HOUSE OF REPRESENTATIVES

H.B. NO.

2843

TWENTY-FIFTH LEGISLATURE, 2010

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO ECONOMIC DEVELOPMENT.

 

 

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

 


     SECTION 1.  Chapter 206M, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"Part   .  HAWAII strategic development

A.  General Provisions

     §206M-A  Definitions.  As used in this part:

     "Committee" means the Hawaii strategic development advisory committee.

     "Direct investment" means an investment by the development corporation in qualified securities of an enterprise to provide capital to an enterprise.

     "Economic development project" means an endeavor related to industrial, commercial, or advanced technology-based agricultural enterprise.  Economic development project shall not include that portion of an endeavor devoted to the construction of housing.

     "Enterprise" means a person with a place of business in Hawaii which is, or proposes to be, engaged in business in Hawaii; provided that the endeavor shall not be devoted to the sale of goods at retail, construction of housing, or tourism- related services.

     "Minority-owned businesses" means businesses at least fifty per cent owned, controlled, and managed by socially or economically disadvantaged persons.

     "Person" means a sole proprietorship, partnership, joint venture, corporation, or other association of persons organized for commercial or industrial purposes.

     "Professional investor" means any bank, bank holding company, savings institution, trust company, insurance company, investment company registered under the Federal Investment Company Act of 1940, financial services loan company, pension or profit-sharing trust or other financial institution or institutional buyer, licensee under the Federal Small Business Investment Act of 1958, or any person, partnership, or other entity of whose resources a substantial amount is dedicated to investing in securities or debt instruments and whose net worth exceeds $250,000.

     "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 of subscription, transferable share, investment contract, certificate of deposit for a security, certificate of interest or participation in a patent or patent application, 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, or option, warrant, or right to subscribe to or purchase any of the foregoing.

     "Seed capital" means financing provided for the earliest stage of business development, including but not limited to developing a working prototype, preparing a business plan, performing an initial market analysis, or organizing a management team.

     "Venture capital investment" means any of the following investments in a business:

     (1)  Common or preferred stock and equity securities without a repurchase requirement for at least five years;

     (2)  A right to purchase stock or equity securities;

     (3)  Any debenture or loan, whether or not convertible or having stock purchase rights, which are subordinated, together with security interests against the assets of the borrower, by their terms to all borrowings of the borrower from other institutional lenders, and that is for a term of not less than three years, and that has no part amortized during the first three years; and

     (4)  General or limited partnership interests.

     206M-B  Hawaii strategic development; purpose.  The purpose of the development corporation under this part shall be to encourage economic development and diversification in Hawaii through innovative actions in cooperation with private enterprises.  The development corporation shall establish programs to stimulate private capital investment in Hawaii toward investments that promote the welfare of citizens in this State, economic growth, employment, and economic diversification.  The development corporation may use public funds to provide incentives to private investment activity, by co-investing public funds in private financial organizations to increase the impact of the public investment while using the investment acumen of the private sector, and by using public funds to reduce the risks of private investments.  The development corporation shall have the flexibility to provide various types of financial assistance.  When providing financial assistance, the development corporation shall make provision for the recovery of its expenditures, as far as possible.

     §206M-C  Hawaii strategic development advisory committee.  (a)  There is established a Hawaii strategic development advisory committee which shall advise the development corporation on matters relating to the implementation of this part.  The committee shall consist of eleven members to be appointed by the governor for staggered terms pursuant to section 26-34 as follows:

     (1)  Three to be appointed directly by the governor;

     (2)  Three to be appointed from a list of nominees from the general public submitted by the president of the senate; and

     (3)  Three to be appointed from a list of nominees from the general public submitted by the speaker of the house of representatives,

and shall be selected on the basis of their knowledge, skill, and experience in the scientific, business, or financial fields.  The director of business, economic development, and tourism and a member from the board of the natural energy laboratory of Hawaii authority appointed by the governor, or their designated representatives, shall serve as ex officio voting members.  Not more than two of the six members of the committee appointed from the lists of nominees submitted by the president of the senate and the speaker of the house of representatives, during their term of office on the committee, shall be employees of the State.  All appointed members of the committee shall continue in office until their respective successors have been appointed.

     (b)  The director of business, economic development, and tourism shall serve as chairperson of the committee until such time as a chairperson is elected by the committee from the membership.  The committee shall elect such other officers as it deems necessary.

