State of Arizona
First Regular Session
SENATE BILL 1292
amending sections 41‑1545 and 41‑1545.02, Arizona Revised Statutes; relating to the Arizona competes fund.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 41-1545, Arizona Revised Statutes, is amended to read:
In this article, unless the context otherwise requires:
1. "Arizona basic enterprise" means any enterprise that is located or principally based in this state and that can provide demonstrable evidence that it meets one or more of the following:
(a) It is primarily engaged in one or more of the Arizona basic industries.
(b) It is the national or regional corporate headquarters of an Arizona basic industry or the corporate or regional headquarters of a multistate enterprise that is primarily engaged in out-of-state industrial activities.
(c) It is primarily engaged in developing or producing goods or providing services for out-of‑state sale.
2. "Arizona basic industry" means any of the following:
(a) Manufacturing industries identified by North American industry classification system code sectors 31, 32 and 33.
(b) Producing goods or services that derive at least sixty-five per cent percent of revenue from out-of-state sales.
(c) Research and development of new products, processes or technologies.
(d) National or regional headquarters or back‑office operations supporting a national or regional company.
(e) Warehouse distribution operations identified by North American industry classification system code sector 42 if sixty-five per cent percent of inventory is shipped out of state.
3. "Authority" means the Arizona commerce authority.
4. "Employee" means a person employed in a new job.
5. "Employer" means an Arizona basic enterprise providing new jobs in conjunction with a project, except that the following do not qualify for the purposes of this article:
(a) Any corporation, partnership or other entity conducting a business identified by any of the following North American industry classification system code groups, sectors or subsectors:
(i) Industry group 7132 or 8131.
(ii) Sector 44, 45, 61, 92 or 221, including water and sewer services.
(iii) Subsector 722.
(b) Any corporation, partnership or other entity that is delinquent in the payment of any unprotested taxes or other amounts due to the federal government, this state or any political subdivision of this state.
(c) Any corporation, partnership or other entity that is currently in bankruptcy or has publicly announced its intention to file for bankruptcy protection.
6. "Full-time" means permanent employment for at least one thousand seven hundred fifty hours per year.
7. "Headquarters" means a principal central administrative office where primary headquarters related functions and services are performed, including financial, personnel, administrative, legal, planning and similar business functions.
8. "Microenterprise" means any business that is located or principally based in this state and that employs five or fewer employees. Microenterprise includes a start-up business, a home-based business and a self‑employed business.
9. "Microlending" means the act of making a microloan to a microenterprise.
10. "Microloan" means any loan that is in an amount of fifty thousand dollars or less and that is made by a microloan delivery organization for the purpose of providing financing to a microenterprise.
11. "Microloan delivery organization" means any community‑based or statewide nonprofit charitable organization that is tax exempt under section 501(c)(3) of the internal revenue code and that provides training, financing and technical assistance services to a microenterprise.
8. 12. "New job" means full-time employment in a new or expanding Arizona basic enterprise that pays an average annual wage equal to at least one hundred per cent percent of the median wage by county as determined annually by the Arizona commerce authority and includes health insurance for employees for which the employer pays at least sixty‑five per cent percent of the premium or membership cost, but not including jobs of recalled workers or existing jobs that are vacant or other jobs that formerly existed in the enterprise in this state.
9. 13. "Primarily engaged" means at least one-half of the gross income of the enterprise is derived from the engagement.
Sec. 2. Section 41-1545.02, Arizona Revised Statutes, is amended to read:
41-1545.02. Grants from the Arizona competes fund
A. The chief executive officer may negotiate the award of monies from the Arizona competes fund. The monies shall be paid, by grant, for the purposes of:
1. Attracting, expanding or retaining Arizona basic enterprises that meet the requirements prescribed by subsection B of this section, that achieve the performance and qualification targets developed under subsection C of this section and that enter into an agreement with the chief executive officer as provided by subsection C of this section. In awarding monies pursuant to this paragraph, the chief executive officer shall give preference to job training and infrastructure activities that create private sector jobs.
2. Supporting and advancing programs and projects for microenterprises, rural businesses, small businesses and business development that enhance economic development.
