News

CAPCO law going, going …

Compromise plan would divert $100M to 2 other programs

The CAPCO program is about to die.

Dueling bills to end the controversial state-backed venture-capital program were merged in the legislature Wednesday, presenting one unified plan that may head to the governor for a signature by week’s end.

By David Milstead, Rocky Mountain News

http://www.insidedenver.com/drmn/business/article/0,1299,DRMN_4_2665740,00.html

The compromise brings together one plan to divert CAPCO money to CoverColorado, which provides health insurance benefits to chronically ill Coloradans, and another plan to create a Colorado Venture Capital Authority to provide capital to the state’s businesses.

The competing bills were vying for $100 million in tax credits destined for the CAPCOs. Now, each concept will get $50 million of the money.

"Republicans and Democrats, both in the House and Senate, came together on this issue to eliminate an ill-conceived program," said Bob Lee, head of the state’s Office of Economic Development. His staff developed the plan to create the venture capital authority, and Gov. Bill Owens preferred that plan, spokesman Dan Hopkins said.

Sen. Mark Hillman, R-Burlington, sponsored the CoverColorado bill in his chamber. The compromise, he said, is "better than the failed CAPCO program . . . at least we know (it) is dead." Sen. Ron Teck, R-Grand Junction, who sponsored the venture-capital authority bill, called it "a legitimate compromise."

The CAPCO industry, meanwhile, will "wait, watch and monitor these developments," said spokesman Eric Anderson. "The record is clear for anyone who cares to examine the program that it has brought investment and jobs to Colorado, and, as is currently structured, has the potential to bring many more investments and jobs."

Colorado passed its CAPCO law in 2001, creating $200 million in tax incentives for insurance companies to use over 10 years. The insurance companies then financed the certified capital companies so that they could invest in Colorado businesses.

Critics of the CAPCOs say the law allows them to claim high fees while investing little. The industry points to $19.6 million invested in 20 companies during an economic slump.

The state already has given out the first $100 million in tax credits. Legislators are in a mad dash to make changes before the second $100 million is allocated in April.

A plethora of bills emerged, but the CoverColorado bill, sponsored by Rep. Shawn Mitchell, R-Broomfield, and Hillman, and the venture-capital authority bill, sponsored by Sen. Ron Teck, R-Grand Junction, and Rep. Joe Stengel, R-Arapahoe County, were leading.

While the governor favored the venture-capital authority bill, the CoverColorado bill gained support from conservatives who don’t think the state has any business in the economic-development game.

Supporters of each bill declined to discuss the legislative machinations and which bill ultimately had the most support. Said Lee: "What really happened here was the governor was committed to end an ill-conceived program, and he instructed all of us to work together to create something different."

Treasurer Mike Coffman, a backer of the CoverColorado plan, blasted the deal. "I am disappointed that the legislature chose to split the pie and send only half the funds to CoverColorado, and use the other half to fund what amounts to CAPCO part two. . . using taxpayer dollars for a government-run venture capital scheme is just as bad an idea as the CAPCOs themselves."

Sen. Dan Grossman, D-Denver, said the compromise appeared to be "a 50 percent mix of this and that, which gets us nowhere for economic development."

Staff writer John Sanko contributed to this report. milstead@RockyMountain News. com or 303-892-2648.

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