Similar to the CAPCO mechanism utilized by a handful of states to attain investment capital, the Tennessee legislation specifies the investment capital is to be derived from deferred insurance premium tax credits. These tax credits are offered to insurance companies in exchange for commitments of investment capital. However, unlike the CAPCO model, the Tennessee legislation does not have clawback provisions on the tax credits that have required funds in other states to purchase a performance bond to guarantee that the insurance companies receive the value of the tax credits. Instead, the program levies substantial fines on the funds that are not meeting specified performance requirements.

The Tennessee legislation requires 50 percent of the investment principal and 50 percent of the profits to be returned to the state over the life of the program. Participating venture capital funds making these investments to small businesses are able to keep 50 percent of the funds’ value.

As a result of the legislation, it is expected $120 million in tax credits will be offered, or $20 million each to six venture capital funds. Each fund is required to secure at least $14 million of the $20 million of tax credits for investment capital. The securitization amount could be greater, but it cannot be less. The difference between the tax credit allocation and the base investment capital exists because there are financing costs associated with pooling the capital in the present for future tax credits. While the six venture capital funds will be chosen by the end of the year, the participating insurance companies cannot claim the tax credits until years 2012 through 2019.

The six venture capital funds will also be mandated to make their investments within a specified time period. For example, within two years after its allocation date, the third party funding entity must invest at least 50 percent of its base investment. Within three years, this grows to at least 70 percent of the base must be invested; within four years, 80 percent; and within six years, 90 percent. These aggressive pacing requirements will be easier to achieve for funds that invest in seed and early stage companies, as such investments will be multiplied by 300% during the first four years for purposes of measuring fund compliance. Failure to meet the performance measures in any calendar year will result in a $250,000 penalty.

The result is a model intended to minimize the expense to the state, provide incentives for participation by venture capital groups, and encourage funds to invest in seed and early stage small businesses in Tennessee within a designated time period.

The language of the Tennessee Small Business Investment Company Credit Act is available at:

http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=HB2085

Positioning the state to successfully compete for research dollars and attract private energy development companies to the state, Gov. Baldacci signed LD 1465, An Act to Facilitate Testing and Demonstration of Renewable Ocean Energy. The legislation establishes the Maine Offshore Wind Energy Research Center for wind energy demonstration projects conducted by wind energy technology researchers at the University of Maine, according to the governor’s press office. Up to five commercially viable sites will be selected by the Ocean Energy Task Force by Dec. 15.

The other bill signed by the governor establishes the Efficiency Maine Trust and Board, bringing together under one roof Maine’s energy rebate, efficiency and conservation programs and setting goals to reduce energy consumption and support renewable energy measures. Funding will come from existing sources including the conservation fund, a solar rebate program, and proceeds from carbon dioxide emission allowances sold through the Regional Greenhouse Gas Initiative. In addition to setting goals for reduced energy consumption, the bill directs the Department of Labor to develop a plan for building private sector jobs in clean energy businesses.

The $150 million bond package approved by lawmakers was roughly half the amount of the governor’s proposed package. Voters will consider the appropriations in three parts starting with a November vote on a $71 million bond for transportation system projects. The June 2010 vote encompasses a $25 million economic development bond and $18 million energy bond that includes the following:

• $6 million for R&D and product innovation associated with developing one or more ocean wind energy demonstration sites;
• $5 million to provide funds to small businesses through the Small Enterprise Growth Fund; and,
• $3 million to be matched with private funds for R&D and commercialization activities administered by the Maine Technology Institute for environmental and renewable energy technology, biotechnology, aquaculture and marine technology, composite materials technology, advanced technologies for forestry and agriculture, information technology and precision manufacturing technology.

The final part of the bond package, which will be placed on the November 2010 ballot, includes funding for the Land for Maine’s Future Board and waterfront projects.

Gov. Baldacci signed the 2009-11 biennial budget in May, authorizing $5.8 billion in state spending over the next two years, a $500 million reduction from the previous biennium. Legislatively directed to support R&D activities for the state, the Office of Innovation within the Department of Economic and Community Development (DECD) will receive $7.4 million each fiscal year, which includes a reduction of $755,567 in FY10 and $755,011 in FY11 for the Maine Technology Institute.