     (c)  The members of the committee shall serve without compensation, but may be reimbursed for expenses, including travel expenses, incurred in the performance of their duties.

     §206M-D  Powers of development corporation.  The development corporation in addition to its powers under section 206M-3 shall have all of the powers necessary to carry out its purposes under this part, including:

     (1)  Adopting rules pursuant to chapter 91 to carry out the purposes of this part;

     (2)  Appearing in its own behalf before state, county, or federal agencies;

     (3)  Entering into agreements or other transactions with any federal, state, or county agency;

     (4)  Appointing officers, employees, consultants, agents, and advisors who shall not be subject to chapter 76, and prescribing their duties and fixing their compensation within the limitations provided by law;

     (5)  Contracting with others, public or private, for the provision of all or a portion of the services necessary for the operation of this part;

     (6)  Appointing advisory committees as deemed necessary;

     (7)  Providing and paying for such advisory services and technical, managerial, and marketing assistance, support, and promotion as may be necessary or desirable to carry out the purposes of this part;

     (8)  Financing, conducting, or cooperating in the financing or conducting of technological, business, financial, or other investigations that are related to or likely to lead to business and economic development by making and entering into contracts and other appropriate arrangements, including the provision of loans, start-up and expansion capital, and other forms of assistance;

     (9)  Acquiring, owning, holding, disposing of, and encumbering personal property of any nature, or any interest therein;

    (10)  Acquiring real property, or an interest therein, by purchase or foreclosure, where that acquisition is necessary or appropriate to protect or secure any investment or loan in which the development corporation has an interest; selling, transfering, and conveying the property to a buyer and if the sale, transfer, or conveyance cannot be effected with reasonable promptness or at a reasonable price, leasing the property to a tenant;

    (11)  Accepting donations, grants, bequests, and devises of money, property, service, or other things of value that may be received from the United States or any agency thereof, any governmental agency, or any public or private institution, person, firm, or corporation, to be held, used, or applied for any or all of the purposes specified in this part;

(12) Using all appropriations, grants, contractual reimbursements, and all other funds not appropriated for a designated purpose to pay for the proper general expenses of the development corporation under this part and to carry out the purposes of this part;

    (13)  Carrying out specialized programs designed to encourage the development of new products, businesses, and markets;

    (14)  Coordinating the development corporation's programs with any education and training program;

    (15)  Organizing, conducting, sponsoring, or cooperating and assisting in the conduct of conferences, demonstrations, and studies relating to the stimulation and formation of businesses and to fulfilling the objectives and purposes of this part;

    (16)  Preparing, publishing, and distributing such technical studies, reports, bulletins, and other materials as it deems appropriate, subject only to the maintenance and respect for confidentiality of client proprietary information; and

    (17)  Exercising any other powers of a corporation organized under the laws of the State.

     §206M-E  Actions of development corporation; guidelines.  (a)  All actions taken by the development corporation under this part shall be necessary to achieve the purposes and objectives of this part; provided that a board member shall not participate in any development corporation decision to invest in, purchase from, sell to, borrow from, loan to, contract with, or otherwise deal with any person with whom or entity in which the board member has a substantial financial interest.  The board may delegate to its staff, employees, or others those functions and powers that the board deems necessary or appropriate, including but not limited to the oversight and supervision of employees of the corporation.

     (b)  The development corporation shall evaluate all programs after three years to determine their effectiveness.  The development corporation shall establish rules to assure equal opportunity to minority-owned businesses, and shall encourage the development of minority-owned businesses.  The development corporation shall support and encourage participation by Hawaii companies in federal grant programs, such as the Small Business Innovation Research Program.

     (c)  Financial participation shall be made on the condition that the recipient of the assistance shall use the money to assist economic development projects within the state that have potential for creating new jobs or retaining current jobs within the state.

     (d)  Financial participation by the development corporation in private financial investment funds shall be made with the provision that the private fund shall make investments in Hawaii in amounts at least equal to the amount of state participation.

     (e)  The development corporation shall not make direct investments in individual businesses except upon a two-thirds vote of the board in each case considered.  When deciding whether to enter into a direct investment, the development corporation shall consider whether:

     (1)  The project is economically sound;

     (2)  The project can be successfully completed;

     (3)  The project will promote economic diversification;

     (4)  The project is located in or will be located in the state and has a reasonable potential to create desirable employment opportunities for residents of the state;

     (5)  The project has been unable to obtain sufficient funding on reasonable terms through ordinary means; and

     (6)  The project can be partially financed through ordinary means at reasonable terms.

