AN ACT Relating to economic development; amending RCW 50.64.050, 82.61.010, 82.61.040, 82.61.070, and 82.62.040; adding new sections to chapter 82.04 RCW; adding new sections to chapter 82.16 RCW; adding new sections to chapter 48.14 RCW; adding new sections to chapter 43.33A RCW; adding a new section to chapter 43.31 RCW; adding a new section to chapter 42.17 RCW; adding new sections to chapter 43.19 RCW; adding a new section to chapter 43.63A RCW; adding a new chapter to Title 31 RCW; adding new chapters to Title 43 RCW; creating new sections; providing an effective date; providing an expiration date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

PART I

INTENT

NEW SECTION. Sec. 101. It is the intent of the legislature to promote economic growth, prosperity, and employment for the citizens of the state of Washington. The legislature therefore enacts the economic development act of 1988.

PART II

UNDEREMPLOYMENT STUDY

NEW SECTION. Sec. 201. The legislature recognizes that the sudden and severe shifts in the economic base of the state's communities, industries, and employment base have led to certain changes in employment practices in the state which have reduced the quality of life of employed citizens. The growth in part-time employment and contracted employment has increased the flexibility of employers in the state in regard to hiring and employment practices, but has also resulted in situations in which employees working part-time for economic reasons and contracted employees must respond to employer requirements in regard to terms and hours of employment which reduce their wages, benefits, and security. The increase in part-time and temporary employment in the state, combined with the continued economic hardships experienced in the state's distressed areas, result in the need for the state to study the problems associated with underemployment and possible legislative responses to them.

NEW SECTION. Sec. 202. (1) The department of employment security shall undertake a study of underemployment in the state and of the policy issues associated with it. The study shall include an examination of:

(a) The extent and seriousness of underemployment;

(b) The character of underemployment, and methods of distinguishing those situations in which less-than-full-time employment reflects an inadequate availability of full-time employment from those in which such employment reflects needs for flexibility on the part of the work force; and

(c) The degree to which underemployment is concentrated in the workforce, including its concentration in economically distressed areas, by race or ethnicity, and by gender.

(2) The department shall:

(a) Conduct the study required under this act using information from the employer tax and wage file, the benefit assistance file, and the continuous wage or benefit history file, consistent with state confidentiality requirements;

(b) Examine the feasibility of modifying these files and related data collection processes to ensure that supplemental information is available on an ongoing basis to monitor and study underemployment in the state economy;

(d) Report on the cost and feasibility of making further modifications, including the costs of data processing, data analysis, and adding legal requirements related to reporting of information by employers, employees, and clients of the agency.

(3) The department of employment security shall, in the performance of this study, enlist the cooperation of the department of trade and economic development, the department of community development, the state economic development board, and other relevant state agencies and programs.

(4) The department of employment security shall report the findings of this study to the legislature no later than January 1, 1989.

NEW SECTION. Sec. 203. Sections 201 and 202 of this act are necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.

PART III

BIDCOS

NEW SECTION. Sec. 301. INTENT. The legislature finds that the vitality of the state economy is dependent on the ability of existing, growing, and new firms in the state to generate enough quality employment opportunities for the state's citizens. This task requires the availability of needed capital at the appropriate stage of development for the new firms and growing firms that are the major source of innovations and new jobs in the state. The state has a critical interest in increasing employment opportunities, retaining existing employment, assisting new and growing enterprises, and promoting an environment in which entrepreneurship can flourish. The limited availability of capital to viable firms that do not meet current commercial bank or venture capital criteria for loans or equity investments restricts the state's efforts to pursue these goals. Without access to appropriate and adequate financing at each stage of an enterprise's development, talented entrepreneurs and promising firms are unable to remain competitive or to gain access to the new markets essential for their long-term growth.

The legislature further finds that the availability of capital to finance the expansion of enterprises is particularly crucial for the creation of new employment opportunities. The state has an interest in the accessibility in the state's credit markets of long-term financing and investment involving greater risk than bank financing but promising lower return than venture capital investment. To ensure the availability of capital to permit the expansion of new and growing enterprises in Washington state, the legislature authorizes the creation of business and industrial development corporations which is a new form of regulated financing entity, provides for technical assistance to ensure their soundness, and authorizes incentives for investments in business and industrial development corporations which provide financing in the state, and authorizes greater incentives for investments in business and industrial development corporations which provide financing in economically distressed areas of the state.

NEW SECTION. Sec. 302. DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter:

(1) "Corporation" means a Washington business and industrial development corporation created under this chapter.

(2) "Financial institution" means any banking corporation or trust company, national banking association, savings and loan association, insurance company or related corporation, partnership, foundation, or other institution engaged primarily in lending or investing funds.

(3) "Board of directors" means the board of directors of the corporation created under this chapter.

(4) "Loan limit" means for any financial institution, the maximum amount permitted to be outstanding at one time on loans made by such financial institution to the corporation, as determined under the provisions of this chapter.

(5) "Business" means an individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, cooperative, corporation, or any other organization operating in this state, and paying more than fifty percent of its contributions or payments for the purposes of unemployment insurance to this state.

(6) "Associate" means, if used with respect to a corporation:

(a) A controlling person, director, officer, agent, or advisor of that corporation.

(b) A director, officer, or partner of a person referred to in (a) of this subsection.

(c) A person who controls, is controlled by, or is under common control with a person referred to in (a) of this subsection directly or indirectly through one or more intermediaries.

(d) Any close relative of any person referred to in (a) of this subsection.

(e) A person of which a person referred to in (a) through (d) of this subsection is a director or officer.

(f) A person in which a person referred to in (a) through (d) of this subsection, or any combination of those persons acting in concert, owns or controls, directly or indirectly, a twenty percent or greater equity interest.

For the purposes of this subsection (6)(f), a person who is in a relationship referred to in this subsection within six months before or after a corporation provides financing assistance shall be considered to be in that relationship as of the date that corporation provides that financing assistance.

If a corporation, in order to protect its interests, designates a person to serve as a director of, officer of, or in any capacity in the management of a business to which that corporation provides financing assistance, that person shall not, on that account, be considered to have a relationship with that business. This exception does not apply if the person has, directly or indirectly, any other financial interest in the business or if the person, at any time before the corporation provides the financing assistance, served as a director of, officer of, or in any other capacity in the management of the business for a period of thirty days or more.

(7) "Close relative" means a parent, child, sibling, spouse, father-in-law, mother-in-law, son-in-law, brother-in-law, daughter-in-law, or sister-in- law.

NEW SECTION. Sec. 303. FORMATION. Seven or more persons, a majority of whom shall be residents of this state, who may desire to create a business and industrial development corporation under the provisions of this chapter, for the purpose of promoting, developing and advancing the prosperity and economic welfare of the state and, to that end, to exercise the powers and privileges hereinafter provided, may be incorporated by filing in the office of the secretary of state, as hereinafter provided, articles of incorporation. The articles of incorporation shall contain:

(1) The name of the corporation, which shall include the words "Business and Industrial Development Corporation of Washington."

(2) The location of the principal office of the corporation, but such corporation may have offices in such other places within the state as may be fixed by the board of directors.

(3) The purposes for which the corporation is founded, which shall be to provide moderate risk financing and management assistance to businesses operating primarily in Washington state to increase job opportunities for Washington citizens and the prosperity of the state. In furtherance of these purposes, the corporation may provide a range of financing assistance.

(4) The names and post office addresses of the members of the first board of directors, who, unless otherwise provided by the articles of incorporation or the bylaws, shall hold office for the first year of existence of the corporation or until their successors are elected and have qualified.

(5) Any provision which the incorporators may choose to insert for the regulation of the business and for the conduct of the affairs of the corporation and any provision creating, dividing, limiting and regulating the powers of the corporation, the directors, stockholders or any class of the stockholders, including, but not limited to a list of the officers, and provisions governing the issuance of stock certificates to replace lost or destroyed certificates.

