Chapter 610 Oregon Laws 2011

AN ACT

HB 3507

Relating to innovation-based economic development; creating new provisions; amending ORS 284.701, 284.706, 284.711, 284.715, 284.720, 284.725, 284.735 and 284.740; appropriating money; and declaring an emergency.

Whereas the Legislative Assembly finds that Oregon is recognized as a leader in business and economic development and has the foundation to become a leader in innovation-based economic development; and

Whereas prosperity in this global economy is critically tied to the ability to innovate and to translate knowledge into new products, processes, technologies and services that create high-skill, high-wage job growth; and

Whereas Oregon, to compete in this challenging global economy, must have focused sources of innovation-based economic development, new technologies, a sustainable talent base of workers, entrepreneurs that are sufficiently capitalized to further innovation-based economic development and a receptive market base; and

Whereas Oregon’s ability to create high-skill, high-wage jobs must be enhanced to significantly address the increasingly high levels of unemployment in this state; and

Whereas many high-skill, high-wage jobs are technology-based and require a skilled workforce and sufficiently capitalized innovation-based businesses; and

Whereas Oregon’s competitive edge in innovation-based economic development should be nurtured and enhanced; and

Whereas Oregon’s public and private educational institutions must improve and expand their facilities, programs and educational and research capabilities to further innovation-based economic development in this state; and

Whereas the Oregon University System and private universities and research institutions in this state are strategic partners in furthering the unique educational and employment needs of Oregon’s innovation-based economic development businesses; and

Whereas to become a leader in innovation-based economic development, Oregon needs policies and strategies to develop new technologies, to attract funding from federal sources and private sector investments, to attract and grow innovation-based economic development businesses and to create high-skill, high-wage jobs; and

Whereas a critical component of furthering Oregon’s innovation-based economic development is a stable and long-term source of funding; and

Whereas the Legislative Assembly finds that state agencies, innovation-based economic development businesses, research institutions, national laboratories and workforce development agencies must collaborate so that Oregon is well-positioned to compete for funds from federal sources and private sector investments; now, therefore,

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 284.701 is amended to read:

284.701. As used in ORS 284.701 to 284.740:

(1) “Clean energy” means a technology, product, process or innovation that involves conservation of natural resources, solar energy, green building products and services, biofuels, biomass energy, bio-based products or other renewable and sustainable energy.

(2) “Innovation-based economic development” includes, but is not limited to, a technology, product, process or innovation that:

(a) Derives from and supports innovation and research;

(b) Promotes Oregon’s market capacities and competitive advantages;

(c) Involves technology-based innovation;

(d) Facilitates the creation of new products, processes and services that retain and create high-wage jobs;

(e) Involves the establishment of partnerships between and collaboration with research institutions, the private sector and public entities;

(f) Endeavors to transfer innovative technologies to the private sector or to commercialize innovative research and development; and

(g) Includes, but is not limited to, clean energy and clean energy economic development.

[(1)] (3) “Oregon [emerging] growth business” means [an emerging growth business as defined in ORS 348.701 that has]:

[(a) Fewer than 100 employees; and]

[(b) At least 51 percent of its employees employed in Oregon.]

(a) An individual, group of individuals or private sector business entity, including but not limited to a partnership, limited liability company, corporation, firm, association or other business entity, that engages in business that furthers innovation-based economic development, that has the capacity upon obtaining appropriate capital to generate significant high-skill, high-wage employment in Oregon and that conducts business in Oregon; or

(b) An emerging growth business as defined in ORS 348.701.

(4) “Public entity” means any agency of the federal or state government, county, city, town, public corporation or political subdivision in this state.

[(2)] (5) “Research institution” means:

(a) A community college as defined in ORS 341.005;

(b) A state institution of higher education listed in ORS 352.002;

(d) An Oregon-based, generally accredited, not-for-profit private institution of higher education;

(e) A federal research laboratory conducting research in Oregon; [or]

(f) A private not-for-profit research institution located in Oregon;

(g) An institution for higher education as defined in ORS 289.005; or

(h) A private institution of higher education located in Oregon.

