PRINTER'S NO. 2285
No. 1854 Session of 1999
INTRODUCED BY FRANKEL, JOSEPHS, LUCYK, MELIO, MICHLOVIC, PESCI, READSHAW, RUFFING, TRELLO, VAN HORNE AND YOUNGBLOOD, SEPTEMBER 27, 1999
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, SEPTEMBER 27, 1999
AN ACT 1 Establishing the Pennsylvania Telecommunications Economic 2 Development Authority and the Pennsylvania Telecommunications 3 Economic Development Fund; providing for the powers and 4 duties of the Pennsylvania Telecommunications Economic 5 Development Authority; and authorizing certain investments in 6 telecommunications business ventures. 7 The General Assembly finds and declares as follows: 8 (1) The telecommunications infrastructure is rapidly 9 becoming the backbone of the emerging technology-based State 10 economy. 11 (2) It is a vital interest of the Commonwealth to 12 stimulate the development of the telecommunications industry 13 and the expansion of the telecommunications infrastructure 14 within this Commonwealth. 15 The General Assembly of the Commonwealth of Pennsylvania 16 hereby enacts as follows: 17 Section 1. Short title. 18 This act shall be known and may be cited as the 19 Telecommunications Economic Development Act.
1 Section 2. Definitions. 2 The following words and phrases when used in this act shall 3 have the meanings given to them in this section unless the 4 context clearly indicates otherwise: 5 "Authority." The Pennsylvania Telecommunications Economic 6 Development Authority established pursuant to this act. 7 "Bridge financing." Financing to a company which is expected 8 to make an initial public offering of stock within the next 12 9 months, with the expectation that such funds be repaid from the 10 proceeds of that initial public offering. 11 "Cableless network provider." A carrier network that 12 provides telecommunications services to end-user subscribers in 13 which radio, microwave or infrared links take the place of 14 physical cables. 15 "Community antenna television." A television system that 16 broadcasts multiple frequency divided channels, connected to a 17 common antenna or server, through a cable. 18 "Financial manager." An organization authorized to do 19 business in this Commonwealth that: 20 (1) is authorized to act as a trustee pursuant to the 21 provisions of the Employee Retirement Income Security Act of 22 1974 (Public Law 93-406, 88 Stat. 829) or an insurance 23 company; 24 (2) (i) is licensed or chartered by the Insurance 25 Department or Department of Banking; 26 (ii) is chartered by an agency of the Federal 27 Government; or 28 (iii) is subject to the jurisdiction of the Federal 29 Securities and Exchange Commission; and 30 (3) provides or secures venture capital. 19990H1854B2285 - 2 -
1 "First stage." Financing for companies that are beyond the 2 start-up phase, that have expended their initial capital and 3 require funds to initiate commercial manufacturing and sales. 4 "Fund." The Pennsylvania Telecommunications Economic 5 Development Fund established in section 6. 6 "Local access provider." An entity authorized by the 7 Federal, State or local government to provide access to a 8 telecommunications network to an end-user subscriber of that 9 service at the subscriber's residence or place of business. 10 "Local exchange telecommunications company." A carrier that 11 is authorized by the Federal Communications Commission to 12 provide local telecommunications services. 13 "Second stage." Working capital for the initial expansion of 14 a company that is producing a product or service and that may 15 have accounts receivable but may not yet be showing a profit. 16 "Telecommunications." Any process that permits the passage 17 of data, voice or video information from a sender to one or more 18 receivers in any usable form by means of an electromagnetic 19 system, whether or not a cable is involved. 20 "Venture capital." A financial investment that results in 21 the acquisition of equity interests or a combination of debt and 22 equity interests which is expected to grow substantially in the 23 future and in which the expected return on investment is to come 24 predominantly from an increase in the value of the equity 25 interests. 26 Section 3. Pennsylvania Telecommunications Economic Development 27 Authority. 28 (a) Authority established.--The Pennsylvania 29 Telecommunications Economic Development Authority is hereby 30 established as a body corporate and politic, with corporate 19990H1854B2285 - 3 -
1 succession. 2 (b) Board of directors.--The authority shall be governed and 3 all of its corporate powers exercised by a board of directors 4 that shall be composed of the following individuals: 5 (1) The State Treasurer. 6 (2) The Auditor General. 7 (3) The Secretary of Community and Economic Development. 8 (4) The chairman of the Public Utility Commission. 9 (5) Four members of the General Assembly, one of whom 10 shall be appointed by the Majority Leader of the Senate, the 11 Minority Leader of the Senate, the Majority Leader of the 12 House of Representatives and the Minority Leader of the House 13 of Representatives. 14 (6) One public member appointed by the Governor. 15 (c) Compensation prohibited.--The members of the board shall 16 not be entitled to compensation for their services as members 17 but shall be entitled to reimbursement for all necessary 18 expenses incurred in connection with the performance of their 19 duties as members. 20 (d) Meetings.--The board shall provide for the holding of 21 regular and special meetings. A majority of the members of the 22 board shall constitute a quorum for the transaction of any 23 authority business. No vacancy on the board shall impair the 24 right of a quorum of the members of the board to exercise the 25 powers and perform the duties of the authority. 26 (e) Intergovernmental cooperation.--All applicable State 27 departments and agencies shall cooperate with and provide 28 assistance to the financing board without financial 29 reimbursement. 30 (f) Dissolution.--The authority may be dissolved by law 19990H1854B2285 - 4 -
