Committee Statement to Assembly, No. 4330 with committee amendments - Assembly Commerce (December 14, 2020)

Summary

A statement of the Assembly Commerce and Economic Development Committee to the Assembly on Assembly Bill No. 4330 with committee amendments, of the State of New Jersey, dated December 14, 2020. The committee reports the bill favorably and with committee amendments. As amended, the bill would create the Economic Emergency Investment Stabilization Program, authorizing the New Jersey Economic Development Authority (EDA) to make direct equity investments in businesses financially harmed by a major economic emergency. A business must identify new outside investment within 90 days of submitting its application, and the EDA total investment in a business is limited to a 25 percent overall equity stake. The EDA may maintain an investment for no more than 10 years after the end of the emergency.

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ASSEMBLY COMMERCE AND ECONOMIC DEVELOPMENT
                COMMITTEE

                          STATEMENT TO

                     ASSEMBLY, No. 4330
                         with committee amendments



       STATE OF NEW JERSEY
                         DATED: DECEMBER 14, 2020

           The Assembly Commerce and Economic Development Committee
      reports favorably Assembly Bill No. 4330, with committee
      amendments.
           This bill, as amended by the committee, would create the
      “Economic Emergency Investment Stabilization Program” for the
      purpose of authorizing the New Jersey Economic Development
      Authority (EDA) to make direct equity investments in businesses that
      have been financially harmed by a “major economic emergency.”
           Under the bill, as amended, the EDA may enter into a “matching
      investment agreement” with a qualified business to invest between
      $100,000 and $1,000,000 in the business during a major economic
      emergency, and six months after the end of the major economic
      emergency. The bill directs the EDA to fund the program with: 1)
      amounts from the “Economic Recovery Fund”; 2) moneys received by
      the EDA from the prior sale of equity stakes in businesses under this
      program; and 3) other EDA moneys.
           A business seeking EDA assistance under the bill must identify at
      least $1 of new outside investment, within 90 days of submission of
      the business’s application, for each $1 of investment that the business
      is seeking from the authority. The EDA may match the amount of new
      investments in a business, up to $1 million, made during a funding
      round, however, EDAs total investment in a business is limited to a 25
      percent overall equity stake in a business. An equity investment made
      by EDA under the bill must be on equal or better terms, for the
      authority, as those made by any of the outside investors. Under the
      bill, the EDA may only make an investment if it determines that the
      potential equity investment will be a material factor in the financial
      success or failure of the business during the major economic
      emergency, and that the business is likely, at the conclusion of the
      economic emergency, to return to a level of financial viability that will
      allow the authority to exit its equity stake without taking a loss on its
      investment. The bill, as amended, provides that EDA may maintain its
      investment in a business for no more than 10 years after the end of the
      major economic emergency, however, the bill authorizes EDA to
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maintain its investment for a longer period of time if it was unable to
sell its investment during the first 10 years without taking a loss, and
the anticipated increase in value by holding the investment for more
than 10 years exceeds the public benefit that would accrue from selling
the investment and using the proceeds for some other eligible use of
the “Economic Recovery Fund.” The bill, as amended, directs EDA,
starting 12 months following the end of the major economic
emergency, to start selling its equity investments under the bill, and to
credit and deposit the proceeds therefrom to the “Economic Recovery
Fund.”

COMMITTEE AMENDMENTS:
    The committee amended the bill to clarify technical inconsistencies
in the bill concerning: the name of the program created under the bill;
and the amount of investment the authority may make in a business
under the program, relative to other new outside investment lined up
by the business seeking authority assistance.


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