SB-0358, As Passed Senate, May 12, 2005
SUBSTITUTE FOR
SENATE BILL NO. 358
A bill to create and provide for the operation of the life
science investment authority; to provide for the creation and
appointment of a board to govern the authority and to prescribe its
powers and duties; to provide for the powers and duties of the
authority; to extend protections against certain liabilities to the
authority; to provide for the issuance of certain bonds, notes, and
other obligations; to promote economic growth; to exempt property,
income, and operations of an authority from tax; and to provide an
appropriation.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the "life
science investment authority act".
Sec. 2. As used in this act:
(a) "Authority" means the life science investment authority
created under section 3.
(b) "Board" means the life science investment authority board
described in section 4.
(c) "Department" means the department of treasury.
(d) "Fund" means the life science investment fund created in
section 18.
(e) "Governmental agency" means a department, agency, or
commission of this state or of a county, city, village, or township
of this state.
(f) "Investment management company" means the entity hired by
the board to make qualified investments from the fund.
(g) "Life science products" means a product that requires food
and drug administration approval or registration prior to its
introduction in the marketplace and is a drug or medical device as
defined by the federal food, drug, and cosmetic act, 21 USC 301 to
399.
(h) "Local unit of government" means a city, county, township,
or village.
(i) "Michigan life science pipeline" or "pipeline" means
members of the Michigan life science pipeline described in section
78 of the Michigan strategic fund act, 1984 PA 270, MCL 125.2078.
(j) "Person" means an individual, partnership, corporation,
limited liability company, association, governmental entity, or
other legal entity.
(k) "Qualified agreement" means an agreement between a
qualified business and the investment management company. A
qualified agreement shall include, but is not limited to, all of
the following:
(i) A condition that the qualified business match the qualified
investment, which shall not exceed 10% of the total need to
complete work on the requested round. A qualified investment may be
made in follow-on rounds.
(ii) A condition that the investment management company ensures
a return on this state's investment similar to other investors in
the qualified business as determined by the investment management
company.
(iii) A condition that the qualified businesses utilize members
of the Michigan life science pipeline to develop their life science
product, if the services needed are readily available as determined
by the investment management company.
(iv) A condition that a qualified investment will not be used
to engage in or support human cloning as defined in section 16274
of the public health code, 1978 PA 368, MCL 333.16274, or stem cell
research with embryonic tissue.
(l) "Qualified business" is a business entity that develops,
markets, or commercializes life science products.
(m) "Qualified investments" means a loan or investment in a
qualified business under the terms of a qualified agreement.
Sec. 3. (1) There is created by this act a public body
corporate and politic known as the life science investment
authority. The authority shall be located within the department.
(2) The authority shall exercise its prescribed statutory
powers, duties, and functions independently of the state treasurer.
The budgeting, procurement, and related administrative functions of
the authority shall be performed under the direction and
supervision of the state treasurer.
(3) The authority may contract with the department for the
purpose of maintaining the rights and interests of the authority.
(4) The accounts of the authority may be subject to annual
financial audits by the state auditor general. Records of the
authority shall be maintained according to generally accepted
accounting principles.
Sec. 4. (1) The authority created under this act shall be
governed by the life science investment authority board, which
shall consist of 7 board members who are residents of this state.
Of the members first appointed under subsection (2)(c), 2 shall be
appointed for a term of 2 years and 3 shall be appointed for a term
of 3 years.
(2) The members of the board shall be as follows:
(a) The state treasurer, or his or her designee.
(b) The chief executive officer of the Michigan economic
development corporation, or his or her designee.
(c) Five other members appointed by the governor by and with
the advice and consent of the senate who are not employed by this
state. Members appointed shall have knowledge, skill, and
experience as follows:
(i) At least 1 member in science.
(ii) At least 1 member in venture capital investments.
(iii) At least 1 member in business in the life science field.
(iv) At least 1 member in the business of bringing life science
products to market.
