Senator Aaron Osmond proposes the following substitute bill:


1     
USTAR GOVERNANCE AMENDMENTS

2     
2015 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Aaron Osmond

5     
House Sponsor: Rebecca P. Edwards

6     

7     LONG TITLE
8     General Description:
9          This bill modifies provisions regarding the Utah Science Technology and Research
10     Governing Authority.
11     Highlighted Provisions:
12          This bill:
13          ▸     modifies certain intent language regarding the Utah Science Technology and
14     Research Governing Authority;
15          ▸     requires that prospective gubernatorial appointees to the Utah Science Technology
16     and Research Governing Authority be approved by the Senate;
17          ▸     gives the governor authority to remove a member of the Utah Science Technology
18     and Research Governing Authority before a member's term is completed;
19          ▸     modifies provisions of the technology outreach innovation program; and
20          ▸     makes technical changes.
21     Money Appropriated in this Bill:
22          None
23     Other Special Clauses:
24          None
25     Utah Code Sections Affected:

26     AMENDS:
27          63B-15-101, as enacted by Laws of Utah 2006, Chapter 123
28          63B-19-101, as enacted by Laws of Utah 2010, Chapter 181
29          63M-2-102, as last amended by Laws of Utah 2014, Chapter 186
30          63M-2-202, as last amended by Laws of Utah 2014, Chapter 186
31          63M-2-204, as last amended by Laws of Utah 2014, Chapter 186
32          63M-2-301, as last amended by Laws of Utah 2014, Chapter 186
33          63M-2-302, as last amended by Laws of Utah 2014, Chapter 186
34          63M-2-401, as enacted by Laws of Utah 2014, Chapter 186
35          63M-2-402, as enacted by Laws of Utah 2014, Chapter 186
36     

37     Be it enacted by the Legislature of the state of Utah:
38          Section 1. Section 63B-15-101 is amended to read:
39          63B-15-101. Capital facilities bonds -- Utah Science Technology and Research
40     Governing Authority -- Maximum amount -- Projects authorized.
41          (1) (a) The total amount of bonds issued under this section may not exceed
42     $111,100,000.
43          (b) When Utah State University certifies to the commission that the university has
44     obtained reliable commitments, convertible to cash, of $10,000,000 or more in nonstate funds
45     to construct the Bio Innovations Research Institute, and when the chairs of the Legislature's
46     Executive Appropriations Committee have certified that the committee has heard a
47     presentation by the chair of the bonding commission and the Utah Science Technology and
48     Research Governing Authority on the project, the commission may issue and sell general
49     obligation bonds in a total amount not to exceed $40,400,000.
50          (c) When the University of Utah certifies to the commission that the university has
51     obtained reliable commitments, convertible to cash, of $30,000,000 or more in nonstate funds
52     to construct the Neuroscience and Biomedical Technology Research Building, and when the
53     chairs of the Legislature's Executive Appropriations Committee have certified that the
54     committee has heard a presentation by the chair of the bonding commission and the Utah
55     Science Technology and Research Governing Authority on the project, the commission may
56     issue and sell general obligation bonds in a total amount not to exceed $70,700,000.

57          (2) (a) Proceeds from the issuance of bonds shall be provided to the Utah Science
58     Technology and Research Governing Authority to provide funds to pay all or part of the cost of
59     acquiring and constructing the projects listed in this Subsection (2).
60          (b) These costs may include the cost of acquiring easements and rights-of-way,
61     improving sites, and acquiring, constructing, equipping, and furnishing facilities and all
62     structures, roads, parking facilities, utilities, and improvements necessary, incidental, or
63     convenient to the facilities, interest estimated to accrue on these bonds during the period to be
64     covered by construction of the projects plus a period of six months after the end of the
65     construction period, and all related engineering, architectural, and legal fees.
66          (c) For the Utah Science Technology and Research Governing Authority, proceeds
67     shall be provided for the following:
68      CAPITAL DEVELOPMENT PROJECTS
69     

Project Description
Estimated
Operations and
Maintenance

Amount
Funded
70      Bio Innovations Research Institute --
     Utah State University

$0

$40,000,000
71      Neuroscience and Biomedical Technology
     Research Building -- University of Utah

