PHED ITEM #2
February 11,2013
Worksession 2
MEMORANDUM
February 7, 2013
TO:
FROM:
SUBJECT:
Planning, Housing and Economic Development Committee
Amanda Mihill, Legislative
Attorne~0Y
Green Organization
Worksession:
Bill 40-12, Economic Development
Supplement
Bill 40-12, Economic Development - Green Organization Supplement, sponsored by Council
President Berliner, was introduced on December 4, 2012. A public hearing was held on January
22 at which a representative of the Executive supported Bill 40-12 (©17). A Planning, Housing
and Economic Development Committee worksession was held on January 28.
Bill 40-12 would authorize the County to provide qualified applicants a Green Organization
Supplement. The County would supplement 50% of the recipient's investment in a qualified
green organization, or a lower percentage set in the annual operating budget resolution, up to
$25,000. This bill would implement one of the recommendations from the Green Economy Task
Force (see report excerpts on ©6).
This program would be structured similarly to the County's Biotechnology Investment Incentive
Tax Credit Supplement (§20-76A). To provide some context, in 2012, the County provided
$500,000 in supplement funds. According to data provided by the Department of Economic
Development, there were 66 eligible transactions. The range of awards provided was $2,117.75
to $42,354.93 with the average award being $7,575.76.
Issues for Committee Discussion
During the January 28 worksession on Bill 40-12, representatives from the Department of
Economic Development indicated that they were developing amendments to the bill, but that the
amendments were not yet ready. Subsequent to that worksession, Director Silverman submitted
several amendments (©22-30). These amendments would:
• Redefine "green product or service" as "a product or service that measures, prevents,
limits, minimizes or corrects environmental damage to water, air and soil, as well as
problems related to waste, ecosystems, biodiversity, habitat or natural resource depletion.
All claims related to environmental attributes, as applicable, for a product or service,
shall conform to current or future guidelines published by the Federal Trade Commission
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or other appropriate entItles designated by the Director of the Department of
Environmental Protection" (©25, lines 5-20).
Redefine "qualified green organization" as "any entity of any form duly organized and
existing under the laws of any jurisdiction for the purpose of conducting business for
profit excluding a sole proprietorship that provides a green product or service or uses a
proprietary technology which adds value to a
green product or service
or is engaged in
research or development of a proprietary
green product or service.
The company would
still be required to implement a sustainable operation as verified by a third party (©25-26,
lines 21-29).
Add a definition of "investment" to mean "the contribution of money in cash or cash
equivalents expressed in United States dollars, at a risk of loss, to a
qualified green
company
in exchange for stock, a partnership or membership interest, or other ownership
interest in the equity of the
qualified green company,
title to which ownership interest
shall vest in the
qualified investor
but does not include debt" (©26, lines 30-35).
Increase the minimum investment in a qualified green company from $5,000 to $25,000
and clarifY that an investor should have limited ownership interest in the company and
should not derive financial benefit from the company (©26, lines 37, 43-50).
Establish an annual limit (rather than one-time supplement) that is the lesser of 50% of
the investment made by the investor, 15% of the total appropriation for the Incentive
Program, or $50,000 (©28, lines 90-101).
Provide for a formula-based allocation process where each qualified investment would be
divided by the total amount of investments during the calendar year to derive the
percentage of the annual appropriation that is paid (©28-29, lines 105-114).
Change the name of the supplement to "Green Investor Incentive Program".
Circle
#
This packet contains:
Bill 40-12
Legislative Request Report
Excerpts from the Green Economy Task Force Report
Fiscal and Economic Impact Statement
Silverman testimony
Silverman memorandum
F:\LAW\BILLS\i240 Green Organization Suppiement\PHED Memo Wks. 2.Doc
1
5
6
12
17
22
2
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Expedited Bill No.
40-12
Concerning: Economic Development ­
Green Organization Supplement
Revised:
11/27/2012
Draft No. _2_
Introduced:
December 4, 2012
Enacted:
June 4,2014
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: ----=--'N=onc:.;:e=---_ _ _ _ __
Ch.
Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President Roger Berliner
AN
ACT to:
(1)
(2)
authorize the County to provide qualified applicants a Green Organization
Supplement; and
generally amend the law governing County financial incentives for investment in
certain businesses,
By adding
Montgomery County Code
Chapter 20, Finance
Section 20-76C
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No.
40-12
1
Sec.
1.
Section 20-76C is inserted as follows:
20-76C. Green Organization Supplement.
2
3
tru
Definitions.
In this Section, the following words have the meanings
4
indicated:
Green product or service
means the delivery of
f!:
product or service in
5
6
7
the following areas:
8
9
10
11
12
ill
ill
ill
ill
ill
(Q)
renewable, clean, or distributed energy;
energy efficiency products or services;
sustainable farming and food distribution;
water quality and conservation;
pollution reduction and remediation;
recycling, reuse, and resource recovery; or
biodiversity and natural resource conservation.
13
14
15
16
17
18
ill
Qualified green organization
means any business, cooperative, or non­
profit that:
ill
ill
provides
f!:
green product or service; and
implements
f!:
sustainable operation as verified
Qy
f!:
third party.
Qualified investor
means any individual or entity that invests at least
19
$5,000 in
f!:
qualified Montgomery County green organization and that is
required to file an income
tax
return in any jurisdiction.
Qualified
20
21
investor
does not include
f!:
qualified pension plan, individual retirement
22
23
24
25
account, or other qualified retirement plan under the Employee
Retirement Income Security Act of 1974, as amended, or fiduciaries or
custodians under such plans, or similar tax-favored plans or entities
under the laws of other countries.
Sustainable operation
means an organization validated
Qy
f!:
third
J2ill1Y
26
27
under one of the following:
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BILL
No.
40-12
28
29
30
31
ill
ill
ill
ill
ill
®
Montgomery County Certified Green Business, as certified by the
Department of Environmental Protection;
Certified B Corp;
Green America Certification;
Green Seal;
International Organization for
certified; or
any other third
lli!!1Y
validation approved by the Department.
~
32
33
34
35
36
37
Standardization ISO
14001
!hl
Payment
Qj
supplement.
The Director of Finance must
subject to
appropriation,
f!
