S T A T E   O F   N E W   Y O R K
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                                  8452

                       2011-2012 Regular Sessions

                          I N  A S S E M B L Y

                              June 16, 2011
                               ___________

Introduced  by  M.  of  A. SCHIMMINGER, SCARBOROUGH, LUPARDO, GABRYSZAK,
  MORELLE -- Multi-Sponsored by -- M.  of  A.  BRONSON,  RAMOS,  REILLY,
  ROBERTS,  RUSSELL, SPANO, ZEBROWSKI -- (at request of the Empire State
  Development) -- read once and referred to the  Committee  on  Economic
  Development

AN ACT to amend the New York state urban development corporation act, in
  relation  to the capital access program and to provide for a new Inno-
  vate NY fund; and making appropriations for the support of government

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.    Section 16-k of section 1 of chapter 174 of the laws of
1968, constituting the New York state urban development corporation act,
as added by section 1 of part J of chapter 413 of the laws of  1999,  is
amended to read as follows:
  S  16-k.  Capital access program. 1. Definitions.  For the purposes of
this section:
  (a) "Financial institution", means any bank,  trust  company,  savings
bank,  savings and loan association or cooperative bank chartered by the
state or any national banking  association,  federal  savings  and  loan
association  or federal savings bank OR ANY COMMUNITY DEVELOPMENT FINAN-
CIAL INSTITUTION  OR  COMMUNITY-BASED  LENDING  ORGANIZATION;  provided,
however, that the financial institution has its principal office located
in the state.
  (b)  "Participating  financial  institution"  shall mean any financial
institution participating in the program established by this section.
  (c) "Small business" shall have the  same  meaning  as  set  forth  in
section  131  of  the  economic  development law, whose primary place of
business is in New York state.
  2. (a) The corporation, or its agent, shall establish a capital access
program to provide a loan loss reserve to assist small  businesses  that
otherwise find it difficult to obtain regular bank financing.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
A                                                          LBD13170-01-1
              

A. 8452                             2

  (b)(i)  Assistance  [from this] UNDER THE CAPITAL ACCESS program shall
be provided for a capital access program under which the corporation  or
its  agent shall be authorized to assist small businesses that otherwise
find it difficult to obtain regular OR SUFFICIENT bank  financing.  Such
assistance  shall  take  the  form of deposits by the corporation or its
agent in the reserve funds in participating  financial  institutions  to
fund loan loss reserves for loans made to such small businesses.
  (ii)  Any  financial  institution  desiring  to become a participating
financial institution shall execute an agreement in  such  form  as  the
corporation  or  its  agent may prescribe, which agreement shall contain
the terms and provisions set forth in paragraph (c) of this  subdivision
and  such other terms and provisions as the corporation or its agent may
deem necessary or appropriate.
  (c) A participating financial institution  originating  a  loan  to  a
small business pursuant to this section shall:
  (i)  provide  a plan to the corporation or its agent for the marketing
of the capital access program TO SMALL BUSINESSES,  INCLUDING  THOSE  in
highly  distressed  areas  and  to minority- and women-owned businesses,
with appropriate lending objectives identified by the financial institu-
tion for such areas and businesses;
  (ii) disperse funds for the purposes of expansion, facility/technology
upgrading, start-up and working capital;
  (iii) not disperse funds which exceed  an  amount  greater  than  five
hundred thousand dollars;
  (iv) set aside an amount, specified OR AGREED TO by the corporation or
its  agent,  [but which shall not be] FROM BOTH THE PARTICIPATING FINAN-
CIAL ORGANIZATION AND THE SMALL BUSINESS, NOT less than  [one  and  one-
half]  THREE percent nor more than [three and one-half] SEVEN percent of
the principal amount of the loan, WHEREBY THE AMOUNT CONTRIBUTED BY  THE
SMALL  BUSINESS  DOES  NOT  EXCEED  FIFTY  PERCENT  OF  THE TOTAL AMOUNT
CONTRIBUTED BY THE SMALL BUSINESS AND THE FINANCIAL INSTITUTION, into  a
loan  loss  reserve  which the institution shall maintain, applicable to
all such loans by said institution to small businesses pursuant to  this
section; AND
  (v)  [obtain  from  the  small business an amount equal to the reserve
contribution  made  by  the  participating  financial  institution  with
respect to such loan;
  (vi)  set  aside such amount into said loan loss reserve maintained by
the participating financial institution applicable to all loans pursuant
to this section; and
  (vii)] certify to the corporation or its agent in such a  fashion  and
with  such  supporting information as the corporation or its agent shall
prescribe, that it has made such loan and has set aside its contribution
and the [equal] contribution of the small business.
  (d) The corporation or its agent shall  after  such  certification  as
provided  in  subparagraph [(vii)] (V) of paragraph (c) of this subdivi-
sion, transfer to the  participating  financial  institution  an  amount
equal  to  the total of the contributions of the participating financial
institution and the small business or such additional amount up  to  one
hundred  fifty percent of such contributions as determined by the corpo-
ration or its agent. The participating financial institution  shall  set
aside such amount so received into said loan loss reserve.
  (e)  In  the  event  the participating financial institution suffers a
loss on any such loan, it may in its discretion draw upon the  funds  in
such loan loss reserve to repay the loan in whole or in part.