[(3)] (6) “Traded sector” has the meaning given that term in ORS 285A.010.

SECTION 2. ORS 284.706 is amended to read:

284.706. (1) There is created the Oregon Innovation Council consisting of the following voting members:

(a) The Governor or the Governor’s designated representative, who shall be chairperson of the council.

(b) Five members appointed by the Governor who are engaged in the operations of Oregon traded sector industries or Oregon growth businesses.

(c) One member appointed by the Governor who is a representative of an Oregon-based, generally accredited, not-for-profit private institution of higher education.

(d) A member of the Oregon Growth Account Board, appointed by the board, who has experience in the field of venture capital.

(e) A member of the Engineering and Technology Industry Council, appointed by the Engineering and Technology Industry Council.

(f) The Director of the Oregon Business Development Department.

(g) The Chancellor of the Oregon University System.

(h) The Commissioner for Community College Services.

(i) The State Treasurer.

(2)(a) The Speaker of the House of Representatives shall appoint two members to the council who are members of the House of Representatives.

(b) The President of the Senate shall appoint two members to the council who are members of the Senate.

(c) Members of the Legislative Assembly appointed to the council are nonvoting members and may act in an advisory capacity only.

(3) The following persons, or their representatives, shall serve as ex officio, nonvoting members of the council:

(a) The [chairperson] presiding officer of the Oregon Business Development Commission.

(b) The president of the State Board of Higher Education.

(d) An executive officer of an association representing Oregon-based, generally accredited, not-for-profit private institutions of higher education, appointed by the Governor.

(4) The term of office of each appointed voting member of the council is three years, but an appointed member serves at the pleasure of the appointing authority. Before the expiration of the term of an appointed voting member, the appointing authority shall appoint a successor whose term begins on July 1 next following. An appointed member is eligible for reappointment. If there is a vacancy for any cause, the appointing authority shall make an appointment to become immediately effective for the remainder of the unexpired term.

(5) A majority of the voting members of the council constitutes a quorum for the transaction of business.

(6) Official action by the council requires the approval of a majority of the voting members of the council.

(7) The council shall meet at least twice per fiscal year at a place, day and time determined by the chairperson. The council may also meet at other times and places specified by a call of the chairperson or by written request of a majority of the voting members of the council.

(8) The council may adopt rules necessary for the operation of the council.

(9) The council may establish committees and delegate to the committees duties as the council considers desirable.

(10) The Oregon Business Development Department shall provide staff support to the council.

(11) Members of the council who are not members of the Legislative Assembly are entitled to compensation and expenses incurred by them in the performance of their official duties in the manner and amounts provided for in ORS 292.495. Claims for compensation and expenses of members of the council who are public officers shall be paid out of funds appropriated to the public agency that employs the member. Claims for compensation and expenses of members of the council who are not public officers shall be paid out of funds appropriated to the Oregon Business Development Department for that purpose.

(12) All agencies of state government, as defined in ORS 174.111, are directed to assist the council in the performance of its duties and, to the extent permitted by laws relating to confidentiality, to furnish such information and advice as the members of the council consider necessary to perform their duties.

SECTION 3. ORS 284.711 is amended to read:

284.711. (1) The Oregon Innovation Council shall provide advice to the Governor, the Legislative Assembly, [public and private post-secondary educational] research institutions, public agencies that provide economic development and the private sector on issues related to:

(a) Promoting agreements between [public and private post-secondary educational] research institutions and private industry that increase technology transfer and the commercialization of research;

(b) Promoting investment in specialized research facilities and signature research centers where Oregon has a distinct or emerging advantage for creating new products and businesses;

(c) Stimulating seed and start-up capital investment and entrepreneurial capacity that will promote economic growth in Oregon traded sector industries or Oregon growth businesses;

(d) Developing the entrepreneurial and management capacity critical to the competitiveness of Oregon traded sector industries [and] or Oregon growth businesses in rapidly growing global markets;

(e) Enhancing the international competitiveness of Oregon traded sector industries or Oregon growth businesses; and

(f) Identifying workforce issues for occupations critical to the competitiveness of Oregon traded sector industries or Oregon growth businesses, including but not limited to scientific, engineering, information technology, [and] business management and innovation-based economic development occupations.