(6) The amount of authorized capital stock and the number of shares into which it is divided, the par value of each share and the amount of capital with which it will commence business and, if there is more than one class of stock, a description of the different classes; the names and post office addresses of the subscribers of stock and the number of shares subscribed by each. The aggregate of the subscription shall be the minimum amount of capital with which the corporation shall commence business which shall not be less than two million dollars, except as otherwise provided in this chapter. The articles of incorporation may also contain any provision consistent with the laws of this state for the regulation of the affairs of the corporation.

(7) The articles of incorporation shall be in writing, subscribed by not less than five natural persons competent to contract and acknowledged by each of the subscribers before an officer authorized to take acknowledgments and filed in the office of the secretary of state for approval. A duplicate copy so subscribed and acknowledged may also be filed.

NEW SECTION. Sec. 304. CERTIFICATION. The articles of incorporation shall recite that the corporation is organized under this chapter.

The secretary of state shall not approve articles of incorporation for a corporation organized under this chapter until the state supervisor of banking has certified the corporation as eligible to operate as a business and industrial development corporation under this chapter.

A person transacting business in this state shall not use a name or title which indicates that the person is a business and industrial development corporation including, but not limited to, the use of the term "BIDCO", and shall otherwise represent that the person is a business and industrial development corporation until such time as the person has been certified as a business and industrial development corporation.

A corporation shall be certified by the state supervisor of banking as eligible to operate under this chapter upon meeting the following conditions:

(a) The corporation has paid a three thousand dollar certification fee to the state supervisor of banking;

(b) The corporation has submitted a business plan which includes at least three years of detailed financial projections and other relevant information;

(c) The corporation has provided information about the character and competence of each director and officer of the corporation; and

(d) The supervisor finds that the corporation will be run competently, will be run in accordance with its articles of incorporation, has a net worth and lendable funds sufficient to provide financing assistance, and that the directors and officers of the corporation have agreed to comply with the terms of this chapter. In making the finding under this subsection, the supervisor shall:

(i) Consult with the director of trade and economic development and the director of community development;

(ii) Require a minimum net worth of one and one-half million dollars and an additional one and one-half million dollars in lendable funds or an enforceable pledge for one and one-half million dollars in lendable funds unless the supervisor finds that special circumstances render lesser amounts adequate for the corporation to meet the intent of this chapter and operate according to its business plan.

Whenever the articles of incorporation shall have been filed in the office of the secretary of state and approved by the secretary and all taxes, fees and charges, have been paid, as required by law, the subscribers, their successors and assigns shall constitute a corporation, and said corporation shall then be authorized to commence business, and stock thereof to the extent herein or hereafter duly authorized may from time to time be issued.

NEW SECTION. Sec. 305. TECHNICAL ASSISTANCE TO NEW BIDCOS. The director of trade and economic development is authorized to provide technical assistance and advice to persons forming corporations under this chapter. The director of trade and economic development is authorized to enter into contracts to carry out the purposes of this section. The director of trade and economic development may contract with the department of community development to undertake a portion of the activities necessary to carry out the purposes of this section.

NEW SECTION. Sec. 306. REGULATION BY THE SUPERVISOR OF BANKING. (1) A corporation shall transact its business in a safe and sound manner and shall maintain itself in a safe and sound condition. The supervisor of banking shall revoke the certification of a corporation if the supervisor finds that the corporation has failed to operate or maintain itself in a safe and sound manner or has failed to operate in accordance with its articles of incorporation under section 3(3) of this act, and the corporation may not transact business as a business and industrial development corporation until such time as the supervisor recertifies the corporation consistent with section 4 of this act. The secretary of state shall remove from the active files the incorporation records of a corporation with its certification revoked until such time as the supervisor of banking has recertified the corporation.

(2) In determining whether a corporation is transacting business in a safe and sound manner or has committed an unsafe or unsound act, the supervisor shall consider the risk of a provision of financing assistance to a business firm, within the context of the anticipated higher risks associated with the purposes of corporations organized under this chapter.

(3) Subsection (2) of this section does not limit the authority of the supervisor to:

(a) Determine that a corporation's financing assistance to a single business or group of affiliated firms is in violation of subsection (1) of this section if the amount of that financing assistance is unduly large in relation to the total assets on the total shareholders equity of the corporation.

(b) Require that a corporation maintain a reserve in the amount of anticipated losses.

(c) Require that a corporation have a written financing assistance policy, approved by its board of directors, including credit evaluation and other matters. The supervisor shall not require that a corporation adopt a financing assistance policy that contains standards which prevent the corporation from exercising flexibility in meeting the capital needs of the individual firms.

NEW SECTION. Sec. 307. AUDITS BY SUPERVISOR OF BANKING. The corporation shall be examined at least once every eighteen months by the state supervisor of banking and shall make quarterly reports of its condition to said state supervisor of banking and more frequently upon call of the state supervisor of banking, who in turn shall make copies of such reports available to the state insurance commissioner and the governor; and the corporation shall also furnish such other information as may from time to time be required by the state supervisor of banking and secretary of state. The corporation shall pay the actual cost of said examinations. The state supervisor of banking shall exercise the same power and authority over corporations organized under this chapter as is now exercised over banks and trust companies by the provisions of Title 30 RCW, where the provisions of Title 30 RCW are not in conflict with this chapter. In adopting rules to govern examinations and reports of corporations operating under this chapter, the supervisor of banking shall determine whether or not the corporation is operating within the purposes of the corporation as specified in its articles of incorporation. In making this determination, the supervisor of banking shall consult with the director of trade and economic development and the director of community development or their designee. In regulating corporations under this chapter, the supervisor of banking shall not consider the risk of a provision of financing assistance to a business unless the supervisor determines that the risk is so great compared with the realistically expected return as to constitute gross mismanagement.

The state supervisor of banking shall publish annually and provide to the house trade and economic development committee, house ways and means committee, senate economic development and labor committee and senate ways and means committee information on the impact of this chapter in promoting economic development in Washington. At the minimum, the information shall include aggregate statistics on each of the following:

(1) The number and locations of corporations operating under this chapter;

(2) The number of instances and dollar amount of financing and management assistance given by corporations operating under this chapter to:

(a) All individual businesses assisted;

(b) Types of businesses classified using the standard industrial classification manual;

(d) Businesses located in areas of high unemployment;

(3) The number of jobs created or retained by:

(a) All individual businesses assisted;

(b) Types of businesses classified using the standard industrial classification manual;

(d) Businesses located in areas of high unemployment;

(4) The percentage of each business's total contributions or payments for unemployment insurance made to the state of Washington.

NEW SECTION. Sec. 308. POWERS. The business of a corporation shall be to provide financing and management assistance to businesses operating primarily in Washington state. In furtherance of its business and in addition to the powers now or hereafter conferred on business corporations by the provisions of Title 23A RCW, each corporation shall, subject to the restrictions and limitations herein contained, have the following powers:

(1) To elect, appoint and employ officers, agents and employees; to make contracts and incur liabilities for any of the purposes of the corporation.

(2) To borrow money for any of the purposes of the corporation; to issue therefor its bonds, debentures, notes or other evidence of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust or other lien on its property, franchises, rights and privileges of every kind and nature or any part thereof or interest therein, without securing stockholder approval.

(3) To make loans to any person, firm, corporation, joint-stock company, association or trust, and to establish and regulate the terms and conditions with respect to any such loans and the charges for interest and service connected therewith.

(4) To purchase, receive, hold, lease, or otherwise acquire, and to sell, convey, transfer, lease or otherwise dispose of real and personal property, together with such rights and privileges as may be incidental and appurtenant thereto and the use thereof, if the real or personal property is for the corporation's use in operating its business, or if the real or personal property is acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations.

