News
Utah Venture Capital Bill Is Challenged
A bill creating a $100 million fund to court out-of-state venture capital, approved quickly and quietly by lawmakers in the waning hours of the 2003 legislative session, appears destined for a court challenge.
BY KIRSTEN STEWART
THE SALT LAKE TRIBUNE
If Gov. Mike Leavitt signs the bill into law — and there is every indication that he will — State Auditor Auston Johnson says he will file a "friendly" lawsuit, challenging the law on the grounds that it violates the Utah Constitution.
The state should not be in the business of "creating a private for-profit entity," Johnson said.
Sponsoring Rep. Peggy Wallace, R-West Jordan, welcomes the lawsuit.
The State Auditor’s Office is charged with keeping an eye on the fund, Wallace said. "I very much appreciate his situation where he wants to make sure everything is as it should be."
She has stressed House Bill 240 creates a fund to be financed by banks, insurance companies and other businesses — not taxpayers. The money would go to venture capital firms that agree to set up shop inside the state and incubate Utah-based companies.
What concerns Johnson, however, is that the bill also sets up a contingency fund fed by up to $20 million a year in investor tax breaks. The money would be made available if the fund’s reserves were depleted.
Backers including the Utah Information Technology Association have argued the tax credits don’t provide the main money source and serve to only "enhance" the fund.
Gay Taylor, general legislative counsel, also notes the bill was amended to address some of Johnson’s concerns. It now clarifies that the fund is "quasi-public" and not a private entity.
Attorney General Mark Shurtleff is refraining from issuing a legal opinion in anticipation that he will have to defend the law in court, said his spokesman, Paul Murphy.
Leavitt’s spokeswoman Natalie Gochnour said the governor supports the legislation "but it will still get a [legal] review."
Although the governor initially was worried about the state’s liability and feared the legislation would discriminate against Utah venture capitalists, he was comforted by last-minute amendments aimed at strengthening oversight of the fund, she said.
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