(3) Upon appointment to the board under subsection (2) and
upon the taking and filing of the constitutional oath of office
prescribed in section 1 of article XI of the state constitution of
1963, a member of the board shall enter the office and exercise the
duties of the office.
(4) After the first appointment, each member shall serve a
term of 4 years, except that a person appointed to fill a vacancy
shall be appointed for the balance of the unexpired term. The
governor shall fill a vacancy in the office by appointment in the
same manner as an appointment under subsection (2). A member of the
board shall hold office until a successor has been appointed and
qualified. A member of the board is eligible for reappointment.
(5) Members of the board and officers and employees of the
authority are considered public servants subject to 1968 PA 317,
MCL 15.321 to 15.330, and 1968 PA 318, MCL 15.301 to 15.310. A
member of the board or an officer, employee, or agent of the
authority shall discharge the duties of the position in a
nonpartisan manner, in good faith, in the best interests of the
authority, and with the degree of diligence, care, and skill that
an ordinarily prudent person would exercise under similar
circumstances in a like position. In discharging duties of the
office, a member of the board or an officer, employee, or agent of
the authority, when acting in good faith, may rely upon a majority
vote of a quorum of the board, upon the opinion of counsel for the
authority, upon the report of an independent appraiser selected
with reasonable care by the board, or upon financial statements of
the authority represented to the member of the board, officer,
employee, or agent to be correct by the officer of the authority
having charge of its books or accounts or stated in a written
report by the auditor general or a certified public accountant or a
firm of accountants to fairly reflect the financial condition of
the authority.
(6) The board shall elect a chairperson, vice-chairperson,
secretary, and any additional officers of the board considered
necessary by the board from among its members. All elected officers
of the board shall be elected annually by the board. Members of the
board shall serve without compensation, but shall be reimbursed for
actual and necessary expenses.
Sec. 5. (1) Upon the appointment of at least 5 members of the
board under section 4, the board may hold its first meeting. The
first meeting of the board shall be held not more than 60 days
after the date the authority is created.
(2) The board shall organize and adopt its own policies,
procedures, schedule of regular meetings, and a regular meeting
date, place, and time. The board shall conduct all business at
public meetings held in compliance with the open meetings act, 1976
PA 267, MCL 15.261 to 15.275. Public notice of the time, date, and
place of each meeting shall be given in the manner required by the
open meetings act, 1976 PA 267, MCL 15.261 to 15.275.
(3) A record or portion of a record, material, or other data
received, prepared, used, or retained by the authority in
connection with an application for a qualified investment that
relates to financial or proprietary information submitted by the
applicant that is considered by the applicant and acknowledged by
the authority as confidential shall not be subject to the
disclosure requirements of the freedom of information act, 1976 PA
442, MCL 15.231 to 15.246. A designee of the authority shall make
the determination as to whether the authority acknowledges as
confidential any financial or proprietary information submitted by
the applicant and considered by the applicant as confidential.
Unless considered proprietary information, the authority shall not
acknowledge routine financial information as confidential. If the
designee of the authority determines that information submitted to
the authority is financial or proprietary information and is
confidential, the designee of the authority shall release a written
statement, subject to disclosure under the freedom of information
act, 1976 PA 442, MCL 15.231 to 15.246, which states all of the
following:
(a) The name of the person requesting that the information
submitted be confidential as financial or proprietary information.
(b) That the information submitted was determined by the
designee of the authority to be confidential as financial or
proprietary information.
(c) A broad nonspecific overview of the financial or
proprietary information determined to be confidential.
(4) The authority shall not disclose financial or proprietary
information not subject to disclosure pursuant to subsection (3)
without consent of the applicant submitting the information. As
used in this section, "financial or proprietary information" means
information that has not been publicly disseminated or is
unavailable from other sources, the release of which might cause
the applicant significant competitive harm.
(5) A board may act only by resolution. A majority of the
members of the board then in office, or of any committee of the
board, shall constitute a quorum for the transaction of business.