A. 8452                             3

  (f)  All  amounts set aside by the participating financial institution
into said loan loss reserve shall be in an account at said institution.
  (g)  Earnings or interest from the principal of said loan loss reserve
accounts shall be:
  (i) maintained in  the  account  and  held  as  additional  loan  loss
reserves; and
  (ii)  available  to  the corporation or its agent at any time and from
time to time, to be used  to  defray  the  costs  of  administering  the
program or to replenish the loan loss reserve account of the corporation
or its agent.
  (H)  THE  CORPORATION SHALL ASSURE ADEQUATE GEOGRAPHIC DISTRIBUTION OF
PARTICIPATING FINANCIAL INSTITUTIONS THROUGHOUT THE STATE TO THE  EXTENT
FEASIBLE.
  3.  Administration  of the capital access program. (a) The corporation
is hereby authorized to do the following:
  (i) enter into a contract with A THIRD  PARTY  FINANCIAL  INSTITUTION,
WHICH MAY BE the New York business development corporation, [hereinafter
referred to as NYBDC,] established under section 210 of the banking law,
to  act  as  the  agent  of the corporation with respect to the adminis-
tration of the program, PROVIDED THAT THE SELECTION  OF  A  THIRD  PARTY
OTHER  THAN  THE NEW YORK BUSINESS DEVELOPMENT CORPORATION SHALL BE MADE
PURSUANT TO A COMPETITIVE PROCESS;
  (ii) conduct an annual review and assessment of the performance of the
[NYBDC] THIRD PARTY in its capacity as  agent  for  the  corporation  to
determine  whether  the  contract referenced in subparagraph (i) of this
paragraph should be renewed for  an  additional  two  year  period.  The
review  shall  be  based  on  whether  the [NYBDC] THIRD PARTY AGENT has
satisfactorily met the terms and conditions of the contract;
  (iii) where an initial determination finds that  the  [NYBDC's]  THIRD
PARTY  AGENT'S  performance  is  unsatisfactory, allow the [NYBDC] THIRD
PARTY AGENT the opportunity to take corrective action;
  (iv) where a  final  review  of  the  [NYBDC's]  THIRD  PARTY  AGENT'S
performance continues to conclude that the [NYBDC's] THIRD PARTY AGENT'S
performance is unsatisfactory, submit to the speaker of the assembly and
the  temporary  president  of the senate its recommendation to terminate
the contract with  the  [NYBDC]  THIRD  PARTY  AGENT  and  transfer  the
contract to another agent; and
  (v)  promulgate  rules and regulations with respect to the implementa-
tion of the capital access program established by this section  and  any
other  rules  and  regulations necessary to fulfill the purposes of this
section, in accordance with the state administrative procedure act,  and
WHICH  shall be consistent with the program plan required by subdivision
19 of section 100 of the economic development law.
  (b) Any contract entered into pursuant to subparagraph  (i)  of  para-
graph (a) of this subdivision shall:
  (i)  be  for  a  period of two years and shall be renewed for an addi-
tional two year period subject to requirements of subparagraph  (ii)  of
paragraph (a) of this subdivision; and
  (ii)  provide  for  compensation  for expenses incurred by the [NYBDC]
THIRD PARTY AGENT in connection with its services as agent and for  such
other  services  as  the corporation may deem appropriate including, but
not limited to the use of the premises, personnel and personal  property
of the [NYBDC] THIRD PARTY AGENT.
  S  2.  Section  1 of chapter 174 of the laws of 1968, constituting the
New York state urban development corporation act, is amended by adding a
new section 16-u to read as follows:

A. 8452                             4

  S 16-U. INNOVATE NY FUND. 1. THE INNOVATE NY FUND IS  HEREBY  CREATED.
THE  PURPOSE OF THE INNOVATE NY FUND IS TO MAKE AVAILABLE STATE FUNDS TO
ELIGIBLE APPLICANTS TO SUPPORT EMERGING BUSINESS IDEAS AND PRODUCTS THAT
RESULT IN THE GROWTH OF BUSINESS WITHIN THE STATE  AND  THE  CONCOMITANT
CREATION OF JOBS AND TAX REVENUES FOR THE STATE.
  2.  ELIGIBLE APPLICANTS FOR INNOVATE NY FUNDS MAY INCLUDE REGIONAL AND
LOCAL ECONOMIC DEVELOPMENT ORGANIZATIONS, TECHNOLOGY DEVELOPMENT  ORGAN-
IZATIONS,  RESEARCH  UNIVERSITIES,  AND  INVESTMENT  FUNDS  THAT PROVIDE
SEED-STAGE INVESTMENTS IN NEW YORK STATE COMPANIES.
  3. FUNDING FROM THE INNOVATE NY FUND MAY  BE  MADE  AVAILABLE  TO  THE
APPLICANT FOR INVESTMENT IN BENEFICIARY COMPANIES. IN ORDER TO BE ELIGI-
BLE  FOR  AN  INVESTMENT  THAT  INCLUDES INNOVATE NY INVESTMENT FUNDS, A
BENEFICIARY COMPANY MUST: (A) BE, OR AGREE IN WRITING TO BE, LOCATED  IN
NEW  YORK  STATE; (B) BE IN THE SEED-STAGE OF DEVELOPMENT, AS DEFINED BY
THE CORPORATION; (C) DEMONSTRATE A POTENTIAL FOR SUBSTANTIAL GROWTH  AND
JOB  DEVELOPMENT  IN AN EMERGING TECHNOLOGY FIELD, AS DEFINED IN SECTION
THIRTY-ONE HUNDRED TWO-E OF THE PUBLIC AUTHORITIES LAW OR IN REGULATIONS
AS ADOPTED BY THE CORPORATION; AND (D) HAVE THE  POTENTIAL  TO  GENERATE
ADDITIONAL  ECONOMIC  ACTIVITY  IN NEW YORK STATE.   INVESTMENT PRIORITY
SHALL BE GIVEN TO BENEFICIARY COMPANIES INVOLVED IN COMMERCIALIZATION OF
RESEARCH AND DEVELOPMENT OR HIGH TECHNOLOGY MANUFACTURING.
  4. THE CORPORATION SHALL ESTABLISH A COMPETITIVE PROCESS FOR THE EVAL-
UATION OF APPLICANTS FOR THE INNOVATE NY INVESTMENT  FUND.    APPLICANTS
SHALL BE EVALUATED ON CRITERIA INCLUDING, BUT NOT LIMITED TO, THE APPLI-
CANT'S:    (A)  TRACK  RECORD OF SUCCESS IN RAISING INVESTMENT FUNDS AND
SUCCESSFULLY INVESTING THEM; (B) CAPACITY TO PERFORM DUE  DILIGENCE  AND
TO  PROVIDE MANAGEMENT EXPERTISE AND OTHER VALUE-ADDED SERVICES TO BENE-
FICIARY COMPANIES; (C) FINANCIAL RESOURCES FOR IDENTIFYING AND INVESTING
IN SEED-STAGE  COMPANIES;  (D)  ABILITY  TO  SECURE  NON-STATE  MATCHING
PROGRAM INVESTMENT FUNDS AT A RATIO THAT IS EQUAL TO OR GREATER THAN ONE
TO ONE (1:1); (E) ABILITY TO EVALUATE THE COMMERCIAL POTENTIAL OF EMERG-
ING  TECHNOLOGIES;  (F)  ABILITY  TO  SECURE  PARTNERSHIPS WITH LOCAL OR
REGIONAL INVESTORS; (G) ADOPTION  OF  CONFLICT  OF  INTEREST  PROVISIONS
ACCEPTABLE  TO  THE  CORPORATION; AND (H) OTHER CRITERIA THAT THE CORPO-
RATION DETERMINES IS RELEVANT TO MAKING INVESTMENT DECISIONS  CONSISTENT
WITH  THE  PURPOSES  OF THE FUND AS SET FORTH IN SUBDIVISION ONE OF THIS
SECTION.  WHEN AWARDING FUNDS PURSUANT TO THIS SUBDIVISION,  THE  CORPO-
RATION  SHALL  ASSURE  THAT THE APPLICANTS DEMONSTRATE THE NEED FOR SEED
CAPITAL IN THE AREAS SERVED BY THE APPLICANT AND  PROVIDE  FOR  ADEQUATE
GEOGRAPHIC  DISTRIBUTION  OF  AWARDS TO BENEFICIARY COMPANIES THROUGHOUT
THE STATE TO THE EXTENT FEASIBLE.    THE  CORPORATION  SHALL  DISTRIBUTE
FUNDS  PROMPTLY PURSUANT TO A DISBURSEMENT PROCESS AGREED TO BETWEEN THE
CORPORATION AND APPLICANT TO ENABLE THE APPLICANT TO FULFILL COMMITMENTS
TO BENEFICIARY COMPANIES IN A TIMELY MANNER.
  5. AT THE TIME THE APPLICANT HAS INVESTED FIFTY PERCENT OF  THE  INNO-
VATE  NY  FUNDS  COMMITTED  TO  SUCH  APPLICANT AND ANNUALLY THEREAFTER,
AGGREGATE INVESTMENTS OF INNOVATE NY FUNDS BY SUCH APPLICANT IN  BENEFI-
CIARY  COMPANIES  SHALL  BE  LEVERAGED  WITH  PRIVATE SOURCES OF CAPITAL
EXCLUDING INVESTMENTS AFTER THE INITIAL FUNDING ROUND AT A  RATIO  EQUAL
TO OR GREATER THAN TWO TO ONE (2:1).
  6. THE INNOVATE NY FUND SHALL NOT INVEST AN AMOUNT IN ANY SINGLE BENE-
FICIARY  COMPANY  THAT  EXCEEDS  FIVE HUNDRED THOUSAND DOLLARS, OR SEVEN
HUNDRED FIFTY THOUSAND DOLLARS IN THE CASE OF ANY INDIVIDUAL BIOTECHNOL-
OGY-RELATED BENEFICIARY, AT ANY ONE TIME, SUBJECT TO CERTAIN  EXCEPTIONS
TO BE ESTABLISHED BY RULES AND REGULATIONS OF THE CORPORATION.

