COMMITTEE SUBSTITUTE

FOR

Senate Bill No. 109

(By Senators Tomblin, Mr. President, and Sprouse,

By Request of the Executive)

____________

[Originating in the Select Committee on Economic Development;

reported February 12, 2002.]

____________



A BILL to amend and reenact section nine-e, article six, chapter twelve of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating generally to the investment of moneys from the consolidated fund in the West Virginia enterprise capital fund, LLC, as managed by the West Virginia enterprise advancement corporation, a subsidiary of the West Virginia economic development authority.

Be it enacted by the Legislature of West Virginia:
That section nine-e, article six, chapter twelve of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ARTICLE 6. WEST VIRGINIA INVESTMENT MANAGEMENT BOARD.
§12-6-9e. Legislative findings; loans for industrial development; availability of funds and interest rates; loan for investment in West Virginia Enterprise Capital Fund, LLC.

(a) The Legislature hereby finds and declares that the citizens of the state benefit from the creation of jobs and businesses within the state; that a business and industrial development loan program provides for economic growth and stimulation within the state; that loans from pools established in the consolidated fund will assist in providing the needed capital to assist business and industrial development; and that time constraints relating to business and industrial development projects prohibit duplicative review by both the board and the West Virginia economic development authority board. The Legislature further finds and declares that an investment in the West Virginia Enterprise Capital Fund, LLC of moneys in the consolidated fund as hereinafter provided will assist in creating jobs and businesses within the state and providing the needed risk capital to assist business and industrial development. This section is enacted in view of these findings.
(b) The board shall make available, subject to cash availability, in the form of a revolving loan, up to one hundred fifty million dollars from the consolidated fund to loan the West Virginia economic development authority for business or industrial development projects authorized by section seven, article fifteen, chapter thirty-one of this code and to consolidate existing loans authorized to be made to the West Virginia economic development authority pursuant to this section and pursuant to section twenty, article fifteen, chapter thirty-one of this code which authorizes a one hundred fifty million dollar revolving loan and article eighteen-b, chapter thirty-one of this code which authorizes a fifty million dollar investment pool: Provided, That the West Virginia economic development authority may not loan more than fifteen million dollars for any one business or industrial development project. The revolving loan authorized by this subsection shall be secured by one note at a variable interest rate equal to the twelve-month average of the board's yield on its cash liquidity pool. The rate shall be set on the first day of July and the rate shall be adjusted annually on the same date. The maximum annual adjustment may not exceed one percent. Monthly payments made by the West Virginia economic development authority to the board shall be calculated on a one hundred twenty-month amortization. The revolving loan shall be secured by a security interest that pledges and assigns the cash proceeds of collateral from all loans under this revolving loan pool. The West Virginia economic development authority may also pledge as collateral certain revenue streams from other revolving loan pools which source of funds does not originate from federal sources or from the board.
The outstanding principal balance of the revolving loan from the board to the West Virginia economic development authority may at no time exceed one hundred three percent of the aggregate outstanding principal balance of the business and industrial loans from the West Virginia economic development authority to economic development projects funded from this revolving loan pool. This provision shall be certified annually by an independent audit of the West Virginia economic development authority financial records.
(c)The interest rates and maturity dates on the loans made by the West Virginia economic development authority for business and industrial development projects authorized by section seven, article fifteen, chapter thirty-one of this code shall be at competitive rates and maturities as determined by the West Virginia economic development authority board.
(d) Any and all outstanding loans made by the board, or any predecessor entity, to the West Virginia economic development authority shall be refunded by proceeds of the revolving loan contained in this section and no loans may be made hereafter by the board to the West Virginia economic development authority pursuant to section twenty, article fifteen, chapter thirty-one of this code or article eighteen-b of said chapter.
(e)The trustees of the board shall bear no fiduciary responsibility as provided in section eleven [§ 12-6-11] of this article with specific regard to the revolving loan contemplated in this section.
