Other states’ CAPCOs get mixed results – Florida and New York officials say their CAPCO programs have resulted in job losses.

At least seven other states have approved a government-backed investment program that Colorado may be on the verge of abolishing.

By:
Andy Vuong
Denver Post

http://www.nasvf.org/web/allpress.nsf/pages/8394

In the five other states where a Certified Capital Company, or CAPCO, program is already active – Florida, Louisiana, Missouri, New York and Wisconsin – $1.3 billion in tax credits have been issued. About 13,000 jobs are estimated to have been created or retained in Louisiana. Florida and New York officials say their CAPCO programs have resulted in job losses.

Alabama and Texas have approved CAPCO programs that will launch this year.

Under the program, states typically issue tax credits to insurance companies that then provide money to CAPCOs to invest in local businesses, usually early-stage companies.

The Colorado CAPCO program was created by the state legislature to spur economic development. Since its inception two years ago, the program has invested $18.2 million in 20 local companies. To fund the program, Colorado issued $100 million in tax credits for the program in April 2002 and is scheduled to issue another $100 million in April.

As is true in Colorado, many questions have surfaced in other states about the programs’ cost and effectiveness.

"The early results haven’t provided the kind of information that would encourage us to authorize another round" of tax credits, said Mary Helen Blakeslee, chief analyst for the Florida Office of Tourism, Trade and Economic Development. Florida approved its CAPCO program in 1998.

While some states, including Louisiana, have enacted reforms, none have killed their programs.

Two bills are advancing quickly through the Colorado legislature that would eliminate the second round of the CAPCO program. House Bill 1206 would divert the tax credits to a program to insure chronically-ill Coloradans. Senate Bill 106 would create a new venture capital program with CAPCO funds. Either or both of the bills could both land on Gov. Bill Owens’ desk this week.

State Treasurer Mike Coffman, who helped draft HB 1206, said Colorado could set an example by abolishing the controversial program.

"In a lot of states, there are huge questions about this program," Coffman said. "Colorado is showing some leadership, and I think other states will follow."

Below is a review of how the program has done in other states:

Louisiana, the first state to approve a CAPCO program, has granted $715 million in tax credits and has seen $450 million in investments since 1988, said John Ducrest, deputy chief examiner for the Louisiana Office of Financial Institutions, which oversees the program. He said CAPCOs have reported that 13,000 jobs have been created or retained through their investments, although the state can’t confirm the numbers.

Florida has issued $150 million in tax credits, Blakeslee said. About $75.4 million has been invested in 30 companies. However, the state has logged a net loss of 153 jobs. "They made several investments in companies that were not exactly early-stage," Blakeslee said. "And there were some spectacular failures."

New York has issued $280 million in tax credits, according to a state annual report issued in June 2002. The state has seen a net loss of 88 jobs.

Missouri has issued $140 million in tax credits and about $90.5 million has been invested in 38 companies, said Kristi Jamison, a spokeswoman for the Missouri Department of Economic Development. The state hasn’t determined how many jobs the investments have created.

Wisconsin has issued $50 million in tax credits, said Tony Hozeny, spokesman for the Wisconsin Department of Commerce, which oversees the program. Nearly $18 million has been invested in 16 companies that have added 478 jobs since receiving CAPCO investments, he said.

The Colorado legislative audit committee completed a review of the state’s CAPCO program in October but couldn’t determine how many jobs had been created. A study by economist Tucker Hart Adams, paid for by the state’s six CAPCOs, found that the program has created more than 300 jobs since inception.

"It’s been a good program getting good results," said Carter Dunkin, senior vice president of Advantage Capital Partners, one of the CAPCOs.

Adams’ study projected that the CAPCO investments could create 5,364 jobs in Colorado by 2008, but that finding has been criticized by Coffman and Bob Lee, director of the Office of Economic Development and International Trade.