(2) The Oregon Innovation Council shall advise the Engineering and Technology Industry Council established in ORS 351.663 on how to coordinate the Engineering and Technology Industry Council’s goals and policies with the state plan developed under ORS 284.715.

(3) The council, the Oregon Business Development Commission, the State Board of Higher Education and the office of the State Treasurer shall coordinate policies and programs related to the duties of the council.

(4) Based on the state plan developed under ORS 284.715 and subject to the approval of the Oregon Business Development Department, the council may distribute moneys in the Oregon Innovation Fund by grant or loan or pursuant to contracts with [public and private post-secondary] research institutions, [state agencies and private sector entities] the private sector and public entities.

(5) The council may assess and charge fees for making grants or loans under section 10 of this 2011 Act.

SECTION 4. ORS 284.715 is amended to read:

284.715. (1) The Oregon Innovation Council shall develop a state plan for innovation and economic competitiveness. The plan shall include policy and program recommendations to:

(a) Identify and expand the state’s industry and core research strengths related to Oregon traded sector industries or Oregon growth businesses;

(b) Promote agreements between [public and private post-secondary educational] research institutions and private industry that increase technology transfer and the commercialization of research;

(c) Promote investment in specialized research facilities and signature research centers where Oregon has a distinct or emerging advantage for [creating new products and businesses] innovation-based economic development; and

(d) Stimulate seed and start-up capital investment and entrepreneurial capacity that will promote [economic growth] innovation-based economic development in Oregon traded sector industries or Oregon growth businesses.

(2) The state plan shall also include an identification of workforce issues and trends related to the development of workers in trade sector industries [and] or Oregon growth businesses and make recommendations to the State Workforce Investment Board and the State Board of Education on training and education enhancements based on the identified workforce issues and trends.

(3) The council shall update the plan every biennium.

(4) Each year, the council shall report to the Governor and the Legislative Assembly about the plan.

SECTION 5. ORS 284.720 is amended to read:

284.720. (1) There is created within the State Treasury, separate and distinct from the General Fund, the Oregon Innovation Fund. Interest earned by the Oregon Innovation Fund shall be credited to the fund.

(2) Moneys in the Oregon Innovation Fund shall consist of:

(a) Amounts donated to the fund;

(b) Amounts appropriated or otherwise transferred to the fund by the Legislative Assembly;

(c) Investment earnings received on moneys in the fund; and

(d) Other amounts deposited in the fund from any source.

(3) Moneys in the fund are continuously appropriated to the Oregon Innovation Council for the [purpose] purposes of making grants and loans under section 10 of this 2011 Act and entering into contracts to carry out the recommendations included in the state plan developed under ORS 284.715.

(4) The council may establish accounts and subaccounts within the fund when the council determines that accounts or subaccounts are necessary or desirable and may credit any interest or income derived from moneys in the fund to any account or subaccount in the fund.

(5) The council may use moneys in the fund to pay the administrative costs associated with the fund and with making grants, loans and other distributions of moneys from the fund.

SECTION 6. ORS 284.725 is amended to read:

284.725. (1) There is created within the State Treasury, separate and distinct from the General Fund, the Oregon Commercialized Research Fund. Interest earned by the Oregon Commercialized Research Fund shall be credited to the fund.

(2) Moneys in the fund are continuously appropriated to the Oregon Innovation Council for the purpose of making grants and loans under ORS 284.735.

(3) The council may accept moneys from any source for deposit in the fund.

(4) The council may use moneys in the fund to pay the administrative costs associated with the fund and with making grants, loans and other distributions of moneys from the fund.

SECTION 7. ORS 284.735 is amended to read:

284.735. (1) The Oregon Innovation Council may make grants and loans from the Oregon Commercialized Research Fund to Oregon [emerging] growth businesses.

(2) To qualify for a grant or loan under this section, an Oregon [emerging] growth business must enter into an agreement with one or more research institutions to carry out proof of concept activities to:

(a) Establish the commercial potential of research; and

(b) Develop a business concept that can attract early stage private investment, including angel capital and venture capital.