1 provided that the authority has no debts or obligations 2 outstanding or that provision has been made for the payment or 3 retirement of all such debts and obligations. Upon the 4 dissolution of the authority, all property, funds and assets of 5 the authority shall be vested in the Commonwealth. 6 Section 4. General powers of the authority. 7 The authority, as a public corporation and governmental 8 instrumentality exercising public powers of the Commonwealth, is 9 hereby granted and shall have and may exercise all powers 10 necessary or appropriate to carry out and effectuate the 11 purposes of this act, including, but not limited to, the 12 following powers: 13 (1) To have existence until its existence shall be 14 terminated by law. 15 (2) To sue and be sued, implead and be impleaded, 16 complain and defend in all courts. 17 (3) To adopt, use and alter at will a corporate seal. 18 (4) To make bylaws for the management and regulations of 19 its internal affairs, and, subject to agreements with holders 20 of its bonds, to make rules and regulations with respect to 21 its operations, properties and facilities. 22 (5) To appoint such officers, agents and employees as it 23 may require for the performance of its duties, and to 24 prescribe their duties, fix their compensation, and to 25 promote and discharge them within the limitations provided by 26 law. 27 (6) To acquire and sell security interests at public or 28 private sale; to negotiate modifications or alterations to 29 security interests; to foreclose on security interest in 30 default or commence any action to protect or enforce any 19990H1854B2285 - 5 -
1 right conferred upon it by any law, security agreement, 2 contract or other agreement; to bid for and purchase property 3 which was the subject of such security interest at any 4 foreclosure or at any other sale; to acquire or take 5 possession of any such property; and to exercise any and all 6 rights as provided by law for the benefit or protection of 7 the authority or security interest holders. 8 (7) To make and execute contracts and to pay the 9 reasonable value of services rendered to the authority 10 pursuant to those contracts. 11 (8) To accept gifts, grants, loans and other aid from 12 the Federal Government, the Commonwealth or any political 13 subdivision of the Commonwealth, or any person or 14 corporation, foundation or legal entity, and to agree to and 15 comply with any conditions attached to Federal and 16 Commonwealth financial assistance not inconsistent with this 17 act. 18 (9) To invest moneys of the authority in such manner as 19 the board shall determine. 20 (10) To procure insurance against any loss in connection 21 with its programs, property and other assets. 22 (11) To engage the services of attorneys, accountants 23 and financial experts and any other advisors, consultants and 24 agents as may be necessary in its judgment and to fix their 25 compensation. 26 (12) To contract for the services of attorneys, 27 accountants and financial experts and any other advisors, 28 consultants and agents as may be necessary in its judgment, 29 subject to the requirement that the chairperson shall ensure 30 that women-owned or minority-owned or women-controlled or 19990H1854B2285 - 6 -
1 minority-controlled firms shall have an opportunity to 2 participate to a significant degree in the provision of any 3 contractual services purchased by the authority or any 4 investment made by or through the authority. 5 (13) To adopt rules and regulations containing such 6 restrictions as it may deem necessary or appropriate to 7 effectuate the public purposes of this act. 8 (14) To do any act necessary or convenient to the 9 exercise of the foregoing powers or powers reasonably implied 10 therefrom. 11 Section 5. Limitation. 12 The authority shall have no authority to incur debt or issue 13 bonds. 14 Section 6. Telecommunications Economic Development Fund. 15 (a) Fund established.--The Pennsylvania Telecommunications 16 Economic Development Fund is hereby established as a trust fund 17 in the State Treasury. All moneys generated by the fees imposed 18 under this act shall be deposited in the fund. 19 (b) Assessments.--Each local access provider shall make 20 contributions to the fund in two installments of 50¢ for each 21 access line, hookup or exchange identified on the following 22 schedule: 23 (1) local exchange telecommunications company providing 24 local telephone service access line in service as of January 25 1, 2000; 26 (2) local exchange telecommunications company providing 27 intrastate toll service access line in service as of January 28 1, 2000; 29 (3) local exchange telecommunications company providing 30 interstate toll service access line in service as of January 19990H1854B2285 - 7 -
1 1, 2000; 2 (4) community antenna television provider cable hookup 3 as of January 1, 2000; and 4 (5) cableless network provider per each local exchange 5 served as of January 1, 2000. 6 (c) Payments.-- 7 (1) The first installment shall be made not later than 8 February 1, 2000. 9 (2) The second installment payment shall be made not 10 later than February 1, 2001. 11 (3) Payments shall be made to the authority. 12 (d) Character of funds.--The funds derived from this 13 assessment shall not be subject to the provisions of the act of 14 June 29, 1976 (P.L.469, No.117), entitled "An act relating to 15 the fiscal affairs of the Commonwealth concerning duties of the 16 Governor, the Secretary of Revenue and the Budget Secretary, 17 with respect to the submission of and signing the budget for any 18 fiscal year; and, after a budget is enacted, regulating the 19 issuance of warrants by the State Treasurer for certain 20 requisitioned funds and imposing duties on persons authorized by 21 law to issue requisitions for the payment of moneys from the 22 State Treasury; and prescribing that Federal funds received by 23 the Commonwealth shall be deposited in the General Fund account 24 with certain exceptions." 25 Section 7. Management of fund and accounts. 26 (a) Control and management of fund.--The members of the 27 board shall be the trustees of the fund. Regardless of any other 28 provision of law governing the investments of funds under the 29 control of an administrative board of the State government, the 30 trustees shall have exclusive control and management of the fund 19990H1854B2285 - 8 -