The development corporation shall not acquire securities to an extent that would provide the development corporation effective voting control of any enterprise after giving effect to the conversion of all outstanding convertible securities of the enterprise.

     (f)  Investments by the development corporation to persons shall be made on the basis of solicitation and a competitive technical review process, subject to the availability of funds allocated to the development corporation for making investments.  Investments by the development corporation shall not be subject to chapter 42F.  Any organization applying for an investment shall meet the following standards:

     (1)  Have bylaws or policies that describe the manner in which business is conducted and policies relating to nepotism and management of potential conflict of interest situations;

     (2)  Be licensed and accredited, as applicable, in accordance with the requirements of federal, state, and county governments;

     (3)  Comply with applicable federal and state laws prohibiting discrimination against any person on the basis of race, color, national origin, religion, creed, sex, age, or physical handicap; and

     (4)  Comply with other requirements as the board may prescribe.

     (g)  The development corporation shall segregate its operations under this part from other development corporation operations.   The development corporation shall not promise to answer for the debts of any other person.

     206M-F  Business and industry evaluation and priorities for job opportunity and economic development.  The development corporation shall develop procedures to set priorities as to which types of businesses and industries are most likely to provide significant opportunities for economic development and diversification in the state, consistent with the purposes of this part.  This evaluation shall take into account the guidelines provided by the state plan for economic development.  Based on these findings, the development corporation shall establish targets by which the operations and programs of the development corporation shall be guided.

     206M-G  Confidentiality of trade secrets or the like; disclosure of financial information.  Notwithstanding chapter 92, 92F, or any other law to the contrary, any documents or data made or received by any member or employee of the development corporation under this part, to the extent that the material or data consist of trade secrets, commercial or financial information regarding the operation of any business conducted by an applicant for, or recipient of, any form of assistance that the development corporation is empowered to render, or regarding the competitive position of that applicant in a particular field of endeavor, shall not be a public record; provided that if the development corporation purchases a qualified security from an applicant, the commercial and financial information, excluding confidential business information, shall be deemed to become a public record of the development corporation.  If the information is made or received by any member or employee of the development corporation after the purchase of the qualified security, it shall become a public record three years from the date the information was made or received.  Any discussion or consideration of trade secrets or commercial or financial information, shall be held by the board, or any subcommittee of the board, in executive sessions closed to the public; provided that the purpose of any such executive session shall be set forth in the official minutes of the development corporation and business which is not related to that purpose shall not be transacted, nor shall any vote be taken during the executive sessions.

     206M-H  Requests for assistance from the development corporation; procedure.  (a)  The board shall approve or disapprove requests for assistance under this part within ninety days of receiving a written application.  Upon written request by an applicant, the board may reconsider its denial of an application for assistance or may waive the ninety-day deadline for approving or disapproving an application.

     (b)  Any person who submits any statement, report, application, or other document to the development corporation which is known to the person to be false in any material respect shall be guilty of a class C felony.

     (c)  The development corporation may condition any assistance of any type by placing restrictions on the recipient in regard to the recipient's assets or indebtedness or in any other manner deemed appropriate by the development corporation.  A recipient who accepts assistance from the development corporation shall be deemed to agree to be bound by any conditions or restrictions imposed by the development corporation.

     206M-I  Private sector financial support.  Significant private sector financial support shall be associated with any economic development project for which the development corporation provides assistance under this part.

     206M-J  Limitations on debt owed to the development corporation.  Not more than $5,000,000 in financial assistance, excluding rights and royalties under a venture capital agreement, shall be provided to any one enterprise at any time.  The direct investments of the development corporation shall not exceed five per cent of the assets of the development corporation, excluding rights and royalties under a venture capital agreement; provided that by a two-thirds vote of the board this amount may be increased to a limit of twenty-five per cent of the total assets of the development corporation.

     §206M-K  Hawaii strategic development revolving fund.  There is established the Hawaii strategic development revolving fund.  The following moneys received by the development corporation under this section shall be deposited into the Hawaii strategic development revolving fund and shall not be considered part of the general fund:  all moneys appropriated by the legislature, received as repayments of loans, earned on investments, received pursuant to a venture agreement, received as royalties, received as premiums or fees charged by the development corporation, or otherwise received by the development corporation under this section.