The board shall meet in person or by means of electronic
communication devices that enable all participants in the meeting
to communicate with each other. A vote of a majority of the members
of the board serving at the time of the vote is necessary to
approve the issuance by the authority of bonds or to approve or
amend the annual budget of the authority. Except as otherwise
provided in this act, a vote of the majority of the board members
present at a meeting at which a quorum is present constitutes the
action of the board.
(6) Before the beginning of each fiscal year, the board shall
prepare a budget containing an itemized statement of the estimated
current operational expenses for the operation of the authority,
the amount necessary to pay the principal and interest of any
outstanding bonds or other obligations of the authority maturing
during the ensuing fiscal year or that have previously matured and
are unpaid, an estimate of the revenue of the authority from all
sources for the ensuing fiscal year, and other amounts necessary to
further the purposes of this act. The authority's budget shall be
funded by proceeds derived from gifts, grants, loans,
appropriations, and other aids from any person or the federal
government, this state, or a local government or any agency of the
federal government, this state, or a local government.
Sec. 6. (1) The board may appoint a person, other than a
member of the board, to serve as director of the authority, to whom
the authority may delegate any of its administrative powers.
(2) Subject to the approval of the board, the director shall
supervise, and be responsible for, all of the following:
(a) The performance of the functions of the authority under
this act.
(b) A regular report describing the activities and financial
condition of the authority.
(c) The issuance of bonds, notes, or other obligations
approved by the board.
(d) All other activities or functions that the board considers
necessary.
(3) The board may employ legal and technical experts, private
consultants and engineers, accountants, scientists, and other
agents or employees for rendering professional and technical
assistance and advice as may be necessary. The authority shall
determine the qualifications, duties, and compensation of those it
employs.
(4) The board shall contract with an investment management
company to make qualified investments in qualified businesses under
terms of qualified agreements as determined by the board. The board
shall require the investment management company to do all of the
following:
(a) Make early seed investments in qualified businesses for
life science products.
(b) Utilize peer review of the science involved in the life
science product before entering into a qualified investment.
(c) Coordinate with the pipeline to ensure that members of the
pipeline are providing services at prices that are competitive
within the industry.
(d) Work with the board to ensure that the purposes of this
act are accomplished.
(e) Report not less than quarterly to the board as determined
by the board.
(f) Any other requirements determined by the board.
Sec. 7. Except as otherwise provided in this act, the
authority may do all things necessary to implement the purposes of
this act, including, but not limited to, all of the following:
(a) Adopt, amend, and repeal bylaws for the regulation of its
affairs and the conduct of its business.
(b) Adopt an official seal and alter the seal at the pleasure
of the board.
(c) Sue and be sued in its own name and plead and be
impleaded.
(d) Solicit and accept gifts, grants, loans, and other
assistance from any person or the federal, the state, or a local
government or any agency of the federal, the state, or a local
government or participate in any other way in any federal, state,
or local government program.
(e) Finance and otherwise aid in the development and
commercialization of life science products.
(f) Make loans and investments; guarantee and insure loans,
leases, bonds, notes, or other indebtedness, whether public or
private; and issue letters of credit.
(g) Borrow money and issue bonds and notes to finance part or
all of the costs of developing and commercializing life science
products and secure those bonds and notes by mortgage, assignment,
or pledge of any of its money, revenues, income, and properties.
(h) Procure insurance against any loss in connection with the
authority's property, assets, or activities.
(i) Invest any money of the authority, at the board's
discretion, in any bond, note, or other obligation determined
proper by the board, and name and use depositories for its money.
(j) Contract for goods and services and engage personnel as
necessary and engage the services of private consultants, managers,
legal counsel, engineers, accountants, scientists, and auditors for
rendering professional financial assistance and advice payable out
of any money of the authority.
(k) Charge, impose, and collect fees and charges in connection
with any transaction and provide for reasonable penalties for
delinquent payment of fees or charges.