(3) Proof of concept activities for which an Oregon [emerging] growth business may receive a grant or loan under this section include:

(a) The development of intellectual property;

(b) The payment of salaries and related expenses for commercialized research;

(d) Furthering innovation-based economic development; and

[(d)] (e) Other activities as defined by rule of the council.

(4) To receive a grant or loan, the Oregon [emerging] growth business or a research institution that has entered into an agreement with the business must agree to provide a cash match equivalent to:

(a) 30 percent of the amount of the grant or loan for businesses with fewer than 20 employees.

(b) 50 percent of the amount of the grant or loan for businesses with 20 or more but fewer than 50 employees.

(5)(a) The council shall award grant or loan moneys to an Oregon [emerging] growth business in a two-phase contract. Each phase of the contract shall have clearly defined performance measures included in the contract between the business and the council.

(b) Under phase I of the contract, a business may be granted or loaned an initial investment not to exceed $75,000. Phase I shall also include an agreement that upon successful completion of the performance measures for phase I, the business shall be eligible for funding under phase II. The amount of grant or loan moneys available to a business under both phases may not exceed $200,000.

(6) The council shall require any Oregon [emerging] growth business that receives a grant or loan under this section and that moves more than 50 percent of the employees of the business out of the state within two years after receiving grant or loan moneys to repay the total amount of the grant or loan moneys.

(7) The council shall require an Oregon [emerging] growth business that receives a loan under this section to repay the loan within five years after receiving the loan. The council shall deposit any loan moneys received under this subsection in the Oregon Commercialized Research Fund.

(8) The council may award up to 15 percent of the amount of moneys available in the fund for grants or loans:

(a) To the Oregon University System for education of faculty on issues related to developing effective technology transfer and commercialized research processes; and

(b) For other activities as defined by rule of the council.

(9) The council may adopt rules to administer this section. The council shall follow the advice of the Oregon Commercialized Research Fund Advisory Council when adopting rules to administer this section.

SECTION 8. ORS 284.740 is amended to read:

284.740. (1) The Oregon Innovation Council [shall] may establish [a] one or more signature research [center] centers to maximize collaborative ventures among research institutions, [the federal government and private industry] public entities and Oregon growth businesses that will capitalize on opportunities to obtain private and federal funding for the research and development of [nanoscience and microscience products, technology and multiscale materials] innovation-based economic development.

(2) The council may contract with [a private, not-for-profit corporation] a nonprofit entity for the administration of the [center] centers.

(3) Signature research centers, Oregon growth businesses and research institutions contracting to engage in innovation-based economic development, to conduct research within a signature research center or to engage in other business endeavors, as defined by the Oregon Innovation Council by rule, may receive grants and loans from moneys in the Oregon Innovation Fund created under ORS 284.720 or the Oregon Commercialized Research Fund created under ORS 284.725.

SECTION 9. Sections 10 to 15 of this 2011 Act are added to and made a part of ORS 284.701 to 284.740.

SECTION 10. (1) Subject to the approval of the Oregon Business Development Department, the Oregon Innovation Council may make grants and loans from the Oregon Innovation Fund created under ORS 284.720 to fund proposals that have as their principal objectives:

(a) The establishment of partnerships between and collaborations with research institutions and Oregon growth businesses for innovation-based economic development; or

(b) The transfer of innovation-based economic development technology to the private sector or the commercialization of innovation-based economic development research and related development in Oregon.

(2)(a) To qualify for a grant or loan under subsection (1) of this section, a proposal must be submitted to the Oregon Innovation Council in the manner and with a fee as may be prescribed by rule.

(b) All proposals for funding under subsection (1) of this section must establish return on investment criteria and performance measures as prescribed by rule.

(3) The Oregon Innovation Council shall make recommendations to the department for rules to be adopted by the department to administer the provisions of this section.