(5) To determine the form and the terms and conditions for financing assistance provided by the corporation to a business including, but not limited to forms such as loans; purchase of debt instruments; straight equity investments, such as purchase of common stock or preferred stock; debt with equity features such as warrants to purchase stock, convertible debentures, or receipt of a percent of net income or sales; royalty based financing; guaranteeing of debt; or leasing of property. A corporation may purchase securities of a business either directly or indirectly through an underwriter. A corporation may participate in the program of the small business administration pursuant to section 7(a) of the small business act, (Public Law 85-536, 15 U.S.C. Sec. 636(a)), or any other government program for which the corporation is eligible and which has as its function the provision or facilitation of financing or management assistance to businesses. If a corporation participates in a program referred to in this section, the corporation shall comply with the requirements of that program. Financing assistance provided by a corporation to a business shall be for the business purposes of that business.

(6) To provide management assistance to a business which may encompass both management or technical advice and management or technical services. Management assistance provided by a corporation to a business shall be for the business purposes of that business.

(7) To mortgage, pledge, or otherwise encumber any property, right or things of value, acquired pursuant to the powers contained in subsection (4) or (5) of this section, as security for the payment of any part of the purchase price thereof.

(8) To cooperate with and avail itself of the facilities of the United States department of commerce, the department of trade and economic development, the department of community development, and any other similar state or federal governmental agencies; and to cooperate with and assist, and otherwise encourage organizations in the various communities of the state in the promotion, assistance and development of the business prosperity and economic welfare of such communities or of this state or of any part thereof.

(9) To make donations for charitable educational, research, or similar purposes.

(10) To do all acts and things necessary or convenient to carry out the powers expressly granted in this chapter.

NEW SECTION. Sec. 309. RIGHTS REGARDING BIDCO SHARES. Notwithstanding any rule at common law or any provision of any general or special law or any provision in their respective charters, agreements of association, articles of organization or trust indentures:

Any person including all domestic corporations organized for the purpose of carrying on business within this state and further including without implied limitation public utility companies and insurance companies, and foreign corporations licensed to do business within this state, and all financial institutions as defined herein, and all trustees, are hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of any bonds, securities or other evidences of indebtedness created by, or the shares of the capital stock of, the corporation, and while owners of said stock to exercise all the rights, powers and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state except as otherwise provided in this chapter.

The amount of capital stock of the corporation which any financial institution is authorized to acquire pursuant to the authority granted herein is in addition to the amount of capital stock in corporations which such financial institution may otherwise be authorized to acquire.

NEW SECTION. Sec. 310. BIDCO SHAREHOLDER POWERS. The stockholders of the corporation shall have the following powers of the corporation:

(1) To determine the number of and elect directors as provided in section 312 of this act;

(2) To make, amend and repeal bylaws;

(3) To amend this charter as provided in section 311 of this act;

(4) To dissolve the corporation as provided in section 315 of this act;

(5) To do all things necessary or desirable to secure aid, assistance, loans and other financing from any financial institutions, and from any agency established under the small business investment act of 1958, Public Law 85-699, 85th Congress, or other similar federal laws now or hereafter enacted.

(6) To exercise such other of the powers of the corporation consistent with this chapter as may be conferred on the stockholders by the bylaws.

As to all matters requiring action by the stockholders of the corporation, said stockholders shall vote separately thereon by classes, and, except as otherwise herein provided, such matters shall require the affirmative vote of a majority of the votes to which the stockholders present or represented at the meeting shall be entitled.

Stockholders shall have one vote, in person or by proxy, for each share of capital stock held.

NEW SECTION. Sec. 311. AMENDING ARTICLES OF INCORPORATION. The articles of incorporation may be amended by the votes of the stockholders, voting separately by classes, and such amendments shall require approval by the affirmative vote of two-thirds of the votes to which the stockholders shall be entitled: PROVIDED, That no amendment of the articles of incorporation which is inconsistent with the general purposes expressed herein or which authorizes any additional class of capital stock to be issued, or which eliminates or curtails the right of the state supervisor of banking to examine the corporation or the obligation of the corporation to make reports as provided in section 307 of this act, shall be made.

Within thirty days after any meeting at which an amendment of the articles of incorporation has been adopted, articles of amendment signed and sworn to by the president, treasurer, and a majority of the directors, setting forth such amendment and due adoption thereof, shall be submitted to the secretary of state, who shall examine them and if the secretary finds that they conform to the requirements of this chapter, shall so certify and endorse his or her approval thereon. Thereupon, the articles of amendment shall be filed in the office of the secretary of state and no such amendment shall take effect until such articles of amendment shall have been filed as aforesaid.

NEW SECTION. Sec. 312. BOARD OF DIRECTORS. The business and affairs of the corporation shall be managed and conducted by a board of directors, a president, a vice president, a secretary, a treasurer, and such other officers and such agents as the corporation by its bylaws shall authorize. The board of directors shall consist of such number, not less than seven nor more than twenty-one, as shall be determined in the first instance by the incorporators and thereafter annually by the stockholders of the corporation. The board of directors may exercise all the powers of the corporation except such as are conferred by law or by the bylaws of the corporation upon the stockholders and shall choose and appoint all the agents and officers of the corporation and fill all vacancies except vacancies in the office of director which shall be filled as hereinafter provided. The board of directors shall be elected in the first instance by the incorporators and thereafter at the annual meeting, the day and month of which shall be established by the bylaws of the corporations, or, if no annual meeting shall be held in the year of incorporation, then within ninety days after the approval of the articles of incorporation at a special meeting as hereinafter provided. The directors shall hold office until the next annual meeting of the corporation or special meeting held in lieu of the annual meeting after the election and until their successors are elected and qualified unless sooner removed in accordance with the provisions of the bylaws. Any vacancy in the office of a director shall be filled by the directors.

Directors and officers shall not be responsible for losses unless the same shall have been occasioned by the wilful misconduct of such directors and officers.

NEW SECTION. Sec. 313. FIRST CORPORATE MEETING. The first meeting of the corporation shall be called by a notice signed by three or more of the incorporators, stating the time, place and purpose of the meeting, a copy of which notice shall be mailed, or delivered, to each incorporator at least five days before the day appointed for the meeting. Said first meeting may be held without such notice upon agreement in writing to that effect signed by all the incorporators. There shall be recorded in the minutes of the meeting a copy of said notice or of such unanimous agreement of the incorporators.

At such first meeting, the incorporators shall organize by the choice, by ballot, of a temporary clerk; by the adoption of bylaws, by the election by ballot of directors; and by action upon such other matters within the powers of the corporation as the incorporators may see fit. The temporary clerk shall be sworn and shall make and attest a record of the proceedings. Five of the incorporators shall be a quorum for the transaction of business.

NEW SECTION. Sec. 314. TERM OF BIDCO. Unless otherwise provided in the articles of incorporation, the period of duration of the corporation shall be perpetual, subject, however, to the right of the stockholders to dissolve the corporation prior to the expiration of that period as provided in section 315 of this act.

NEW SECTION. Sec. 315. DISSOLUTION OF CORPORATION. The corporation may upon the affirmative vote of two-thirds of the votes to which the stockholders shall be entitled dissolve the corporation as provided by Title 23A RCW, insofar as Title 23A RCW is not in conflict with the provisions of this chapter. Six months' advance notice of such dissolution must be provided to the supervisor of banking before dissolution takes effect. Upon any dissolution of the corporation, none of the corporation's assets shall be distributed to the stockholders until all sums due the creditors of the corporation have been paid in full.

NEW SECTION. Sec. 316. A new section is added to chapter 82.04 RCW to read as follows:

BUSINESS AND OCCUPATION TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 301 through 315 and 322 through 325 of this act). The amount of allowable credit in each such year shall be as follows:

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!tl1990!tl25%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(3) Credits allowed under this section to any taxpayer shall not exceed the tax otherwise payable under this chapter by the taxpayer for that fiscal year. Any excess credit shall not be carried over to succeeding years.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 317, 318, 319, 320, or 321 of this act.

(5) Any taxpayer receiving a credit under this section who withdraws all or part of the investment on which the credit was based within three years shall repay the credit in proportion to the withdrawal as provided in section 322 of this act.