$0

$70,000,000
72      TOTAL CAPITAL DEVELOPMENT PROJECTS$110,000,000
73      TOTAL GENERAL OBLIGATION BOND AUTHORIZATION FOR
     CAPITAL DEVELOPMENT PROJECTS
$110,000,000
74          [(d) The Legislature intends that the Utah Science Technology and Research
75     Governing Authority pay the operations and maintenance costs on the research buildings
76     authorized by this section.]
77          (3) (a) The amounts funded as listed in Subsection (2) are estimates only and do not
78     constitute a limitation on the amount that may be expended for the projects.
79          (b) The commission, by resolution and in consultation with the Utah Science
80     Technology and Research Governing Authority, may delete the project if the inclusion of that
81     project could be construed to violate state law or federal law or regulation.

82          (4) The Utah Science Technology and Research Governing Authority may enter into
83     agreements related to the project before the receipt of proceeds of bonds issued under this
84     chapter.
85          (5) The commission or the state treasurer may make any statement of intent relating to
86     that reimbursement that is necessary or desirable to comply with federal tax law.
87          (6) The commission may not issue or execute bonds authorized by this section that
88     have a maturity date or dates of more than 20 years after the date of delivery of the bonds.
89          (7) The Utah Science Technology and Research Governing Authority shall contract
90     with the Division of Facilities Construction and Management to oversee construction of the
91     buildings.
92          (8) The Utah Science Technology and Research Governing Authority may not delegate
93     authority over construction of the capitol development projects identified in this section to any
94     entity other than the Division of Facilities Construction and Management.
95          Section 2. Section 63B-19-101 is amended to read:
96          63B-19-101. Capital facilities bonds -- Utah Science Technology and Research
97     Governing Authority -- Maximum amount -- Projects authorized.
98          (1) The bonds issued under this section may not exceed $46,000,000 for acquisition
99     and construction proceeds, plus additional amounts necessary to pay costs of issuance, to pay
100     capitalized interest, and to fund any debt service reserve requirements, with the total amount of
101     the bonds not to exceed $46,460,000.
102          (2) (a) Proceeds from the issuance of bonds shall be provided to the Utah Science
103     Technology and Research Governing Authority to provide funds to pay all or part of the cost of
104     constructing the projects listed in this Subsection (2).
105          (b) These costs may include the cost of acquiring easements and rights-of-way,
106     improving sites, and acquiring, constructing, equipping, and furnishing facilities and all
107     structures, roads, parking facilities, utilities, and improvements necessary, incidental, or
108     convenient to the facilities, interest estimated to accrue on these bonds during the period to be
109     covered by construction of the projects plus a period of six months after the end of the
110     construction period, and all related engineering, architectural, and legal fees.
111          (c) For the Utah Science Technology and Research Governing Authority, proceeds
112     shall be provided for the following:

113      CAPITAL DEVELOPMENT PROJECTS
114     

Project Description
Estimated
Operations and
Maintenance

Amount
Funded
115      Bio Innovations Research Institute --
     Utah State University     

$0

$18,400,000
116      Neuroscience and Biomedical Technology
     Research Building -- University of Utah
$0$27,600,000
117      TOTAL CAPITAL DEVELOPMENT PROJECTS$46,000,000
118      ADDITIONAL AUTHORIZED AMOUNTS$460,000
119      TOTAL GENERAL OBLIGATION BOND AUTHORIZATION FOR
     CAPITAL DEVELOPMENT PROJECTS

$46,460,000
120          [(d) The Legislature intends that the Utah Science Technology and Research
121     Governing Authority pay the operations and maintenance costs on the research buildings
122     authorized by this section.]
123          (3) (a) The amounts funded as listed in Subsection (2) are estimates only and do not
124     constitute a limitation on the amount that may be expended for the projects.
125          (b) The commission, by resolution and in consultation with the Utah Science
126     Technology and Research Governing Authority, may delete the project if the inclusion of that
127     project could be construed to violate state law or federal law or regulation.
128          (4) The Utah Science Technology and Research Governing Authority may enter into
129     agreements related to the project before the receipt of proceeds of bonds issued under this
130     chapter.
131          (5) The commission or the state treasurer may make any statement of intent relating to
132     that reimbursement that is necessary or desirable to comply with federal tax law.
133          (6) The Utah Science Technology and Research Governing Authority shall contract
134     with the Division of Facilities Construction and Management to oversee construction of the
135     buildings.
136          (7) The Utah Science Technology and Research Governing Authority may not delegate
137     authority over construction of the capital development projects identified in this section to any