     206M-L  Cancer detection development revolving fund; establishment.  (a)  There is established the cancer detection development revolving fund to be administered by the  development corporation to assist enterprises that develop healthcare and biomedical technology to detect cancer, including cervical cancer, in its early stages.

     (b)  The fund shall not be considered part of the general fund and shall consist of moneys:

     (1)  Appropriated by the legislature;

     (2)  Received as repayments of loans;

     (3)  Earned on investments;

     (4)  Received pursuant to a venture agreement;

     (5)  Received as royalties; or

     (6)  Received as premiums, or fees charged by the development corporation or otherwise received by the development corporation.

     206M-M  Hydrogen investment capital special fund.  (a)  There is established the hydrogen investment capital special fund, into which shall be deposited:

     (1)  Appropriations made by the legislature to the fund;

     (2)  All contributions from public or private partners;

     (3)  All interest earned on or accrued to moneys deposited in the special fund; and

     (4)  Any other moneys made available to the special fund from other sources.

     (b)  Moneys in the fund shall be used to:

     (1)  Provide seed capital for and venture capital investments in private sector and federal projects for research, development, testing, and implementation of the Hawaii renewable hydrogen program, as set forth in section 196-10; and

     (2)  For any other purpose deemed necessary to carry out the purposes of section 196‑10.

     206M-N  Annual report.  The development corporation shall submit a complete and detailed report of the development corporation's activities to the legislature.  The annual report shall include the receipt of each donation or grant by the development corporation under this part, the identity of the donor or lender, the nature of the transaction, and any conditions attaching thereto.  The report shall be submitted no later than twenty days before the convening of each regular session of the legislature.

     206M-O  Annual audit.  The books and records of the development corporation under this part shall be subject to an annual audit by an independent auditor.

     206M-P  Construction of part.  This part shall be liberally construed to effect its purposes.

B.  Program for Seed Capital Assistance

     206M-Q  Establishment.  The development corporation shall establish a program for seed capital assistance.

     206M-R  Seed capital investments.  Subject to this part, the development corporation may invest in:

     (1)  A certified development company under sections 501 to 503 of the Small Business Investment Act of 1958, 15 United States Code 695 to 697, and the regulations adopted under those sections;

     (2)  A small business investment company under the Small Business Investment Act, 15 United States Code 631 to 634, 636 to 649, and the regulations adopted under those sections;

     (3)  A minority enterprise small business investment corporation or equivalent venture capital corporation;

     (4)  A similar entity that may leverage its capital under a federal program; or

     (5)  A seed capital fund or partnership.

     206M-S  Purposes and terms of investments.  (a)  Investments may be used for any purpose consistent with the purposes and objectives of this part, including but not limited to:

     (1)  Developing a working prototype;

     (2)  Preparing a development plan;

     (3)  Performing an initial market analysis;

     (4)  Organizing a management team; and

     (5)  Any other purpose reasonably related to an economic development project.

     (b)  Investments may be made on such terms and conditions as the development corporation shall determine to be reasonable, appropriate, and consistent with the purposes and objectives of this part.

C.  Program for Venture Capital Assistance

     206M-T  Establishment.  The development corporation shall establish a program for venture capital.

     206M-U  Venture capital investments.  Subject to this part, the development corporation may invest in:

     (1)  A certified development company under sections 501 to 503 of the Small Business Investment Act of 1958, 15 United States Code 695 to 697, and the regulations adopted under those sections;

     (2)  A small business investment company under the Small Business Investment Act, 15 United States Code 631 to 634, 636 to 649, and the regulations adopted under those sections;

     (3)  A minority enterprise small business investment corporation or equivalent venture capital corporation;

     (4)  A similar entity that may leverage its capital under a federal program; or

     (5)  A venture capital fund or partnership.

     206M-V  Purposes and terms of investments.  (a)  Investments may be used for any purpose consistent with the purposes and objectives of this part.

     (b)  Investments may be made on such terms and conditions as the development corporation shall determine to be reasonable, appropriate, and consistent with the purposes and objectives of this part.

 

 

D.  Program for Capital Access

     206M-W  Establishment.  The development corporation shall establish a program for capital access.