Green Organization Supplement to each applicant who
meets certain eligibility standards.
38
39
40
41
42
W
Eligibility standards.
An applicant, who need not be
~
County resident,
is eligible to receive the Supplement if the applicant:
ill
ill
is
~
qualified investor; and
invests in
~
qualified green organization that:
(A)
43
44
45
46
has its headquarters and base of operations in the County;
or
an
@
has signed
~
lease to open
~
facility in the County and has
been in business for less than 10 years and employs less
than 50 people.
47
48
49
50
Additional eligibility standards.
The County Executive, by Method
regulation, may impose other eligibility standards.
~
However, those
standards must not make any person ineligible to receIve the
Supplement who would be eligible under subsection
!£1
51
52
53
W
Ineligible investments.
A qualified investor must not receIve
supplement for capital used for any:
~
54
ill
geothermal, or solar photovoltaic, or similar system; or
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BILL
No.
40-12
55
56
57
ill
ill
any building green or energy efficiency improvement,
Amount
gf
supplement.
The Supplement paid to each recipient is
~
one­
time Supplement and must equal 50% of the recipient's investment in
~
qualified green organization, or
~
58
59
lower percentage set in the annual
operating budget resolution,
1!P
to $25,000.
(g)
Application required.
The Director must require each eligible person to
60
61
submit an application for the Supplement and may take any other action
necessary to administer the Supplement.
regulations under Method
The Executive may issue
62
63
64
65
ill
to specify an application process and
otherwise implement this Section.
(h}
Fraudulent applications.
A person who submits
£!
false or fraudulent
66
67
68
69
application, or withholds material information, to obtain
£!
payment
under this Section has committed
£!
Class A violation.
In
addition, the
person must repay the County for all amounts improperly paid and all
accrued interest and penalties that would apply to those amounts as if
they were overdue taxes. A person who violates this Section is liable
for all court costs and expenses of the County in any civil action brought
70
71
72
Qy
the County to recover any payment, interest, or penalty. The County
may collect any amount due, and otherwise enforce this Section,
Qy
any
appropriate legal action.
73
74
~l
~
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LEGISLATIVE REQUEST REPORT
Bi1140-12
Economic Development
-
Green Organization Supplement
DESCRIPTION:
Authorizes the County to provide qualified applicants a Green
Organization Supplement. The County supplement 50% of the
recipient's investment in a qualified green organization, or a lower
percentage set in the annual operating budget resolution, up to
$25,000.
Need for further incentives to invest in local green technology
companies
To promote investment in local green technology companies
Finance Department, Department of Economic Development
To be requested.
To be requested.
To be requested.
To be researched.
Amanda Mihill, Legislative Attorney, 240-777-7815
Applies to companies anywhere in the County.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable
F:\LA W\BILLS\ 12xx Green Organization Supplement\Legis!ative Request Report.Doc
f:\law\bills\ 1240 green organization supplement\legislative request report.d(
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Green Economy Task Force Enal Report
9
Overview ofthe green economy in Montgomery County, MD
tvfontgomery County is laying the foundation for a new green economy, which will create, expand
and attract businesses that provide environmentally sustainable products, green technologies and
services. With .its history of progressive policies, engaged residents and innovative entrepreneurs,
Montgomery County
em
nurture its nascent green industries and transform its entire economy into
one of the greenest and most successful in the region-and beyond.
This report documents the Montgomery County Green Economy Task Force's recommendations
for growing a sustainable economy in the 21st century.
It
covers a variety of topics, including raising
substantial capital
for
new green technologies, spurring innovation through competition, simplifYing
bll1'eaucracy for green businesses and building a vibrant, local food system.
lhese are not small recommendations that can be done quickly
by
one department or agency. ll1ey
involve new partnerships, substantial private investments, advocacy at multiple levels of government
and a county-wide commitment to a new way of doing business. In some cases, the inspiration for
these recommendations comes from other jurisdictions like Silicon Valley, Austin and Toronto who
are leaders in sustainable development. The Task Force has examined these programs and tailored
some of them to fit Montgomery County's strategic advantages.
Other jurisdictions have set ambitious goals for green
job
gl'Owth, including Vancouver, BC, which
hopes
to
add 20,000 by 2020 and Silicon Valley. which aims to add 25,000 clean-tech jobs within 15
years.
I
111e Task Force hopes and expects that if the recommendadons are implemented, something of
a
similar nature might be achievable in Montgomery County.
But,
in
addition to new jobs, the
Task
Force recommends that the success of the green economy
should not be determined
by
usual measures like tax receipts or new construction starts. Instead,
leaders should analyze the County's triple bottom line. Evaluating success using a "triple bottom line"
approach means that we no longer look only at financial health, but we are now obligated to consider
economic prosperity, environmental quality and social justice equally, with each policy decision we
make.
By
implementing the recommendations outlined in this report, and committing
to
a triple bottom
line approach for evaluation, the potential for Montgomery County's green economy is only limited
by our researchers' and entrepreneurs' imaginations. lhe Task Force is confident chat Montgomery
County will become a green economic engine that supports profitable business ventures while
contributing to a sustainable sodety.
Charge to the Green Economy Task Force
In early 2009, the County Executive commissioned the 29-member Green Economy Task Force
for the purpose of charting "a bold new course for Montgomery County focused on creating
opportunities tor new and existing 'green' businesses, spurrilig innovation, increasing employment,
and developing next generation technologies."
I
"Vancouver 2020 - A Bright Green Furure". David R. Boyd
&
The Greenest
City
Action Team. 2009
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10
Montgomery County, Maryland
The Task Force was asked
to
build upon several strengths inherent in Montgomery County: 1)
a successful track record in promoting the growth of the local biotech industry;
2)
progressive
environmental policies; and 3) existing environmental and economic development initiatives.
Examples of key policies include green building legislation, which requires both privately-constructed
buildings and new County-owned buildings to achieve certain
LEEry
standard~,
and the Home
Energy Loan Program, a new financing mechanism that allows residents
to
make energy efficient
home improvements that are repaid through property assessments. In addition to these policies, key
initiatives like the Sustainability Working Group/ and imponant partnerships with organizations like
the Maryland Clean Energy Cemer,4 informed the Task Force's work.