(f) Subject to cash availability, the board shall make available to the West Virginia economic development authority from the consolidated fund a non-recourse loan in an amount up to twenty-five million dollars, for the purpose of the West Virginia economic development authority making a loan or loans from time to time to the West Virginia enterprise advancement corporation, an affiliated nonprofit corporation of the West Virginia economic development authority. The respective loans authorized by this subsection (f) by the board to the West Virginia economic development authority and by the West Virginia economic development authority to the West Virginia enterprise advancement corporation shall each be evidenced by one note and shall each bear interest at the rate of three percent per annum. The proceeds of any and all loans made by the West Virginia economic development authority to the West Virginia enterprise advancement corporation pursuant to subsection (f) shall be invested by the West Virginia enterprise corporation in the West Virginia enterprise capital fund, llc, the manager of which is the West Virginia enterprise advancement corporation. The loan to West Virginia economic development authority authorized by this subsection (f) shall be non-revolving, and advances thereunder shall be made at such times and in such amounts as may be requested or directed by the West Virginia economic development authority, upon reasonable notice to the board, Any and all amounts advanced to the West Virginia economic development authority pursuant to this subsection (f) and not repaid shall reduce by an equal amount the amount available to the West Virginia economic development authority pursuant to the revolving loan described in subsection (b) of this section, but the loan authorized by this subsection (f) shall not be subject to or included in the limitations set forth in subsection (b) of this section with respect to the fifteen million dollar limitation for any one business or industrial development project and limitation of one hundred three percent of outstanding loans, and shall not be included in the revolving fund loan principal balance for purposes of calculating the loan amortization in subsection (b) of this section. The loan authorized by this subsection (f) to the West Virginia economic development authority shall be classified by the board as a long-term, fixed income investment, shall bear interest on the outstanding principal balance thereof at the rate of three percent per annum payable annually on or before the thirtieth day of June of each year, and the principal of which shall be repaid no later than the thirtieth day of June, two thousand twenty-two in annual installments due on or before the thirtieth day of June of each year, which annual installments shall commence no later than the thirtieth day of June, two thousand and three, in such annual principal amounts as may he agreed upon between the board and the West Virginia economic development authority, and which annual installments need not be equal. The loan authorized by this subsection (f) shall be non-recourse and shall be payable by the West Virginia economic development authority solely from amounts or returns received by the West Virginia economic development authority in respect of the loan authorized by this subsection (f) to the West Virginia enterprise advancement corporation, whether in the form of interest, dividends, realized capital gains, return of capital or otherwise, in all of which the board shall have a security interest to secure repayment of the loan to the West Virginia economic development authority authorized by this subsection (f). Any and all loans from the West Virginia economic development authority to the West Virginia enterprise advancement corporation made pursuant to this subsection (f) shall also bear interest on the outstanding principal balance thereof at the rate of three percent per annum payable annually on or before the thirtieth day of June of each year, shall be non-recourse and shall be payable by the West Virginia enterprise advancement corporation solely from amounts of returns received by the West Virginia enterprise advancement corporation in respect of its investment in the West Virginia enterprise capital fund, llc, whether in the form of interest, dividends, realized capital gains, return of capital or otherwise, in all of which the board shall have a security interest to secure repayment of the loan to the West Virginia economic development authority authorized by this subsection (f). In the event the amounts or returns received by the West Virginia enterprise corporation in respect of its investment in the West Virginia enterprise capital fund, llc, are not adequate to pay when due the principal or interest installments, or both, with respect to the loan from the West Virginia economic development authority and, as a result thereof, the West Virginia economic development authority is unable to pay the principal or interest installments, or both, with respect to the loan authorized by this subsection (f) by the board to the West Virginia economic development authority, the principal or interest, or both, as the case may be due on the loan made to the West Virginia economic development authority pursuant to this subsection (f) shall be deferred, and any and all such past-due principal and interest payments shall promptly be paid to the fullest extent possible upon receipt by the West Virginia enterprise advancement corporation of moneys in respect of is investments in the West Virginia enterprise capital fund, llc. The trustees or the board shall bear no fiduciary responsibility as provided in section eleven, article six, chapter twelve of this code with regard to the loan authorized by this subsection (f).
NOTE:
The purpose of this bill is to allow the investment of up to $25 million in the West Virginia Enterprise Capital Fund, LLC, as managed by the West Virginia Enterprise Advancement Corporation, an affiliated nonprofit corporation of the West Virginia economic development authority, for the purpose of providing venture capital to certain selected companies.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added to present law.