NEW SECTION. Sec. 317. A new section is added to chapter 82.16 RCW to read as follows:

PUBLIC UTILITY TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 301 through 315 and 322 through 325 of this act). The amount of allowable credit in each such year shall be as follows:

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 316, 318, 319, 320, or 321 of this act.

NEW SECTION. Sec. 318. A new section is added to chapter 48.14 RCW to read as follows:

INSURANCE PREMIUM TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 301 through 315 and 322 through 325 of this act). The amount of allowable credit in each such year shall be as follows:

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!tl1990!tl25%

!tl1991!tl20%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 316, 317, 319, 320, or 321 of this act.

NEW SECTION. Sec. 319. A new section is added to chapter 82.04 RCW to read as follows:

BUSINESS AND OCCUPATION TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 301 through 315 and 322 through 325 of this act) with at least one-half of the corporation's loans and investments made to businesses located in distressed areas as defined in RCW 82.60.020(3). The amount of allowable credit in each such year shall be as follows:

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!tl1990!tl35%

!tl1991!tl30%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 316, 317, 318, 320, or 321 of this act.

NEW SECTION. Sec. 320. A new section is added to chapter 82.16 RCW to read as follows:

PUBLIC UTILITY TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 301 through 315 and 322 through 325 of this act) with at least one-half of the corporation's loans and investments made to businesses located in distressed areas as defined in RCW 82.60.020(3). The amount of allowable credit in each such year shall be as follows:

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!tl1990!tl35%

!tl1991!tl30%

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(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 316, 317, 318, 319, or 321 of this act.

NEW SECTION. Sec. 321. A new section is added to chapter 48.14 RCW to read as follows:

INSURANCE PREMIUM TAX CREDITS. (1) A credit is allowed against the tax imposed under this chapter for each of the fiscal years beginning July 1, 1989, and ending June 30, 1992, for amounts invested in each such year in business and industrial development corporations organized under chapter 31.-- RCW (sections 301 through 315 and 322 through 325 of this act) with at least one-half of the corporation's loans and investments made to businesses located in distressed areas as defined in RCW 82.60.020(3). The amount of allowable credit in each such year shall be as follows:

!tp1,2,2,3 !tl@beFIS!ttCAL!sc ,1YEAR@ee!tj1!tl@beAMOUNT!tt!sc ,1INVESTED@ee

!tl1990!tl35%

!tl1991!tl30%

!tl1992!tl25%

!tl1993!tl!sc ,0010%

!te

(2) Applications for credit under this section shall be submitted as prescribed by the department by rule. No credit may be taken under this section until it has been approved by the department.

(4) No credit may be allowed under this section for an investment for which credit has been allowed under section 316, 317, 318, 319, or 320 of this act.

NEW SECTION. Sec. 322. WITHDRAWAL OF INVESTMENTS. (1) Investors that take advantage of the tax credits allowed under sections 316 through 321 of this act, and that withdraw within the first three years of their investment any funds invested in a corporation governed by this chapter, shall be obligated to return to the state treasury a portion of the tax credit granted, with interest, which is equal in proportion to the amount the withdrawn funds represent relative to the total funds invested by the investor.

(2) Any corporation which loses its certification shall be obligated to pay to the state treasurer an amount equal to any tax credits taken by investors in such corporation within three years preceding the loss of certification. Such payment shall be made within eighteen months of the loss of certification unless the corporation is recertified within that time. The obligation to pay the state treasurer created by this section shall be a lien on the assets and capital of a corporation losing its certification and shall have priority over any other liens or security interests.

NEW SECTION. Sec. 323. The department of revenue shall keep a running total of all credits granted under sections 316 through 321 of this act during each fiscal biennium. The department of revenue shall not allow any credits which would cause the tabulation for the biennium beginning July 1, 1989, to exceed two and one-half million dollars, nor to exceed one million dollars for the period from July 1, 1991, through June 30, 1992.

NEW SECTION. Sec. 324. RESTRICTIONS ON BIDCO FINANCIAL ASSISTANCE. (1) A corporation shall not provide, directly or indirectly, financing assistance to:

(a) An associate of the corporation;

(b) Discharge, or to free other money for use in discharging, in whole or in part, an obligation to an associate of that corporation. This section does not apply to a transaction effected by an associate of a corporation in the normal course of that associate's business involving a line of credit or short-term financing assistance.

(c) A business to which an associate of that corporation provides financing assistance, either contemporaneously with, or within one year before or after, the providing of financing assistance by the corporation, if the terms on which the corporation provides financing assistance are less favorable to the corporation than the terms on which the associate provides financing assistance to the business. If the financing assistance provided by the associate of the corporation is of a different kind from the financing assistance provided by the corporation, the burden shall be on the corporation to prove that the terms on which the corporation provided financing assistance were at least as favorable to the corporation as the terms on which the associate provided financing assistance to the business.

This subsection (1)(c) does not apply to any of the following:

(i) If the associate is a controlling person of the corporation and is also the only shareholder of the corporation;

(ii) If the associate is a subsidiary of the corporation; or

(iii) A transaction effected by an associate of a corporation in the normal course of that associate's business involving a line of credit or short-term financing assistance.

(2) For the purposes of this section and section 325 of this act:

(a) "Person" means an individual, proprietorship, joint venture, partnership, trust, business trust, syndicate, association, joint stock company, corporation, cooperative, government, agency of a government, or any other organization. If used with respect to acquiring control of or controlling a specified person, person includes a combination of two or more persons acting in concert;

(b) "Control" means, if used with respect to a specified person, the power to direct or cause the direction of, directly or indirectly through one or more intermediaries, the management and policies of that specified person, whether through the ownership of voting securities; by contract, other than a commercial contract for goods or nonmanagement services; or otherwise. A natural person shall not be considered to control a person solely on account of being a director, officer, or employee of that person. A person who, directly or indirectly, owns of record or beneficially holds with power to vote, or holds proxies with discretionary authority to vote, twenty percent or more of the then outstanding voting securities issued by a corporation shall be rebuttably presumed to control that corporation; and

(c) "Controlling person" means, if used with respect to a specified person, a person who controls that specified person, directly or indirectly through one or more intermediaries.

NEW SECTION. Sec. 325. RESTRICTIONS ON BENEFITS. An associate of a corporation shall not receive, directly or indirectly, from a person to whom that corporation provides financing assistance, compensation in connection with the providing of that financing assistance or anything of value for procuring, influencing, or attempting to procure or influence the corporation's action with respect to the providing of the financing assistance. This section does not apply to the receipt of fees by an associate of a corporation for bona fide closing services performed by that associate if all of the following are true:

(1) The associate, with the consent and knowledge of the person to whom the financing assistance is provided, is designated by the corporation to perform the services;

(2) The services are appropriate and necessary in the circumstances;

(3) The fees for the services are approved as reasonable by the corporation; and

(4) The fees for the services are collected by the corporation on behalf of the associate.

NEW SECTION. Sec. 326. CAPTIONS. Captions as used in this part shall constitute no part of the law.

NEW SECTION. Sec. 327. If any provision of sections 301 through 327 of this act or its application to any person or circumstance is held invalid, the remainder of sections 301 through 326 of this act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 328. Sections 301 through 327 of this act shall take effect on July 1, 1988, and shall be effective for taxes imposed July 1, 1989, and thereafter.

NEW SECTION. Sec. 329. Sections 301 through 315 and 322 through 325 of this act shall constitute a new chapter in Title 31 RCW.!np

PART IV

IN-STATE INVESTMENT PLAN

NEW SECTION. Sec. 401. The legislature finds that the availability of adequate funds to meet the diverse financing needs of the enterprises located in the state is essential for the provision of sufficient quality employment for the citizens of the state. The increased involvement of the state economy in the international economy, the dramatic shifts in financial markets, and the deregulation of the banking system require the state to explore new avenues to assure an adequate supply of capital in the state economy. The financial characteristics of the trusts and capital funds managed by the state investment board with their requirements for long-term investment, low risk, and diverse portfolios may permit the state investment board to encourage additional in-state investment in the pursuit of its legislatively mandated purpose.