The County Executive appointed Dick Wegman, an environmental attorney with broad experience in
federal, state and local environmental issues, as the Task Force chairman. The Task Force deliberated
for ten months to develop the recommendations outlined in this report. 'lbe schedule included six
full Task Force meetings and dozens of smaller subcommittee meetings. The subcommittees were
created to target broad categories of the green economy, including: Agriculture, Finance, Innovation,
Land Use, Policy/Regulation, Promotion and Workforce. The Task Force's consultants, Sustainable
Design Group, provided the subcommittees with topical background information including
relevant green initiatives in other jurisdictions. Several of these programs are referenced in the final
recommendations.
The purpose of this report is to provide the Leggett Administration with expert guidance and input
regarding the investments, policies and strategic partnerships that will nurture Montgomery County's
nascent green economy. The ultimate goal is to increase IVlontgomery County's triple bottOm line by
generating economic, environmental and social value for local businesses, residents and the region.
Lessonsfrom our biotech history
Beginning a quarter of a century ago, Montgomery County embarked on a major biotechnology
initiative designed
to
stimulate [he local economy by taking advantage of its proximity
to
major
national medical research facilities, including the National Institutes of Health, U.S. Army Walter
Reed Medical Center, Bethesda Naval Medical Center and related entities such as the Food and
Drug Administration. To convert these research assets into commercial opportunities, Montgomery
County pursued the following initiatives:
Purclused close to 300 acres for the world-renowned Shady Grove Life Sciences Center, whose
land value today approximates $150 million;
"The leadership in Energy and Environmental Design
(LEED)
rating system is a third party certification
program and the nationally accepted benchmark for high performance green buildings.
3
In January 2009, Montgomery County issued a ground-breaking Climate Protection Plan, prepared by the
legislatively created Sustainability Working Group. The Sustainability Working Group's recommendations will
create a demand for green companies, through green building laws, greenhouse gas reduction mandates and
other quality oflife recommendations.
j
]he Maryland Clean Energy Center, headquartered at the Universities at Shady Grove, was created by the
State legislature and the governor in 2008
to
develop dean technology development and dean tech jobs in the
state. The Center's mission is
to
provide a coordinated approach
to
building a strong, dean energy economy
in lv1aryland through techuolo!,'Y comrnercializario(l, business incubation and workforce devdopmem and
training.
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Green Economy Task Force Final Report
11
Coordinated the donation of 85 acres of private land to the University of Maryland and The
Johns Hopkins University for their academic campuses and for the Center for Advanced
Research in Biotechnology (CARB);
Infused over
$17
million in infrastructure for the Life Sciences Center and for Hopkins'
Belward Campus;
Constructed Hopkins' first academic building (a $12 million capital outlay), and financed the
construction of CARB;
Developed a life sciences business incubation strategy; which began with the
$10
million
Maryland Technology Development Center. and now includes
a
total of five incubators; and
Advocated at the State level for major capital investments in the University of Maryland, Johns
Hopkins and CARB by continually highlighting these assets in the County's state legislative
priorities.
The deeper pockets
of
the state, through financing agencies like MEDCO and TEDCO, and
the Sunny Day Fund, and the atrraction of out of state venture capital, were also needed to grow
companies such as MedImmune and Human Genome Sciences.
As a result of this
25
year effort, Montgomery County's biosciences industry now generates combined
annual revenues of
$2.36
billion, employs more than
9,200
private sector employees, and is often
ranked
as
one of the top ten biotechnology dusters in the nation.
5
Strategic advantages for growing the green economy
The Green Economy Task Force believes that even though there are significant differences between
the biotech industry and the green technology industry,
by
implementing certain strategies outlined
in this report, the probability of growing a robust green economy in Montgomery County is guite
high.
'Ihe County's
innate
strengths, which promoted the growth
of
biotech,
will
again
be the bedrock for
the new, green economy. These strengths include an engaged private sector, bold political leadership,
proximity
to
federal agencies, partnerships with academia and a highly-educated workforce. For
example, the local government has a history of progressive leadership, which has already made
significant strides in terms of green policies and sustain ability. A recent study
by
the National
Association of Counties, entitled "Local Leaders in Sustainability," described Montgomery County
as
"a progressive leader on green building and sustain ability. Montgomery County will certainly be
a county
to
watch as recent legislation takes effect and local policymakers go to new and innovative
lengths to promote green buildings in their communities."6
Additionally, Montgomery County has a highly engaged professional community. It has experience
building public-private partnerships and facilitating communication and collaboration between
citizens, government, industry, researchers and academia. These professionals include employees
at several federal installations related
to
energy, climate change and other green economy issues,
Maryland.·National Capital Park and Planning Commission (M-NCPPC).
(; NACO - Local Leaders in Susrainabiliry - Green Counties. Brooks Rainwater
&
Cooper Martine.
~
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12
Montgomery County, Maryland
including the National Institute of Standards and Technology, the National Oceanic and Atmospheric
Administration, and the Department of Energy.
Bccaust~
of these federal partners, Montgomery
County is particularly well positioned to take advantage of the new federal and state support for
strategies that utilize sustainability as a driver of economic development. And, unlike the biotech
experience, there are existing large corporations in the County that can provide sources of technology
a.,
well as generate demand for green goods
and
services. Local sustainability strategies will also serve
as demand generators.
Presently, Montgomery County's companies and businesses benefit from access to a well-educated
and highly skilled workforce of
500,000
people. Nearly
60
percent of the county's labor force holds a
bachelor's degree and
34
percent have earned a graduate or professional degree', making Montgomery
County an advantageous location for new and expanding green businesses.
Finally, Montgomery County has over
93,000
acres of viable farmland, which includes
577
farms and
350
horticulture enterprises, producing
$251
million annually and employing
10,000
people.
Combined, these strategic advantages give us an opportunity to become a leading jurisdiction in the
green economy.
Defining the green economy
The green economy means different things to different people. With respect to many of the
recommendations contained in [his report, regulawrs or county officials in carrying out their
responsibilities may find the Governor's Workforce Investment Board (G\'VIB) definition helpful.