1 and full power to invest the same in accordance with the 2 provisions of this section and section 8, subject, however, to 3 the exercise of that degree of judgment, skill and care under 4 the circumstances then prevailing which persons of prudence, 5 discretion and intelligence, who are familiar with such matters, 6 exercise in the management of their own affairs not in regard to 7 speculation, but in regard to the permanent disposition of the 8 funds, considering the probable income to be derived therefrom 9 as well as the probable safety of their capital. The board shall 10 have the power to hold, purchase, sell, lend, assign, transfer 11 or dispose of any of the securities and investments in which any 12 of the moneys in the fund shall have been invested as well as of 13 the proceeds of said investments, including any directed 14 commissions which have accrued to the benefit of the fund as a 15 consequence of the investments, and of any moneys belonging to 16 said fund, subject in every case to meeting the standard of 17 prudence set forth in this subsection. 18 (b) Custodian of fund.--The State Treasurer shall be the 19 custodian of the fund. 20 (c) Payments from fund.--All payments from the fund shall be 21 made by the State Treasurer in accordance with requisitions 22 signed by the secretary of the board, or his designee, and 23 ratified by resolution of the board. 24 (d) Fiduciary status of board.-- 25 (1) The members of the board, employees of the board and 26 agents thereof shall stand in a fiduciary relationship 27 regarding the investments and disbursements of any of the 28 moneys of the fund and shall not profit either directly or 29 indirectly with respect thereto. The board may, when possible 30 and consistent with its fiduciary duties imposed by this 19990H1854B2285 - 9 -
1 subsection, section 8, or other law, including its obligation 2 to invest and manage the fund, consider whether an investment 3 in any project or business enhances and promotes the general 4 welfare of this Commonwealth and its citizens, including, but 5 not limited to, investments that increase and enhance the 6 employment of Commonwealth residents and stimulate further 7 investment and economic activity in this Commonwealth. 8 (2) The board shall, through the Governor, submit to the 9 General Assembly annually a report identifying the nature and 10 amount of all existing investments made pursuant to this 11 subsection and section 8. 12 (e) Name for transacting business.--By the name of "The 13 Pennsylvania Telecommunications Economic Development Fund" all 14 of the business of the authority shall be transacted, its fund 15 invested, all requisitions for money drawn and payments made, 16 and all of its cash and securities and other property shall be 17 held, except that, any other law to the contrary 18 notwithstanding, the board may establish a nominee registration 19 procedure for the purpose of registering securities in order to 20 facilitate the purchase, sale or other disposition of securities 21 pursuant to this act. 22 (f) Considerations.--In determining whether an investment 23 meets the standard of prudence, the board may consider, together 24 with the expected return on and the risk characteristics of the 25 particular investment, the actual and expected future returns 26 and the risk characteristics of the total venture capital 27 investments held by the board at the time and the degree to 28 which the proposed new investment would promote further 29 diversification within the venture capital asset class. 30 (g) Vehicles for authorized investments.--The board in its 19990H1854B2285 - 10 -
1 prudent discretion may make any investments which meet the 2 standard of prudence set forth in subsection (a) by becoming a 3 limited partner in partnerships that will hold or make such 4 investments or by acquiring stocks or shares or units of 5 participation or otherwise participating beneficially in the 6 fund of any corporation or trust organized or created and 7 existing under the laws of the United States or of this 8 Commonwealth, provided that, in any such case, the liability of 9 the fund shall be limited to the amount of its investment. 10 (h) Legislative declaration concerning certain authorized 11 investments.--The General Assembly finds and declares that 12 authorized investments of the fund made by or on behalf of the 13 board under this section whereby the board becomes a joint owner 14 or stockholder in any company, corporation or association are 15 outside the scope of the original intent and therefore do not 16 violate the prohibition set forth in section 8 of Article VIII 17 of the Constitution of Pennsylvania. 18 Section 8. Limitations on investments. 19 Notwithstanding any other provision of this act to the 20 contrary, the board shall invest the moneys in the fund 21 exclusively to provide loans to or take an equity interest in 22 telecommunications-related business ventures located within this 23 Commonwealth. The board may make such investments directly or 24 through an approved financial manager. Such loans or equity 25 interests by the board shall be limited to first stage, second 26 stage and bridge financing venture capital investments. 27 Section 9. Effective date. 28 This act shall take effect in 60 days. H16L66DMS/19990H1854B2285 - 11 -