A. 8452                             5

  7.  NOTWITHSTANDING  ANY  PROVISION OF LAW TO THE CONTRARY, THE CORPO-
RATION MAY ESTABLISH A PROGRAM FUND FOR PROGRAM USE AND  PAY  INTO  SUCH
FUND  ANY  ELIGIBLE  FUNDS AVAILABLE TO THE CORPORATION FROM ANY SOURCE,
INCLUDING MONEYS APPROPRIATED BY THE STATE.
  8.  THE CORPORATION SHALL SUBMIT A REPORT ANNUALLY ON DECEMBER THIRTY-
FIRST TO THE DIRECTOR OF THE BUDGET,  THE  TEMPORARY  PRESIDENT  OF  THE
SENATE,  THE  SPEAKER OF THE ASSEMBLY, THE MINORITY LEADER OF THE SENATE
AND THE MINORITY LEADER OF THE ASSEMBLY DETAILING (A) THE  TOTAL  AMOUNT
OF  FUNDS COMMITTED TO EACH APPLICANT THAT RECEIVES FUNDS AND THE AMOUNT
OF SUCH FUNDS THAT HAS BEEN INVESTED BY EACH  SUCH  APPLICANT;  (B)  THE
AMOUNT  OF  INNOVATE  NY  AND PRIVATE FUNDS INVESTED IN EACH BENEFICIARY
COMPANY; (C) THE TYPE  OF  PRODUCT  OR  TECHNOLOGY  BEING  DEVELOPED  OR
PRODUCED BY EACH BENEFICIARY COMPANY; (D) THE LOCATION OF EACH BENEFICI-
ARY COMPANY; (E) THE NUMBER OF JOBS PROJECTED TO BE CREATED OR RETAINED;
AND (F) SUCH OTHER INFORMATION AS THE CORPORATION DEEMS NECESSARY.
  9.  THE CORPORATION IS HEREBY AUTHORIZED TO PROMULGATE RULES AND REGU-
LATIONS IN ACCORDANCE WITH THE STATE ADMINISTRATIVE PROCEDURE ACT AS ARE
NECESSARY TO FULFILL  THE  PURPOSES  OF  THIS  SECTION,  INCLUDING  WITH
RESPECT  TO  REASONABLE  MANAGEMENT  FEES, PROMOTES, SHARE OF RETURN AND
OTHER FEES AND CHARGES OF APPLICANTS THAT RECEIVE FUNDS, AND TO  PROVIDE
FOR  THE  REPAYMENT  OF FUNDS RECEIVED BY THE BENEFICIARY COMPANY IF THE
BENEFICIARY COMPANY LEAVES NEW YORK STATE WITHIN A PERIOD OF TIME TO  BE
ESTABLISHED BY THE CORPORATION.
  10.  IN ACCORDANCE WITH THE RULES AND REGULATIONS TO BE PROMULGATED BY
THE CORPORATION, THE CORPORATION MAY IMPOSE  FEES,  ESTABLISH  REPAYMENT
TERMS  AND  PROVIDE  FOR  EQUITY  PARTICIPATION  BY  THE  CORPORATION IN
CONNECTION WITH INVESTMENTS FROM THE INNOVATE NY FUND.
  11. THE PROVISIONS OF SECTION  TEN  AND  SUBDIVISION  TWO  OF  SECTION
SIXTEEN  OF  THIS  ACT SHALL NOT APPLY TO ASSISTANCE PROVIDED UNDER THIS
SECTION.
  S 3. a) The several amounts specified in this act for aid  to  locali-
ties,  or  so  much  thereof  as  shall  be sufficient to accomplish the
purposes designated by the appropriations, are hereby  appropriated  and
authorized  to be paid as hereinafter provided, to the respective public
officers and for the several purposes specified.
  b) Where applicable, appropriations made by this act for  expenditures
from  federal grants for aid to localities may be allocated for spending
from federal grants for any grant period beginning, during, or prior to,
the state fiscal year beginning on April 1,  2011  except  as  otherwise
provided.
  c)  No  moneys appropriated by this act shall be available for payment
until a certificate of approval has been issued by the director  of  the
budget, who shall file such certificate with the department of audit and
control,  the chairperson of the senate finance committee and the chair-
person of the assembly ways and means committee.
  d) The appropriation contained within this section  is  based  on  the
amount  of federal moneys estimated to become available within the funds
for which this appropriation provides. Disbursements from this appropri-
ation shall be limited to the actual amounts received in such funds from
the federal government.
  e) The appropriations contained in this act shall be available for the
fiscal year beginning on April 1, 2011 except as otherwise provided.