SECTION 11. As used in sections 11 to 15 of this 2011 Act, “bond-related costs” means:

(1) The costs and expenses of issuing and administering bonds under sections 11 to 15 of this 2011 Act, including but not limited to:

(a) Paying or redeeming the bonds, including principal, interest and premium, if any;

(b) Paying amounts due in connection with credit enhancement devices or reserve instruments;

(c) Paying the administrative costs and expenses of the State Treasurer, the Oregon Business Development Department and the Oregon Innovation Council, including the cost of consultants, attorneys and advisers retained by the State Treasurer, the department or the council for the bonds; and

(d) Any other costs or expenses that the State Treasurer, the department or the council determines are necessary or desirable in connection with issuing or administering the bonds;

(2) The cost of funding bond reserves;

(3) Capitalized interest for the bonds; and

(4) Rebates or penalties due to the United States in connection with the bonds.

SECTION 12. (1)(a) The Oregon Innovation Council, in consultation with the Oregon Business Development Department, shall determine eligibility for revenue bond financing of proposals for funding under section 10 of this 2011 Act pursuant to rules adopted by the council in consultation with the department.

(b) After determining that a proposal, grant or loan is eligible for revenue bond financing under paragraph (a) of this subsection, the department shall forward a request for the issuance of revenue bonds to the State Treasurer.

(2) The State Treasurer may issue revenue bonds subject to the budget authorization for bond issuance established under ORS 286A.035 for the department and the council for the purpose of financing or refinancing, in whole or part, grants and loans made under section 10 of this 2011 Act, plus an additional amount to be estimated by the State Treasurer for payment of bond-related costs.

(3) Net proceeds of the revenue bonds issued pursuant to this section must be deposited in the Oregon Innovation Bond Fund established under section 13 of this 2011 Act for disbursement to the council to finance the making of grants and loans under section 10 of this 2011 Act.

(4) Bond-related costs must be paid from the gross proceeds of the revenue bonds issued under this section and from moneys deposited in an account or subaccount of the Oregon Innovation Fund that has been established by the council specifically for this purpose.

(5) The department and the council, with the approval of the State Treasurer, may irrevocably pledge and assign all or a portion of the moneys deposited in an account or subaccount of the Oregon Innovation Fund that has been established by the council specifically for the purpose of securing revenue bonds issued under this section or credit enhancements obtained for the revenue bonds issued under this section.

(6) Revenue bonds issued under this section:

(a) Are payable from the moneys deposited in an account or subaccount of the Oregon Innovation Fund that has been established by the council specifically for the purpose of making payments on revenue bonds issued under this section.

(b) Do not constitute a debt or general obligation of the state, the Legislative Assembly or a political subdivision of this state but are secured solely by:

(A) The moneys deposited in an account or subaccount of the Oregon Innovation Fund that has been established by the council specifically for the purpose of making payments on revenue bonds issued under this section;

(B) Amounts in a debt service reserve account established with respect to revenue bonds issued under this section; or

(C) A credit enhancement obtained for the revenue bonds issued under this section.

(7) The State Treasurer, the department and the council have no obligation to pay bond-related costs except as provided in this section. A holder of revenue bonds or other similar obligations issued under this section does not have the right to compel the exercise of the taxing power of the state to pay bond-related costs.

(8) The holders of revenue bonds issued under this section, upon the issuance of the revenue bonds, have a perfected lien on the moneys deposited in an account or subaccount of the Oregon Innovation Fund that has been established by the council specifically for the purpose of securing and making payments on revenue bonds issued under this section or credit enhancements obtained for the revenue bonds issued under this section. The lien and pledge are valid and binding from the date of issuance of the revenue bonds and are automatically perfected without physical delivery, filing or other act. The lien and pledge are superior to subsequent claims or liens on the moneys deposited in the Oregon Innovation Fund.

(9) As long as any revenue bonds issued under this section are outstanding, the provisions of this section and the provisions of a security document related to the revenue bonds are deemed to be contracts between the state and holders of the revenue bonds. The state:

(a) May not create a lien, encumbrance or any other obligation that is superior to the liens authorized by subsection (8) of this section on the moneys in the Oregon Innovation Fund that are pledged and assigned to the payment of the revenue bonds; and

(b) May not give force or effect to a statute or initiative or referendum measure approved by the electors of this state if doing so would unconstitutionally impair existing covenants made with the holders of existing revenue bonds or would unconstitutionally impair other obligations or agreements regarding the security of revenue bonds to which the moneys deposited in the Oregon Innovation Fund are pledged and assigned.

