Posted on: Saturday, April 30, 2005
State-backed tech fund won't happen
By Sean Hao
Advertiser Staff Writer
A bill to create a $120 million state-backed fund for investment in local companies failed yesterday, putting the so-called State Private Investment Fund, or SPIF, on hold indefinitely.
The program, aimed at addressing a need among local technology companies for venture capital, was created last year. But the fund cannot invest money without additional legislative authorization. Modeled after a similar program started in Oklahoma during the 1990s, SPIF is hailed by proponents as a low-cost way to boost the level of investment in Hawai'i for local businesses looking to grow.
However, lawmakers remain cautious about the complex program in which the state borrows money that's placed with a fund manager in a venture capital fund, which then invests in businesses. The investments create tax credits, which would provide a guarantee on repayment of the state's loan.
The credits would not immediately drain the state's general fund, because they aren't sold until the fund is terminated — and then only if there is a shortfall after management and interest fees are accounted for.
"I think the concept is so new that it's taking much longer than we had anticipated to persuade our colleagues that this is the right course of action," state Rep. Brian Schatz, D-25th (Makiki, Tantalus), who was on the committee that opted not to pass the bill.
Schatz said efforts to alleviate concerns about the financial risks of the program will continue.
"We'll keep pushing," he said.
The administration of Gov. Linda Lingle, which lobbied hard in favor of the bill, expressed disappointment yesterday.
"As we speak, there are already wakes being organized, mainly because of all the work that went into this," said Ted Liu, director of the Department of Business, Economic Development and Tourism. "Risks are part of real life, but risks are to be managed, and there are solutions to managing risks.
"It's really when the economy is good that we ought to be making some long-term investments" such as the SPIF program, Liu said.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