A. 8452                             6

                   DEPARTMENT OF ECONOMIC DEVELOPMENT

SMALL BUSINESS CREDIT INITIATIVE PROGRAM .................... 55,351,534

  Special Revenue Funds - Federal
  Federal Operating Grant Fund
  Small Business Credit Initiative Account

For   programs   and  activities  authorized
  pursuant to section sixteen-f of  the  new
  york  state  urban development corporation
  act,  including  any  services  and  costs
  associated  with  administration  of  such
  programs and activities,  subject  to  the
  limitations  imposed  by  federal  funding
  requirements.     Notwithstanding      any
  provision  of  law  to  the contrary, such
  moneys shall be paid by the department  of
  economic development to the new york state
  urban development corporation from federal
  operating  grant  moneys  deposited in the
  state treasury for the federal state small
  business  credit  initiative.     Provided
  further  that,  notwithstanding any incon-
  sistent provision of law, subject  to  the
  approval  of  the  director of the budget,
  funds appropriated herein  may  be  inter-
  changed  with  any other item of appropri-
  ation to be funded from the small business
  credit initiative account ................... 10,405,173
For  programs  and   activities   authorized
  pursuant  to  section sixteen-k of the new
  york state urban  development  corporation
  act,  including  any  services  and  costs
  associated  with  administration  of  such
  programs  and  activities,  subject to the
  limitations  imposed  by  federal  funding
  requirements.        Notwithstanding   any
  provision of law  to  the  contrary,  such
  moneys  shall be paid by the department of
  economic development to the new york state
  urban development corporation from federal
  operating grant moneys  deposited  in  the
  state treasury for the federal state small
  business   credit  initiative.    Provided
  further that, notwithstanding  any  incon-
  sistent  provision  of law, subject to the
  approval of the director  of  the  budget,
  funds  appropriated  herein  may be inter-
  changed with any other item  of  appropri-
  ation to be funded from the small business
  credit initiative account ................... 18,994,204
For   programs   and  activities  authorized
  pursuant to section sixteen-u of  the  new
  york  state  urban development corporation

A. 8452                             7

  act,  including  any  services  and  costs
  associated  with  administration  of  such
  programs and activities,  subject  to  the
  limitations  imposed  by  federal  funding
  requirements.       Notwithstanding    any
  provision  of  law  to  the contrary, such
  moneys shall be paid by the department  of
  economic development to the new york state
  urban development corporation from federal
  operating  grant  moneys  deposited in the
  state treasury for the federal state small
  business  credit  initiative.     Provided
  further  that,  notwithstanding any incon-
  sistent provision of law, subject  to  the
  approval  of  the  director of the budget,
  funds appropriated herein  may  be  inter-
  changed  with  any other item of appropri-
  ation to be funded from the small business
  credit initiative account ................... 25,952,157

  S 4. This act shall take effect immediately.