1 HB473
2 213148-5
3 By Representative Garrett
4 RFD: Ways and Means Education
5 First Read: 02-MAR-21
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1
2 ENROLLED, An Act,
3 Relating to commerce; to establish the Alabama
4 Rural, Agribusiness, and Opportunity Zone Jobs Act; and to
5 establish a procedure for the certification of growth funds.
6 BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
7 Section 1. This act shall be known and may be cited
8 as the Alabama Rural, Agribusiness, and Opportunity Zone Jobs
9 Act.
10 Section 2. As used in this act, the following words
11 shall have the following meanings:
12 (1) AFFILIATE. An entity that directly, or
13 indirectly through one or more intermediaries, controls, is
14 controlled by, or is under common control with another entity.
15 For the purposes of this subdivision, an entity is controlled
16 by another entity if the controlling person holds, directly or
17 indirectly, the majority voting or ownership interest in the
18 controlled person or has control over the day-to-day
19 operations of the controlled person by contract or by law.
20 (2) AGRIBUSINESS. A business that earns a majority
21 of its revenues from either farming, forestry, biotechnology,
22 fisheries, or biofuels and the processing, manufacturing,
23 packaging, storage, distribution, marketing, and sales of
24 those products or commodities, or the design, creation,
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1 manufacture, marketing, or sales of technology, equipment, or
2 supplies related to those businesses.
3 (3) CLOSING DATE. The date the department and the
4 growth fund execute the SSBCI loan closes agreement.
5 (4) DEPARTMENT. A department designated by the
6 Office of the Governor.
7 (4) DEPARTMENT. The state body, department,
8 subdivision, or agency authorized by the state to direct
9 federal funds available under Subtitle C of Title III of the
10 American Rescue Plan Act of 2021.
11 (5) FOLLOW-ON CAPITAL. The sum of 50 percent of each
12 initial growth investment, subsequent growth investments made
13 to satisfy subdivision (a)(2) of Section 5 and any additional
14 financing received by a growth business on or after the date
15 of the initial growth investment, including senior debt,
16 subordinate debt, mortgage debt, equipment financing,
17 mezzanine debt, convertible notes, revolving lines of credit,
18 letters of credit, capital leases, preferred equity,
19 participating preferred equity, convertible preferred equity,
20 common equity, warrants and simple agreements for future
21 equity and any other financing approved by the department.
22 (6) FOLLOW-ON CAPITAL PERCENTAGE. Fifty percent
23 multiplied by a fraction, the numerator of which is the
24 aggregate follow-on capital reported to the department in
25 reports submitted pursuant to subsection (b) of Section 6 and
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1 the denominator of which is 10 times the amount of the SSBCI
2 loan. The percentage may exceed 50 percent.
3 (7) GROWTH BUSINESS. A business to which all of the
4 following apply at the time of the initial investment in the
5 company by a growth fund:
6 a. Has fewer than 200 employees.
7 b. Has its principal business operations in one or
8 more growth zones in the state.
9 c. Is made in any of the following:
10 1. Any business in North American Industry
11 Classification System codes 11, 21, 22, 23, 31 through 33, 48
12 through 49, 54, or 62 or, if not engaged in those industries,
13 the department decides that the investment will be beneficial
14 to the growth zone.
15 2. An agribusiness.
16 3. A minority owned business.
17 (8) GROWTH FUND. An entity certified by the
18 department under subsection (g) of Section 3.
19 (9) GROWTH INVESTMENT. Any capital or equity
20 investment in a growth business or any loan to a growth
21 business with a stated maturity at least one year after the
22 date of issuance, provided that with respect to any loan to a
23 growth business secured by accounts receivable, inventory,
24 real estate, or other tangible property, the chief executive
25 officer or similar official of the growth business executes an
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1 affidavit that the business sought and was denied similar
2 financing from a banking institution doing business in this
3 state. Fifty percent of a growth investment shall be comprised
4 of a draw on the SSBCI loan with the remaining 50 percent
5 funded with the growth fund's matching capital.
6 (10) GROWTH ZONE. A rural county of the state with
7 less than 50,000 in population pursuant to the 2020 Federal
8 Decennial Census, or a qualified opportunity zone as
9 designated pursuant to 26 U.S.C. 1400Z-2 1400Z-1 with a
10 poverty rate of at least 20 percent, or otherwise meeting the
11 definition of low-income community in Section 45-D of the
12 Internal Revenue Code (26 U.S.C. 45D).
13 (11) HIGH WAGE EMPLOYMENT POSITION. An employment
14 position that is filled, pays a wage of at least 110 percent
15 of the county average as noted in the most recent quarterly
16 County Employment and Wages report by the Bureau of Labor
17 Statistics of the United States Department of Labor, and
18 requires at least 35 hours of work per week or any other
19 period of time generally accepted by custom, industry, or
20 practice as full-time employment.
