Are Hawaii's Tech Tax Credit Worth the Cost?

Comment

Comment by Bruce M. Bird on May 13, 2009 at 2:20pm

Hi, Ken & Laurence.

Ken: When you wrote, "Everything I say has a certain amount of sarcasm, get used to it.", my first thought was, "I hope that the talking labels at Ken's talking label company don't talk like that".

In any event, thanks for the "heads up" and I will be sure to read between the lines of your future blog posts.


Laurence: I think that you are really on to something. Many good suggestions about Act 221 have been made on this blog.

My sense is that a consensus can be reached.

Here's a suggestion: I wonder how many high-tech entrepreneurs in Hawaii would benefit from being able to acquire a "small" bit of capital by which to start --or grow-- a business ? It would appear to me that there are potential high-tech entrepreneurs out there who might be $50,000 --or $100,000-- away from starting such a company.

Reg D offerings simply aren't designed to fund companies seeking such a small amount of capital.

A professor at Vanderbilt University won the Nobel Prize in Economics a few years' back for his work involving investors setting up "micro-loan" banks in underdeveloped companies. Why not encourage the State of Hawaii to set up a quasi-"micro-loan" bank --or to somehow encourage existing banks to make small loans-- to help out new high-tech ventures in Hawaii? Maybe $50,000-$100,000 a venture? Maybe "buy down" the interest rate ?

Maybe, for this purpose, the term "high tech" could be defined more broadly than it is currently in Act 221. Instead of focusing upon QHTBs engaged in certain "activities" (defined by statute) maybe a venture that wanted to borrow money from such a bank would be required to have at least a certain percentage of its "workers" engaged in "high tech" activities (as classified by NAICS). This would broaden the "base" of eligible high-tech businesses.

Also, there might be loan covenants that require the loan be repaid if the venture leaves the state.
And some sort of equity "kicker" for the State of Hawaii might be worked into the deal.

And there would have to be some sort of "vetting" process to determine which ventures receive loans. (I have a few things in mind, but I don't want to get into it right this minute).

Please note that I am not suggesting that this idea supplant Act 221. Rather, I think that this idea could complement Act 221. It could also bring in support from members of the high-tech community who currently don't benefit from Act 221.

Comment by Laurence A. Lee on May 13, 2009 at 9:50am

Act 221's demise via SB199 should be a wake-up call for the local Tech Scene. I'm all for working toward a "Son of 221" legislation, as Jay suggests, in order to draft something that more of us can agree on. From where I sit, this is the best possible outcome, as it's more likely a "Son of 221" will throw a few bones to the Little Guys in order to gain their support. It could also throw a few bones to the Watchdogs, concerned about potential abuse and excesses, in order to gain their support as well.

GB and John put forth some good amendment ideas earlier in this thread that are worth exploring; and there was even talk of meeting up to discuss (and possibly draft) amendments to 221/215. Perhaps that should be changed into a Round-Table event to draft the "Son of 221" within the Tech Community, with the final draft in a form suitable for Tech-Friendly Legislators to run with in an upcoming session.

And finally.. yes, headlines certainly do have an impact on a reader's reception of an article, as they set the initial tone and expectation of the content within. IMHO, it's not likely Jay's article's headline was altered by an Editor, however, as he specifically uses the word "hostile" within the article in reference to State Legislators.

Comment by Ken Berkun on May 13, 2009 at 8:56am

Everything I say has a certain amount of sarcasm, get used to it.

BTW, the editors at the paper (website) write the headlines not the the author of the article and so sometimes it sets things off a bit differently than the author expected.

Ken

Comment by Bruce M. Bird on May 13, 2009 at 8:25am

Oops. I accidentally made the last part of my post one big hyperlink. Sorry about that.

Comment by Bruce M. Bird on May 13, 2009 at 8:20am

Hi, Ken. First, let me apologize in advance if the tone of your statement "We're 63 and Proud of It" is intended to convey a certain amount of sarcasm. If so, you faked me out, because you really had me going.

