SENATE BILL REPORT

E2SSB 6220

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 industrial development corporations.

Senate Committee on Economic Development & Labor

Senate Hearing Date(s):January 12, 1988; January 18, 1988

Majority Report:  That Substitute Senate Bill No. 6220 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

      Signed by Senators Lee, Chairman; Anderson, Vice Chairman; Cantu, Conner, Deccio, McMullen, Saling, Smitherman, Warnke, West, Williams.

Senate Staff:Jack Brummel (786-7428)

                  January 19, 1988

Senate Committee on Ways & Means

Senate Hearing Date(s):January 20, 1988; February 1, 1988; February 2, 1988

Majority Report:  That Second Substitute Senate Bill No. 6220 be substituted therefor, and the second substitute bill do pass.

      Signed by Senators McDonald, Chairman; Bauer, Bluechel, Cantu, Deccio, Fleming, Hayner, Johnson, Lee, Newhouse, Saling, Smith, Talmadge, Vognild, Warnke, Williams, Wojahn, Zimmerman.

Senate Staff:William Bafus (786-7437)

                  March 3, 1988

AS PASSED SENATE, FEBRUARY 11, 1988

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 Washington firms experience in obtaining capital if they do not 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 corporations' (BIDCO) investments are to be in firms with a majority of their workforce in Washington state.

A certification requirement prior to approval of corporate documents is added.  Such certification may be revoked if the BIDCO fails to act in a safe sound manner or fails to comply with the intent of the Act to make capital available to moderate risk firms.

Fewer people are required to form a corporation and they are given greater flexibility in operation.  The amount of capital necessary to start BIDCO is $1 million in equity and $1 million in lendable funds.  Detailed reporting requirements on BIDCO performance are required.  Reserve requirements for BIDCOs may be established by the Supervisor of Banking.

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.  BIDCOs contracting with the department will enter first-source hiring agreements and one half of their firms will be in distressed areas.

Investors are given credit against state B&O, utility, or insurance premium taxes for their investment in a BIDCO.  The tax credits available to investors start at 25 percent in fiscal year 1990 and decline by 5 percent per year to a 0 percent tax credit in 1995. The cumulative total of B&O tax credits available to private investors in BIDCOs is capped at $4 million.

Investment in BIDCOs by insurance companies, banks, savings and loan associations and public utilities is subject to control by the appropriate regulatory bodies.

Appropriation:    $49,000 to the Department of Trade & Economic Development; $15,000 to the Department of General Administration

Revenue:    yes

Fiscal Note:      available

Senate Committee - Testified: ECONOMIC DEVELOPMENT & LABOR:  Senator Halsan; John Anderson, DTED; David Dougherty, DTED; Collin Sprague, AWB; Bill Lotto, EDEW; Mary Jean Ryan, Evergreen CDA; Wayne Schwandt, 4th Corner Development; Gary Smith, Independent Business Association

Senate Committee - Testified: WAYS & MEANS:  Senator Anderson; Bill Lotto, EDEW; David Daugherty, DTED; Roger Paulson, Office of the Insurance Commissioner

HOUSE AMENDMENTS:

Credits against the business and occupations, utility and insurance premiums taxes for investment in BIDCOs are removed.  Authority for the Department of Trade and Economic Development (DTED) to contract with BIDCOs in distressed areas is removed.  Appropriations to DTED and the Department of General Administration are deleted.  Industrial development corporations operating under existing law may continue to operate and be governed by the language of the 1963 act.