2012 -- H 8175

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LC02645

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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J O I N T R E S O L U T I O N

RELATING TO ECONOMIC DEVELOPMENT

     Introduced By: Representatives Ehrhardt, Savage, Malik, Gallison, and Reilly

     Date Introduced: May 17, 2012

     Referred To: House Finance

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     WHEREAS, The Rhode Island Economic Development Corporation was created by the

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general assembly pursuant to chapter 64 of title 42 of the general laws in order to, among other

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actions, promote the retention and expansion of businesses and the creation of jobs in Rhode

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Island; and

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     WHEREAS, One of the methods utilized by the Rhode Island Economic Development

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Corporation to help promote and expand businesses in Rhode Island is the use of its quasi-public

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corporation powers to issue bonds and debt and guarantees of debt; and

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     WHEREAS, Rhode Island continues to suffer from continuing high unemployment and

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other ill effects from the most recent national recession; and

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     WHEREAS, One of Rhode Island's economic development strategies is to continue to

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optimize its knowledge economy assets, such as the sciences, technology, digital media,

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innovative manufacturing and other technologies, which requires adequate access to capital; and

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     WHEREAS, Rhode Island companies in growth phases are limited in their ability to

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obtain reasonable credit without access to credit enhancement; and

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     WHEREAS, The Rhode Island Economic Development Corporation desires to create a

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loan guarantee and bond program pursuant to which it will be able to guarantee loan repayments

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either directly or through the issuance of its bonds in order to induce lending to companies

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growing their employment in Rhode Island;

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     WHEREAS, The Rhode Island Economic Development Corporation seeks to have

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authority pursuant to chapter 18 of title 35 of the general laws to guarantee debts or otherwise

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issue its bonds for this purpose not to exceed one hundred twenty five million dollars

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($125,000,000) in the aggregate of unpaid principal, thereby limiting the contingent long-term

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cost of such program to the state; and

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     WHEREAS, The Rhode Island Economic Development Corporation requests the

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approval of the general assembly prior to undertaking such a program; now, therefore be it

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     RESOLVED, That the Rhode Island Economic Development Corporation (the

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"corporation") is hereby empowered and authorized pursuant to chapter 18, title 35 of the general

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laws, and notwithstanding any provisions of chapter 64, title 42 of the general laws to the

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contrary, to create the corporation's Job Creation Guaranty Program (the "program"). Under the

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program, the corporation may from time to time issue its bonds, guaranty debt service thereon or

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on bonds issued by the Rhode Island industrial facilities corporation, or guaranty the debt service

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of another provided that the principal amount of bonds or other obligations guaranteed pursuant

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to the program shall not at any time exceed one hundred twenty-five million dollars

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($125,000,000) of which no more than ten million dollars ($10,000,000) shall in the future be

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issued to any individual or entity or such entity's affiliates. The guaranty of any bond or other

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obligation may extend to repayment of the principal thereof, sinking payments therefore, interest

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thereon, and payment of any redemption price or premium in connection with the redemption

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thereof prior to maturity; and be it further

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     RESOLVED, That guaranties or bonds issued by the corporation shall be approved by its

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board of directors, or a committee of the board as so designated by the board, and shall be

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executed by its executive director or any authorized officer of the corporation as authorized in a

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resolution approved by the board of directors of the corporation from time to time in a form the

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corporation may prescribe. The board of directors of the corporation in authorizing any such

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guaranty or bond obligations shall consider and be guided by the following objectives:

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     (1) Priority will be given to projects that promptly create permanent, full-time jobs with

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annual wages in excess of two hundred fifty percent (250%) of the then current minimum wage

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earned annually with industry comparable benefits. A full-time job shall mean one in which the

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employee works a minimum of thirty (30) hours per week within this state.

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     (2) Any guaranty or bond obligations hereby authorized should leverage capital

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formation to facilitate business development with new and existing companies that will create or

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retain jobs in this state. The documentation reflecting guaranty and bond obligations authorized

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hereby shall contain adequate legal provisions for assuring performance by the borrower of

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creating and retaining new jobs within this state.

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     (3) Priority shall be given to guarantees that align with the State’s economic development

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strategy to expand high-wage jobs in knowledge industry growth clusters or with respect to assets

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related thereto.

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     (4) Guarantees or loan obligations from the program’s borrowers will be collateralized by

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any and all available assets of the borrower and guarantors, where applicable, including

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subordinate collateral positions, cross collateralization with other lenders, and collateralized

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guarantees as appropriate.

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     (5) Insurances, including hazard and key person life, may be required where appropriate.

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     (6) The corporation may utilize such data and retain experts as necessary to assess and

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validate associated guaranty risk, and the corporation may charge borrower, reasonable fees for

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the corporation’s guaranty and reimbursement of expenses; and be it further

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     RESOLVED, That in order assure any payments due on guarantees or bond obligations

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issued by the corporation in connection with the program pursuant to this authorization are made,

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to assure the continued operation and solvency of the corporation for the carrying out of its

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corporate purposes, and except as otherwise set forth in these authorizing resolutions in

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accordance with the provisions of chapter 64, title 42 of the general laws: (1) The corporation

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shall create a reserve fund from which shall be charged any and all expenses of the corporation

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with respect to guarantee or bond obligations of the corporation pursuant to these resolutions

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resulting from a program borrower’s default; and (2) The corporation shall credit to the reserve

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fund no less than fifty percent (50%) of all program receipts of the corporation, including

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guaranty fees, premiums, and any other receipts or recoveries from collections received pursuant

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to the corporation’s rights to recover payments as a guarantor; and (3) To the extent the

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corporation’s obligations as a guarantor or pursuant to its program bond obligations are not

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satisfied by amounts in its guaranty reserve fund, the executive director of the corporation shall

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annually, on or before December 1st, make and deliver to the governor a certificate stating the

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minimum amount, if any, required for the corporation to make payments due on such guarantees.

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During each January session of the general assembly, the governor shall submit to the general

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assembly, as part of the governor’s budget, the total of such sums, if any, required to pay any and

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all obligations of the corporation under such guarantees or bond obligations pursuant to the terms

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of this authorization. All sums appropriated by the general assembly for that purpose and paid to

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the corporation, if any, shall be utilized by the corporation to make payments due on such

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guarantees or bond obligations. Any recoveries by the corporation of guarantee payments are to

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be returned to the guarantee reserve fund and utilized to reduce any obligation of the state

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pursuant to any guarantees entered into by the corporation; and be it further

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     RESOLVED, On or before January 1 of each year, the corporation shall issue a report on

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all guarantees issued by the corporation pursuant to this authorization. The report shall include at

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a minimum: a list of each guarantee issued; a description of the borrower on behalf of which the

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guarantee was issued; the lender or lenders that made the loan, and the amount of such loan, to

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such borrower; the amount of principal and interest on each such loan outstanding as of the date

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of such report; a summary of the collateral securing the repayment of such loan for which the

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guarantee was issued; and a summary of the economic impacts made by such borrower as a result

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of the guaranteed loan, including, but not limited to, the number, type, and wages of jobs created

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by such borrower, any impacts on the industry in which the borrower operates and an estimate of

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income taxes for the State of Rhode Island generated by the employees of such borrower and the

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borrower itself.

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LC02645

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

J O I N T R E S O L U T I O N

RELATING TO ECONOMIC DEVELOPMENT

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     This resolution would limit any future Rhode Island Economic Development Corporation

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guarantee to any one entity to ten million dollars ($10,000,000).

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LC02645

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