If not, please read on.

The link to the bizjournal article that you posted within the last few days contains the following information:.

City: Honolulu
Rank: 63
High-tech index: -1.68
High-tech companies: 944
High-tech jobs: 9,860
Jobs per high-tech company: 10.4
High-tech jobs per 1,000 private-sector jobs: 27.4
High-tech companies per 1,000 private-sector companies: 42.6
Adults (25 or older) with master's and/or doctoral degree: 8.5%

The "methodology" section of the article can be found at: .

Information from the Census Bureau indicates that Honolulu is 48... .

So, what is one to make of all of this? That Honolulu is the 48t...

Comment by Ken Berkun on May 12, 2009 at 7:24pm

If it makes us all feel better, even the folks in Seattle aren't too happy with their own state.

http://www.techflash.com/Lazowska_Washingtons_smug_tech_industry_needs_kick_in_butt44821697.html

Ed Lazowska is a great guy and on my advisory board. And he calls it as he sees it.

Ken

Comment by Daniel Leuck on May 12, 2009 at 1:28am

Laurence A. Lee: And for the record, while I agree with Pono Chong's position on Act 221, I wholeheartedly disagree with the whacked-out reasoning behind how he reached his position. There is a difference.

I fully appreciate this. Its all about respect. Although I disagree with your position on this particular issue, I'm happy to engage in dialog because I know you are a respectful, thoughtful person. I'm also happy to buy if you want to disagree over a few beers. :-)

Comment by Laurence A. Lee on May 11, 2009 at 8:31pm

Dan,

I'm absolutely confident that you, Jay Fidell, GB, Bill Spencer, and others have come to your conclusions after much research, insight, and personal experience. I also appreciate the fact that we all can participate on a thread an intelligent conversation in a (more or less) civil manner.

However, I take great offense at the article's sensationalist headline, "Killing of Act 221 signals Islands' Hostility...", as I don't view Act 221's demise as an act of hostility toward Technology in the least. The program was originally set to expire in 2010.

Any hopes to extend it beyond 2010 depends on how well the affected companies can demonstrate how Act 221 seed-funding has helped them build up the local landscape; only a handful of companies have stepped up, and of those, most have done an admirable job of presenting their case.

Probably the most compelling story that softened my stance is GB's -- helping create much needed jobs in the Big Island, which has swayed my opinion from being Totally Opposed to Act 221 to merely "Not For" Act 221. While I'm not holding signs and attending rallies in favor of Act 221, I'm not attending rallies to destroy Act 221, either.

The article concludes with "By next year, we will begin to see the scope of the damage to the industry", and I find that rather misleading (and hence why I call BS on the FUD). Extending 221/215 beyond 2010 was never guaranteed, and the article makes it sound like it was a "done deal" that suddenly got yanked away by a State Legislature Coup led by Pono Chong and others.

To be fair, though, Sean Hao also puts out some ridiculous spin on the facts in his articles. While I usually agree with Sean Hao's position, the amount of spin he puts out often makes me cringe.

And for the record, while I agree with Pono Chong's position on Act 221, I wholeheartedly disagree with the whacked-out reasoning behind how he reached his position. There is a difference.

Comment by GB Hajim on May 11, 2009 at 8:18pm

Indeed, no big rollers among our investors. Our biggest investor put in $15k. We have an army of small investors.

Comment by Daniel Leuck on May 11, 2009 at 7:36pm

Hey Laurence. In Jay's defense, he wouldn't write something he doesn't believe to be true. Whether or not you agree with his politics, he is a sincere guy.

Also, there are small businesses affected by this debate. We (Ooi, not Ikayzo) are one of them. As you know, I'm not interested in putting our top independent developers out of business. I want to hire them. Like GB, Bill and Ken, I'm interested in growing a business in Hawaii and hiring local whenever possible. While some jobs lend themselves to outsourcing (think Y2K proofing 2M lines of COBOL or VB), others will always be best done locally with a small group of smart guys.

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