BILL NUMBER: AB 1870 CHAPTERED 09/24/00 CHAPTER 605 FILED WITH SECRETARY OF STATE SEPTEMBER 24, 2000 APPROVED BY GOVERNOR SEPTEMBER 23, 2000 PASSED THE ASSEMBLY AUGUST 31, 2000 PASSED THE SENATE AUGUST 30, 2000 AMENDED IN SENATE AUGUST 29, 2000 AMENDED IN SENATE JUNE 15, 2000 AMENDED IN ASSEMBLY MAY 31, 2000 AMENDED IN ASSEMBLY APRIL 25, 2000 INTRODUCED BY Assembly Member Davis FEBRUARY 10, 2000 An act to amend Sections 15339.2 and 15339.3 of, and to add Section 15339.8 to, the Government Code, relating to small business. LEGISLATIVE COUNSEL'S DIGEST AB 1870, Davis. Small business funding. The Business Incubation Program Act establishes the Business Incubation Program, pursuant to which grants may be awarded by the Trade and Commerce Agency's Office of Small Business to assist in the development of, and delivery of services to small businesses by, business incubators. A "business incubator" is defined for these purposes as an entity that facilitates the formation and growth of new small businesses to increase their probability of success through the provision or sharing of specified types of equipment, services, and facilities. This bill would include specified types of activities and services within the definition of "business incubator" for purposes of the program. It would require that programs and services provided through the program be flexible and responsive to the needs of small business, as specified. It would additionally require the office, when awarding grants, to give highest priority to proposals matching each state dollar requested with at least one dollar in private or nonstate public resources, either cash or in-kind. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 15339.2 of the Government Code is amended to read: 15339.2. For purposes of this chapter, the following definitions apply: (a) "Incubator" means an entity that facilitates the formation and growth of new small businesses to increase their probability of success through the provision or sharing of needed equipment, services, and facilities, including at least six of the following: (1) Reception and meeting areas, secretarial services, accounting and bookkeeping services, and research libraries. (2) Onsite financial, management, marketing, business development, and technical counseling. (3) Office furniture rentals and flexible lease arrangements for business sites or for necessary equipment. (4) Technology and computing assistance. (5) Entry criteria and a graduation or exit policy. (6) Provision of, or reasonable access to, debt or equity financing for client companies as a component of the incubator's programs. (7) Regional collaboration, as appropriate, among facility-based incubators, virtual, e-commerce, technology incubation systems, and existing economic and business development programs, to meet the ongoing demands to support development of micro and small business enterprises for community economic development. (8) A comprehensive entrepreneurial program of services offered by one or more facility-based or virtual incubation centers or business enterprise centers. (b) "Office" means the Office of Small Business within the Trade and Commerce Agency. SEC. 2. Section 15339.3 of the Government Code is amended to read: 15339.3. (a) The Office of Small Business shall award grants to California nonprofit corporations or public agencies pursuant to the application process described in this section. (b) In developing the applications for grants, the office shall consult with incubators and other interested parties to ensure that the application is understandable and is disseminated as widely as possible. (c) Grant funds shall be encumbered no later than one year from the date they become available to the agency for this purpose. (d) The grants shall be awarded to the proposals scoring the highest points, based upon criteria that shall include the following: (1) Priority shall be given to proposals that provide maximum debt or equity funding to small businesses that receive services pursuant to Section 15339.2 from a California incubator. The office shall give consideration to applicants that leverage the state funds with funds from other sources used to provide funding to the incubator businesses. The office shall give highest priority to proposals matching each state dollar requested with at least one dollar in private or nonstate public resources, either cash or in-kind. (2) Consideration shall also be given to proposals that enable the formation and development of incubators. (e) Grant awardees shall provide the office with suitable financial records to ensure their financial viability, and after receiving the grant, shall allow the office to audit the records of the expenditure of grant funds. (f) The Office of Small Business shall evaluate the Business Incubation Program and present its findings to the Legislature on a biennial basis, commencing January 1, 2000. This evaluation shall include, but shall not be limited to, identifying the number of applicants for available grants, the number of incubators assisted through the program, the number of small businesses assisted, the graduation rate of businesses out of incubators, and the number of jobs created and their mean wage level, and identifying the four-digit Standard Industrial Classification (SIC) code for businesses in incubators partially financed by the office. The evaluation shall be completed within the existing resources of the office. The office may consult with industry representatives, incubator associations, and the California Research Bureau while developing the biennial evaluation. SEC. 3. Section 15339.8 is added to the Government Code, to read: 15339.8. Programs and services provided pursuant to this article shall be flexible and responsive to the needs of small businesses identified through the regional planning process described in this article. Services shall be demand-driven, and delivery structures shall be in accordance with best business practices, performance-oriented, and cost-effective, and contribute to regional and statewide economy growth and competitiveness.