News

Idaho Gov. Kempthorne vetoes venture capital guarantee

BOISE _ Citing constitutional questions and a lack of
protection for taxpayers, Gov. Dirk Kempthorne late
Wednesday vetoed a multimillion-dollar guarantee for
investors putting their money behind innovative
business ideas.

Associated Press The Spokesman Review

In a three-page message to lawmakers, Kempthorne
acknowledged the value of incentives to create pools
of venture capital for new business. But he said the
legislation that overwhelmingly passed both the
House and Senate earlier this month has too many
flaws.

"Promoting the availability of funds for venture capital
in Idaho is a laudable effort," Kempthorne wrote. "But
that role must be fulfilled within the bounds of the
Idaho Constitution and with appropriate measures in
place to protect the taxpayers of Idaho."

Having proposed a venture capital tax credit that
lawmakers declined to endorse last year,
Kempthorne promised to work with lawmakers next
winter to find a satisfactory incentive.

In finishing work on the 373 bills that cleared the
Legislature during the 68-day session, the governor
also vetoed legislation revamping the responsibilities
of the Soil Conservation Districts around the state.
While intended to modernize the local entities, the
governor said the bill unwittingly made them equal
partners with the state Soil Conservation Commission
and could enable the districts to veto commission
projects.

He also complained about a lack of accountability for
use of $5 million allocated to the commission and
districts.

The only other bill he vetoed this year was the term
limits repeal, which lawmakers quickly overrode.

The venture capital incentive would have put the
state on the hook for up to $30 million in business
investments although no money would have been
paid out until after 2009.

Creation of the Idaho Venture Investment Fund
overseen by an advisory committee made up of the
state commerce director and four of his own
appointees was sold as a way for the state to bolster
new business development.

As the businesses helped by the fund turned a profit,
repayments to the fund would be funneled back to
the original investors. The state would provide
income tax credits — up to a total of $30 million — to
investors if they did not fully recouped their
investments and a predetermined profit. Those
credits could not be claimed until 2010 and could be
redeemed or sold through 2025.

Advocates said startup businesses backed by the
credit could generate more than 4,000 new jobs and
$63 million in tax revenue over 10 years.

But critics warned that the investment guarantees
offered by the fund could encourage financing of
exceedingly risky ventures with limited chances of
success.

They also warned that the state could not
constitutionally guarantee private investments with
taxpayer money.

The governor seized on the constitutional questions
in his veto, citing the fact that even the proposal’s
supporters recognized the issue and had promised to
take the matter to court if the bill had been signed.

But he also was concerned about the lack of public
disclosure of the workings of the fund’s advisory
board, the fact that only the commerce director is
subject to confirmation by the state Senate and that
no money was provided to enable the board to
adequately investigate the venture capital proposals
and the investors making them before providing any
guarantees.

In his tax-cutting proposal a year ago, Kempthorne
offered a tax credit of 10 percent on investments in
qualified private venture capital companies, capped
at half the investor’s annual taxes or $150,000 a
year. If the investment was held for over three years,
there would also be a 60 percent capital gains tax
preference.

http://www.spokesmanreview.com/news-story.asp?date=032802&ID=s1123577&cat=section.business

Sorry, we couldn't find any posts. Please try a different search.

Leave a Comment

You must be logged in to post a comment.