutions be members and have voting control is eliminated.  Business and industrial development corporation's (BIDCO) investments are to be in firms with a majority of their workforce in Washington state. Fewer people are required to form a BIDCO and they are given greater flexibility in operation.  The amount of capital necessary to start a BIDCO is increased to $1 million in equity and $1 million in lendable funds.  The Department of Trade and Economic Development provides technical assistance to BIDCOs in formation.  BIDCOs may contract with the Department to deliver management assistance to firms but one-half of the firms must enter first-source agreements to interview first from a list of unemployed individuals.

BIDCOs must meet certification requirements prior to approval of corporate documents. BIDCOs are required to make quarterly reports but the Supervisor of Banking is not to consider riskiness in regulating the BIDCOs' activities unless it constitutes gross mismanagement. Tax credits are available to investors in BIDCOs starting at 25 percent in fiscal year 1988 and declining by 5 percent per year to a 0 percent tax credit in 1993.

Fiscal Note:      available

Senate Committee - Testified: COMMERCE & LABOR: Senator Halsan; Senator Fleming; Derek "Pete" Hansen, American Capital Access; Stanton Barnes, Union Street Capital; Rune Carlson, Bear Creek Golf Course; Nona Brazier, N.W. Recovery System, Inc.

Senate Committee - Testified: WAYS & MEANS:  Bill Lotto, Economic Development Executives of Washington; Wayne Schwandt, Fourth Corner Development