(l) Indemnify and procure insurance indemnifying any members of
the board or employees of the board from personal loss or
accountability from liability asserted by a person on the bonds or
notes of the authority or from any personal liability or
accountability by reason of the issuance of the bonds, notes,
insurance, or guarantees; by reason of acquisition, construction,
ownership, or operation of a project; or by reason of any other
action taken or the failure to act by the authority.
(m) Promulgate rules pursuant to the administrative procedures
act of 1969, 1969 PA 306, MCL 24.201 to 24.328, necessary to carry
out the purposes of this act.
(n) Do all other things necessary to promote and finance
development and commercialization of life science products in this
state.
Sec. 8. (1) The authority may authorize and issue its bonds or
notes payable solely from revenues or funds available to the
authority. Bonds and notes of the authority are not a debt or
liability of this state and do not create or constitute any
indebtedness, liability, or obligations of this state or constitute
a pledge of the full faith or credit of this state. All authority
bonds and notes shall be payable solely from revenues or funds
pledged or available for their payment as authorized in this act.
Each bond and note shall contain on its face a statement to the
effect that the authority is obligated to pay the principal of and
the interest on the bond or note only from revenue or funds of the
authority pledged for the payment of principal and interest and
that this state is not obligated to pay that principal and interest
and that neither the full faith and credit nor the taxing power of
this state is pledged to the payment of the principal of or the
interest on the bond or note.
(2) All expenses incurred in carrying out this section shall
be payable solely from revenues or funds provided or to be provided
under this act. This act does not authorize the authority to incur
any indebtedness or liability on behalf of or payable by this
state.
(3) Bonds and notes issued under this act are not subject to
the revised municipal finance act, 2001 PA 34, MCL 141.2101 to
141.2821.
(4) The issuance of bonds and notes under this section is
subject to the agency financing reporting act, 2002 PA 470, MCL
129.171 to 129.177.
Sec. 9. (1) The authority may issue from time to time bonds or
notes in principal amounts the authority considers necessary to
provide funds for any purpose, including, but not limited to, all
of the following:
(a) The payment, funding, or refunding of the principal of,
interest on, or redemption premiums on bonds or notes issued by the
authority whether the bonds or notes or interest to be funded or
refunded has or has not become due.
(b) The establishment or increase of reserves to secure or to
pay authority bonds or notes or interest on those bonds or notes.
(c) The payment of interest on the bonds or notes for a period
as the authority determines.
(d) The payment of all other costs or expenses of the
authority incident to and necessary or convenient to carry out its
authorized purposes and powers.
(2) The bonds or notes of the authority shall not be a general
obligation of the authority but shall be payable solely from the
revenues or funds, or both, pledged to the payment of the principal
of and interest on the bonds or notes as provided in the resolution
authorizing the bonds or notes.
(3) The bonds or notes of the authority:
(a) Shall be authorized by resolution of the authority.
(b) Shall bear the date or dates of issuance.
(c) May be issued as either tax-exempt bonds or notes or
taxable bonds or notes for federal income tax purposes.
(d) Shall be serial bonds, term bonds, or term and serial
bonds.
(e) Shall mature at a time or times not exceeding 20 years
from the date of issuance.
(f) May provide for sinking fund payments.
(g) May provide for redemption at the option of the authority
at any time for any reason or reasons.
(h) May provide for redemption at the option of the bondholder
at any time for any reason.
(i) Shall bear interest at a fixed or variable rate or rates
of interest per year or at no interest.
(j) Shall be registered bonds, coupon bonds, or both.
(k) May contain a conversion feature.
(l) May be transferable.
(m) Shall be in the form, denomination or denominations, and
with such other provisions and terms as are determined necessary or
beneficial by the authority.
Sec. 10. (1) The authority may authorize and approve an
insurance contract, an agreement for a line of credit, a letter of
credit, a commitment to purchase notes or bonds, an agreement to
remarket bonds or notes, or any other transaction to provide
security to assure timely payment of a bond or note.
