AN ACT Relating to city and county seed capital pools; and adding a new chapter to Title 36 RCW.

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

NEW SECTION. Sec. 1. This chapter may be known and cited as the city and county seed capital pool act.

NEW SECTION. Sec. 2. The legislature finds that the diversification of the state's economy and the creation of new employment opportunities will be enhanced by the development of locally responsive and accountable sources of capital for new enterprises and for new product development. The difference between state economies which provide adequate high-quality employment opportunities for citizens and those which do not is in part a function of the rate of creation of new enterprises and of their ability to sustain themselves. The availability of capital to finance new business enterprises and new product development is a critical factor in increasing the number of successful new enterprises created in the state and thus the ability of the state economy to create employment opportunities. The state has a history of promoting economic health and growth through the creation of development entities which are created locally and which are accountable to local citizens. The state finds it a public purpose to authorize the creation of local seed capital pools by city and county governments, financed by citizen contributions, which may provide capital to new enterprises and which may finance new product development in counties in the state.

NEW SECTION. Sec. 3. As used in this chapter, the following terms have the meanings indicated unless the context clearly requires otherwise.

(1) "Eligible enterprise" means a small business that is primarily located and operated in the city or county and that is or proposes to be engaged in the city or county in research and development, in commercial product development, or in manufacturing, technology, or the production of goods and services with high potential for expansion and trade outside the state's borders.

(2) "Qualified security" means any note, stock, treasury stock bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, preorganization certificate or subscription, transferable share, investment contract, certificate of deposit for a security, certificate of interest or participation in a patent or application therefor, or in royalty or other payments under such a patent or application, or, in general, any interest or instrument commonly known as a "security" or any certificate for, receipt for, guarantee of, or option, warrant, or right to subscribe to or purchase any of the foregoing.

(3) "Seed capital" means financing that is provided for the initial development, refinement, testing, marketing, and commercialization of a product, service, or process to an enterprise with a high potential for long-term commercial sales and that is provided before any substantial commercial sales have been made by the enterprise of the product or service being developed.

(4) "Small business" means any business that has fewer than fifty full-time employees or its equivalent.

NEW SECTION. Sec. 4. A city or county may create a local seed capital pool to operate in the city or county and to provide funds in the form of loans or equity participation to finance new enterprises or to assist in the development of new products in the marketplace. The local seed capital pool shall be governed by a board of directors consisting of seven members appointed by the legislative authority of the city or county. The legislative authority may designate, as the board of directors of the local seed capital pool, the board of directors of an industrial development corporation located in the city or county. Unless the board of directors of an industrial development corporation is designated, members of the board of directors shall be citizens of the city or county with expertise in small business, new business development, and business finance and shall include members of the general public. The legislative authorities of two or more contiguous counties may, pursuant to chapter 39.34 RCW, combine to form a multicounty seed capital pool. If a local seed capital pool is created by both a county and a city within the county, only one pool shall operate and it shall be by interlocal agreement pursuant to chapter 39.34 RCW.

NEW SECTION. Sec. 5. A local seed capital pool shall provide funds by purchasing qualified securities of eligible enterprises. A local seed capital pool may not acquire more than forty-five percent of the stated capital of any eligible enterprise, and no seed capital funds may be used for real estate investments.

The legislative authority of the city or county shall provide, by ordinance or resolution, procedures for the determination of which enterprises qualify as eligible and may grant any powers to the board of directors as may be necessary for it to carry out its duties.

NEW SECTION. Sec. 6. Upon request of the legislative authority of a city or county in which a seed capital pool has been created and the board of directors of the local seed capital pool, each utility providing water distribution services and each utility providing sewerage collection services in the city or county shall include in its billings to a utility consumer printed materials which provide the consumer the opportunity to indicate his or her assent to donate a monthly sum of no less than one dollar to finance the local seed capital pool. The materials shall allow the local utility consumer the opportunity to denote the amount of funds to be donated each month to the local seed capital pool. If a consumer indicates that donations should be made on a monthly basis to a local seed capital pool, the utility shall add such sums to its periodic billings for services and shall pass such funds as are collected as a result to the local seed capital pool. A utility may charge the local seed capital pool a fee of no more than three percent of the funds collected to defray the utility's costs in collecting and processing donations to local seed capital pools.

NEW SECTION. Sec. 7. Sections 1 through 6 of this act shall constitute a new chapter in Title 36 RCW.