The legislature reaffirms that the purpose of the state investment board is to provide professional investment management of trusts, operating funds and capital funds established by law and that the goal of state investment board management is to accomplish the purpose of each trust or fund. The legislature declares that the purpose of the plan and the process set forth under sections 401 through 403 of this act are subordinate to the statutory purposes of the state investment board. Nothing in sections 401 through 403 of this act requires the investment board to implement any part of this plan if, in the judgment of the state investment board, to do so would conflict in any way with the purposes reaffirmed in this section.

NEW SECTION. Sec. 402. The business assistance center established under RCW 43.31.083 shall investigate and plan for profitable in-state investment opportunities. The business assistance center shall develop a plan to increase the amount of profitable in-state investment, consistent with the statutory purpose of each trust or fund managed by the state investment board. The business assistance center shall deliver the plan to the state investment board. The plan shall discuss potential investments to be made during the first to fifth fiscal years following submittal, and shall include:

(1) A report describing the types of investment in businesses in this state which will have the greatest likelihood of enhancing the economic health of the citizens of this state. The report shall discuss the amounts and categories of investments recommended. The report should examine the potential for the board to act as a developmental investor, focusing on the following types of investments:

(a) Those types of investments which are best matched to the financial characteristics of the funds managed by the state investment board. They should include investments which are long term, in which the risk of loss is minimized, and which serve to retain a prudent portfolio diversity.

(b) Those investments which would increase net investment in the state and which would not primarily replace existing investments in the state.

The prudent investment of the funds under the management of the state investment board remains the purpose of the state investment board, and the report should not investigate those types of investments which would promote the economy of the state at the expense of the prudent investment of those funds under the management of the state investment board.

(2) Proposed nonbinding management objectives for each fiscal year stated as a dollar amount or as a percentage of the total amount of all investments made by the investment board, for:

(a) Investments in companies domiciled in this state and for other investments benefiting this state.

(b) Investments, except secondary market stock or bond purchases, in companies to which all of the following apply: (i) The company has more than fifty percent of its employees employed in this state or more than fifty percent of its fixed assets located in this state; (ii) the company meets the size standard for a small business under 13 C.F.R. 121; (iii) the company sells a substantial portion of its goods or services outside of this state; and (iv) the company is reasonably likely to use the funds invested by the investment board to maintain or expand employment in this state.

(3) Recommended actions to help the board meet its management objectives. The actions may include preparing and distributing informational materials, soliciting and reviewing proposals from venture capital investment firms located within or outside this state for investments in businesses in this state and soliciting investment proposals from businesses in this state.

NEW SECTION. Sec. 403. (1) By January 1, 1989, the business assistance center and state investment board shall report the results of the investigation and plan required under section 402 of this act to the governor, the trade and economic development and ways and means committees of the house of representatives and the economic development and labor and ways and means committees of the senate.

(2) The state investment board shall submit a plan for making investments in the state by January 1 of each odd-numbered year, beginning in 1991. The plan shall be developed in conjunction with the business assistance center established under RCW 43.31.083. The plan should focus on developmental investments that would increase net investment in the state without replacing existing in-state investments. The plan shall be submitted to the governor, the trade and economic development and ways and means committees of the house of representatives, and the economic development and labor and ways and means committees of the senate. Nothing in this section requires the investment board to implement any part of this plan if, in the judgment of the state investment board, to do so would conflict in any way with the purposes reaffirmed in section 401 of this act.

NEW SECTION. Sec. 404. Sections 401 through 403 of this act are each added to chapter 43.33A RCW.

PART V

TRADE INFORMATION

NEW SECTION. Sec. 501. The legislature finds that the internationalization of the state's economy has increased the importance of international trade to the state's economic vitality. This is especially true in light of the dramatic financial shifts that have occurred in the past year. The legislature further finds that access to current international trade market information can contribute to the state's efforts to increase the vitality of the state's economy by providing expanded opportunities for the health and growth of in-state businesses, especially small and medium-size businesses. Information on trade leads currently collected by the federal departments of commerce and agriculture can be readily accessed for use by in-state exporters of goods and services. The legislature therefore declares that it is in the public interest to establish a trade leads program in the department of trade and economic development to provide in-state exporters access to up-to-date international trade market information and to provide out-of-state buyers with access to information on Washington products.

NEW SECTION. Sec. 502. A new section is added to chapter 43.31 RCW to read as follows:

There is established within the department a Washington trade leads program. In administering the program, the department shall:

(1) Establish a computerized trade leads network which shall access the data on trade opportunities currently collected by the United States department of commerce, the United States department of agriculture, and other relevant sources. The computer network shall provide information on:

(a) Potential foreign buyers of particular goods and services; and

(b) In-state goods and services, the producers of which are interested in identifying foreign markets.

(2) Respond to inquiries from foreign buyers or agents who seek to purchase particular Washington goods and services.

(3) Charge fees for its services.

PART VI

BUSINESS AND JOB RETENTION PROGRAM

NEW SECTION. Sec. 601. The legislature finds that the economic health of the state of Washington is a function of the capacity of the citizens of the state to continue to work at good jobs with good pay and good working conditions producing quality products. The legislature further finds that a large majority of the state's citizens will continue to be employed in the future at companies which are currently in operation. The state of Washington has permanently lost between forty-four thousand and fifty-five thousand jobs per year between 1979 and 1985 as a result of plant closures, business failures, and mass layoffs. These job losses resulted in tremendous suffering and dislocation affecting individuals, families, and communities and have also resulted in large-scale public costs. These include substantial increases in expenditures for unemployment compensation and public assistance, the loss of taxes paid by workers and businesses, as well as increases in social and health program costs due to rising social problems caused by high levels of unemployment.

The state has a long-term interest in assisting viable firms to remain in business, reducing business and job loss which can be avoided, and minimizing the social and financial costs resulting from those business and job losses which cannot be prevented. It is the purpose of this chapter to authorize and fund the creation of locally based business and job retention teams to assist businesses which are likely to close, fail, or experience a permanent mass layoff, and to assist individuals who are employed by such businesses and thereby are or may be affected by a closure, failure, or permanent mass layoff of these businesses. The state's primary objective is to provide continuing financial and technical assistance and training to the business and job retention teams to ensure their success.

NEW SECTION. Sec. 602. There is established within the department of trade and economic development the business and job retention program. An exempt position is hereby created at the division director level within the department of trade and economic development for the managing director of the business and job retention program. The managing director shall be appointed by the governor and shall serve under the direction of the director of trade and economic development at the governor's pleasure. In carrying out the purposes of this chapter, the managing director shall solicit volunteer assistance, work with the business assistance center, the small business development center, the department of community development's employee ownership program, local early warning programs, local reemployment centers, labor representatives, and other appropriate public and private agencies and organizations, and contract with private consultants, with the approval of the director of trade and economic development, for such services as the managing director deems advisable.

NEW SECTION. Sec. 603. The managing director shall appoint an advisory committee having equal representation from local businesses, local government, and local labor organizations, and representatives of higher education, community colleges, vocational technical institutes, associate development organizations, community-based economic development organizations, private industry councils, local early warning programs, local reemployment centers, and other advocates for dislocated and unemployed workers. The managing director shall consult with the advisory committee in developing implementation plans for carrying out this chapter and shall monitor implementation and operations of the state and regional components of the program. Staff assistance shall be provided to the committee by the departments of trade and economic development, employment security, and community development. Members of the advisory committee shall receive no compensation but shall be reimbursed for travel expenses under RCW 43.03.050 and 43.03.060.

NEW SECTION. Sec. 604. The managing director, after consultation with the advisory committee, shall:

(1) Designate service delivery regions in the state, each of which shall have no less than one county and no more than six counties.