138     entity other than the Division of Facilities Construction and Management.
139          Section 3. Section 63M-2-102 is amended to read:
140          63M-2-102. Definitions.
141          As used in this chapter:
142          (1) "Commercialization revenues" means dividends, realized capital gains, license fees,
143     royalty fees, and all other revenues received by a university as a result of commercial
144     applications, inventions, or intellectual property developed from the USTAR initiative, less:
145          (a) the portion of [those] revenues allocated to the inventor; and
146          (b) expenditures incurred by the university to legally protect the intellectual property.
147          (2) "Executive director" means the person appointed [by the governing authority] under
148     Section 63M-2-301.
149          (3) "Research buildings" means any of the buildings listed in Section 63M-2-201.
150          (4) "Research universities" means the University of Utah and Utah State University.
151          (5) "Technology outreach innovation program" or "TOIP" means the program
152     described in Section 63M-2-202.
153          (6) "USTAR governing authority" means the Utah Science Technology and Research
154     Governing Authority created in Section 63M-2-301.
155          (7) (a) "USTAR initiative" means the Utah Science Technology and Research Initiative
156     created in Section 63M-2-301.
157          (b) "USTAR initiative" includes the projects, operations, activities, programs, and
158     services described in this chapter.
159          Section 4. Section 63M-2-202 is amended to read:
160          63M-2-202. Technology outreach innovation program.
161          (1) As funding becomes available from the Legislature or other sources, the USTAR
162     governing authority shall establish a technology outreach innovation program, also known as
163     the TOIP, at up to five locations distributed strategically throughout Utah.
164          (2) [(a)] The USTAR governing authority shall ensure that the technology innovation
165     outreach program acts as a resource to:
166          [(i)] (a) broker ideas, new technologies, and services to entrepreneurs and businesses
167     throughout a defined service area;
168          [(ii)] (b) engage local entrepreneurs and professors at applied technology centers,

169     colleges, and universities by connecting them to Utah's research universities;
170          [(iii)] (c) screen business ideas and new technologies to ensure that the ones with the
171     highest growth potential receive the most targeted services and attention;
172          [(iv)] (d) connect market ideas and technologies in new or existing businesses or
173     industries or in regional colleges and universities with the expertise of Utah's research
174     universities;
175          [(v)] (e) assist businesses, applied technology centers, colleges, and universities in
176     developing commercial applications for their research; and
177          [(vi)] (f) disseminate and share discoveries and technologies emanating from Utah's
178     research universities to local entrepreneurs, businesses, applied technology centers, colleges,
179     and universities.
180          [(b)] (3) In designing and operating the [technology outreach program,] TOIP, for each
181     TOIP location the USTAR governing authority [shall]:
182          [(i) for each technology outreach program location:]
183          (a) may hire a TOIP director;
184          [(A)] (b) shall establish written performance standards and expectations [for each
185     location]; and
186          [(B)] (c) shall require reporting [from each location] related to those performance
187     standards and expectations on at least an annual basis[; and].
188          [(ii) work cooperatively with the Technology Commercialization Offices at Utah State
189     University and the University of Utah.]
190          (4) A TOIP director hired under Subsection (3) shall:
191          (a) be categorized as a schedule AC employee in accordance with Section 67-19-15;
192          (b) report to, and be supervised by, the executive director;
193          (c) ensure the TOIP serves to further the vision and mission of the USTAR initiative;
194     and
195          (d) as directed by the executive director, implement the policies and procedures
196     adopted by the USTAR governing authority.
197          Section 5. Section 63M-2-204 is amended to read:
198          63M-2-204. Financial participation agreement.
199          (1) In consideration of the money and services provided or agreed to be provided, the