(2) The authority may authorize payment from the proceeds of
the notes or bonds, or other funds available, of the costs of
issuance, including, but not limited to, fees for placement,
charges for insurance, letters of credit, lines of credit,
remarketing agreements, reimbursement agreements, or purchase or
sales agreements or commitments, or agreements to provide security
to assure timely payment of notes or bonds.
(3) The authority shall not invest or otherwise approve an
insurance contract, an agreement for a line of credit, a letter of
credit, a commitment to purchase notes or bonds, an agreement to
remarket bonds or notes, or an issuance of bonds or notes or any
other transaction that results in a combined liability of the
authority in excess of $50,000,000.00.
Sec. 11. Within limitations contained in the issuance or
authorization resolution of the authority, the authority may
authorize a member of the board, the director, or other officer of
the authority to do 1 or more of the following:
(a) Sell and deliver and receive payment for notes or bonds.
(b) Refund notes or bonds by the delivery of new notes or
bonds whether or not the notes or bonds to be refunded have matured
or are subject to redemption.
(c) Deliver notes or bonds, partly to refund notes or bonds
and partly for any other authorized purpose.
(d) Buy notes or bonds that are issued and resell those notes
or bonds.
(e) Approve interest rates or methods for fixing interest
rates, prices, discounts, maturities, principal amounts,
denominations, dates of issuance, interest payment dates,
redemption rights, at the option of the authority or the holder,
the place of delivery and payment, and other matters and procedures
necessary to complete the transactions authorized.
(f) Direct the investment of any and all funds of the
authority.
(g) Approve the terms of a contract and execute and deliver
the contract subject to the restrictions of this part.
(h) Approve the terms of any insurance contract, agreement for
a line of credit, a letter of credit, a commitment to purchase
notes or bonds, an agreement to remarket bonds or notes, an
agreement to manage payment, revenue, or interest rate exposure, or
any other transaction to provide security to assure timely payment
of a bond or note.
(i) Perform any power, duty, function, or responsibility of
the authority.
Sec. 12. A resolution authorizing bonds or notes may provide
for all of the following that shall be part of the contract with
the holders of the bonds or notes:
(a) A pledge to any payment or purpose all or any part of
authority revenues or assets to which its right then exists or may
later come to exist, of money derived from the revenues or assets,
and of the proceeds of bonds or notes or of an issue of bonds or
notes, subject to any existing agreements with bondholders or
noteholders.
(b) A pledge of a loan, grant, or contribution from the
federal, state, or local government.
(c) The establishment and setting aside of reserves or sinking
funds and the regulation and disposition of reserves or sinking
funds subject to this act.
(d) Authorization for and limitations on the issuance of
additional bonds or notes for the purposes provided for in the
resolution and the terms upon which additional notes or bonds may
be issued and secured.
(e) The procedure, if any, by which the terms of a contract
with noteholders or bondholders may be amended or abrogated, the
number of noteholders or bondholders who are required to consent to
the amendment or abrogation, and the manner in which consent may be
given.
(f) A contract with the bondholders as to the custody,
collection, securing, investment, and payment of any money of the
authority. Money of the authority and deposits of money may be
secured in the manner determined by the authority. Banks and trust
companies may give security for the deposits.
(g) Vest in a trustee, or a secured party, the property,
income, revenue, receipts, rights, remedies, powers, and duties in
trust or otherwise as the authority determines necessary or
appropriate to adequately secure and protect noteholders and
bondholders or to limit or abrogate the right of the holders of
bonds or notes of the authority to appoint a trustee under this act
or to limit the rights, powers, and duties of the trustee.
(h) Provide the trustee, the noteholders, or the bondholder's
remedies that may be exercised if the authority fails or refuses to
comply with this act or defaults in an agreement made with the
holders of an issue of bonds or notes, which may include, but are
not limited to, the following:
(i) By mandamus or other action or proceeding at law or in
equity, to enforce the rights of the bondholders or noteholders and
require the authority to carry out any other agreement with the
holders of those notes or bonds and to perform the duties of the
authority under this act.
