NASHVILLE — House Commerce Committee members on Tuesday approved the Bredesen administration’s proposed $80 million expansion of its TNInvestco program, a state venture capital program.
Proponents beat back critics’ efforts to inject more openness into what they say is a secretive award process involving taxpayer dollars.
The Senate is acting on a similar bill.
The state-operated TNIvestco program last summer gave $120 million in tax credits to six venture capital firms, each of which received $20 million in credits. Now the administration administration is extending the program to another four firms, which will split the additional $80 million in tax credits.
Firms convert the credits into venture capital funds that they are investing in start-up and intermediate businesses with Tennessee ties or that plan to relocate to Tennessee.
The six firms sold the initial $120 million in tax credits to insurers for $85 million. Insurers can use the tax credits beginning in 2012. Profits, if any, would be shared with the state, and officials emphasize the job-generating capability of the program in a down economy.
At the urging of Revenue Commissioner Reagan Farr and Economic and Community Development Commissioner Matt Kisber, Commerce Committee members approved an administration-backed amendment that treats proprietary information submitted by the venture capital programs as if it were tax information.
The bill also permanently restricts public view of evaluation “matrices” used last year by the state used last year to award $120 million in tax credits to six of 25 companies. That is the subject of a lawsuit filed by Coleman, Swenson, Booth, one of the venture firms that lost out on the program.
Both Mr. Kisber and Mr. Farr said venture capital firms would shun the program if their investment models and other information were open to the public.
“The public ought to have a tremendous amount of faith” in Tennessee’s program, Commissioner Kisber later said, noting that the state has made the program competitive and “transparent.”
He said that in “every other state” where similar programs have been implemented, there has “been a cozy relationship between some national (investment) firms and some insurance firms.”
Mr. Kisber angrily accused national venture capital firms of stirring up disinformation and “insinuations” about Tennessee’s program.
But Tennessee Coalition for Open Government Executive Director Frank Gibson, whose group includes major newspapers and open-government organizations, said taxpayers deserve more openness.
“What they’re talking about here is information used to turn over millions of dollars in what is essentially taxpayer dollars to private entities without disclosing why those private entities were chosen,” he said. “It’s the government saying, ‘Take my word.'”
WHAT’S NEXTThe bill now goes to the House Budget Subcommittee and is currently in the Senate Finance Committee.
Earlier Tuesday, Commerce Committee members defeated attempts by Rep. Joe Carr, R-Lacassas, to inject more openness. Among his proposals were a state comptroller audit of the program and attempts to bar state officials from working for or with any of the venture capital firms for a year after leaving office. Lawmakers complained it could apply to them and their families.
The bill quickly was gaveled through at the end on a voice vote.
Both Mr. Farr and Mr. Kisber said they would not go to work for any TNInvestco firm after leaving office.