Governor, Democratic Lawmakers Agree On Economic Development Bill
May 01, 2010
The Rell administration and Democratic lawmakers have agreed on a comprehensive economic development bill with more than $250 million to help small businesses.
The bill, headed for an expected vote in the House today, redirects $200 million in insurance industry tax credits to a 10-year-program of investing in technology startups.
The largest slice of the money will be offered to venture capital firms as a match to their investments in technology firms with fewer than 250 employees or less than $3 million in sales, as long as 80 percent of the firms' employees are in the state.
Matthew Nemerson, president and CEO of the Connecticut Technology Council, said the bill is the most wide-ranging economic development approach yet. The government already invests in tech startups through the quasi-public Connecticut Innovations, but as companies grow, and need $5 million to $10 million in capital, they become too large for Connecticut Innovation's fund, which invested less than $7 million in 2009 in a variety of companies.
At that point, Nemerson said, frequently out-of-state venture capital firms step in, or the companies are purchased.
Sometimes, as in the case of Premise Corp. in Farmington, the company and its jobs stay. In other cases, the biotech and software companies move to California.
"Eighty percent of job growth comes from about 1 percent of the companies," Nemerson said. "It turns out that there's a huge difference between fast-growing companies and small businesses. If we create a few health care IT companies that grow from three people today to 300 in a few years, now we're talking."
Both Rell and Senate Democrats contributed to the bill, although most elements are smaller in scale than when announced at the beginning of the year.
The bill caps loan forgiveness for Connecticut college graduates in a handful of high-tech fields at $3 million.
The loan forgiveness, of $10,000 for an undergraduate degree or $5,000 for an associate's degree, would be available to Connecticut residents with jobs in the state who graduated from Connecticut universities with degrees in the life sciences, health care information technology or green technology. The graduates would get the full amount once they have worked in a job in those fields for one year.
Under the bill, direct lending to small business is now planned at $15 million. The state would borrow $15 million and pay it back over 20 years in order to offer five- to 10-year loans of $500,000 or less to small businesses. Part of that money would be for micro-loans — between $15,000 and $50,000 per loan — and would be underwritten by nonprofit lenders. The larger loans would be made by the state, which loaned out $35 million to small businesses in the fiscal year that ended last June.
Last year, the state waived $3.6 million in corporate income tax for companies that hired 404 workers — less than the $10 million available.
The bill would change the terms of that job-creation tax credit by shrinking it to $2,500 per job, limiting it to Connecticut-based companies with fewer than 50 employees and expanding it to corporations that do not pay corporate income tax. For those companies, the owners would be able to take the deductions on their own income taxes.
TARP Bonus Tax
A separate bill passed 21-14 by the Senate Friday night waives the $250 business entity tax and makes up for the revenue by taxing Troubled Asset Relief Program bonuses of more than $500,000. The Senate bill is not part of the jobs bill agreement worked out with the administration of Gov. M. Jodi Rell, so it would have to be passed separately by the House before the end of the session Wednesday.
Reprinted with permission of the Hartford Courant.
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