SSTI Digest

With the opportunity presented by a $732 million budget surplus, Gov. Linda Lingle wants Hawai`i to shift its public investment philosophy away from land development and toward encouraging, nurturing and rewarding innovation, creativity, entrepreneurship and risk-taking. Most of Gov. Lingle's State of the State Address on Jan. 22 and her 56-page 2007 Initiatives booklet is dedicated to explaining how she wants the public sector to lead realignment of the state’s economy toward “one fueled by innovation and new ideas generated by our universities and a highly-trained workforce.”   Facing a legislature controlled by Democrats, the Republican governor’s plan embraces several proposals first advanced by legislative leadership last session, including a $100 million Hawai`i Innovation Fund. The privately managed technology-based equity fund would be capitalized from the State Employees Retirement System, under Gov. Lingle’s proposal.  Other proposals include: High school students who successfully complete the science, technology and math curriculum through proposed STEM academies, would receive undergraduate scholarships at the…

Hawaii Gov. Linda Lingle has submitted her budget proposal to the state legislature for the fiscal biennium 2007-09, including significant increase in the amount allocated for certain state economic development entities. The High Technology Development Corporation (HTDC), a state agency that develops and supports Hawaii’s science and technology resources, would grow from average annual expenditures of $4.2 million in the 2005-07 biennium cycle to $9.8 million in the next cycle. Projects funded by HTDC include providing matching grants for Hawaii-based companies receiving SBIR funds, administering high-tech incubators across the state and the state’s MEP program, and managing a renewable energy development initiative.   The Hawaii Strategic Development Corporation (HSDC) also would see a marked change going from a $246,500 budget in fiscal year 2005-06 and $4.3 million in FY 2006-07, up to a proposed $9 million in FY07-08 and $6.9 million in FY08-09. The primary goal of the HSDC is to provide investment capital to Hawaii-based businesses, such as seed capital and venture capital.   The proposed 2007-09 budget contains…

A recent report from Hawaii’s Tax Review Commission recommends the state eliminate or drastically overhaul its five-year old tax credit for high-tech investors. According to the report, the current credit provides no clear advantage to the state and appears open to taxpayer abuse. The commission was particularly troubled by the lack of data provided by taxpayers who were approved for the credit and by the lack of transparency concerning the credit within the state’s Department of Taxation.   A review undertaken on behalf of the commission was unable to determine the effectiveness of the credit, due to insufficient data on its cost to the state and its impact on state high-tech industries. This lack of transparency led the commission to suggest the Hawaii credit may be a ‘black hole’ for tax revenues, and propose legislative changes that would restructure the credit as a program of grants administered by a state agency.   The Tax Review Commission concluded that the state’s high-tech industries would be better served by a program of grants administered by a state agency, which could better oversee the state’s technology…

Yuka Nagashima was named executive director of Hawaii's High Technology Development Corporation.

Efforts to capitalize Hawaii's $120 million State Private Investment Fund (SPIF) collapsed Friday as a joint conference committee of the state legislature could not reconcile differences between House and Senate versions of the measure. Passage of Senate Bill 1695 was one of Gov. Linda Lingle's top economic development priorities for this legislative session. The SPIF, created by the Hawaii legislature last year but left unfunded, is intended to encourage venture capital investments in state-based tech businesses using the Oklahoma Capital Investment Fund model of state-backed guarantees on private investments. Established in 1993, the Oklahoma program has been widely replicated in recent years. The joint conference committee of the Hawaii legislature met to discuss Senate Bill 1695 six times during the past 10 days before deferring the measure. With the legislature expected to adjourn on May 5, the fund is "on hold indefinitely," reports the April 30 edition of the Honolulu Advertiser. More information on S.B. 1695 is available at: http://www.capitol.…

To encourage investment in high tech companies, the Hawaii Senate recently passed Senate Bill 1695, authorizing $120 million for the State Private Investment Fund (SPIF) and Senate Bill 1696 to allow fiduciaries to make equity investments. Under the SPIF program, the state could use transferable tax credits in order to guarantee commercial bank loans to professional venture capital (VC) firms. These firms, in turn, would use the loans to invest in local high-tech companies. SPIF was created by the Legislature in 2004, although no funds were directed to it at the time. The fund is designed to function as a financing tool to provide a consistent source of capital to meet the demands of Hawaii's high tech industries, according to the Senate Majority Caucus. Following the lead of other states, the House Economic Development & Business Concerns committee also passed SB 1696 to encourage institutional investors, such as the Employees' Retirement System, to invest a small portion of assets in local high tech companies. Under the bill, fiduciaries could invest up to 2.5 percent of their…

Robert Rosner, chief scientist for the Argonne National Laboratory, will be the lab's new director.