(ii) Bring action upon the notes or bonds.
(iii) By action, require the authority to account as if it were
the trustee of an express trust for the holders of the notes or
bonds.
(iv) By action in equity, enjoin any acts or things that may be
unlawful or in violation of the rights of the holders of the notes
or bonds.
(v) Declare the notes or bonds due and payable and, if all
defaults shall be made good, then, as permitted by the resolution,
annul that declaration and its consequences.
(i) Any other matters of like or different character that in
any way affect the security or protection of the bonds or notes.
Sec. 13. A pledge made by the authority shall be valid and
binding from the time the pledge is made. The money or property
pledged and then received by the authority immediately is subject
to the lien of the pledge without physical delivery or further act.
The lien of a pledge is valid and binding as against parties having
claims of any kind in tort, contract, or otherwise against the
authority and is valid and binding as against the transfers of
money or property pledged, irrespective of whether parties have
notice. The resolution, the trust agreement, or any other
instrument by which a pledge is created is not required to be
recorded in order to establish and perfect a lien or security
interest in the property pledged.
Sec. 14. The members of the board and any person executing
bonds or notes issued as provided in this act and any person
executing any agreement on behalf of the authority is not
personally liable on the bonds or notes by reason of their
issuance.
Sec. 15. The authority may hold, cancel, or resell authority
bonds or notes subject to or in accordance with an agreement with
holders of authority bonds or notes.
Sec. 16. This state pledges to and agrees with the holders of
bonds or notes issued in accordance with this act that this state
shall not limit or restrict the rights vested in the authority by
this act to fulfill the terms of an agreement made with the holders
of authority bonds or notes or in any way impair the rights or
remedies of the holders of the bonds or notes of the authority
until the bonds and notes, together with interest on the bonds or
notes and interest on any unpaid installments of interest, and all
costs and expenses in connection with an action or proceedings by
or on behalf of those holders are fully met, paid, and discharged.
Sec. 17. Notwithstanding any restriction in any other law,
this state and a public officer, local unit of government, agency
of this state or a local unit of government, an intergovernmental
entity created under the laws of this state; a bank, trust company,
savings bank and institution, savings and loan association,
investment company, or other person carrying on a banking business;
an insurance company, insurance association, or other person
carrying on an insurance business; or an executor, administrator,
guardian, trustee, or other fiduciary may legally invest funds
belonging to them or within their control in bonds or notes issued
under this act, and authority bonds or notes shall be authorized
security for public deposits.
Sec. 18. (1) The life science investment fund is created under
the jurisdiction and control of the authority and may be
administered for the general operations of the authority and to
secure any notes and bonds of the authority.
(2) The authority may receive money or other assets from any
source for deposit into the fund. The authority shall credit to the
fund interest and earnings from fund investments.
(3) Money in the fund at the close of the fiscal year shall
remain in the fund and shall not lapse to the general fund.
(4) The authority shall expend money from the fund only for
the authorized purposes provided in this act.
Sec. 19. The authority created under this act shall be exempt
from and shall not be required to pay taxes on property, both real
and personal, belonging to the authority, which is used for a
public or governmental purpose. Property of the authority is public
property devoted to an essential public or governmental function
and purpose. The authority's income and operation, including bonds
or notes issued by the authority or the interest and income derived
from the bonds or notes, are exempt from all taxes and special
assessments of this state or a political subdivision of this state.
Sec. 20. This act shall be construed liberally to effectuate
the legislative intent and its purposes. All powers granted shall
be cumulative and not exclusive and shall be broadly interpreted to
effectuate the intent and purposes and not as a limitation of
powers.
Sec. 21. There is appropriated from the general fund for
initial implementation costs for this act the sum of $100,000.00.
Enacting section 1. This act does not take effect unless
Senate Bill No. 359 of the 93rd Legislature is enacted into law.