The
GWIB treats a company as "green" if it is "directly engaged in the development, manufacture,
sale and distribution, installation, and application of products and services that promote energy
security andlor protects our environmenc"s However, this approach would not be appropriate
for some of the other recommendations in this report. For example, the Task Force recommends
encouraging the consumption oflocally produced products and food; clearly, in this area, a different
metric would be needed. In other instances, the construction or operation of a LEED-certified
building may qualify as "green," and the GW1B test would not fit here either.
What is the same are the basic principles that underlie
all
of the recommendations in this
report:
(1)
dependence on carbon-based sources of energy is rapidly becoming economically and
environmentally unsustainable and
(2)
Montgomery County can playa major leadership role in
finding new ways to meet these challenges.
'Ihus,
after considering whether a single definition of the
green economy should be adopted, in the end the Task Force decided that a one-size-fits-all approach
would
nOt
be usehll.
7
R
Research
&
Technology Center - Montgomery County Planning Department.
www.mdworkiorce.com
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Green Economy
Ta.sk
Force Final Report
13
Benchmarks
At this rime, there is no national definition of what constitutes the "green economy," so it is difficult
to benchmark and monitor Montgomery County's progress against other jurisdictions. For example,
a contractor may build green homes, an HVAC contractor may specialize in energy efficient
equipment. or an architect may design only LEED-rated buildings. However, common data sources
like NAICS Codes are of limited use, because they don't have a special green designation--every
architect would fall under the same code. Similarly, there is no single source of data on the green
industry within Montgomery County. For this report, the consultants lIsed a variety of data sources,
including industry associations serving specific technology sectors and consumer guides.
According
to
the
consultant~'
preliminary estimates, there aTe over 200 businesses in Montgomery
County that contribute to the green economy. Montgomery County's green industry can be divided
into several categories: Energy Companies, Products and Services, Federal Installations, Finance and
Venture Capital, and Private Green Technology R&D. Additionally, the Task Force acknowledges
the importance of existing companies that are implementing sustainable business practices, regardless
of their industry, because they create significant demand for local green products. 1he following are
some examples of existing businesses and organizations already impacting Montgomery County's
green economy:
Energy Companies:
Preliminary research shows
11
companies that provide energy-related products
and services in Montgomery County (not counting energy auditors), One of the most successful
companies is Standard Solar, Inc., which was started in 2004, and currently employs more than 60
people. Not only was Standard Solar involved in one of the east coast's largest solar electric system
installations for the US Department of Energy, the company was recently part of the region's largest
Power Purchase Agreements in Upper Marlboro, MD.
Grcm Products and !:;ervices:
111<':
available data indicates that the largest sector of green business
in Montgomery COUnty is green products/services. These services include everything from green
cleaning companies to energy auditors and consultants. Additionally, there are an estimated
41
0
LEED Accredited Professionals working in Montgomery County. An example of a green product
provider is Amicus Green Building Center, in Kensington, MD, which otters a range of green
building products and supplies. In addition
to
providing green products. Amicus follovvs triple
bottom line principles in its operations.
Federal Installations:
There are three federal installations in Montgomery County whose work
support~
the advancement of green technology. For example, the National Institute of Standards
and Technology (NIST), in Gaithersburg. is committed to studying and solving issues associated
with a variety of green technology standards, including high performance buildings and sustainable
infrastructure materials.
Filllmce and vlmture Capital:
Investors are an important component to a healthy green industry,
because they help companies bring their technologies to market. Calvert Investments, an
environmentally and socially responsible investment firm in Bethesda, manages
$14
billion in assets.
PritJate Green Technology R&D:
Montgomery County is home to several large corporations that
are diversifYing their businesses to include green technology. One example is Lockheed Martin, the
country's largest defense contractor, which is now investing in smart grid R&D.
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Green Economy Task Force
I~inal
Report
33
B-3) Ellcourage p1ivate investment in green technology through tax incentives
In order to promote investments in local green technology companies, Montgomery County should
establish a local tax credit (against income, real or personal property taxes) for investors who invest in
Montgomery County-based green tech companies.
Model Program:
The Maryland Biotechnology InvestmenrTax Credit provides income tax credits for investors in
qualified Maryland biotechnology companies
to
offer incentives for investment in seed and early
privately held biotech companies. The value of the credit is equal
to
50<!/O
of an eligible
investment made in a qualified Maryland biotechnology company during the taxable year. 'The
maximum amount of the credit cannot exceed $250,000 for investors.
St1'ategic Advantages:
The State of Maryland has a proven track record of using investment tax credits
to
leverage private
investment in early stage biotech companies. Montgomery County is currently developing its
own biotechnology investment tax credit program, which
will
provide a model for a parallel green
technology local ta..x credit program. Alternatively. a single biotech/dean tech investment tax credit
program could be established through one piece oflegislation/program.
Implementatio1U
1.
\'Vork with the Office of the County Executive, Department of Finance, Office of
Management and Budget and Office of the County Attorney to draft legislation and a fiscal
impact statement.
2. Enlist local biotech companies that have benefited from the MD biotech investment tax
credit
to
educate decision makers on the potential direct and indirect benefits of the tax for
the green sector.
3. Coordinate funding for the tax credit in appropriate fiscal year budget, and develop the
necessary administrative procedures.
Resources and Financial Impacts:
Funds
will
need to be included in the County budget for the tax credit program (as a point of
reference, FYI0 funding for the MD Biotech Investment Tax Credit is $6 million). Staff resources
will be needed
to
develop the legislation and regulatoly/a.dministra.tive procedures, and
to
certify
eligible investments and administer the
ta-,\:
credit program.
Partnerships:
State Comptroller
• Tech Council of Maryland and chambers of commerce (for outreach on the program)
Angel investors and VC funds
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ROCKVILLE, MARYLAND
071377
MEMORANDUM
January 18,2013
TO:
Nancy
Navarro, President, County Council
Jennifer
A. Hughes,
Office
of Management and BudgetkUt-
Joseph
F.
Beach,
Director, Department
ofFin~
FROM:
Dire~tor,
if
'"
SUBJECf:
Council Bill 40-12. Economic Development
Jbre~n
Organization Supplements
Please
find attached the fiscal and economic impact statements fur the above-referenced
legislation.
