In the March 12, 2004 Issue:

Copyright State Science & Technology Institute 2004. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected.

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South Carolina Commits $500M for TBED Package
The South Carolina Technology Alliance calls it the most significant victory for South Carolina's research universities and tech entrepreneurs in the last 50 years. An idle exaggeration? Probably not.

Senate Bill 0560 creates a $50 million venture capital (VC) fund for the state and offers tax credits and other incentives to attract large life science and pharmaceutical businesses. It also facilitates borrowing up to $250 million for university construction and improvement projects encouraging research and tech-based economic development (TBED). The bill, which passed overwhelmingly in both the state senate and house, includes three sections:

Uses of the Technology Innovation Fund are more varied, permitting the state to provide small grants to support research and tech transfer through the technology incubators connected to the state's research universities. Administration of the Innovation Fund will be contracted to a separate nonprofit.

S. 0560 is available at: http://www.scstatehouse.net/cgi-bin/web_bh10_2003.exe

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South Dakota Clears Path for Tech-based ED
With the recent passage of much economic development legislation in South Dakota, Gov. Mike Rounds' 2010 Initiative would seem to be moving along as planned. The 2010 Initiative, an economic stimulus plan introduced last fall, outlines a series of goals for growth in South Dakota by the year 2010 (see the Oct. 31, 2003, issue of the Digest).

Gov. Rounds signed House Bill 1145 on March 3, setting up a $3 million loan program for entrepreneurs and start-up companies wanting to do business in their home state. Under the bill, any entrepreneur or start-up company located in South Dakota can apply for low interest loans. Start-up companies are defined as new technology, communications, service or manufacturing businesses.

Some stipulations on HB 1145 apply. Loan applicants are required to provide matching funds equal to the amount of their loan, which could range from $30,000 to $50,000. Applicants also will be responsible for developing a three-year strategic plan for their innovative business concept. They must prove to a state economic development board "with a reasonable probability" their concept can succeed.

Other bills recently signed by Gov. Rounds in support of the 2010 Initiative include:

Although the opportunity scholarship program is being funded for the first time, it would not be the first of its kind for South Dakota. The Dakota Corps Scholarship Program was introduced in the 2003 legislative session but failed to receive funding, according to Gov. Rounds' press secretary Mark Johnston. The governor has raised $600,000 from private sources to implement Dakota Corps, Johnston said.

Under Dakota Corps, eligible high school graduates are awarded $4,000 per year, covering full tuition and fees at participating universities in South Dakota. The students must agree in writing to stay in-state following college graduation and meet other criteria to qualify for the program. The first round of Dakota Corps scholarships will take effect in Fall 2004.

One tech-based economic development bill not passed by the South Dakota State Legislature, HB 1281, would have provided for certain property tax exemptions for business incubators owned by nonprofit organizations. The bill failed 17-16, needing 18 votes.

To view the full text of any of the above-mentioned bills, visit: http://legis.state.sd.us/index.cfm

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Indiana Looks to Make Permanent 10% Tax Credit on R&D
The Indiana General Assembly recently passed legislation that would make permanent a 10 percent research and development (R&D) tax credit, if signed by Gov. Joe Kernan.

Indiana's Research Expense Tax Credit provides for a credit based upon a taxpayer's increased research activities conducted in Indiana. The credit is 10 percent of the increase in qualified research expenses paid or incurred in a taxable year over a taxpayer's base amount of research expenses.

Last month's action taken by the Indiana General Assembly is the latest development with the state's R&D tax credit. During the 2003 Legislative Session, the expiration date for the credit was extended from Dec. 31, 2004, to Dec. 31, 2013. The General Assembly also has doubled the credit from 5 percent to 10 percent.

Proponents of the R&D tax credit are hopeful it will lead businesses to invest in new products, ultimately creating new jobs. Such products are expected to include computers or laboratory equipment. Other supporters believe the credit will enable more high-tech firms to be spun out of Indiana's universities and large companies.

More information on Indiana's R&D tax credit is available at: http://www.in.gov/doc/compare/Research_Expense_Tax_Credit.htm

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Colorado CAPCO Demise Leads to Questions for Other States
The creation and subsidization of CAPCOs, certified capital corporations intended to encourage venture capital (VC) investment, is one of the more controversial policies some states have adopted to encourage the growth of tech-based economies. With substantial revisions to Colorado's short CAPCO experiment this month, questions are raised once again for other states that either have passed or are considering various approaches to increasing the availability of risk capital for new tech firms.

Colorado Governor Bill Owens signed two bills on March 4 effectively ending the state's two-year-old CAPCO program -- and blocking an additional $100 million in tax credits scheduled for distribution in April.

Instead, the $100 million will be split equally between a new Colorado Venture Capital Authority (see Colorado Senate Bill 04-106) to provide capital to businesses throughout the state and CoverColorado, a program designed to provide health benefits to the chronically ill.