200     state of Utah, Utah State University, and the University of Utah agree that they will allocate
201     commercialization revenues as follows:
202          [(a) for the first $15,000,000 received:]
203          [(i) $10,000,000 to Utah State University and the University of Utah, with the money
204     distributed proportionately based upon which university conducted the research that generated
205     the commercialization revenues; and]
206          [(ii) $5,000,000 to the USTAR governing authority for the ongoing operations of the
207     USTAR initiative; and]
208          (a) for up to and including the first $15,000,000 in commercialization revenues
209     generated:
210          (i) 66.6% shall be retained by the research universities, with the money distributed
211     proportionably to the university that generated the commercialization revenue; and
212          (ii) 33.4% shall be paid to the USTAR governing authority for the ongoing operation
213     of the USTAR initiative;
214          (b) for all subsequent money received:
215          (i) 50% to Utah State University and the University of Utah, with the money
216     distributed proportionately based upon which university conducted the research that generated
217     the commercialization revenues; and
218          (ii) 50% to the USTAR governing authority or other entity designated by the state to be
219     used for:
220          (A) unless prohibited by law, deposit with the state treasurer for deposit into the
221     sinking fund created under Section 63B-1a-301 for debt service on the bonds issued to fund
222     planning, design, and construction of the research buildings;
223          (B) ongoing operations of the USTAR initiative;
224          (C) replacement of equipment in the research buildings;
225          (D) recruitment and funding of additional research teams; and
226          (E) construction of additional research buildings.
227          Section 6. Section 63M-2-301 is amended to read:
228          63M-2-301. The Utah Science Technology and Research Initiative and the Utah
229     Science Technology and Research Governing Authority -- Creation -- Membership --
230     Meetings -- Staff.

231          (1) There is created the Utah Science Technology and Research Initiative.
232          (2) To oversee the Utah Science Technology and Research Initiative, there is created
233     the Utah Science Technology and Research Governing Authority consisting of the state
234     treasurer or the state treasurer's designee, the executive director of the Governor's Office of
235     Economic Development, and the following eight members appointed as follows:
236          (a) three appointed by the governor, with the consent of the Senate;
237          (b) two appointed by the president of the Senate;
238          (c) two appointed by the speaker of the House of Representatives; and
239          (d) one appointed by the commissioner of higher education.
240          (3) (a) (i) The eight appointed members shall serve four-year staggered terms.
241          (ii) The appointed members may not serve more than two full consecutive terms.
242          (iii) An appointed member may be removed from the board for any reason before the
243     member's term is completed at the discretion of the governor after consultation with the
244     governing authority.
245          (b) Notwithstanding Subsection (3)(a)(i), the terms of the first members of the
246     governing authority shall be staggered by lot so that half of the initial members serve two-year
247     terms and half serve four-year terms.
248          (4) Vacancies in the appointed positions on the governing authority shall be filled by
249     the appointing authority [with consent of the Senate] in the same manner as the original
250     appointment for the unexpired term.
251          (5) (a) The governor, with the consent of the Senate, shall select the chair of the
252     governing authority to serve a one-year term.
253          (b) The governor may extend the term of a sitting chair of the governing authority
254     without the consent of the Senate.
255          [(b)] (c) The executive director of the Governor's Office of Economic Development
256     shall serve as the vice chair of the governing authority.
257          (6) The governing authority shall meet at least [monthly] six times each year and may
258     meet more frequently at the request of a majority of the members of the governing authority.
259          (7) Five members of the governing authority are a quorum.
260          (8) A member may not receive compensation or benefits for the member's service, but
261     may receive per diem and travel expenses as allowed in:

262          (a) Section 63A-3-106;
263          (b) Section 63A-3-107; and
264          (c) rules made by the Division of Finance according to Sections 63A-3-106 and
265     63A-3-107.
266          (9) (a) After consultation with the USTAR governing authority, the governor, with the
267     consent of the Senate, shall appoint a full-time executive director to provide staff support for
268     the USTAR governing authority.
269          (b) The executive director is an at-will employee who may be terminated without cause
270     by the governor or by majority vote of the USTAR governing authority.
271          Section 7. Section 63M-2-302 is amended to read:
272          63M-2-302. USTAR governing authority powers.
273          (1) The USTAR governing authority shall:
274          (a) ensure that funds appropriated and received for research and development at the
275     research universities and for the [technology outreach program] TOIP are used appropriately,
276     effectively, and efficiently in accordance with the intent of the Legislature;
277          (b) in cooperation with the universities' administrations, expand key research at the two
278     research universities;
279          (c) enhance technology transfer and commercialization of research and technologies
280     developed at the research universities to create high-quality jobs and new industries in the
281     private sector in Utah;
282          (d) review state and local economic development plans and appropriations to ensure
283     that the USTAR initiative and its appropriations do not duplicate existing or planned programs;
284          (e) establish written economic development objectives for the USTAR initiative that
285     are measurable and verifiable, including how to maximize revenue to the USTAR initiative so
286     that it becomes financially self-supporting;
287          (f) by following the procedures and requirements of Title 63G, Chapter 3, Utah
288     Administrative Rulemaking Act, make rules for allocating appropriated money for research
289     teams and for the commercialization of new technology between Utah State University and the
290     University of Utah;
291          (g) verify that the USTAR initiative is being enhanced by research grants and that it is
292     meeting the governing authority's economic development objectives;

293          (h) monitor all research plans that are part of the USTAR initiative at the research
294     universities to determine that appropriations are being spent in accordance with legislative
295     intent and to maximize the benefit and return to the state; and
296          (i) develop methods and incentives to encourage investment in and contributions to the
297     USTAR initiative from the private sector.
298          (2) The USTAR governing authority may:
299          (a) in addition to money received from the Legislature, receive contributions for the
300     USTAR initiative from any source in the form of money, property, labor, or other things of
301     value;
302          (b) subject to any restrictions imposed by the donation, appropriations, or bond
303     authorizations, allocate money received by it among the research universities, technology
304     outreach program, and technology transfer offices to support commercialization and technology
305     transfer to the private sector; or
306          (c) enter into agreements necessary to obtain private equity investment in the USTAR
307     initiative.
308          Section 8. Section 63M-2-401 is amended to read:
309          63M-2-401. Reporting requirements.
310          (1) By October 1 of each year, the USTAR governing authority shall submit to the
311     governor; the Legislature; the Business, Economic Development, and Labor Appropriations
312     Subcommittee; and the Economic Development and Workforce Services Interim Committee an
313     annual written report of the operations, activities, programs, and services of the governing
314     authority and the USTAR initiative for the preceding fiscal year.
315          (2) For each project, operation, activity, program, or service related to the USTAR
316     initiative or overseen or funded through the USTAR governing authority, the annual report
317     shall include:
318          (a) a description of the project, operation, activity, program, or service;
319          (b) data selected and used by the governing authority to measure progress,
320     performance, and scope of the project, operation, activity, program, or service, including
321     summary data;
322          (c) a clear description of the methodology for any data in the report that includes an
323     estimation;

324          (d) the amount and source of all USTAR initiative funding, including:
325          (i) funding from legislative appropriations;
326          (ii) funding procured outside of legislative appropriations, including a separate
327     accounting of grants or investments contributing to research teams and other activities of the
328     USTAR initiative from the federal government, private entities, or other sources, and an
329     explanation of the extent to which:
330          (A) outside funding was contingent on or leveraged by legislative appropriations; and
331          (B) outside funding would continue if legislative appropriations were discontinued;
332          (iii) commercialization revenue, including a separate accounting of:
333          (A) realized commercialization revenue;
334          (B) unrealized [and expected] commercialization revenue; and
335          (C) commercialization revenue going to other parties attributable to USTAR initiative
336     funding;
337          (iv) lease revenue from each building in which the USTAR governing authority holds
338     title; and
339          (v) the amount of money deposited with the state treasurer for deposit into the sinking
340     fund created under Section 63B-1a-301 for debt service on the bonds issued to fund planning,
341     design, and construction of the research buildings;
342          (e) all expenses of the USTAR initiative, including:
343          (i) operational expenses;
344          (ii) for each employee receiving compensation from USTAR initiative funding,
345     compensation information, including:
346          (A) salary expenses, benefit expenses, and travel expenses;
347          (B) information for each research team employee and each employee of the
348     [technology outreach program] TOIP that receives compensation directly or indirectly through
349     USTAR initiative funding; and
350          (C) information regarding compensation for each employee from sources other than
351     USTAR initiative funding, including grants and compensation from a university or private
352     entity;
353          (iii) for each research team, salary expenses, benefit expenses, travel expenses, and
354     operations and maintenance expenses;