JAH:a2a
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin,
Offices
ofthe County Executive
Joy
Nunni, Special
Assistant
to
the
County Executive
Patrick
Lacefield,
Director, Public Information
Office
Joseph
F.
Beach. Director, Department of
Finance
Michael Coveyoll, Department of
Finance
Steve Sitvennan,
Director, Department ofBconomic Development
Peter Bang. Deparbnent ofEconomic Development
Helen
Vallone, Office ofManagement and Budget
Blaise DeFazio,
Office
ofManagement
and
Budget
Ayo Apollon, Office of
Management and
Budget
j'i
-
')
..
..,)
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Fiscal Impact Statement
Bill 40-12, Economic Development - Green Organization Supplements
1.
Legislative Summary.
Bill 40-12 would authorize the County to provide qualified applicants a Green
Organization Supplement. The supplement must equal 50% ofthe recipients' investment
in
a qualified green organization, or a lower percentage set in the annual operating budget
resolution, up to $25,000.
2.
An estimate of changes
in
Connty revenues and expenditures regardless ofwhether
the revenues or expenditures
are
assumed in
the
recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
The changes in the County revenue and expenditures cannot be determined at this time
due to the unknown number of green organiz;ations in the County, and the uncertainty of
how many of those organizations have, and will be pursuing outside investment.
Assuming that most of the green organizations are willing and able to receive outside
funding, the following factors need to be evaluated to detennine the expenditure:
• Bill 40-12 acknowledges the validation of organization as a green organization
from five entity/institutiol18, the County DEP, Green America Certification,. Green
Seal, State of Maryland (B-Corps), and the ISO. Based on the preliminary
internet search, the County has approximately 180 organiz;ations designated as
green organization by the first three entities, and unknown number of certified
organizatiol18
:from
the last two entities.· Since some organizations receive
certification from multiple certifying entities, it is believed that the CoUnty
has
over 150 green organizations that meet the Bill's definition.
• The County administered the Biotech Tax Credit Supplement Program during
FY 12. Sixty-six investment transaction.q were awarded supplement payments
totaling $500,000. The mean (average) investment size
was
$89,500 and the
mode (most frequent) of the investment was $50,000. The proposed Green
Organization Supplement
will
be a similarly structured program, with the
Supplement amount proposed to be 50% of the actual investment made to a
qualified green organization, or a lower percentage set in the annual operating
budget resolution up to $25,000. Based on the Department ofEconomic
Development's experience of administering the EDF progmm and the Biotech
Tax Credit Supplement program, it is believed that $50,000 is the minimwn
investment size deemed "worthy of investing" by individual investors and the
smaller institutional investors. As such, if the Green Organization Supplement
pays 50% of the actual investment, an assumption can be made that most of the
Supplement payments will
be
for investments at or above $50,000. Therefore, the
typical Supplement payment will be $25,000 (or
at
the maximum Supplement
amount) per transaction; unless a lower percentage is set in the budget resolution.
3. Revenue and expenditure estimates covering
at least
the next
6
rlScal
years.
Not available at this time due to the unknown variables listed in question 2.
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4. An actuarial analysis through the elltire amortization period for each regulation
that would affect retiree pension or tp"oup insurance costs.
Not applicable.
5.
Later actions that may affect
future
revenue and expenditures
if
the regulation
authorizes future spending.
Unknown at this time.
6.
An
estimate of the stafftime needed to implement the regulation.
Since the qualification of green organizlrtioDS is done by a third
party,
the
Department of
Economic Development believes we can use
its
existing
staff
members to market the
program and receive applications, with assistance from the Department of Finance for the
Supplement payment processing.
7.
An
explanation of how the addition of new sbitT responsibilities would afi'eet other
tblties.
Not applicable.
8.
An
estimate of costs when an additional appropriation
is
needed.
Not applicable.
9. A
description of any variable that could affect revenue and cost estimates.
It is believed
that
the macro market condition such as
federal
government's policy and
incentive
programs related to the
alternative
energy industry, and the
public~s
Willingness
to embrace new green products/services will influence
the
overall number of green
organizations and the investment activities to those organizations.
10.
RaBIes of
revenue or expenditures that are UJ1certain or diffieuJt to projeet.
All revenue or expenditures are
difficult
to
project at this time due to the variables
described in question 2.
n.1f
a
bill
is
Jikely
to have no
fis~al
impact,
why that
is
the
case.
Not applicable.
12.
Other
fisc.
I
impaets
or eommenu.
None.
13. The following contributed to and eoncurred with this aDalysis.
Peter Bang, ChiefOperating Officer. Department of Economic Development
Helen Vallone. Office ofManagement
and
Budget
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Economic
Impact
Statement
Bin 40-12, Economic Development - Green Organization Supplements
Background:
This legislation would authorize the County to provide qualified applicants a Green
Organization Supplement. The supplement must equal 50% of the recipients' investment
in
a qualified
green
organization, or a lower percentage set in the annual operating budget
resolution, up to
$25,000.
1. The sources
of
information, assumptions, and methodologies used.
The Department of Economic Development researched the number of existing eligible
businesses based on the certifications/validations pennitted under the proposed
legislation.
Based
on this research the County has approximately
180
organizations
designated as green organization
by
the first three entities, and an indeterminate number
of certified organizations from the last two entities. Since some organizations receive
certification from a multiple certifying entities,
it is
estimated that
the
County has over
150 green organizations as defined in the subject legislation.
2. A description of any variable
that
could affect the economic impact estimates.
• The total amount of funding available each year for the supplements. While
the legislation permits the supplements to
be
awarded to a potentially large
number of businesses, the total amount that could be awarded is subject to
annual budget appropriations.
• The number of businesses receiving the supplement each year.
• The avaHability of other investment, loan, or support programs at the federal
or state level or the availability of private capital. The amount of the County
support for
the
Green Organizations is only a supplement and other sources of
capital would
be
necessary to
initiate
or support the expansion of these
organizations.
3. The Bill's positive
or
negative effect,
if
any
on employment,
spending,
saving,
investment, incomes, and property values
in
the County.