     206M-X  Financial assistance.  The development corporation, through the program for capital access, may:

     (1)  Procure insurance, a guarantee, or a letter of credit from any source for all or a part of a loan, debenture, or lease of others, public or private, or a revenue bond issue of the State or other entity or authority authorized by law to issue revenue bonds; and

     (2)  Procure insurance, a guarantee, or a letter of credit for either a single loan, debenture, or lease or for any combination of loans, debentures, or leases, or a single revenue bond issue or for all or a part of any combination of revenue bond issues.

     206M-Y  Purposes and priorities required in the procuring of insurance, loan guarantees, or letters of credit.  (a)  Insurance, guarantees, or letters of credit procured pursuant to section 206M-X shall be procured only for economic development projects within the state that are consistent with the purposes and objectives of this part.

     (b)  The development corporation shall give paramount priority in procuring insurance, guarantees, and letters of credit to economic development projects that have the greatest potential for creating new jobs or retaining current jobs within the state.

     206M-Z   Conditions for procuring of insurance, loan guarantees, or letters of credit.  (a)  Insurance, guarantees, or letters of credit shall not be procured pursuant to section 206M-X unless the development corporation is assured that the loans, debentures, or leases insured, or guaranteed, or for which letters of credit are issued, shall be used to assist economic development projects that also have significant private sector financial support.

     (b)  Insurance, guarantees, or letters of credit may be procured on such terms and conditions as the development corporation, in its sole discretion, shall determine to be reasonable, appropriate, and consistent with the purposes and objectives of this part.

     (c)  The development corporation shall charge the lender or the borrower, or both, a fee or premium for procuring loan, debenture, or lease insurance, guarantee, or a letter of credit.  Rules for premiums or fees shall be established by the development corporation.

     206M-AA  Program for capital access participation agreements.  The development corporation shall enter into agreements with lenders for participation in the program for capital access that shall include but not be limited to:

     (1)  Authorization for the lender to determine, collect, and transmit to the development corporation a fee or premium charge within a specified range established consistent with the purposes and objectives of the development corporation;

     (2)  Specification of whether the premium charge shall be paid by the lender, the borrower, the development corporation, or by a combination thereof in specified proportions;

     (3)  The procedure by which a lender may make a claim upon the development corporation upon default by the borrower, and the conditions under which a claim may be made; and

     (4)  The maximum amount of claims a lender may make upon the development corporation, which amount may be equal to or less than the proportion of the total premiums contributed by the development corporation.

     206M-BB  Establishment of special funds to secure loan insurance obligations; source of funds.  The development corporation may establish a special fund or funds for capital access into which fees or premiums collected by the development corporation are deposited.

E. Hawaii Technology Investment Program

     206M-CC  Definitions.  As used in this subpart:

     "Biotechnology" means fundamental knowledge regarding the function of biological systems from the macro level to the molecular subatomic levels that has application to development including the development of novel products, services, technologies, and subtechnologies from insights gained from research advances that add to that body of fundamental knowledge.

     "Computer data" means any representation of information, knowledge, facts, concepts, or instructions that is being prepared or has been prepared and is intended to be processed, is being processed, or has been processed in a computer or computer network.

     "Computer program" means an ordered set of computer data representing coded instructions or statements, that, when executed by a computer, causes the computer to perform one or more computer operations.

     "Computer software" means computer data, a computer program, or a set of computer programs, procedures, or associated documentation concerned with the operation and function of a computer system, and includes both systems and application programs and subdivisions, such as assemblers, compilers, routines, generators, and utility programs.

     "Financial organization" means an organization authorized to do business in Hawaii that is:

     (1)  Certified as an insurer by the insurance commissioner;

     (2)  Licensed or chartered as a financial institution by the commissioner of financial institutions;

     (3)  Chartered by an agency of the federal government;

     (4)  Subject to the jurisdiction and regulation of the federal Securities and Exchange Commission; or

     (5)  Any other entity otherwise authorized to do business in the state that meets the requirements of this part.

     "Program" means the Hawaii technology investment program.

     "Program manager means a financial organization selected by the development corporation to manage the program.

     "Qualified high technology business":

     (1)  Means a business, employing or owning capital or property, or maintain­ing an office, in this state that:

         (A)  Conducts more than fifty per cent of its activities in performing qualified research in this state; or

         (B)  Receives more than fifty per cent of its gross income derived from qualified research; provided that the income is received from:

              (i)  Products sold from, manufactured in, or produced in the state; or

             (ii)  Services performed in this state.