Colorado state lawmakers originally enacted CAPCO to stimulate economic growth, giving tax credits to insurance companies that in turn lend money to CAPCOs to invest in small businesses. The first $100 million tax credits were distributed in 2002 to be used over the next 10 years.

An October 2003 audit by the Colorado legislative audit committee could not determine the actual number of jobs created in the state through the CAPCO program. In a December 2003 Rocky Mountain News article, Tony Monteraselli, spokesman for six CAPCOs, said since its enactment the CAPCO program had invested $16 million in Colorado companies, generated $35 million in additional financing and created 370 jobs.

Opponents of the program, however, describe it as expensive and inefficient, producing little job creation for the cost to taxpayers. Their argument, substantiated by criticism of the CAPCOs from State Treasurer Mike Coffman and the legislative audit, won earlier this month. The Colorado Legislative Audit Committee concluded:

Skepticism of the CAPCO model is not limited to Colorado, however. Since Louisiana passed the first CAPCO bill in 1983, the model has been riddled by criticism. Louisiana has revised and restructured its program nearly every year since 1989, after it was determined little impact could be shown for the initial investment.

A 2000 report for the Louisiana state legislature concluded the state had awarded more than $600 million in CAPCO credits since its inception, but had only seen $180 million in CAPCO-related venture capital deals. Proponents for the program contend, however, that the CAPCO act is responsible for nearly all of the state's VC activity.

Last year, the Florida legislature withheld the second installment of its CAPCO tax credits after learning the state had lost more than 150 jobs from its initial $150 million investment.

According to a Feb. 9, 2004, Denver Post article, a 2002 annual report on the New York CAPCO program revealed it had lost 88 jobs, but with a $280 million cost to the taxpayers.

According to a Missouri state study cited in the Milwaukee Journal-Sentinel, 66 percent of funds generated by venture capital programs through its CAPCO legislation were not being used for their intended purpose of providing capital for start-up or expanding state businesses. In Wisconsin, an analysis by the state audit bureau found the $50 million CAPCO program enacted over three years ago had generated only 157 jobs.

In addition to the poor job creation figures, a recurring criticism of the CAPCO model in most news accounts and state audits appears to be that all or nearly all of the risk is borne by the state. The CAPCOs receive the full tax credits and management fees regardless of the quality, quantity or success of the investments made.

There are other approaches available to states interested in increasing venture capital investment in their tech community. In October 2001, the National Association of Seed and Venture Funds (NASVF) prepared Understanding CAPCOs, a 21-page paper comparing various VC models. The NASVF report is available at: http://www.nasvf.org/web/allpress.nsf/6f8e2b6a64fb92e786255f880053ee02/2c673437172e0c0986256ade005780fa?OpenDocument

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Utah Universities Could Own Stock in Inventions under Constitutional Amendment
Legislators in Utah have passed a constitutional amendment that, with approval by voters, would allow the state's universities to take ownership in private businesses in exchange for intellectual property. The proposed amendment cleared the Utah State Legislature with relative ease, despite some concerns it will thwart the incentive of researchers wanting to commercialize their results.

Approved on March 3 with a unanimous vote by the senate, the amendment states that Utah and any of its schools may "acquire an equity interest in a private business entity as consideration for the sale, license, or other transfer to the private business entity of intellectual property developed in whole or in part" by state agencies or schools. The Utah Constitution would retain a ban on state investment in railroad, telegraph or other companies.

Supporters of the amendment pointed to the success of the University of Florida's Gatorade, which has generated more than $80 million in royalties, according to the Associated Press. Critics, however, suggested the amendment would allow universities too much control over profits from inventions and recommended sending such profits to the state treasury. Any profitable discoveries at Utah state schools presently are governed by employment pacts, the AP reports.

Utah residents go to voting booths in November to decide on the proposed amendment. House Joint Resolution 12, which describes the amendment, is available through the Utah State Legislature: http://www.le.state.ut.us/

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NSTC Lays Out Plans to Improve Academic Research Grant Administration
With the goal of encouraging interdisciplinary and collaborative research, the Research Business Models Subcommittee of the National Science and Technology Council (NSTC) has issued a list of initiatives to improve management of academic research grants made by various agencies of the federal government. The recommendations are also expected to result in greater consistency across agencies in award policies and reporting requirements.

The selected initiatives are the result of a series of workshops held last fall involving academic officials, researchers and federal grant administrators. The Association of American Universities (AAU) has noted that cost issues of concern for the academic research community, such as reimbursement rates for facilities and administrative costs, are not addressed by the initiatives.

In its e-newsletter, AAU identifies the NSTC initiatives as being:

Alignment of Funding Mechanisms with Scientific Opportunities

Common Practices Among Agencies

The AAU reports the subcommittee also is working with the Office of Management and Budget to change Circular A-133 audit monitoring requirements so that universities that are working as sub-recipients on each other's grants will no longer be required to monitor each other.

