Each week, Editorial and Opinion Editor Jeanne Mariani-Belding hosts The Hot Seat, our opinion-page blog that brings in elected leaders and people in the news and lets you ask the questions during a live online chat.

On The Hot Seat last week was Rob Robinson, co-founder of Kolohala Ventures and founder and convener of the Hawai'i Angels, discussing Hawai'i's high-tech tax credit.

Here is an excerpt from that Hot Seat session. To see the full conversation, go to The Hot Seat blog at www.hotseat.honadvblogs.com.

Chelsea: How much has been spent on the tax-credit program? Also, what is the benefit to taxpayers in general?

Rob Robinson: First of all, the total "cost" in terms of tax credits since 2002 has been just a tad under $300 million. What has the state gotten in return? The total investment into the Act 221 companies has been over $1.2 billion, and the companies have spent over $1.4 billion in Hawai'i. About 4,500 jobs have been created. These are Department of Taxation figures, and do not even consider indirect benefits. So this is a great deal for the state.

Gogo: What kind of organization is Hawai'i Angels? Where does your funding come from?

Robinson: Hawai'i Angels is a nonprofit group of local individual investors who invest in Hawai'i companies. Prior to 2002 there was very little in the way of startup funding for companies in Hawai'i. Hawai'i Angels seeks to address this. Many, but not all, of the companies are Hawai'i companies that benefit from Act 221. Some investors use the tax credits generated; many do not. You can find out more about Hawai'i Angels at www.hawaiiangels.org. The individual members of Hawai'i Angels pay an annual membership fee that funds the organization.

June Z: My question deals with the types of companies using the tax credit. Can you break down for us how "high-tech" is defined? What is the test to determine if these dollars are well spent. Is it jobs? Spending?

Robinson: Act 221 has several categories of companies that qualify such as life sciences, alternative energy, software, ocean sciences, optics and sensors, and performing arts. Many of these categories are ones in which Hawai'i has some unique advantages.

Ultimately, the best test of how well spent the dollars are will be if these companies succeed, and thereby help diversify the economy of Hawai'i so that we can create great jobs for our population, and not be entirely dependent on tourism for our economic well-being.

Dakine: As an investor, what's your take on the economy?

Robinson: Hawai'i is an economy with a lot of opportunity that is faced with some strong challenges. We need to diversify ourselves away from a single industry (tourism), and take advantage of the new, global economy. This means looking at things like life sciences and alternative energy, and engaging with Asia.

Noah: Hawai'i has been said to be a bad place to do business — do you agree or disagree? What are the hurdles and challenges we need to get over to make Hawai'i more business-friendly?

Robinson: I'd not be telling the truth if I didn't agree that Hawai'i is a difficult business environment. As a state, we are over-taxed and over-regulated relative to a lot of other places. In my area, a major challenge is finding enough capital to support companies here, which is why Act 221 has been such a boon. Many wealthy people live in Hawai'i, but have traditionally tended to invest outside of the state: Act 221 has created a mechanism to get those dollars to work inside Hawai'i.

Overall, I think we need to work on making the connections between the larger community in Hawai'i and the business community. The two need to work hand in hand to make this state the best it can be.

Nahoaloha: I watched part of the hearing on the three Act 221 bills. The legislators talked about "tightening" the requirements, and it seems like they're looking to you guys for ideas. How do you think the act should be amended to make sure the breaks are going to investors for legitimate qualifying work, and not just bogus subsidiaries?

Robinson: I truly believe that the vast majority of Act 221 companies are excellent organizations that are well worth the effort to have in Hawai'i. I can say this as someone who has watched this up close for the last eight years. However, in these tight economic times, everyone is looking for places to save money, which is why the act is being scrutinized so closely. One of the places being discussed is so-called "drop-down" subsidiaries where large established companies create a subsidiary that qualifies for Act 221 benefits. These are real companies that do real work (not bogus), but there is a feeling by some that this sort of company should not qualify for Act 221 funding. I think this is a legitimate conversation to have, especially when we are seeking to save money.

Lee asks: High-tech jobs are good for the state. It would be better if we could, however, hire local kids to fill these jobs. Is anything being done to recruit local talent?

Robinson: I have three boys who I want to be able to get great jobs in Hawai'i after they get done with school, so this is close to my heart. The answer is: absolutely! First of all, many of our best and brightest have had to leave Hawai'i to get jobs on the Mainland, and I know of many instances where Act 221 companies have been able to hire back these engineers, scientists, analysts, etc. However, we need more of these folks for the growing tech community, and the more that can be hired locally the better. I also teach at UH, and our high school and college business plan competitions and other outreach activities are aimed at attracting students into the areas of the sciences so that they will be qualified to work at these companies in the future. Act 221 jobs are well-paying: an average of over $75,000, which is far higher than the state average. This is the kind of "brain gain" that Act 221 has created by acting as a stimulus package to create jobs and bring our kids home.

Jason: There's been much talk about eliminating the tax credit. What will be the real impact of doing that? Can this be defined in real dollars?

Robinson: I believe that eliminating Act 221 would create a huge amount of "capital flight" from the state. In addition to the huge amount of Mainland investment that Act 221 has brought into Hawai'i, all of the companies that are here that still need to be nurtured for a few more years would likely be forced to move, or go out of business. We would lose all the gains we have made, and all the people who are in the industry. It is hard to quantify, but the state's tax base would decrease substantially, and I believe that we would be far worse off economically. Further, what would we be left with? What kind of future would we be offering our kids?

Jeanne Mariani-Belding: Some have proposed reducing Act 221 credits? Thoughts?

Robinson: I think we need to look at all ideas that make sense in this tough economic climate. The absolutely vital task is to make sure that the Legislature does this in consultation with the tech community. There are a lot of ways to throw the baby out with the bath water and kill a very useful and creative program in ways that will make it very difficult to recover. We can reduce the cost of the program, if that is the consensus, but it must be done very carefully. There are plenty of great minds in the tech community who have good thoughts on how to accomplish this.

Mariani-Belding: Other states offer similar tax incentives. Is there something to learn there in terms of how these states structure their credits?

Robinson: I have studied the ways in which various states have targeted attracting business to their states. There are many, many programs, and they all have their strengths and weaknesses. Folks in Hawai'i may be surprised to learn that Act 221 has been lauded nationally for its innovative nature and the way it is designed — yes, we did good here! The real issue is whether or not we are all of one mind in terms of having a real tech industry in Hawai'i. If we do — and for me, this is a no-brainer, I mean, what is the alternative? — then Act 221 is a tremendous tool that we should be very proud of, and that we should protect.

Caroline: How long will it take Hawai'i to build this sector? I have four children. What kind of jobs can I expect to be available to them because of this law?

Robinson: I think we should be prepared to take 20-25 years to fully build a tech sector, but we are well begun. As I said earlier, my three kids also want jobs here, and I hope that they will be able to get work as scientists, or engineers, or analysts or anything that requires a college degree and which is rewarding. Our children will be competing globally, and this is our chance to position Hawai'i to do that. This is a real challenge, but a great opportunity.

Reach Rob Robinson at (Unknown address).