355          (iv) operational and maintenance expenses for each building in which the USTAR
356     governing authority holds title;
357          (v) operational and maintenance expenses paid for by USTAR initiative funding for
358     each location that has an established [technology outreach program] TOIP; and
359          (vi) each grant or other incentive given as a result of the USTAR initiative, including
360     grants or incentives awarded through the [technology outreach program] TOIP;
361          (f) the number of jobs and the corresponding salary ranges created by the USTAR
362     initiative, including the number of jobs where the employee is expected to be employed for at
363     least one year and earns at least 125% of the prevailing wage of the county where the employee
364     works;
365          (g) the name of each business entity receiving a grant or other incentive as a result of
366     the USTAR initiative, including the outreach program;
367          (h) a list of business entities that have hired employees as a result of the USTAR
368     initiative;
369          (i) the tax revenue generated as a result of the USTAR initiative, with actual revenue
370     generated clearly separated from potential revenue;
371          (j) a list of intellectual property assets, including patents, generated by research teams
372     as a result of the USTAR initiative, including a reasonable estimate of the USTAR initiative's
373     percentage share of potential commercialization revenue that may be realized from those
374     assets;
375          (k) a description of any agreements entered into regarding private equity investment in
376     the USTAR initiative;
377          (l) beginning with data from the fiscal year beginning July 1, 2013, historical data from
378     previous years for comparison with the annual data reported under this Subsection (2);
379          (m) goals, challenges, and achievements related to the project, operation, activity,
380     program, or service;
381          (n) relevant federal and state statutory references and requirements;
382          (o) contact information of officials knowledgeable and responsible for each project,
383     operation, activity, program, or service;
384          (p) other information determined by the USTAR governing authority that:
385          (i) may be needed, useful, or of historical significance; or

386          (ii) promotes accountability and transparency for each project, operation, activity,
387     program, or service with the public and with elected officials;
388          (q) the written economic development objectives required under Subsection
389     63M-2-302(1)(e) and a description of any progress or challenges in meeting the objectives; and
390          (r) the audit report described in Section 63M-2-402.
391          (3) The annual report shall be designed to provide clear, accurate, and accessible
392     information to the public, the governor, and the Legislature.
393          (4) The governing authority shall:
394          (a) submit the annual report in accordance with Section 68-3-14; and
395          (b) make the annual report and previous annual reports accessible to the public by
396     placing a link to the reports on the USTAR initiative's website.
397          (5) In addition to the annual written report described in this section:
398          (a) upon the request of a committee, the USTAR governing authority shall provide
399     information and progress reports to the Economic Development and Workforce Services
400     Interim Committee; the Business and Labor Interim Committee; and the Business, Economic
401     Development, and Labor Appropriations Subcommittee; and
402          (b) on or before October 1, 2019, and every five years after October 1, 2019, the
403     USTAR governing authority shall include with the annual report described in this section a
404     written analysis and recommendations concerning the usefulness of the information required in
405     the annual report and the ongoing effectiveness of the USTAR initiative, including whether:
406          (i) the reporting requirements are effective at measuring the performance of the
407     USTAR initiative;
408          (ii) the reporting requirements should be modified; and
409          (iii) the USTAR initiative is beneficial to the state and should continue.
410          Section 9. Section 63M-2-402 is amended to read:
411          63M-2-402. Audit requirements.
412          (1) Each fiscal year, an audit of the activities of the USTAR initiative shall be made as
413     described in this section.
414          (2) (a) As approved by the Legislative Audit Subcommittee, the audit shall be
415     conducted by:
416          (i) the legislative auditor; or

417          (ii) an independent auditor engaged by the legislative auditor.
418          (b) An independent auditor used under Subsection (2)(a)(ii) may not have a [business
419     or contractual connection, or other connection,] direct financial conflict of interest with the
420     USTAR initiative or the USTAR governing authority.
421          (3) The USTAR governing authority shall pay the costs associated with the annual
422     audit.
423          (4) The annual audit shall:
424          (a) include a verification of the accuracy of the information required to be included in
425     the annual report described in Section 63M-2-401; and
426          (b) be completed by September 1 of each year.