Rhode Island Gov. Lays Foundation for TBED

Addressing a joint session of Rhode Island's General Assembly, Gov. Don Carcieri unveiled last week a fiscal year 2005 budget that includes funding for several technology-based economic development (TBED) initiatives.

Gov. Carcieri's budget attempts to navigate around a projected $240 million budget gap for FY 2004 and FY 2005. Despite proposing $92 million in spending reductions, the governor would direct $50 million toward a new Center for Biotechnology to be built at the University of Rhode Island. The center would serve as both a world-class research facility for students and a stimulus for the state's growing biotech economy.

Other highlights of the governor's budget include:

• $4 million to the Samuel Slater Technology fund for increased investment in start-up companies;
• $1.5 million in seed capital to help the state's universities attract $3 million in new National Science Foundation (NSF) research funds;
• $48 million in bonds for a marine life sciences park at Quonset Point in North Kingstown, R.I.;
• A new tax incentive program aimed at attracting entrepreneurs; and,
• Continued funding for the Rhode Island Economic Development Corp.'s (RIEDC) economic and community development fund.

The research funding would come partly by virtue of a nearly $200,000 planning grant awarded to Rhode Island through NSF's Experimental Program to Stimulate Competitive Research. The Providence Journal reports the state hopes to receive $9 million over the next three years from NSF. A proposal for the initial $3 million will be presented to NSF in July, the newspaper states.

Another initiative of note, Gov. Carcieri's tax incentive program, is being introduced through RIEDC-sponsored legislation known as the Creative Companies Act. Under the legislative proposal, Rhode Island companies that can generate within five years $25 million in annual revenue and at least 200 "high quality jobs," or a $10 million annual payroll, would be eligible for tax breaks. Stocks, bonds and other assets sold or exercised by these companies and their investors would be free from the state's capital gains tax. High quality jobs, as defined by the Act, are full-time positions earning at least 150 percent of Rhode Island's minimum wage.

Businesses or entrepreneurs that start a company in Rhode Island are eligible to receive certification as creative companies, provided they meet the above conditions. These companies would not begin to receive tax breaks until three years following receipt of creative company status from RIEDC. Their exemption amount would start at 25 percent in the fourth year and increase proportionally each year thereafter, so long as the companies stay in-state, continue to add employees and increase sales.

Applications for two existing tax exemptions in Rhode Island, one benefiting software companies and the other for venture capitalists, would be blocked with passage of the Creative Companies Act, according to the Providence Journal. Additionally, only 20 companies per year may be granted preferred tax status.

Gov. Carcieri's budget address is available in its entirety at: http://www.governor.state.ri.us/