(10) The council is authorized to establish separate accounts or subaccounts within the Oregon Innovation Fund for separate bond issues.

(11) The council may:

(a) Make all contracts, execute all instruments and do all things necessary or convenient in the exercise of the powers granted by this section, in the performance of its covenants or duties, or in order to secure the payment of revenue bonds issued under this section; and

(b) Enter into covenants for the benefit of bond holders regarding the use and expenditure of moneys in the Oregon Innovation Fund.

(12) The State Treasurer, the department or the council may appoint bond counsel as prescribed in ORS 286A.130.

SECTION 13. (1) The Oregon Innovation Bond Fund is established in the State Treasury, separate and distinct from the General Fund. The net proceeds from the sale of revenue bonds issued under section 12 of this 2011 Act must be credited to the Oregon Innovation Bond Fund. Investment earnings received on moneys in the fund must be credited to the fund.

(2) Moneys in the fund are continuously appropriated to the Oregon Innovation Council for the purpose of making grants and loans under section 10 of this 2011 Act.

SECTION 14. (1) The Oregon Innovation Debt Service Fund is established in the State Treasury, separate and distinct from the General Fund. The Oregon Innovation Debt Service Fund consists of:

(a) An amount from the moneys deposited in the Oregon Innovation Fund credited to the Oregon Innovation Debt Service Fund by the State Treasurer that is necessary in a fiscal year, as determined by the Oregon Innovation Council, in consultation with the Oregon Business Development Department and the State Treasurer, to pay the bond-related costs scheduled to be paid in that fiscal year on the revenue bonds issued under section 12 of this 2011 Act;

(b) Any funds appropriated or allocated to the Oregon Innovation Debt Service Fund; and

(c) Investment earnings received on moneys in the Oregon Innovation Debt Service Fund.

(2) Moneys in the Oregon Innovation Debt Service Fund are continuously appropriated to the Oregon Innovation Council to pay, when due, the bond-related costs on outstanding revenue bonds, to fund revenue bond reserves and to pay amounts due in connection with credit enhancements.

(3) The council, in consultation with the department and the State Treasurer, shall use amounts in the Oregon Innovation Debt Service Fund to pay, when due, the bond-related costs on outstanding revenue bonds, to fund revenue bond reserves and to pay amounts due in connection with credit enhancements.

(4) If the moneys deposited in the Oregon Innovation Fund are not sufficient to pay the bond-related costs due to be paid in a fiscal year, the council, in consultation with the department and the State Treasurer, shall make payments in that fiscal year according to the relative priority of revenue bonds secured by the moneys deposited in the Oregon Innovation Fund.

SECTION 15. (1) The Oregon Innovation Bond Administration Fund is established in the State Treasury, separate and distinct from the General Fund. The Oregon Innovation Bond Administration Fund consists of:

(a) The amount of revenue bond proceeds remaining after depositing the net proceeds in the Oregon Innovation Bond Fund pursuant to section 13 of this 2011 Act;

(b) The proceeds of revenue bonds issued to pay bond-related costs;

(c) Any funds appropriated or allocated to the Oregon Innovation Bond Administration Fund; and

(d) Investment earnings received on moneys in the Oregon Innovation Bond Administration Fund.

(2) Moneys in the Oregon Innovation Bond Administration Fund are continuously appropriated to the Oregon Innovation Council for paying bond-related costs during the term of revenue bonds issued under section 12 of this 2011 Act.

(3) The council, in consultation with the Oregon Business Development Department and the State Treasurer, may use amounts in the Oregon Innovation Bond Administration Fund to pay bond-related costs during the term of revenue bonds issued under section 12 of this 2011 Act. Amounts in the fund must be disbursed upon the written request of the council in consultation with the department.

SECTION 16. This 2011 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 2011 Act takes effect on its passage.

Approved by the Governor July 6, 2011

Filed in the office of Secretary of State July 6, 2011

Effective date July 6, 2011

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