(2) Establish business and job retention teams for each region. The managing director shall designate an associate development organization or other appropriate locally based organization as the team coordinator for each regional business and job retention team. Each team shall have equal representation from local businesses, local government, and local labor organizations. In addition, each team shall have representatives from local associate development organizations, local reemployment centers, local businesses, local labor organizations, local educational institutions, community-based organizations, advocates for the dislocated and unemployed workers, local private industry councils, and local governments. The team coordinator shall select appropriate marketing, management, training, and technical specialists to assist the team on any given project or group of projects. The department may subcontract with existing early warning or job retention programs to avoid duplication of effort in any region. The team coordinator shall be responsible for soliciting assistance from within the region from local chambers of commerce, private industry councils, colleges, universities, local early warning programs, local reemployment centers, and any other private, public, or nonprofit group with appropriate expertise.

(3) Develop a model local business survey and assist the regional business and job retention team in administering in each region surveys of businesses, utilities, labor unions, employees, financial institutions, and community organizations in cooperation with any existing business retention programs, reemployment centers, and associate development organizations. The surveys will gather information about business needs, expansion plans, relocation decisions, training needs, potential layoffs, financing needs, the availability of financing, and other appropriate information.

(4) Designate criteria for receipt of services offered to businesses, labor unions, employee groups, community groups, local governments, and port districts. Such criteria shall include the number of employees affected, the type of business involved, reemployment potential of employees, severity of problems affecting the business or workforce, skill level of workforce, availability of financing, and the social and economic costs of layoffs or closure.

(5) Be responsible for the development and implementation of training programs for the regional business and job retention team coordinators and teams. The training programs shall be designed to assist the teams in developing and coordinating local resources, assessing the need for outside resources, and locating other public and private resources needed to assist firms.

(6) Provide or coordinate the delivery of technical and managerial assistance upon request from the local business and job retention team coordinator in the areas of financial management, marketing, product development, production process analysis, training, and other business services.

NEW SECTION. Sec. 605. The business and job retention teams shall provide marketing, technical, managerial, and training assistance appropriate to client businesses, unions, employee groups, and workforces. The teams shall initiate contact with those firms or employees indicating the potential for closure, mass layoff, or relocation. For firms or employees not indicating such potential, the provision of services from the teams will be in response to direct requests from firms, labor unions, employee groups, community groups, local governments, and port districts. The team coordinator shall be responsible for conducting an initial assessment of firms or work forces to determine viability, problems, and skill levels, in cooperation with any early warning programs, reemployment centers, and associate development organizations. The assessment shall include but not be limited to the public and private costs of any potential closure or layoff, the potential for preventing a closure, business failure, business relocation, or mass layoff, the potential for a change in ownership, including worker and community buy outs of the firm, and the costs of keeping the facility in operation. Where appropriate, team coordinators shall assist local governments or organizations in applying for local development matching funds from the department of community development.

After the initial assessment, the team coordinator shall coordinate the delivery of technical, managerial, financial training, and other assistance. The team coordinator shall work with the employment security department and local reemployment centers to assess the need for and to ensure the provision of training services to client businesses, prelayoff services, and the establishment of programs for dislocated workers such as job clubs, retraining counseling, and the referral and delivery of social services.

NEW SECTION. Sec. 606. In addition to the responsibilities set forth in sections 602 through 605 of this act, the department of trade and economic development shall draw upon its existing resources, employment and economic data from the employment security department, and data from the department of licensing and the department of revenue and other sources, to do nonduplicative analysis of trends in the state's industries and workforces. The department shall make such analyses available to relevant businesses, labor organizations or workforces, local governments, economic development organizations, early warning programs, and business and job retention teams, and shall work with them to develop long-term strategies for economic growth and revitalization.

NEW SECTION. Sec. 607. The employment security department shall:

(1) Monitor industries, occupations, and substate labor markets by employment levels, and hourly wage and annual wage rates.

(2) Track numbers of dislocated workers and part-time workers in the state.

(3) Assess the number and causes of permanent mass layoffs and closures using a modified permanent mass layoff and plant closure data base which is presently funded by the federal government.

(4) Supply the managing director with data under subsections (1) through (3) of this section which will allow the state and local components of the program to prioritize delivery of service to distressed, mature, and cyclical industries.

(5) Provide information and assistance to the program on training resources available through the department.

(6) Offer any businesses assisted by the program its first source hiring services.

(7) Work with the department of social and health services to track dislocated workers who exhaust their unemployment compensation benefits and begin collecting public assistance.

NEW SECTION. Sec. 608. The department of community development shall provide resources to the business and job retention teams through its various programs, such as the community development finance unit, the employee ownership program, the community revitalization team and the development loan fund. In addition, the department shall assist local governments and organizations with local economic development planning processes and the development of entrepreneurial training programs.

NEW SECTION. Sec. 609. The state board for vocational education shall assist the business and job retention program through the development of partnerships between educational institutions and businesses that can benefit from job skills programs.

NEW SECTION. Sec. 610. The managing director shall publish an annual report which shall be made available to the senate and house of representatives ways and means committees, the senate economic development and labor committee, and the house of representatives committee on trade and economic development. The report shall include the following:

(1) The number of businesses, labor unions, employee groups, local governments, and port districts assisted under this chapter;

(2) The types of assistance provided; and

(3) The number of businesses and jobs retained through assistance rendered under this chapter.

These reporting requirements shall be disaggregated by county, standard industrial classification, and size of firm.

NEW SECTION. Sec. 611. A new section is added to chapter 42.17 RCW to read as follows:

Notwithstanding the provisions of RCW 42.17.260 through 42.17.340, no financial or proprietary information supplied by businesses to the department of trade and economic development may be made available to the public.

NEW SECTION. Sec. 612. Sections 601 through 610 of this act shall constitute a new chapter in Title 43 RCW.

PART VII

FIRST SOURCE AGREEMENTS

NEW SECTION. Sec. 701. The legislature recognizes that a primary purpose of state economic development programs is to encourage the hiring of the unemployed. The state is benefited to a greater degree if citizens drawing unemployment or public assistance benefits are hired in the private sector, resulting in greater security and prosperity for those hired and reduced costs to the state in benefit expenditures. The legislature further recognizes that state economic development programs are not intended to replace employees already employed in order to provide access to employment for the unemployed. Such action would ultimately result in increased benefit costs to the state and a lower standard of living for affected employees. The use of a targeted program that encourages employers to make a good faith effort to hire public assistance recipients and the unemployed in ways that replace existing employees will undermine the effectiveness of such a program and is not beneficial to the state.

Sec. 702. Section 5, chapter 116, Laws of 1986 and RCW 50.64.050 are each amended to read as follows:

(1) An employer and a prospective employee to be hired from the pool may agree to a thirty-day training period, at the end of which time the employer shall make a decision whether to hire the individual. The individual may continue to draw unemployment or public assistance, or both during the thirty-day training period.

(2) Financial incentives under RCW 50.64.040 and the training period under this section shall not be available to an employer who assumes operation of the business or the facilities of a prior employer and who does not offer employment to the nonmanagement employees of the predecessor employer, with wages, hours, and working conditions that are similar or substantially equivalent. This subsection does not apply when a business is substantially different in character from the business engaged in by the prior employer.

PART VIII

STATE PURCHASING RESTRICTION

NEW SECTION. Sec. 801. The legislature hereby finds and declares that:

(1) The countries of South Africa and Namibia are the only countries on this planet which constitutionally enshrine political systems whereby a small minority of the population has the power and authority to separate, discriminate against, and deny fundamental political, social, and economic rights to, a far larger majority solely on the basis of race.

(2) The policy of apartheid restricts the freedom of speech and the freedom of movement of black and colored persons in South Africa and Namibia. In South Africa alone, this policy of apartheid relegates eighty-three percent of the nation's population to thirteen percent of the land area.

