SSTI Digest

Venture capital investments in Montana may have become a little more attractive last Friday as the Montana House of Representatives passed the Montana Equity Capital Investment Act, moving the legislation to Gov. Brian Schweitzer for his consideration and expected signature.

To maximize the rate of return for investors, Senate Bill 133 calls for the creation of a $60 million Montana Equity Fund, which will be used as a provisional financial safety net for investors and distributed as tax credits should investments go badly. Adopting what is commonly referred to as the Oklahoma model, the act also establishes the Montana Capital Investment Board to oversee the fund's activities.

Tech firms in New Mexico received happy tax news on April 4 as Gov. BIll Richardson signed several bills to encourage economic growth across New Mexico. House Bill 410 authorizes the Small Business Technology Tax Credit, created to attract R&D investment into the state by providing small companies with a three-year “tax holiday.” The tax credit is available to businesses with total revenue of $5 million or less, no more than 25 employees, and qualified research expenditures of at least 20 percent.

Gov. Richardson also signed H.B. 518, the SMART Money Initiative, which creates a $10 million fund to be used as loans for companies looking to build or expand in New Mexico, particularly in rural areas. The initiative will be administered by the New Mexico Finance Authority and is estimated to grow to $30 million over 10 years with loan paybacks. The governor anticipates the state's one-time $10 million investment will net approximately 3,000 jobs over the decade.

New York's Empire Zones Program dodged a veto from Gov. George Pataki as an agreement was met with the legislature to restructure the program. The state budget, signed into law last week, extends the program and allows for an additional 12 zones to be created throughout the state.

Under the agreement with the legislature, Gov. Pataki will give up some control of the administration of the program to a new board, which will oversee creation of the new zones and rule on boundary issues for all existing zones, according to an article in the New York Times. The new board will consist of a panel of representatives appointed by the legislature and the governor.

Legislation that would extend and expand the federal research tax credit was introduced in the U.S. Senate last month. Senate Bill 627 seeks to make permanent the research credit that was first enacted in 1981 and is set to expire Dec. 31, 2005. The bill, sponsored by Orrin Hatch (R-Utah), also would provide an alternative simplified credit for qualified research expenses and increase the rates of the alternative incremental credit.

The simplified credit addresses changes in business models and economic circumstances that currently prevents some businesses from using the credit. Under S.B. 627, companies could receive a credit of 12 percent for qualified research expenses that exceed 50 percent of the average of those expenses for the three previous years. The credit would be 6 percent for companies having qualified research expenses in just one year.

Do tax credits pave the way for more investment in R&D and equity investments in new enterprises? Or, do they reward companies and venture capitalists for investments they would have made anyway?

Discussions on these questions can become quite heated and fueled by data supportive of both sides, as two new academic analyses demonstrate.

The recent studies examine two Canadian business tax credits, but come to opposite conclusions. One study reviews the impact of Canadian R&D tax credits, a permanent feature of the Canadian tax code. A second study focuses on a Quebecquoise investor credit established a decade ago to encourage local venture capital to the region.

Gross State Product (GSP) is considered, at least in theory, to be an effective measure of the "value added" by a state's economy. That is, the figure represents the sum of all net industrial activity within the state, where net activity is defined as total outputs (sales or receipts and other operating income, commodity taxes, and inventory change) minus total inputs (consumption of goods and services purchased from other industries or imported).

Comparing states' GSPs is difficult without some form of standardization, such as population or "per capita." Examining standardized trends over several years for an individual state or for comparison among two or more states may serve as a macro indicator of the state's economic health or direction.

To test this, SSTI has prepared a table presenting:

On the final day of March, Gov. Brad Henry signed legislation establishing a $475 million bond issue for a slate of higher education projects, much of which targets research and laboratory facilities. The Oklahoma Higher Education Promise of Excellence Act of 2005, which the governor called "desperately needed," was one of his top legislative priorities for the year (see the Feb. 7, 2005, issue of the Digest). The bill containing the bond issue, H.B. 1191, also provides $25 million in the form of a bond bank to finance future improvements at the state's colleges and universities.

The U.S. Department of Commerce announced Friday that President Bush intends to nominate David Sampson as Deputy Secretary for the agency. If confirmed, Dr. Sampson will succeed Theodore Kassinger, who will resign effective April 30, 2005.

Prior to becoming Deputy Secretary, Mr. Kassinger served as General Counsel from 2001 to 2004. Mr. Kassinger has served as Deputy Secretary since July 2004.

Dr. Sampson was nominated by President Bush on March 19, 2001, and confirmed as the Assistant Secretary of Commerce for Economic Development by the U.S. Senate on Aug. 3, 2001. Sampson has served as the principal advisor to Secretary Donald Evans on domestic economic development policy.

Two organizations with seemingly the same goal in mind recently released statistics on the health of their region's technology sectors. Relying on different methods, the Pittsburgh Technology Council (PTC) and the Sacramento Area Regional Technology Alliance (SARTA) both analyze and report the impact of technology clusters on the local economy.

PTC's annual State of the Industry report gathers growth indicators from state and federal resources to track southwestern Pennsylvania's employment statistics, number of tech companies, and total annual payroll for information technology, life science, advanced manufacturing, advanced materials, and environmental technology industries. According to PTC, the goal is to quantify the impact and draw attention to the region's significant technological resources.

The source of eadership on specific state tech-based economic development activities greatly influences the design and effectiveness of the effort. It remains to be seen then how the recently launched Arkansas Nanotechnology Alliance evolves locally as its direction originates from the nation's capital.

During a recent visit to the Arkansas Research & Technology Park, U.S. Senator Mark Pryor (D-Ark.) announced ANA's formation. Pryor will chair the statewide consortium, bringing together "universities, federal agencies, and private sector partners to develop, launch and nurture nanotechnology initiatives."

He said that, in building an Arkansas nanotechnology community, some of the possibilities include:

There are several factors that go into location decisions for biomedical firms. Proximity to strong university research capacity, other biotech businesses, and technically competent workers are all important considerations. With the financial investments many states and localities are making toward the life sciences, however, the field of prospective locations for successfully launching a biotech firm has grown considerably larger than the "usual suspects."

That is a good thing, based on a recent study by the Boyd Company, a Princeton-based location consulting firm. As highly leveraged biotech start-ups increasingly are pressured by their venture capital backers to reduce operating costs, many smaller cities may present attractive alternatives for new biomedical industry investments, the study suggests.

Western Carolina University (WCU) Chancellor John Bardo recently unveiled plans for a comprehensive regional economic development strategy that would more than double the size of the campus and promote university-industry partnerships.

The recent acquisition of 344 acres adjacent to the current campus would be used to develop a Millennium Campus at WCU, similar to traditional technology parks. The university likens the campus to a multi-use neighborhood that would encompass a mix of academic buildings, research facilities, business, industry, and housing. State-approved legislation in 2000 made it possible for University of North Carolina institutions to seek public-private partnerships and also authorized the Millennium Campus.