Kansas Legislature Wants $500M for TBED Strategy

Flanked by the Kansas Senate President and House Speaker, Republican legislators unveiled on Tuesday a two-pronged agenda to encourage entrepreneurship and biotechnology across the state. The plan calls for the state to invest at least $500 million over the next 10 years through a variety of new programs to encourage research, innovation and technology commercialization.

An interesting and unique element of the plan is the allocation of the tax revenues received from the Kansas bioscience sector over the next decade to pay for the state's increased investment in helping grow the industry. Similar to Tax Increment Financing models used to cover the cost of site-specific infrastructure costs for local economic development projects, the Emerging Industry Investment Program outlined in the Kansas Economic Growth Act identifies the relevant SIC/NAICS codes that would be included in the pool of funds earmarked for the bioscience initiative.

The entrepreneurship portion of the Act calls for creation of five major initiatives to foster entrepreneurship across the state:

• The Kansas Center for Entrepreneurship would work with all entrepreneur organizations throughout the state to create policies to foster entrepreneurship in Kansas, provide a resource center and clearinghouse (including an 800 number and website), and oversee collaboration among federal, state, and local economic development and entrepreneurial assistance organizations.
• The Kansas Community Entrepreneurship Fund, to be managed by the new Kansas Center for Entrepreneurship, would provide grants to local and regional community seed capital and economic development agencies to assist in providing seed funding for qualified entrepreneurs. The State of Kansas will make the initial contribution to the fund that is expected to be matched by federal, foundation, corporate and other individual sources through donations and grants.
• The Kansas Downtown Redevelopment Act is intended to encourage entrepreneurs to locate businesses and invest in local Kansas communities. Cities will apply to be designated a downtown redevelopment area, whereby abatement of real property tax increments will be available for properties that have undergone improvements.
• The Enterprise Facilitation Program would support the expansion of the existing Enterprise Facilitation Boards that ensure existing community boards can provide continued support for local, rural entrepreneurs.
• The Angel Investment Tax Credit Program would provide tax incentives for successful business persons to invest in Kansas start-ups and to serve as advisors to those companies. The credit would allow an investor to utilize 50 percent of a qualifying investment as a dollar-for-dollar credit to reduce Kansas income tax owed by the investor. Investors are expected to come from throughout Kansas and a variety of industry backgrounds.

Funding specifically enumerated in the strategy for the entrepreneurship element is limited to an initial state investment of $3.5 million. The press announcement for the strategy states "additional funds for the Enterprise Facilitation Program will need to be identified."

The bioscience portion of the strategy, however, carries a $500 million price tag to Kansas over 10 years and includes a number of new initiatives to encourage research in and commercialization of life sciences technologies. The creation of a new independent public agency, the Kansas Bioscience Authority, will oversee and administer much of the state's investment – with the goal of recruiting 25 eminent and 35 rising star scholars to be associated with the state’s universities – fund the development of the necessary lab space and equipment to conduct superior research in the biosciences, and drive technology transfer and the commercialization of bioscience discoveries.

In addition, the act would create the following within the Authority's responsibilities:

• The Collaborative Research Incentive Programs include the Kansas Bioscience Research Matching Funds Program, to provide matching funds for federal research grants, and the Kansas Bioscience Research and Development Voucher Program, which would encourage Kansas-based bioscience companies to engage in joint research projects in partnership with Kansas universities.
• The Bioscience Research Facilities Program would fund the construction and ongoing maintenance of bioscience research facilities at and in association with Kansas universities with a goal of adding enough state-of-the-art bioscience research space to support the addition of the eminent and rising star scholars over 10 years.
• The BioAuthority's Technology Transfer Program would increase the number of technology transfer agents and patent lawyers working directly with researchers to identify technology with commercial potential and ensure that patents are filed and moved through the incubation stage.
• The Patent Donation Attraction Program would drive the short-term strategy for start-up company creation by identifying patents (e.g., orphan drugs and bioscience technologies) with commercial potential that are likely candidates for corporate patent donations.

Through the proposed Business Assistance and Acceleration Program, the Kansas Technology Enterprise Corporation (KTEC), the state's lead organization for encouraging economic development through science and technology, would work to ensure that start-up companies have the right assistance and wet labs facilities to bring their businesses through the incubation period. In addition, an Executive Entrepreneurs Program would recruit serial entrepreneurs to work with start-up companies to ensure their success.

KTEC also would receive additional funding for a Bioscience Seed Fund. The fund's goal would be to provide early-stage funding for Kansas bioscience companies in the proof-of-concept and product development states.

In addition, the act includes several tax proposals to encourage the growth of bioscience firms. For example, the Bioscience Net Operative Loss Program would provide the opportunity for bioscience companies to sell their net operating losses to certain qualified taxpayers, which will allow bioscience companies to receive cash and the purchaser to receive the benefit of a loss, which could be used to decrease future tax liability. A Bioscience Tax Investment Program would provide incentives to bioscience companies to expand and locate facilities in Kansas by creating Bioscience Development Districts in which incremental tax increase in property and sales tax generated by the development and construction of new facilities to perform bioscience research, development and commercialization will be collected and reinvested into bioscience research.

Legislative approval of the Kansas Economic Growth Act seems highly likely during this session given the GOP holds large majorities in both legislative chambers.

The plan is available at: http://www.kshousegop.org/economic_growth/roadmap.pdf