     (2)  Does not include:

         (A)  Any trade or business involving the performance of services in the field of law, architecture, accounting, actuarial science, consulting, athletics, financial services, or brokerage services;

         (B)  Any banking, insurance, financing, leasing, rental, investing, or similar business; any farming business, including the business of raising or harvesting trees; any business involving the production or extraction of products of a character with respect to which a deduction is allowable under section 611 (with respect to allowance of deduction for depletion), 613 (with respect to basis for percentage depletion), or 613A (with respect to limitation on percentage deplet­ing in cases of oil and gas wells) of the Internal Revenue Code;

         (C)  Any business operating a hotel, motel, restaurant, or similar business; and

         (D)  Any trade or business involving a hospital, a private office of a licensed health care professional, a group practice of licensed health care professionals, or a nursing home.

     "Qualified research" means:

     (1)  The same as in Section 41(d) of the Internal Revenue Code; or

     (2)  The development and design of computer software using fourth generation or higher software development tools or native programming languages to design and construct unique and specific code to create applications and design databases for sale or license; or

     (3)  Biotechnology;

provided that more than fifty per cent of the business' activities are qualified research.

     "Venture capital investment" means any of the following investments in a qualified high technology business:

     (1)  Common or preferred stock and equity securities without a repurchase requirement for at least five years;

     (2)  A right to purchase stock or equity securities;

     (3)  Any debenture or loan, whether or not convertible or having stock purchase rights, which:

         (A)  Is subordinated, together with security interests against the assets of the borrower, by their terms to all borrowings of the borrower from other institutional lenders;

         (B)  Is for a term of not less than three years; and

         (C)  Has no part amortized during the first three years;

     (4)  General or limited partnership interests; and

     (5)  Membership interests in limited liability companies.

     206M-DD  Formation of Hawaii technology investment program.  (a)  The development corporation shall establish the Hawaii technology investment program for the purpose of allowing individual investors to contribute to the program to invest venture capital in businesses in Hawaii.

     (b)  The development corporation may implement the Hawaii technology investment program through a regulated investment company under the terms and conditions established by this section.  The development corporation may make changes to the program as required for participants to obtain the federal and state income tax benefits or treatment provided by Sections 851 to 855 of the Federal Internal Revenue Code of 1986, as amended.

     The development corporation may establish a program in which the dividends distributed by the regulated investment company are exempt from income taxation under chapter 235.  If the development corporation establishes a program that is proposed to be exempt from income taxation under chapter 235, it shall furnish sufficient information and notify the department of taxation and investors of the tax exempt status of that program.

     (c)  The development corporation may implement the program through the use of financial organizations as program managers.  Under the program, individuals may establish accounts directly with a program manager.

     (d)  The development corporation may solicit proposals from one or more financial organizations to act as a program manager.  Financial organizations submitting proposals shall describe the investment instrument.  The development corporation shall select as program managers the financial organizations from among the bidding financial organizations that demonstrate the most advantageous combination, both to potential program participants and this State, based on the following factors:

     (1)  The financial stability and integrity of the financial organization;

     (2)  The ability of the financial organization to establish or act as a regulated investment company for the purposes of this part;

     (3)  The ability of the financial organization to satisfy recordkeeping and reporting requirements for the purposes of a program that allows a program that is exempt from taxation under chapter 235;

     (4)  The financial organization's plan for promoting the program and the resources it is willing to allocate to promote the program;

     (5)  The fees, if any, proposed to be charged to persons for opening accounts;

     (6)  The minimum initial deposit and minimum contributions, subject to this section that the financial organization will require; and

     (7)  Other benefits to the State or its residents included in the proposal, including fees payable to the State to cover expenses to operate the program.

     (e)  The development corporation may enter into a management contract of up to ten years with a financial organization.  The financial organization shall provide investment instruments meeting the requirements of this section.  The management contract shall include, at a minimum, terms requiring the financial organization to:

     (1)  Take any action required to keep the program in compliance with requirements of this section and to manage the program to meet the requirements of Sections 851 to 855 of the Federal Internal Revenue Code of 1986, as amended;

     (2)  Keep adequate records of each account, keep each account segregated from each other's account, and provide the development corporation with the information necessary to prepare any necessary statements;

     (3)  Provide the development corporation with the information necessary to determine compliance with this section;

     (4)  Provide the development corporation access to the books and records of the financial organization to the extent needed to determine compliance with the contract;

     (5)  Hold all accounts for the benefit of the account owner;

     (6)  Be audited at least annually by a firm of independent certified public accountants selected by the financial organization, and provide the results of the audit to the development corporation; and

     (7)  Provide the development corporation with copies of all regulatory filings and reports related to the program made by the financial organization during the term of the management contract or while it is holding any accounts, other than confidential filings or reports that will not become part of the program.  The financial organization shall make available for review by the development corporation, the results of any periodic examination of the financial organization by any state or federal banking, insurance, or securities commission, except to the extent that the report or reports may not be disclosed under applicable law or the rules of the examining agency.