The first three installments of SSTI's annual look at how TBED will play in the 2005 legislative priorities of the governors can be found in the Digest archives on our website: http://www.ssti.org/Digest/digest.htm Hawaii Gov. Linda Lingle, State-of-the-State Address, Jan. 24, 2005 "My proposed biennium budget earmarks $20 million in new scholarship funds for the University to ensure that all who can meet the standards and want a higher education can get one. I have also budgeted an additional $25 million for ongoing operations in order to meet what the University believes are its highest priorities...Beyond this, I am proposing tax credits that promote partnerships between the University and business in order to foster world-class research that creates commercial spin-offs and the opportunity for higher paying jobs. "In the wake of 9/11, the state received millions of dollars in federal funds to support employment-related programs. I am requesting that the Legislature authorize us to spend $20 million of that money on The Workforce Development Act, which will improve…

Amid criticism from taxpayers, legislators in Hawaii agreed to renew the widely debated bill that extends high-technology tax credit for another five years, without a provision requiring the disclosure of companies that receive the credits, the Honolulu Advertiser recently reported. Act 221 was first enacted in 2001 to encourage high-tech business in Hawaii and to diversify the state’s economy away from tourism and the military. Based on a survey of businesses that claimed the credits, the state Department of Taxation says the tax credits helped generate at least 600 new jobs in 2002, with an average salary of $46,000. Hawaii taxpayers grew upset when they learned that credits from the bill were being used to finance one-shot movie deals, the Honolulu Advertiser reports. The bill, which allows for confidentiality of companies involved, investors and the amount of credits claimed, makes it difficult to verify actual benefits of the program. Under the renewed bill, companies will now be required to disclose more information to the Department of Taxation, but not to the public. Gov. Linda…

This is the third in a series of articles as SSTI continues its look at the prominence of tech-based economic development in the Inaugural, State of the State and Budget Addresses given by the nation's governors. Highlights from this week's speeches are provided below. Hawaii Gov. Linda Lingle, State of the State Address, Jan. 26, 2004 "Conservation, waste-to-energy programs and alternative energy initiatives can reduce our dependence on fossil fuels and move our state to the forefront of progressive energy policies. To demonstrate the state's commitment and leadership role, I ask you today to pass our bill that mandates 20 percent of all electricity sold in the year 2020 come from renewable sources. "This ambitious goal would be mandated in steps through a balance of incentives and penalties. We are also proposing a bill to encourage the use of non-fossil fuels by exempting them from the Hawai`i state fuel tax... "We ask you to work with us in providing improved investment tools to encourage technology industries, as well as non-tech businesses, to locate…

Secures State as Pilot Site for FastTrac™ Coming soon to an island near you — business development services. That could be the sales pitch for a new development within the High Technology Development Corporation (HTDC), Hawaii's lead tech-based economic development agency. HTDC launched last week a statewide incubation services program designed to give incubation tenants and non-tenants access to business development services, strategic partnerships, networking and marketing opportunities, shared support services, and business mentoring. Prior to launching its new program, HTDC's incubation services were limited to tenants at its Manoa Innovation Center on Oahu and its Maui Research & Technology Center on Maui. The expanded program brings services to technology start-ups on the Big Island and Kauai. External groups such as the University of Hawaii-Hilo are expected to partner with HTDC to strengthen the new program. UH-Hilo has signed on with a $3 million commitment, the Honolulu Advertiser reported last week. Additional funding will be derived from state and federal…

Earlier this week, the High Technology Development Corporation (HTDC) launched HiTechHawaii.com, the state's newest and most comprehensive high technology web portal. A collaboration with the Hawaii Technology Trade Association, the site provides a single point of access to information about Hawaii's technology industry, including business and technology resources, job listings, events and news articles. HTDC will be responsible for monitoring and keeping HiTechHawaii.com up-to-date. Among other features, the portal provides helpful information on doing business in Hawaii, tax incentives, funding opportunities, and meetings and conventions resources. The site also has valuable search capabilities, including a direct search and link to HTDC's Technology Business Directory and TechJobs Hawaii. With the launch of HiTechHawaii.com, Hawaii joins a number of other states using the Web to create a greater sense of community within a dispersed constituency base and to more easily share pertinent information across the state. The portals also can serve as tools for attracting new business…