(3) There has been continued unrest and mounting protests against the policy of apartheid in South Africa and Namibia, to which both governments have responded with force.

(4) This system of apartheid is contrary to the basic religious and political assumptions underlying our nation, which hold that all people are created equal with the inalienable right to life, liberty, and the pursuit of happiness. The present struggle by blacks and other members of the majority populations of South Africa and Namibia echo the call of our Declaration of Independence which recognized the right of an oppressed people to alter or abolish any form of government which becomes destructive to securing these basic human rights.

(5) The United States of America has rejected the separate and unequal treatment of its citizens on the basis of race as ethically immoral and politically indefensible.

(6) Residents of this state of all races, creeds, and religions regard the policies and practices of apartheid in South Africa, as they do repressive policies and practices in other countries, as repugnant to the principles of individual liberty, social justice, and political and social enfranchisement, which are fundamental to free societies everywhere. The opposition to apartheid reflects the deep and long-standing opposition of the American people to inequality and injustice wherever it may be found.

(7) The purchase of products originating from South Africa and Namibia serves to support the economy of these nations and, in so doing, supports the policy of apartheid.

(8) By refusing to purchase products originating from South Africa and Namibia, the free nations of the world can let it be known that the policy of apartheid will not be tolerated.

NEW SECTION. Sec. 802. A new section is added to chapter 43.19 RCW to read as follows:

The definitions in this section apply throughout sections 803 and 804 of this act.

(1) "Apartheid" means an official policy authorizing the denial of equal voting rights or political, educational, or economic rights on the basis of race. This definition includes only the policies of South Africa and Namibia.

(2) "Business firm" means any organization, association, corporation, partnership, venture, or other entity, its subsidiary, or affiliate which exists for profit-making purposes or to otherwise secure economic advantage.

(3) "Governmental entity" means the central government of the referenced country or any instrumentality thereof.

(4) "Originate" or "Originated" means manufactured in or shipped from as a port of export.

(5) "State agency" means a governmental entity subject to either RCW 43.19.190(2) or 43.19.1911.

NEW SECTION. Sec. 803. A new section is added to chapter 43.19 RCW to read as follows:

(1) No state agency may contract with any business firm for the purchase of any product, supplies, or equipment unless the business firm stipulates, as a material condition of the contract, that none of the products, supplies, or equipment to be provided originated in a country that has an apartheid policy.

(2) No state agency may contract for the purchase of any product, supplies, or equipment from any governmental entity representing a country that has an apartheid policy.

NEW SECTION. Sec. 804. A new section is added to chapter 43.19 RCW to read as follows:

Any business firm that enters into a contract to provide a state agency with products, supplies, or equipment and both knowingly and falsely stipulates that the products, supplies, or equipment did not originate in a country that has an apartheid policy, shall be liable for liquidated damages in an amount equal to one-half the contract purchase price.

PART IX

EXCISE TAX CREDITS AND DEFERRALS

Sec. 901. Section 1, chapter 2, Laws of 1985 ex. sess. as last amended by section 1, chapter 497, Laws of 1987 and RCW 82.61.010 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Applicant" means a person applying for a tax deferral under this chapter.

(2) "Person" has the meaning given in RCW 82.04.030.

(3) "Department" means the department of revenue.

(4) "Eligible investment project" means:

(a) Construction of new buildings and the acquisition of new related machinery and equipment when the buildings, machinery, and equipment are to be used for either manufacturing or research and development activities, which construction is commenced prior to December 31, ((~~1988~~)) 1990; or

(b) Acquisition prior to December 31, ((~~1988~~)) 1990, of new machinery and equipment to be used for either manufacturing or research and development if the machinery and equipment is housed in a new leased structure: PROVIDED, That the lessor/owner of the structure is not eligible for a deferral unless the underlying ownership of the buildings, machinery, and equipment vests exclusively in the same person; or

(c) Acquisition of all new or used machinery, equipment, or other personal property for use in the production or casting of aluminum at an aluminum smelter or at facilities related to an aluminum smelter, if the plant was in operation prior to 1975 and has ceased operations or is in imminent danger of ceasing operations for economic reasons, as determined by the department, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represented employees of the plant pursuant to a collective bargaining agreement that was in effect either immediately prior to the time the plant ceased operations or during the period when the plant was in imminent danger of ceasing operations, on the proposed operation of the plant and on the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter or has received a concurrence waiver from the department of trade and economic development; or

(d) Modernization projects involving construction, acquisition, or upgrading of equipment or machinery, including services and labor, which are commenced after May 19, 1987, and are intended to increase the operating efficiency of existing plants which are either aluminum smelters or aluminum rolling mills or of facilities related to such plants, if the plant was in operation prior to 1975, and if the person applying for a deferral (i) has consulted with any collective bargaining unit that represents employees of the plant on the proposed operation of the plant and the terms and conditions of employment for wage and salaried employees and (ii) has obtained a written concurrence from the bargaining unit on the decision to apply for a deferral under this chapter or has received a concurrence waiver from the department of trade and economic development.

(5) "Manufacturing" means all activities of a commercial or industrial nature wherein labor or skill is applied, by hand or machinery, to materials so that as a result thereof a new, different, or useful substance or article of tangible personal property is produced for sale or commercial or industrial use and includes the production or fabrication of specially made or custom-made articles.

(6) "Research and development" means the development, refinement, testing, marketing, and commercialization of a product, service, or process before commercial sales have begun.

(7) "Buildings" means only those new structures used for either manufacturing or research and development activities, including plant offices and warehouses or other facilities for the storage of raw materials or finished goods if such facilities are an essential or an integral part of a factory, mill, plant, or laboratory used for manufacturing or research and development purposes. If a building is used partly for manufacturing or research and development and partly for other purposes, the applicable tax deferral shall be determined by apportionment of the costs of construction under rules adopted by the department.

(8) "Machinery and equipment" means all industrial and research fixtures, equipment, and support facilities that are an integral and necessary part of a manufacturing or research and development operation. "Qualified machinery and equipment" includes computers; software; data processing equipment; laboratory equipment; manufacturing components such as belts, pulleys, shafts, and moving parts; molds, tools, and dies; operating structures; and all equipment used to control or operate the machinery. For purposes of this chapter, new machinery and equipment means either new to the taxing jurisdiction of the state or new to the certificate holder. Used machinery and equipment may be treated as new equipment and machinery if the certificate holder either brings the machinery and equipment into Washington or makes a retail purchase of the machinery and equipment in Washington or elsewhere.

(9) "Qualified employment position" means a permanent full-time employee employed in the eligible investment project during the entire tax year.

(10) "Recipient" means a person receiving a tax deferral under this chapter.

(11) "Certificate holder" means an applicant to whom a tax deferral certificate has been issued.

(12) "Operationally complete" means constructed or improved to the point of being functionally useable for the intended purpose.

(13) "Initiation of construction" means that date upon which on-site construction commences.

(14) "Concurrence waiver" means a written waiver of an otherwise required concurrence from a bargaining unit. The department of trade and economic development may issue a concurrence waiver only if:

(a) The department determines an applicant has made a good faith effort to obtain the required concurrence from a bargaining unit; and

(b) The department determines that granting the concurrence waiver is clearly in the best interests of the people of this state.

Sec. 902. Section 8, chapter 2, Laws of 1985 ex. sess. as amended by section 10, chapter 116, Laws of 1986 and RCW 82.61.040 are each amended to read as follows:

RCW 82.61.020 and 82.61.030 shall expire July 1, ((~~1988~~)) 1990.

Sec. 903. Section 6, chapter 2, Laws of 1985 ex. sess. as amended by section 11, chapter 116, Laws of 1986 and RCW 82.61.070 are each amended to read as follows:

The department and the department of trade and economic development shall jointly report to the legislature about the effects of this chapter on new manufacturing and research and development activities in this state. The report shall contain information concerning the number of deferral certificates granted, the amount of sales tax deferred, the number of jobs created and other information useful in measuring such effects. Reports shall be submitted by January 1, 1986, and by January 1 of each year through ((~~1989~~)) 1991.