     (f)  The development corporation may require an audit to be conducted of the operations and financial position of the program manager at any time if the development corporation has any reason to be concerned about the financial position, the recordkeeping practices, or the status of accounts of the program manager.

     (g)  During the term of any contract with a program manager, the development corporation shall conduct an examination of the program manager and its handling of accounts.  The examination shall be conducted at least biennially if the program manager is not otherwise subject to periodic examination by the commissioner of financial institutions, the Federal Deposit Insurance Corporation, or other similar entity.

     (h)  If selection of a financial organization as a program manager is not renewed, after the end of the term:

     (1)  Accounts previously established and held in investment instruments at the financial organization may be terminated;

     (2)  Additional contributions may be made to the accounts;

     (3)  No new accounts may be placed with the financial organization; and

     (4)  Existing accounts held by the financial organization shall remain subject to all oversight and reporting requirements established by the development corporation.

If the development corporation terminates a financial organization as a program manager, the development corporation shall take custody of accounts held by the financial organization and shall seek to promptly transfer the accounts to another financial organization that is selected as a program manager and into investment instruments as similar to the original instruments as possible.

     (i)  The development corporation may enter into contracts for the services of consultants for rendering professional and technical assistance and advice and any other contracts that are necessary and proper for the implementation of the program.

     (j)  The program shall only allow contributions from individual investors in amounts ranging from a minimum of $1,000 to a maximum of $100,000 per investor.

     (k)  The program manager shall invest all contributions received from investors in securities not limited to legal investments under state laws relating to the investment of trust fund assets by trust companies, including those authorized by article 8 of chapter 412.  Contributions shall be used for venture capital investment.  Investment may be made in any manner the program deems correct.  If no venture capital investment is available at the time a contribution is made to the program, the program manager may invest the contribution in any manner allowed a regulated investment company until a venture capital investment opportunity occurs.  While the program manager should make a best effort to make venture capital investments as defined in section 206M-CC, if no such venture capital investment is available in Hawaii, then the program manager may make venture capital investments outside Hawaii.

     206M-EE  Limitation of liability.  In no case shall the development corporation, officers or employees of the development corporation, or the State be liable for the monetary losses of individuals contributing to the program.  In all cases, the program manager shall inform individual contributors of the risk involved in contributing to the program."

     SECTION 2.  Section 206M-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The governing body of the development corporation shall consist of a board of directors having [eleven] ten voting members.  Seven of the members shall be appointed by the governor for staggered terms pursuant to section 26-34.  Six of the appointed members shall be from the general public and selected on the basis of their knowledge, interest, and proven expertise in[,] but not limited to[,] one or more of the following fields:  finance, commerce and trade, corporate management, marketing, economics, engineering, and telecommunications, and other high technology fields.  The other appointed member shall be selected from the faculty of the University of Hawaii.  All appointed members of the board shall continue in office until their respective successors have been appointed.  The director of business, economic development, and tourism, the director of finance, [an appointed member from the board of the Hawaii strategic development corporation,] and an appointed member from the board of the natural energy laboratory of Hawaii authority, or their designated representatives, shall serve as ex officio voting members of the board.  The director of business, economic development, and tourism shall serve as the chairperson until such time as a chairperson is elected by the board from the membership.  The board shall elect such other officers as it deems necessary."

     SECTION 3.  Section 211G-1, Hawaii Revised Statutes, is amended by amending the definition of "corporation" to read as follows:

     ""Corporation" means the [Hawaii strategic development corporation, a public body corporate and politic and an instrumentality and agency of the State,] high technology development corporation established under chapter [211F.] 206M."

