HSDC revolving fund

Appropriates funds into the Hawaii strategic development
corporation (HSDC) revolving fund.  Specifies that the HSDC board
administer the HSDC revolving fund.  Stipulates that the
department of business, economic development, and tourism not
restrict the use of moneys in the HSDC revolving fund.  (SB1607

THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 1999                                H.D. 2
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that economic
 2 diversification throughout many communities has been enhanced by
 3 the availability of venture capital investment.  Areas such as
 4 Silicon Valley, Route 128 in Boston, Austin, Texas, and Research
 5 Triangle in North Carolina have benefited greatly from venture
 6 capital supporting high growth technology companies.  Nationally,
 7 $14,000,000,000 of venture capital funding was generated in the
 8 last year.  Hawaii's future economic diversification and creation
 9 of a flourishing technology component will be dependent on the
10 availability of venture capital.
11      The Hawaii strategic development corporation was established
12 by the legislature to develop a sustainable venture capital
13 industry in Hawaii and attract investment from the private
14 sector.  Hawaii has been successful in developing many new
15 technology companies that use research undertaken at the
16 University of Hawaii with support from the high technology
17 development corporation and the department of business, economic
18 development, and tourism.

Page 2                                                     1607
                                     S.B. NO.           S.D. 2
                                                        H.D. 2

 1      To date, the Hawaii strategic development corporation has
 2 launched five venture capital limited partnerships that have
 3 invested in twenty-one companies in the fields of information
 4 technology, telecommunications, biotechnology, aquaculture, food
 5 processing and distribution, and others.  The corporation has
 6 leveraged its initial investment funds of $5,250,000 over ten
 7 times with private investment, and generated over $58,000,000 of
 8 venture capital for Hawaii companies.  As a result of receiving
 9 venture capital investment, these twenty-one companies have
10 created or sustained over five hundred jobs.
11      Hawaii strategic development corporation's investments have
12 served as the catalyst for Hawaii's venture capital industry.  It
13 is the goal of the corporation to use its investment fund to
14 attract private investment from Hawaii, the U.S. mainland, and
15 Asia, as private investment is seen as the long-term source of
16 venture capital for Hawaii's businesses.
17      Hawaii strategic development corporation's seed funding of
18 start-up companies represents long-term investments that have not
19 yet generated financial returns.  The corporation has fully
20 committed its available funds and will be unable to maintain its
21 momentum for business creation without additional funding.
22      There is a continuing need by Hawaii businesses for venture
23 capital so that in the future, companies such as Verifone,

Page 3                                                     1607
                                     S.B. NO.           S.D. 2
                                                        H.D. 2

 1 Neugenesis, Intelect, and Aspect will not have to relocate their
 2 operations to areas where venture capital is more readily
 3 available.
 4      The purpose of this Act is to appropriate funds to be paid
 5 into the Hawaii strategic development corporation revolving fund.
 6      SECTION 2.  There is appropriated out of the general
 7 revenues of the State of Hawaii the sum of $           or so much
 8 thereof as may be necessary for fiscal year 1999-2000 to be paid
 9 into the Hawaii strategic development corporation revolving fund;
10 provided that:
11      (1)  Investments shall be made primarily in high technology
12           companies;
13      (2)  An investment expenditure is only permitted when the
14           amount is at least equally matched by private sector
15           investment; and
16      (3)  Up to $           shall be used to develop a plan to
17           further develop venture capital in Hawaii identifying
18           investment opportunities, listing resources and support
19           organizations, describing the impact of venture capital
20           on various communities, and targeting additional
21           private investment capital for Hawaii companies.
22      SECTION 3.  The sum appropriated shall be expended by the
23 Hawaii strategic development corporation for the purposes of this
24 Act.

Page 4                                                     1607
                                     S.B. NO.           S.D. 2
                                                        H.D. 2

 1      SECTION 4.  Section 211F-5, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "[[]211F-5[]]  Hawaii strategic development corporation
 4 revolving fund.  There is established the Hawaii strategic
 5 development corporation revolving fund[.] that shall be
 6 administered by the board.  The following moneys shall be
 7 deposited into the Hawaii strategic development corporation
 8 revolving fund and shall not be considered part of the general
 9 fund:  all moneys appropriated by the legislature, received as
10 repayments of loans, earned on investments, received pursuant to
11 a venture agreement, received as royalties, received as premiums
12 or fees charged by the corporation, or otherwise received by the
13 corporation.  The department of business, economic development,
14 and tourism shall not restrict the use of any moneys in the
15 Hawaii strategic development corporation revolving fund."
16      SECTION 5.  Statutory material to be repealed is bracketed.
17 New statutory material is underscored.
18      SECTION 6.  This Act shall take effect on July 1, 1999.