At
an
appropriate funding level, the subject legislation could potentially have a
positive impact on
the
County's economic indicators. However, as mentioned
in
#2
above, there
are
some key variables that limit our ability to quantify
with
any
certainty the impact on employment, spending, saving, investment, incomes, or
property values. These variables include:
• the total amount appropriated for the
Green
Organization supplement each
year;
Page
1
of2
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Economic Impact Statement
Bil14t)..12, Economic Development - Green Organization Supplements
• the
type of
businesses
that receive the
supplement (e.g. retail, service,
manufacturing, etc). Investment
in
clifferent
types
of businesses would have
varying impacts on employmentJ spending,
investment, and
wages; and
• the extent
to
which the County's supplement would
be
critical to an
enterprise's
decision to
initiate
or expand its operations including hiring.
leasing. purchasing. construction and other related activities.
Based on the number of existing eligible businesses and assumptions of available
funding
the potential
increased investment in Green Organizations is shown
in
the
table below:
'
Entitles
R~ehing
the A&'lumal Maximum
Total Annual
Suppl~nt
Investment
Investment
150
$
5(),ooo
$
7,500,000
$
300
$
SO,OOO
$
15,000,000
$
County
Funding
Existing Eligible Entities
With Expanded Business Formation
Required
3,750,000
7,500,000
4.
If
a
Bill
is
likely to have no economic impact, why is that the case?
Not Applicable. See
#2
and #3.
5. The following contributed to and concurred with this analysis: David Platt and Mike
Coveyou,
Finance;
Peter Bang, Department of Economic Development
.
~1r(LA-
o h F. B ch, Director
1)epanxneotofFinance
Page20f2
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Bill 40-12
Economic Development - Green Organization Supplement
Testimony of Steve Silverman, Director, Department of Economic
Development
Good afternoon. For the record, I am Steve Silverman, Director of
Montgomery County's Department of Economic Development, and I am here,
today, on behalf of County Executive Isiah Leggett, to testify in support of this
legislation to support the growth of green businesses in Montgomery County.
In 2010, the County Executive received the Green Economy Task Force's
report, which presented 19 recommendations to support the growth of the green
industry cluster in our County.
Developed at the depth of the recession, the Task Force's mission was to
uncover the local economic value embedded in solving the global environmental
crisis.
In the Task Force's report, Recommendation 8-3 states, "In order to
promote investments in local green technology companies, Montgomery County
should establish a local tax credit (against income, real or personal property
1
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taxes) for investors who invest in Montgomery County-based green tech
companies."
We applaud Councilmember Berliner for proposing legislation that will
encourage private capital investment in local green companies. We absolutely
value local businesses that improve the sustainability of our everyday lives with
environmentally sensitive products and services. We are similarly proud of
companies that are committed to operating in a sustainable manner.
Behind their seemingly simple recommendation are hours of discussion
about whether to advocate for investments in green businesses, generally, or to
guide investors to our green technology companies. The phrase "green
technology companies" was ultimately chosen because growing new companies
that will create disruptive innovations and reshape the global market place
should be our goal-both from an economic point of view and out of
environmental necessity.
In light of this intent to be bold in our commitment to combating climate
change while strengthening our economy, we recommend the following items for
your consideration:
@
2
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1) The proposed criteria could be tiered to reftect the magnitude of investments
or the desires of investors. For example, it might make sense to increase the
minimum amount of a quali'fled investment for green technology companies, or
modify the percentage of investment that will be credited back to investors, or
even to increase the maximum dollar amount that could be received. My office
would be happy to work with you to determine dollar amounts that would have
the most impact for our green economy. We suggest deploying this tiered
approach as a pilot during the first few 'years, so that the results can be tracked
and the criteria easily re'fined to meet the realities of investors' appetites.
2) To address the uncertainty surrounding the amount of money available for the
Supplement each year, we propose a formula-based allocation process. To
begin, an investor making a qualified investment during a calendar year would
submit an application by January 31 of the following calendar year. (For
example, if an investor invests in a local company in August of 2013, she would
need to submit an application to the County payment by January 31, 2014.)
Then, each qualified individual investment would be divided by the total amount
of investments during that calendar year to derive the percentage of the annual
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3
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appropriation that is paid out. For example, if Investor A invests $50,000 in a
local green business, and qualified green business investments across the
County totaled $1 M, then Investor A would get 5% of the appropriated
Supplement fund.
The County would make payments to all qualified investors by August 31
of each calendar year. By working from a definitive number of investors and
investment amount, the County can make more informed appropriations
decisions.
In terms of the legislation, as it is written, today, we also recommend a
number of clarifying amendments that we will submit to Council staff.
Circle 3:
Line 35(6) Clarify the "Department" as the Department of Environmental
Protection.
4
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Line 48-51 (d): Additional eligibility standards. We recommend rewording
these lines to say, "The County Executive may adopt Method 2
regulations to implement this section."
Circle 4:
Line 55-59
m
Amount of supplement.
Replace the language with "The
Supplement paid to each quali'fied investor is a one-time payment for up to
50% of the investment made to a Green Organization, or a lower
percentage set in the annual budget resolution, up to a maximum of
$25,000."
Line 60 (g) Application required: Recommend defining the Director as the
Director of the Department of Economic Development.
In early-stage investing, we sometimes hear that being first looks a lot like being
wrong. We hope that incentive programs like the one, here, today will encourage
investors to take the first step and become leaders in the growth of our green
technology cluster. Thank you for the opportunity to testify today. We look
forward to working with Council as it considers this bill.
5
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MEMORDANDUM
To:
From:
Nancy Floreen, Chair, PIlED Committee
Montgomery County Council
Steve
Silverman,
Director
Depat1ment of Economic Development
-;::::::r:jt,;;:..'
,(
,#>"Wf
//~H>\""
\,""W
Subject:
Recommended amendments to Bill 40*12, Economic Development
*
Green
Organization Supplement
I want to thank Councilman Berliner for introducing Bill 40-12, Economic
Development - Green Organization Supplement on December 4, 2012 and holding a public hearing
on tbe bil
t
on January 22,2013. Based on testimony provided at the public hearing and feedback 1
have
received
from
my
departments
and green business owners, I am recommending anumhcr of
amendments to clarify
the intent
of
the
bill and
the
manner in
which it
would be implemented. The
substantive changes arc discussed below'.