     SECTION 4.  Section 227D-2, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  The governing body of the authority shall consist of a board of directors having [thirteen] twelve voting members.  Three members from the general public shall be appointed by the governor for staggered terms pursuant to section 26-34, except that one of these members shall be a resident of the county of Hawaii.  The members shall be selected on the basis of their knowledge, interest, and proven expertise in[,] but not limited to[,] one or more of the following fields:  finance, commerce and trade, corporate management, marketing, economics, engineering, energy management, real estate development, property management, aquaculture, and ocean science.  The chairperson and secretary of the research advisory committee shall serve on the board.  The director of business, economic development, and tourism, the chairperson of the board of land and natural resources, the president of the University of Hawaii, the mayor of the county of Hawaii, and an appointed member from the board of the high technology development corporation, [and an appointed member from the board of the Hawaii strategic development corporation,] or their designated representatives, shall serve as ex officio, voting members of the board.  The tenants of the authority shall elect two members to the board from among the tenants of the authority, of which one member shall serve a two-year term, and one member shall serve a four-year term.  In electing the tenant members, each tenant shall be entitled to cast one vote for each member position.  The tenant members shall be recused from voting on setting lease rents, water rates, or utility rates, but may participate in discussions.  The director of business, economic development, and tourism shall serve as the chairperson until such time as a chairperson is elected by the board from the membership.  The board shall elect other officers as it deems necessary."

     SECTION 5.  Chapter 211F, Hawaii Revised Statutes, is repealed.

     SECTION 6.  All rights, powers, functions, and duties of the Hawaii strategic development corporation are transferred to the high technology development corporation.

     All officers and employees whose functions are transferred by this Act shall be transferred with their functions and shall continue to perform their regular duties upon their transfer, subject to the state personnel laws and this Act.

     No officer or employee of the State having tenure shall suffer any loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefit or privilege as a consequence of this Act, and such officer or employee may be transferred or appointed to a civil service position without the necessity of examination; provided that the officer or employee possesses the minimum qualifications for the position to which transferred or appointed; and provided that subsequent changes in status may be made pursuant to applicable civil service and compensation laws.

     An officer or employee of the State who does not have tenure and who may be transferred or appointed to a civil service position as a consequence of this Act shall become a civil service employee without the loss of salary, seniority, prior service credit, vacation, sick leave, or other employee benefits or privileges and without the necessity of examination; provided that such officer or employee possesses the minimum qualifications for the position to which transferred or appointed.

     If an office or position held by an officer or employee having tenure is abolished, the officer or employee shall not thereby be separated from public employment, but shall remain in the employment of the State with the same pay and classification and shall be transferred to some other office or position for which the officer or employee is eligible under the personnel laws of the State as determined by the head of the department or the governor.

     SECTION 7.  All appropriations, records, equipment, machines, files, supplies, contracts, books, papers, maps, and other moneys or personal property heretofore made, used, acquired, or held by the Hawaii strategic development corporation relating to the functions transferred to the high technology development corporation shall be transferred with the functions to which they relate.  All moneys held in the Hawaii strategic development corporation revolving fund shall be transferred to the Hawaii strategic development revolving fund established under this Act.  All moneys held in the cancer detection development revolving fund established under chapter 211F, Hawaii Revised Statutes, shall be deemed transferred to the cancer detection development revolving fund established by this Act.  All moneys held in the hydrogen investment capital special fund established under chapter 211F, Hawaii Revised Statutes, shall be deemed transferred to the hydrogen investment capital special fund established by this Act.

     SECTION 8.  All deeds, leases, contracts, loans, agreements, permits, or other documents executed or entered into by or on behalf of the Hawaii strategic development corporation relating to the functions transferred to the high technology development corporation shall remain in full force and effect.  Effective January 1, 2011, every reference to the Hawaii strategic development corporation therein shall be construed as a reference to the high technology development corporation.

     SECTION 9.  All rules adopted by the Hawaii strategic development corporation in effect on the day prior to the effective date of this Act shall remain in full force and effect until such time that the high technology development corporation adopts new rules superseding the rules of the Hawaii strategic development corporation and implementing this Act.

     SECTION 10.  In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

     SECTION 11.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 12.  This Act shall take effect on January 1, 2011.

 

INTRODUCED BY:

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Report Title:

Hawaii Strategic Development Corporation

 

Description:

Transfers the powers and responsibilities of the Hawaii Strategic Development Corporation (HSDC) to the High Technology Development Corporation; makes the HSDC board an advisory committee on issues pertaining to HSDC functions.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.