B. To be eligible to receive a deal closing grant under subsection A, paragraph 1 of this section, an applicant must:
1. Be in good standing under the laws of the state in which the applicant was formed or organized, as evidenced by a certificate issued by the secretary of state or other state official having custody of the records pertaining to entities or other organizations formed under the laws of that state.
2. Owe no delinquent taxes to a taxing jurisdiction in this state.
3. Qualify as an Arizona basic industry.
4. Pay compensation that exceeds, on average, one hundred percent of the median wage by county as determined annually by the authority.
5. Include health insurance for employees for which the applicant pays at least sixty‑five percent of the premium or membership cost.
6. Demonstrate by analysis by an independent third party that estimated income, property and transaction privilege tax and government fee revenues in this state will exceed state incentives.
C. Before awarding a grant from the fund under this section, the chief executive officer must enter into a written agreement with the applicant specifying that:
1. A reasonable percentage of the total amount of the grant may be withheld until the recipient meets specified performance targets.
2. If the chief executive officer finds that the grant recipient has not met each of the performance targets specified in the agreement as of a date stated in the agreement:
(a) The recipient must repay the grant and any related interest to this state at an agreed rate and on agreed terms. The repayment may be prorated to reflect partial attainment of performance targets.
(b) The chief executive officer shall not disburse any remaining grant money to the recipient under the agreement.
(c) The chief executive officer may assess specified penalties against the recipient for noncompliance.
3. If any part of the grant is used to build a capital improvement, this state may:
(a) Retain a lien or other security interest in the improvement in proportion to the percentage of the grant amount used to pay for the improvement.
(b) Require the recipient, if the improvement is sold, to:
(i) Repay to this state the grant monies used to pay for the improvement, with interest at a rate and according to terms stated in the agreement.
(ii) Share with this state a proportionate amount of any profit realized from the sale.
D. The chief executive officer must determine:
1. The performance targets and dates required to be included in each grant agreement.
2. If the grant agreement includes withholding a percentage of the grant until the recipient meets the performance targets, the percentage of the grant money to be withheld.
E. Before awarding a grant from the fund under this section, the authority must prepare a written statement, signed by the chief executive officer, that, specifically and in detail, assesses the direct economic impact of the grant. The statement must:
1. Include a finding that the enterprise, which may include a microloan delivery organization, is clearly in the best interests of this state.
2. Set forth the evidence and reasons supporting this finding, including:
(a) The estimated annual tax revenue accruing to this state and its political subdivisions as a direct or indirect result of the enterprise.
(b) The public benefit of the enterprise from the employment base, including the estimated number and the median wage of jobs to be created in this state by the potential recipient each year.
(c) The extent to which the economic development from the enterprise will raise the standard of living of affected persons, increases free enterprise growth and increases the quality of life in this state.
(d) The ratio of economic benefit from wages paid and capital investment made by the enterprise to the amount of the grant.
(e) The contribution from the enterprise to the growth of existing businesses and creation of new businesses and business clusters.
(f) Whether the enterprise will provide its employees with benefits such as retirement, child care, educational reimbursements and training.
(g) The percentage of the products or services the enterprise will export outside of this state over the first five years of operation.
(h) Any other information the chief executive officer considers to be necessary for inclusion in the statement.
F. Beginning from and after June 30, 2017, on the last day of each fiscal year, thirty percent of the monies appropriated to the fund in the fiscal year, minus the amount of grants awarded in the fiscal year for the purposes prescribed in subsection A, paragraph 2 of this section, not to exceed the unencumbered monies in the fund on the last day of the fiscal year, are reserved for grants for the purposes prescribed in subsection A, paragraph 2 of this section. Of the amount reserved for grants under this subsection, At least one million dollars shall be used for grants to support and advance programs and projects that facilitate microlending and microenterprise development in this state.
G. In addition to the monies reserved pursuant to subsection F of this section, at least twenty‑five percent of the monies appropriated to the fund each year shall be reserved to support and advance activities and projects for businesses located in a county with a population of less than two million persons or on tribal lands, or both. Monies not awarded pursuant to this subsection within nine months after the beginning of the fiscal year may be awarded to activities and projects for businesses that are located in any county. In awarding monies reserved pursuant to this subsection, the chief executive officer shall give priority to a county that is located along the Arizona‑Mexico border or a county in which a military facility is located or to projects located on tribal lands.