Name of
the
IJrogram
I recommend that the nanle of the program be changed to "Green InYestor Incentive Program'! to
clarify
the
purpose of
thiS
initiative, which is to encourage investments in [ocal green companies
(Line
2).
Definition of
"Green
Product or Service"
I recommend that we use a more deliberate deHnition of green products and services.
]11C
amended language is derived from the international "Organisation for Economlc Co-operation
and Development". The OECD definition is the foundation
ftlf
many national and international
green product and service rc.latcd eflQrts (Lines 5-12).
I)cfinition of "Qllalified
Green
Company"
t
recommend
that
the name "Green Organization" be changed to "Green Company" (Line 21).
777·.2046 TTY
*
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Further, I
recommend
that the definition of "Qua1ifled Green Company" be changed to mean any
tor~profit
company that provides a green product or service and is verified as a sustainable
operation bya third purty (Lines 21-29).
'l1Ie legislation's original inclusion of
non~profits
and
co~ops
conflicted with the intent
0f
the
Green Economy Task Force, whose goal \vas to clllargethe base of wealth-creating businesses
while addressing environmental
challenges.
Donating to a
non:-profit
or participating in a co-op
is very different from investing in a for-profit
enterprise,
in which an investor assumes risk.
Therefore,
Talso recommend amended language, which clatities that an investment
is in
return
for stock
or
some otber type of
ownership interest (Lines
30-35).
Definition of "Qualified Investor"
I recommend increasing the millimuminvestmentfrom $5,000 to $25,000, We know
fTOm
the
existing EDF and Biotech programs that $50,000 is the most frequently invested amount. Based
on conversations with local green entrepreneurs, the administrative costs ofrevic\ving very small
investmentappUcutions will ouhveigh the benefits to our companies, (Lines 36-39).
Additionally, I recommend clarifying that a qualified investor have limited ownership interest in
the company and not derive financial benefIt from the company, This
wilt
fot'
example, limit a
business owner from receiving an incentive payment for investing in her own company (Lines
39-50),
Amount of
incclltivcpaYDltnt increased
to $50,000
Based on both conversations
with
entrepren.eurs and our
0\\<11
data from the EDF and Biotech
programs. the average investment in local companies is approximately
$90,000. As
such,
we
should increase
the
maximum supplement amount
to $50,000 (Line 100).
Additionally.
if
we want to grow the number of investors who support local green companies,
\"lC
should not limit investors to a
"one~time"
supplement (or "incentive paymenf' as proposed in the
amendment). Instead, we should itnpleme.nt an
annual
limit that encourages individuals to keep
investing
in local
companies in subsequent
years
(Lines 97-103).
Payment
of
Incentive
&
Allpropriations
We propose a formula-based allocation process, where each qualified investment would be
divided
by
tile
total amount of qualified investments during
that
calendar year
to
derive the
percentage of the annual appropriation that
is
paid out (Lines 89-103).
This
rneth..
)d
will ensure that
the
County'
5
appropriation amount, based on its wlilateral
decision
and
tiscal
condition~
"viII drive the Program, as opposed to the total amount of qualified
investment dictating
ule
appropriation requirement and leaving the County exposed.
Under this scenario, then,
if
an
individual
invests $50,000 in a local green business, and qualified
green business investments across the county totaled
$
1M, then investor A would get 5% of the
Program's appropriated amount.
.
2
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Expedited Bill No.
40-12
Concerning: Economic Development ­
Green [Organization Supplement]
Investor Incentive Program
Revised:
11/27/2012
Draft No.
L
Introduced:
December 4,2012
Enacted:
June 4,2014
Executive: _ _ _ _ _ _ _ __
Effective:
_~-:--
_ _ _ _ _ __
Sunset Date:
--...:...:.No=n..:.::e~
_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Berliner
AN
ACT to:
(1)
(2)
authorize the County to provide qualified applicants a Green [Organization
Supplement] Investor Incentive Payment
generally amend the law governing County financial incentives for investment in
certain businesses.
By adding
Montgomery County Code
Chapter 20, Finance
Section 20-76C
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
*
* *
Heading or defined term.
Added to existing law
by
original hill.
Deletedfrom existing law
by
original bill.
Added
by
amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No.
40-12
1
Sec.
1.
Section 20-76C is inserted as follows:
20-76C. Green [Organization Supplement] Investor Incentive Program.
2
3
!ill
Definitions.
In
this Section, the following words have the meanings
indicated:
4
5
6
Green product or service
means
~
product or service that measures,
prevents, limits, minimizes or corrects environmental damage to water,
air and soil, as well as problems related to waste, ecosystems.
biodiversity, habitat or natural resource depletion. All claims related to
environmental attributes, as applicable, for
~
7
8
9
10
product or service, shall
conform to current or future guidelines published by the Federal Trade
Commission or other appropriate entities designated by the Director of
the Department of Environmental Protection. [the delivery of
~
product
or service in the following areas:
11
12
13
14
15
16
17
18
19
20
21
ill
ill
ill
ill
ill
®
renewable, clean, or distributed energy;
energy efficiency products or services;
sustainable farming and food distribution;
water quality and conservation;
pollution reduction and remediation;
recycling, reuse, and resource recovery; or
biodiversity and natural resource conservation.)
ill
Qualified green [organizationl company
means any entity of any form
duly organized and existing under the laws of any jurisdiction for the
purpose
of conducting business
for
profit
excluding
~
22
23
24
sole
proprietorship [any business, cooperative, or non-profit] that:
25
26
ill
provides
~
green product or service or uses
~
~
proprietary
technology which adds value to
green product or service
or is
-2­
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Bill No. 40-12
27
28
engaged in research or development of
~
proprietary
green product
Q!
service;
and
29
30
31
ill
implements
~
sustainable operation as verified by
~
third party.
Investment
means the contribution of money in cash or cash equivalents
expressed in United States dollars, at
~
risk of loss, to
company
in exchange for stock,
~
~
qualified green
32
33
34
partnership or membership interest,
or other ownership interest in the equity of the
qualified green
company,
title to which ownership interest shall vest in the
qualified
investor
but does not include debt.