Sec. 904. Section 22, chapter 116, Laws of 1986 and RCW 82.62.040 are each amended to read as follows:

RCW 82.62.020 and 82.62.030 shall expire July 1, ((~~1988~~)) 1990.

PART X

LOCAL MARKETPLACE PROGRAMS

NEW SECTION. Sec. 1001. The legislature finds and declares that substantial benefits in increased employment and business activity can be obtained by assisting local in-state firms in identifying opportunities to purchase the goods and services they need from local suppliers. The replacement of out-of-state imports with services and manufactured goods produced locally can be an important source of economic growth in a local community. Firms in the state are often unaware that goods and services they purchase from remote suppliers are available from local firms with substantial advantages in responsiveness, service, and price. Increasing the commercial connections between firms in a community can improve the understanding of local communities of their economies and can result in the identification of additional opportunities for successful economic development initiatives. Providing additional information to firms regarding local sources of goods and services can be a particularly valuable component of local revitalization strategies in economically distressed areas. The legislature finds and declares that it is the policy of the state to strengthen the economies of local communities by increasing the commercial connections between local businesses and creating programs to assist firms in identifying local sources of goods and services.

NEW SECTION. Sec. 1002. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter:

(1) "Department" means the department of trade and economic development.

(2) "Center" means the business assistance center established under RCW 43.31.083.

(3) "Director" means the director of trade and economic development.

(4) "Local nonprofit organization" means a local nonprofit organization organized to provide economic development or community development services, including but not limited to associate development organizations, economic development councils, and community development corporations.

NEW SECTION. Sec. 1003. There is established a Washington marketplace program within the business assistance center established under RCW 43.31.083. The program shall assist Washington businesses to competitively meet their needs for goods and services within Washington by providing information relating to the replacement of imports with local products. The program shall place special emphasis on strengthening local economies in economically distressed areas of the state as defined in RCW 82.60.020(3). The Washington marketplace program shall be administered in conjunction with the community revitalization team established pursuant to chapter 43.165 RCW.

NEW SECTION. Sec. 1004. (1) The department shall contract with local nonprofit organizations in two locations in the state located within economically distressed areas of the state as defined in RCW 82.60.020(3) to implement the Washington marketplace program at the local level. In contracting with local nonprofit organizations, the department shall:

(a) Award contracts based on a competitive bidding process, pursuant to chapter 43.19 RCW;

(b) Give preference to nonprofit organizations representing a broad spectrum of community support; and

(2) The contracts with local development organizations shall be for the performance of the following services for the Washington marketplace program:

(a) Contacting Washington businesses to identify goods and services they are currently buying or are planning in the future to buy out of state and determine which of these goods and services could be purchased on competitive terms within the state;

(b) Identifying locally produced goods and services which are currently provided by out-of-state firms;

(c) Determining, in consultation with local business, goods and services for which the business is willing to make contract agreements;

(d) Advertising market opportunities described in (c) of this subsection;

(e) Receiving bid responses from potential suppliers, tabulating them according to criteria agreed upon in advance with a prospective purchasing business and sending them to that business for final selection;

(f) Assisting and initiating contract agreements for buyers and sellers within the state; and

(g) Charging service fees for businesses that profit as a result of participation in the program.

(3) The center shall contract with no more than two nonprofit organizations located in areas of the state that are not categorized as economically distressed that are operating local import replacement programs to provide technical assistance to nonprofit organizations in economically distressed areas in establishing local marketplace programs.

(4) The center shall also perform the following activities in order to promote the goals of the program:

(a) Preparing promotional materials or conducting seminars to inform communities and organizations about the Washington marketplace program;

(b) Providing technical assistance to communities and organizations interested in developing an import replacement program;

(d) Providing continuing management and technical assistance to local contractors; and

(e) Reporting by December 31 of each year to the legislature describing the activities of the Washington marketplace program.

NEW SECTION. Sec. 1005. This chapter shall expire on June 30, 1991, unless extended by law for an additional fixed period of time.

NEW SECTION. Sec. 1006. If any provision of sections 1001 through 1005 of this act or its application to any person or circumstance is held invalid, the remainder of sections 1001 through 1005 of this act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 1007. Sections 1001 through 1005 of this act shall constitute a new chapter in Title 43 RCW.

PART XI

DEVELOPMENT LOAN FUND

NEW SECTION. Sec. 1101. The legislature finds that the development loan fund was created to provide flexible financing, often at reduced terms, to businesses in areas of the state experiencing economic distress. The success of the development loan fund can be measured by its leveraging of private sector investment in businesses in distressed areas, by increasing the involvement of lenders in providing assistance to firms in these areas, and by providing a tool to increase the economic health of the distressed areas of the state. The use of federal funds to make grants to local governments for loans to businesses in economically distressed areas of the state has provided a program which has increased the scarce capital available to finance small and medium-size firms in distressed areas. These funds have successfully financed new firms, firm expansions, and the reopening of closed plants as well as preventing the threatened closure of facilities in distressed areas. Therefore, the legislature finds that additional funds shall be provided to the development loan fund to continue the financing provided by the development loan fund program.

PART XII

DISLOCATED WORKERS

NEW SECTION. Sec. 1201. The legislature of the state of Washington finds that in order to promote the economic well-being of its citizens the state should address the changing needs of both industry and labor, particularly in distressed industries throughout the state. The legislature further finds that the state should encourage and support programs to successfully combat unemployment in these distressed industries. Although previous federal funding to support efforts to assist dislocated shipyard workers under the federal shipyard national reserve project has been withdrawn, the state should continue and expand this assistance to dislocated workers. It is the intent of the legislature to authorize funding for a dislocated workers program administered by the employment security department that will identify those workers in shipbuilding and other distressed industries needing additional training.

PART XIII

SCHOOL-BASED ENTERPRISE DEVELOPMENT

NEW SECTION. Sec. 1301. The legislature recognizes the importance of new and growing enterprises to the vitality of the state economy. The majority of new jobs in the state are created by new small enterprises, and the state has an interest in fostering an environment in which such enterprises can prosper and grow. The legislature further recognizes the importance of education in creating an economic climate characterized by experimentation and flexibility. The development of local school-based incubators of small student-developed enterprises can increase student self-reliance, nurture entrepreneurial skills, and help identify and respond to the unmet needs of local communities. The value of local school-based incubators is especially important in economically distressed communities.

NEW SECTION. Sec. 1302. A new section is added to chapter 43.63A RCW to read as follows:

(1) The local education and enterprise development program is established in the department of community development. The program shall be developed in conjunction with the office of the superintendent of public instruction. The department is directed to contract with a local school district in an economically distressed area to operate the program. For the purposes of this section, "economically distressed area" means a county designated as economically distressed as defined in RCW 82.60.020(3).

The program shall be operated in one or more secondary schools having an enrollment of over one hundred students in an economically distressed area. The program shall undertake activities to include but not be limited to the following:

(a) Conduct a student-conducted survey of unmet local market needs;

(b) Provide training in business skills to students to assist them to operate businesses; and

(2) The program shall utilize the services of local associate development organizations, the business assistance center established under RCW 43.31.083, the small business development center, local vocational education advisory committees of management and labor, and local governments.

(3) School-based businesses developed under this section may be sold to students upon graduation, or to others in the business community. The sales shall be at fair market value. The proceeds of such sales shall be deposited in the state general fund to be used solely to fund the program under this section.

NEW SECTION. Sec. 1303. The department of community development and the local school district shall report to the trade and economic development committee of the house of representatives and the economic development and labor committee of the senate on the progress of the program under section 1302 of this act by December 31, 1989.

NEW SECTION. Sec. 1304. Sections 1301 through 1303 of this act are necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.

PART XIV

MISCELLANEOUS

NEW SECTION. Sec. 1401. Section and part captions as used in this act constitute no part of the law.