Level funding of $14.7 million each fiscal year is included for the Maine Economic Improvement Fund established by the legislature in 1997 to increase federal and private investment in university-based research focusing on seven key sectors of the economy. The Centers for Innovation will receive $244,858 over the biennium, a slight reduction from the previous two years. Funding for the centers provide grant support for innovative R&D projects by Maine growers and researchers and business incubator development.

The 2009-11 enacted budget is available at: http://www.mainelegislature.org/legis/bills/bills_124th/chappdfs/PUBLIC213.pdf.

Gov. Phil Bredesen first announced plans for the solar initiative in his state of the state address earlier this year (see the Feb. 25, 2009 issue of the Digest) and released further details in May. Under the plan, a Tennessee Solar Institute at the University of Tennessee (UT) and Oak Ridge National Laboratory will be established to focus on basic science and industry partnerships to improve the affordability and efficiency of solar products, according to the governor’s office. Additionally, the state will acquire 1,700 acres for the Haywood County industrial megasite to house a 20-acre power generation facility that will serve as a demonstration tool for educational, research and economic development purposes. Although the state will own the solar farm, the Tennessee Valley Authority could own some of the equipment within the farm, reports the Jackson Sun.

The governor also signed last month the Clean Energy Future Act of 2009, encouraging high-wage job growth and creation in the clean energy technology sector by extending the state’s existing emerging industry tax credit to qualified businesses in this sector.

The FY10 budget signed by Gov. Bredesen reflects a 10.1 percent reduction in state appropriations from revenues and reserves from last fiscal year and includes a provision that requires the governor to make $55 million in impoundments by Oct. 1 if state revenues fail to meet state projections, reports the Knox News.

UT research initiatives are slated to receive $11.2 million in FY10, including $5.3 million to provide third-year, non-recurring operational funds for the UT Biofuels Center, about the same as last fiscal year. A component of a comprehensive plan for Tennessee’s alternative fuel strategy, the facility is capable of producing five million gallons of biomass-based ethanol per year, according to the governor’s office.

The higher education budget includes $8.3 million for the UT Space Institute, slightly less than the FY09 appropriation of $8.4 million, for graduate study, research and assistance to private companies in aerospace engineering. To support the state’s 26 Centers of Excellence, the budget includes $19.6 million in FY10 funding, slightly less than the $19.95 million FY09 appropriation.

The Tennessee Job Skills Program will receive $9.3 million in FY10, the same amount as last year. These grants are used to create and retain high-skill, high-wage jobs in technology, skilled manufacturing and emerging occupations.

The FY10 Appropriations Act is available at: http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=SB2355.

Statewide Consortium Announces $100 Million Green Computing Center in Western Massachusetts
Massachusetts Governor Deval Patrick recently announced plans to develop a $100 million high-performance computing center powered by clean and renewable energy in the small city of Holyoke. The center will be managed by a consortium of state agencies, universities and technology companies including the Massachusetts Institute of Technology, the University of Massachusetts, Cisco Systems and EMC Corp.. Universities and high-tech businesses will be able to access the center’s resources, which local leaders hope could boost the local high-tech economy.

GAO Finds Inequality between Minority and Non-Minority Applicants for the New Markets Tax Credit
Minorities receive fewer approvals and lower cash awards through the Department of Treasury’s New Markets Tax Credit (NMTC), according to a recent Government Accountability Office (GAO) report. From 2005-2008, non-minority Community Development Entities (CDEs) were successful with 26.8 percent of their applications, with 14.7 percent awarded the dollar amount requested, whereas application from minority-owned groups were successful with just 9.1 percent and with those successful applications, 4.1 percent of the dollar amount requested was awarded.

Useful Stats
Inventors per 1,000 Residents by MSA: 1980, 1990, 2000, 2005
The methods of measuring the “innovativeness” of a region take many forms, including metrics which gauge the concentration of those inventing new ideas though patents. From data made available through the Office of the University Economist at Arizona State University, one can track over time the number of patent inventors per capita by metro area.

TBED People and Organizations

The Piedmont Triad Research Park laid off Bill Dean, director of the park, and Nancy Johnson, marketing director. Park officials said that the park’s project manager and executive assistant also were laid off.