21 (12) INVESTMENT AUTHORITY. The amount stated on the
22 notice issued under subsection (g) of Section 3 certifying the
23 growth fund.
24 (13) JOBS RETAINED. The number of high wage
25 employment positions that existed before the initial growth
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1 investment and for which the growth business's chief executive
2 officer or similar officer certifies that the high wage
3 employment position would have been eliminated but for the
4 initial growth investment. The retained jobs of a growth
5 business shall be calculated each year based on the monthly
6 average of high wage employment positions. The reported number
7 of retained jobs may not exceed the number reported on the
8 initial report required under subsection (a) of Section 6.
9 (14) MANAGEMENT FEE. An amount equal to three
10 percent per annum of the growth fund's investment authority
11 that accrues annually, but shall not be paid until the growth
12 fund exits the program in accordance with subsection (e) of
13 Section 5.
14 (15) MATCHING CAPITAL. An amount of capital raised
15 by the growth fund as debt or equity and invested in growth
16 businesses. Matching capital shall only be considered debt of
17 the growth fund and eligible for repayment pursuant to
18 subdivision (e)(2)a. of Section 5 if the growth fund provides
19 evidence of such direct or indirect debt to the department.
20 (16) MINORITY OWNED BUSINESS. A business that is
21 more than 50 percent owned by one or more individuals of
22 African-American, Asian, or Hispanic origin.
23 (17) NEW ANNUAL JOBS. Except as provided in
24 paragraph c., the term means the difference between paragraphs
25 a. and b.
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1 a.1. The monthly average of high wage employment
2 positions for the preceding calendar year.
3 2. If the preceding calendar year contains the
4 initial growth investment, the monthly average of high wage
5 employment positions for the months including and after the
6 initial growth investment and before the end of the preceding
7 calendar year.
8 b. The number of high wage employment positions at
9 the growth business on the date of the initial growth
10 investment.
11 c. If the amount calculated in subparagraph a.1. is
12 less than zero, the new annual jobs amount is equal to zero.
13 (18) NEW ANNUAL JOBS AND JOBS RETAINED PERCENTAGE.
14 Fifty percent multiplied by a fraction, the numerator of which
15 is the number of new annual jobs and jobs retained reported in
16 annual reports submitted to the department pursuant to
17 subsection (b) of Section 6 and the denominator of which is
18 the number of new annual jobs and jobs retained set forth in
19 the growth fund's certification provided pursuant to
20 subsection (g) of Section 3. The percentage may exceed 50
21 percent.
22 (19) PRINCIPAL BUSINESS OPERATIONS. The place or
23 places where at least 60 percent of the business's employees
24 work or where employees that are paid at least 60 percent of
25 the business's payroll work. A business that has agreed to
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1 relocate or hire new employees using the proceeds of a growth
2 investment to establish its principal business operations in a
3 growth zone in the state shall be deemed to have its principal
4 business operations in this new location, provided the
5 business satisfies this requirement within 180 days after
6 receiving the growth investment, unless the department agrees
7 to a later date.
8 (20) PROGRAM EXIT. The process described in
9 subsection (e) of Section 5.
10 (21) SSBCI. The federal State Small Business Credit
11 Initiative pursuant to Subtitle C of Title III of the American
12 Rescue Plan of 2021.
13 (21) (22) SSBCI FUND. The SSBCI Alabama Rural,
14 Agribusiness, and Opportunity Zone Jobs Act Account which is
15 hereby established.
16 (22) (23) SSBCI FUNDING. An amount equal to
17 twenty-five million dollars ($25,000,000) of the State of
18 Alabama's allocation of funds pursuant to Subtitle C of Title
19 III of the American Rescue Plan Act of 2021 which shall be
20 deposited in the SSBCI fund.
21 (23) (24) SSBCI LOAN. A loan made by this state to a
22 SSBCI LOAN. A loan made to a growth fund using SSBCI funding.
23 The department and the growth fund shall execute a loan
24 agreement which shall provide for:
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1 a. An interest rate of one percent interest
2 compounding annually which shall be due upon program exit or
3 acceleration pursuant to Section 5.
4 b. Forgiveness at exit of a percentage of principal
5 and interest due on the SSBCI loan equal to the sum of the
6 follow-capital percentage and the new annual and jobs retained
7 percentage, provided forgiveness shall not be available with
8 respect to SSBCI loans accelerated pursuant to Section 5.
9 c. Subordination to matching capital funded directly
10 or indirectly as debt, which subordination may be revoked
11 pursuant to Section 5.
12 d. Draws in connection with growth investments in
13 accordance with subsection (c) of Section 4.