35
36
37
38
Qualified investor
means any individual or entity that [invests] makes
an investment of at least $25,000 in
I!
qualified
[Montgomery County]
green
[organization]
company
and that is required to file an income tax
39
40
return in any jurisdiction.
Qualified investor
does not include
I!
qualified pension plan, individual retirement account, or other qualified
retirement plan under the Employee Retirement Income Security Act of
1974, as amended, or fiduciaries or custodians under such plans, or
similar tax-favored plans or entities under the laws of other countries or
any individual or entity that has an ownership interest in the
qualified
green company other than from
~
previous
investment,
which previous
investment
by itself or with the additional
investment
does not create
~
41
42
43
44
45
46
47
48
49
50
25% or greater equity holding by the
qualified investor
in the
qualified
green company,
or any individual or entity deriving any financial
benefit, including salary or other compensation, from the
qualified
green company
in which the
qualified investor
makes an
investment.
51
52
Sustainable operation
means an organization validated by
I!
third
Pill1Y
under one of the following:
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BILL
No.40-12
53
54
55
56
57
ill
Montgomery County [Certified] Green Business Certification
Program, as certified by the Department of Environmental
Protection;
58
59
ill
ill
ill
ill
[Certified] BLab's B Corp Certification;
Green America Gold Certification;
Green Seal Certification;
International Organization for Standardization ISO
[certified] Certification; or
14001
60
61
®
(hl
any other third
Pill1Y
validation approved by the Department of
62
63
Environmental Protection.
Incentive Payment
[Qf
supplement/.
The Director of Finance must
~
64
65
66
67
68
subject to the amount of the annual appropriation in that fiscal year, an
[Green
Organization
Supplement1
incentive
payment
to
each
[applicant]qualified investor who meets certain eligibility standards.
1£1
Eligibility standards.
A[n applicant]qualified investor, who need not
be
£!:
County resident, is eligible to receive the [Supplement] incentive
payment if the [applicant] qualified investor:
69
70
71
ill..)
@
is
£!:
qualified investor; and]
invests] makes an investment in
£!:
qualified green [organization]
companv that:
72
73
([A]l)has its headquarters and base of operations
in
the County; or
([B]2)has signed
£!:
lease for not less than five
74
75
76
77
78
ill
years to open
£!:
qualified green company [facility] constituting its headquarters
and base of operations in the County; and
ill
has been in business for less than
10
years and employs [less]
fewer than 50 people and does not have its securities publicly
traded on any exchange.
-4-
79
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BILL
No.
40-12
80
@
Additional eligibility standards.
The County Executive,
Qy
Method
regulation, may impose other eligibility standards.
.f
81
82
83
However, those
standards must not make any person ineligible to receive the
[Supplement) incentive payment who would be eligible under
subsection
(£1
84
85
86
87
W
Ineligible investments.
LA
qualified1 An investor must not receive
ll!
supplement for capital] an incentive payment [used] for any investments
m:
88
89
90
ill
ill
ill
geothennal, or solar photovoltaic, or similar system; or
any building green or energy efficiency improvement,
The [Supplement paid]
Amount
Q[
[supplement/incentive payment.
91
incentive payment made, subject to the amount of the annual
appropriation in that fiscal year, to each [recipient]
qualified investor
shall be equal to the amount of the
investment
made
Qy
the
qualified
92
93
94
95
investor,
divided
Qy
the total amount of
investments
made
Qy
all
qualified investors
within the same calendar year, multiplied
Qy
the
total amount of funds appropriated for the green investor incentive
program in that year. The incentive payment made to any
qualified
96
97
98
99
investor
in any single fiscal year shall not exceed the lesser of
ill
50%
of the investment made
Qy
the
qualified investor
in that fiscal year or
Oi) 15% of the total annual and supplement appropriation for the green
investor incentive program in that fiscal year or (iii) $50,000.
100
101
102
103
I
is
~
one-time Supplement and must equal 50% of the recipient's
investment in
~
qualified green organization, or
~
lower percentage set
in the annual operating budget resolution,
.!:ill
to $25,000.]
104
105
106
(g)
The Director of the Department of Economic Development shall
Qy
January 15
th
of each calendar year compile
~
list of each
qualified
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BILL No. 40-12
107
108
109
110
111
112
investor
making an
investment
in
£!
qualified green company
and the
amount of that
investment
during the preceding calendar year, based on
the applications and the supporting documents as submitted by
qualified investors,
in order to calculate the amount of the incentive
payment to be made to
£!
qualified investor
under Subsection
ill
and
may take any other action necessary to administer the incentive
payment. The Executive may issue regulations under Method (2) to
implement this Section.
113
114
115
([glh)
Application required.
The Director of the Department of Economic
Development must require each [eligible person]
qualified investor
to
submit an application for the [Supplement] incentive payment and may
take any other action necessary to administer the [Supplement]
incentive payment. The Executive may issue regulations under Method
116
117
118
119
120
121
122
123
124
125
126
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ill
to specify an application process and otherwise implement this
Section.
.cJ.hlj}
Fraudulent applications.
A person who submits
£!
false or fraudulent
application, or withholds material information, to obtain an incentive
payment under this Section has committed
£!
Class A violation.
In
addition, the person must repay the County for all amounts improperly
paid and all accrued interest and penalties that would
amounts as if they were overdue taxes.
ill2l?lY
to those
IA
person who violates this
Section is liable for] Any unpaid amount shall constitute
£!
lien on all
real and personal property owned by the investor in the County and
shall be subject to collection and lien as any other unpaid tax and the
County shall be entitled to recover as part of any such tax enforcement
action or lien enforcement action all court costs and expenses and
reasonable attorney's fees of the County incurred
in
any
[civil]
tax
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BILL
No. 40-12
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enforcement or lien enforcement action brought
Qy
the County to
recover any payment, interest, or penalty. The County may in addition
or in the alternative collect any amount due, and otherwise enforce this
Section,
Qy
any other appropriate legal action and in any such action
shall likewise be entitled to recover in addition to the amount due all
court costs and expenses and reasonable attorney's fees of the Countv
incurred in any such action brought
Qy
the County to recover any
payment, interest, or penalty.
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