2004 Senate Bill text for SB0033

SENATE BILL 33

46th legislature - STATE OF NEW MEXICO - second session, 2004

INTRODUCED BY

Roman M. Maes III

FOR THE ECONOMIC AND

RURAL DEVELOPMENT AND TELECOMMUNICATIONS COMMITTEE

AN ACT

RELATING TO PUBLIC FINANCES; PROVIDING FOR INVESTMENTS OF THE SEVERANCE TAX PERMANENT FUND FOR ECONOMIC DEVELOPMENT IN NEW MEXICO; CREATING THE NEW MEXICO CENTERS OF EXCELLENCE FUND; MAKING AN APPROPRIATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. Section 7-27-5.15 NMSA 1978 (being Laws 1990, Chapter 126, Section 5, as amended by Laws 2003, Chapter 399, Section 2 and by Laws 2003, Chapter 401, Section 1 and also by Laws 2003, Chapter 406, Section 1) is amended to read:

"7-27-5.15. NEW MEXICO PRIVATE EQUITY FUNDS AND BUSINESS INVESTMENTS.--

A. No more than six percent of the market value of the severance tax permanent fund may be invested in New Mexico private equity funds or New Mexico businesses under this section.

B. In making investments pursuant to Subsection A of this section, the council shall make investments in New Mexico private equity funds or New Mexico businesses whose investments or enterprises enhance the economic development objectives of the state.

C. The state investment officer shall make investments pursuant to Subsection A of this section only upon approval of the council, upon review of the recommendation of the private equity investment advisory committee and within guidelines and policies established by the council.

D. As used in this section:

(1) "New Mexico business" means, in the case of a corporation or limited liability company, a business with its principal office and a majority of its full-time employees located in New Mexico or, in the case of a limited partnership, a business with its principal place of business and eighty percent of its assets located in New Mexico; and

(2) "New Mexico private equity fund" means a limited partnership, limited liability company or corporation organized and operating in the United States and maintaining an office staffed by a full-time investment officer in New Mexico that:

(a) has as its primary business activity the investment of funds in return for equity in or debt of businesses for the purpose of providing capital for start-up, expansion, product or market development, recapitalization or similar business purposes;

(b) holds out the prospects for capital appreciation from such investments;

(c) has at least one full-time manager with at least three years of professional experience in assessing the growth prospects of businesses or evaluating business plans and who has established permanent residency in the state;

(d) is committed to investing or helps secure investing by others, in an amount at least equal to the total investment made by the state investment officer in that fund pursuant to this section, in businesses with a principal place of business in the state and that hold promise for attracting additional capital from individual or institutional investors nationwide for businesses in the state; and

(e) accepts investments only from accredited investors as that term is defined in Section 2 of the federal Securities Act of 1933, as amended, (15 USCA Section 77(b)) and rules and regulations promulgated pursuant to that section.

E. The state investment officer is authorized to make investments in New Mexico businesses to create new job opportunities and to support new, emerging or expanding businesses in a manner consistent with the constitution of New Mexico if:

(1) the investments are made in conjunction with cooperative investment agreements with parties that have demonstrated abilities and relationships in making investments in new, emerging or expanding businesses;

(2) an investment in any one business does not exceed ten percent of the amount available for investment pursuant to this section; and

(3) the investments represent no more than fifty-one percent of the total investment capital in a business; provided, however, that nothing in this subsection prohibits the ownership of more than fifty-one percent of the total investment capital in a New Mexico business if the additional ownership interest:

(a) is due to foreclosure or other action by the state investment officer pursuant to agreements with the business or other investors in that business;

(b) is necessary to protect the investment; and

F. The state investment officer shall make a commitment to the small business investment corporation pursuant to the Small Business Investment Act to invest one-fourth percent of the market value of the severance tax permanent fund [by July 1, 2001] to create new job opportunities by providing capital for land, buildings or infrastructure for facilities to support new or expanding businesses and to otherwise make investments to create new job opportunities to support new or expanding businesses in a manner consistent with the constitution of New Mexico. On July 1 [2003 and on each July 1 thereafter] of each year, the state investment officer shall determine whether the invested capital in the small business investment corporation is less than one-fourth percent of the market value of the severance tax permanent fund. If the invested capital in the small business investment corporation equals less than one-fourth percent of the market value of the severance tax permanent fund, further commitments shall be made until the invested capital is equal to one-fourth percent of the market value of the fund.

G. The state investment officer shall report semiannually on the New Mexico private equity investments made pursuant to this section. Annually, a report shall be submitted to the legislature prior to the beginning of each regular legislative session and a second report no later than October 1 each year to the legislative finance committee, the revenue stabilization and tax policy committee and any other appropriate interim committee. Each report shall provide the amounts invested in each New Mexico private equity fund, as well as information about the objectives of the funds, the companies in which each fund is invested and how each investment enhances the economic development objectives of the state. Each report shall provide the amounts invested in each New Mexico business.

H. The state investment officer shall make a commitment to invest one-fourth percent of the market value of the severance tax permanent fund by July 1, 2004 in a limited partnership interest in the New Mexico centers of excellence fund.

Section 2. A new section of Chapter 9, Article 15 NMSA 1978 is enacted to read:

"[NEW MATERIAL] NEW MEXICO CENTERS OF EXCELLENCE FUND CREATED.--The "New Mexico centers of excellence fund" is created in the state treasury. The fund shall consist of money invested in the fund by the state investment officer from the severance tax permanent fund pursuant to Section 7-27-5.15 NMSA 1978 and from limited partnership investments from businesses and financial institutions and foundations, money appropriated to the fund or money otherwise accruing. Money in the fund is appropriated to the department for the purpose of collaborating with the state's universities to make and manage early stage equity investments in new or expanding businesses in New Mexico that possess technologies with promising prospects for commercialization to stimulate job growth. Money in the fund shall not revert to the general fund at the end of a fiscal year. The fund shall be administered by the department. Disbursements from the fund shall be made only upon warrant drawn by the secretary of finance and administration pursuant to vouchers signed by the secretary of economic development."

Section 3. A new section of Chapter 9, Article 15 NMSA 1978 is enacted to read:

"[NEW MATERIAL] DUTIES OF THE SECRETARY.--The secretary shall appoint a manager for the New Mexico centers of excellence fund that:

A. is a New Mexico limited partnership, limited liability company or corporation organized and operating in New Mexico that maintains its principal place of business in New Mexico and an office in New Mexico that is staffed by at least one full-time investment officer;

B. has as its primary business activity the investment of funds in return for equity or debt securities in businesses for the purpose of providing capital for start-up, expansion, technology commercialization, product or market development, acquisition of other businesses, recapitalization or similar business purposes;

C. shall manage the investments of the New Mexico centers of excellence fund for the purpose of achieving risk adjusted rates of returns at least equal to the national average of rates of returns for early-stage and pre-seed venture capital funds; and

D. employs an individual responsible for the fund who:

(1) has at least ten years professional experience in direct equity investing, private placement investments or investment banking and corporate finance;

(2) possesses professional credentials and related experience in financial analysis, in assessing the growth prospects of businesses or in evaluating business plans;

(3) has at least five years experience in structuring and negotiating corporate finance transactions; and

(4) has established permanent residency in the

state."

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