NSTC, a Cabinet-level Council chaired by the President, is the principal means for the President to coordinate science, space, and technology to coordinate the diverse parts of the federal research and development enterprise. Membership consists of the Vice President, the assistant to the President for science and technology, cabinet secretaries and agency heads with significant science and technology responsibilities, and other White House officials.

The subcommittee's membership includes representatives from 15 federal departments and agencies that support or are engaged in research activities. More information is available at: http://rbm.nih.gov./

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Process and Product Innovation Key to Mfg Sector in Pa., Report Finds
With contributions of nearly $64 billion annually to the gross state product, manufacturing remains the largest of all industry sectors in Pennsylvania, according to a new report sponsored by the Team Pennsylvania Foundation. Data released by the nonprofit public-private partnership documents the role of manufacturing in Pennsylvania and analyzes the forces shaping the future of the industry.

Manufacturing Pennsylvania’s Future: Regional Strategies that Build from Current Strengths and Address Competitive Challenges shows Pennsylvania's manufacturing sector remains the primary economic driver in the state. Sixteen industries that collectively produce nearly half of the state's manufacturing output have grown and concentrated in Pennsylvania over the past 10 years, the report states. Small and medium-sized manufacturing firms are identified as providing the broad foundation for manufacturing in Pennsylvania.

Despite some high rankings, manufacturing employment in Pennsylvania has declined by 133,000 jobs since 1998, the report finds. Recessionary issues, foreign competition, offshore outsourcing and improvements in productivity are cited as major factors for the job reductions. Increasing competition nationally and internationally also are expected to present significant challenges for the state’s manufacturing sector in the coming years.

Pennsylvania companies that respond to the challenge by becoming faster, better and more cost-effective will best position themselves to compete, report data suggest. To succeed, researchers point to the need for Pennsylvania manufacturers to pay special attention to increasing sales through process and product innovation.

Gov. Ed Rendell will hold a Manufacturing Summit on March 23 for select Pennsylvania manufacturers and economic development providers to further discuss report's the findings and gather input to help develop a comprehensive plan to assist the industry.

Manufacturing Pennsylvania’s Future was commissioned by the state’s Industrial Resource Centers network and the Pennsylvania Department of Community and Economic Development. The report is available at http://www.teampa.com/.

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MTC Seeks Manager for John Adams Innovation Institute
The Massachusetts Technology Collaborative (MTC) announces the creation of the Innovation Systems Division and a unique economic development initiative, the John Adams Innovation Institute, a vehicle for the state to make strategic investments in its knowledge economy.

The Manager, Grants and Business Administration will be a hands-on business professional, responsible for managing the day-to-day operations of the John Adams Innovation Institute and serving as the internal expert for grant-making procedures and best practices. The "candidate of choice" will have a demonstrated passion and ability to run a successful grant making enterprise and understand the challenges associated with achieving successful projects in the field. He or she also will have 8-10 years of experience in positions of increasing responsibility that involve management of business activity in the public or non-profit sectors, with significant exposure to the issues surrounding business practice in the management of grant making and monitoring systems.

Qualified candidates are encouraged to forward resume and salary requirements via e-mail to employment@masstech.org. Applications are due March 24, 2004. More information is available at: http://www.ssti.org/posting.htm

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People

George Bald, Commissioner of the New Hampshire Department of Resources and Economic Development, has announced his resignation to become executive director of the Pease Development Authority.

Janice Bourque, president and chief executive officer of the Massachusetts Biotechnology Council, plans to step down once a replacement has been found.

Cynthia Helphingstine is the new vice president for business development for Inproteo (formerly the Indiana Proteomics Consortium).

Andrea Lohneiss, community development director for Riverhead, N.Y., is leaving to become Suffolk County's commissioner of economic development.

The Georgia Department of Industry, Trade and Tourism, in partnership with the University System of Georgia, has appointed Page Siplon and Michael Hale as directors of the Maritime Logistics Innovation Center and the Middle Georgia Innovation Center for Aircraft Lifecycle Support, respectively.

SSTI welcomes Rhiannon Mehring to its staff as a research associate.

Doros Platika is the new chief executive officer for the Pittsburgh Life Sciences Greenhouse.

Sherrie Priesche, the science and technology advisor to New Jersey Governor James McGreevey, has been appointed as the new executive director for the New Jersey Commission on Science and Technology.

James Roberson, president of the Research Triangle Foundation for the past 16 years, is retiring at the end of May.

George Swift is the first executive director for the new Southwest Louisiana Partnership for Economic Development.

The University of Vermont announced that Janice St. Onge has joined the Vermont Business Center as the director of business education.

Kay Wade is the new president of the Oklahoma Professional Economic Development Council. Ms. Wade retains her position as director of the Center for Business Development at the Meridian Technology Center.

The Wright Center for Innovation for Advanced Data Management and Analysis named Charles Walsh as its first president.

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