14 Section 3. (a) Upon receipt of an allocation of
15 funds pursuant to Subtitle C of Title III of the American
16 Rescue Plan Act of 2021, the department shall cause the SSBCI
17 funding to be deposited in the SSBCI fund.
18 (b) Within 30 days of this state's receipt of an
19 allocation of funds pursuant to Subtitle C of Title III of the
20 (b) Within 30 days of the approval of the state's
21 application for federal funds pursuant to Subtitle C of Title
22 III of the American Rescue Plan Act of 2021, the department
23 shall accept applications for certification as a growth fund
24 on a form prescribed by the department. The application shall
25 include all of the following:
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1 (1) The total investment authority and SSBCI loan
2 sought by the applicant not to exceed fifteen million dollars
3 ($15,000,000) and seven million five hundred thousand dollars
4 ($7,500,000), respectively.
5 (2) Evidence that the applicant, or an affiliate of
6 the applicant, is licensed as a rural business investment
7 company under 7 U.S.C. 2009cc or as a small business
8 investment company under 15 U.S.C. 681, including a
9 certificate executed by an executive officer of the applicant
10 attesting that the license remains in effect and has not been
11 revoked, and that at least one principal in a rural business
12 investment company or a small business investment company is,
13 and has been for at least five years, an officer or employee
14 of the applicant or an affiliate of the applicant on the date
15 the application is submitted.
16 (3) Evidence that as of the date the application is
17 submitted, the applicant or affiliates of the applicant have
18 invested at least one hundred million dollars ($100,000,000)
19 fifty million dollars ($50,000,000) in, or lent at least fifty
20 million dollars ($50,000,000) to, nonpublic companies located
21 in nonmetropolitan counties, as defined by the Office of
22 Management and Budget within the Office of the President of
23 the United States, on the basis of county or county-equivalent
24 units and invested at least twenty-five million dollars
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1 ($25,000,000) in, or lent at least twenty-five million dollars
2 ($25,000,000) to, minority owned businesses.
3 (4) An estimate of the number of aggregate new
4 annual jobs that will be created and jobs retained in this
5 state because of the applicant's growth investments.
6 (5) A business plan that includes a revenue impact
7 assessment projecting state and local tax revenue, as well as
8 reduced state expenditures, to be generated by the applicant's
9 proposed growth investments prepared by a nationally
10 recognized third-party independent economic forecasting firm
11 using a dynamic economic forecasting model that analyzes the
12 applicant's business plan over the 10 years following the date
13 the application is submitted to the department.
14 (6) A letter of credit issued to the applicant from
15 a depository institution equal to at least 50 percent of the
16 amount of investment authority requested or similar evidence
17 that the applicant has secured matching capital equal to such
18 amount.
19 (7) A nonrefundable application fee of twenty
20 thousand dollars ($20,000) payable to the department.
21 (8) An education and marketing plan to educate
22 growth businesses regarding the availability of funds and
23 requirements for participation pursuant to this act.
24 (c) Within 30 days after receipt of a completed
25 application containing the information set forth in subsection
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1 (b), the department shall grant or deny the application. The
2 department shall deem applications received on the same day to
3 have been received simultaneously. The department shall
4 approve investment authority up to an amount that would allow
5 not more than fifty million dollars ($50,000,000) of
6 investment authority and twenty-five million dollars
7 ($25,000,000) of SSBCI loans. If requests for investment
8 authority and SSBCI loans exceed this limitation, the
9 department shall proportionally reduce the investment
10 authority and SSBCI loan for each approved application as
11 necessary to avoid exceeding the limit.
12 (d) The department shall deny an application if any
13 of the following are true:
14 (1) The application is incomplete.
15 (2) The applicant does not satisfy all the criteria
16 described in subdivisions (2), (3), (6), and (7) of subsection
17 (b).
18 (3) The revenue impact assessment submitted under
19 subdivision (b)(6)(5) does not demonstrate that the
20 applicant's business plan will result in an economic impact on
21 this state over a 10-year period that exceeds the growth
22 fund's SSBCI loan.
23 (4) The department has already approved the maximum
24 amount of investment authority and SSBCI loans allowed under
25 subsection (c).
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1 (e) If the department denies an application, the
2 applicant may provide additional information to the department
3 to complete, clarify, or cure defects in the application
4 identified by the department, except for failure to comply
5 with subdivision (b)(7)(6), within 15 days of the notice of
6 denial for reconsideration and determination. The department
7 shall review and reconsider the applications for which
8 additional information is provided within the 15-day period
9 within 30 days and, if approved, the application shall be
10 considered complete as of its original submission date.
11 (f) The department may not reduce the requested
12 investment authority or deny a growth fund application for
13 reasons other than those described in subsections (c) and (d).
14 (g) Upon approval of an application, the department
15 shall certify the applicant as a growth fund, specifying the
16 amount of th