Assembly Commerce and Economic Development Committee Statement to Assembly, No. 4330 (December 14, 2020)

Summary

An Assembly Commerce and Economic Development Committee statement to Assembly, No. 4330, State of New Jersey, dated December 14, 2020, reporting the bill favorably with committee amendments. The bill would create the "Economic Emergency Investment Stabilization Program," authorizing the New Jersey Economic Development Authority to make direct equity investments in businesses financially harmed by a "major economic emergency." The EDA could invest between $100,000 and $1,000,000 in a qualified business, matching new outside investment, with its total stake limited to a 25 percent overall equity stake. The EDA may maintain an investment for no more than 10 years after the emergency ends, with exceptions, and proceeds go to the "Economic Recovery Fund."

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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 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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