Ted Liu lobbies
investment tax credits
The man in charge of fostering growth in the state's economy is convinced it's a "spiffy" idea. But Ted Liu admits explaining the complex state capital investment stimulation strategy to lawmakers and the public will take some doing.
An administration bill would set up a $50 million State Private Investment Fund, or SPIF, that uses transferable state tax credits to guarantee commercial bank loans to professional venture capital firms that invest in local companies wanting to expand.
"It's a tool that simply induces a bank that would not otherwise lend to something like this to lend the money" because it guarantees the bank will get its money back along with the interest charge, said Liu, director of the Department of Business, Economic Development and Tourism.
The bank isn't concerned if the investment creates a 20-fold return on the investment or nothing, as long as the bank gets its money back, plus interest, he said.
The state's exposure to loss of future tax revenues if the tax credits are cashed in because of a failure of one or two investments is diluted, if not eliminated, because the SPIF would involve multiple venture capital firms with multiple investments, a majority of which likely would succeed and provide a positive return in the portfolio, Liu said.
The state could end up making money, although that's not the intent, he said. "It goes into a special fund ... and the Legislature will have the choice at any time to raid it or to reinvest."
The idea of an SPIF is to create a local pool of investment money for promising Hawaii companies, allowing them to remain here and grow.
The SPIF concept was outlined yesterday by officials of private sector investment and business groups to members of four House and Senate committees that deal with economic development issues.