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Comments by states and independent experts having evaluated CAPCO actual results

Independent Experts
Colorado   Florida   Louisana   Missouri   New York   Rhode Island   Wisconsin


Independent Experts
The CAPCO program is fatally flawed - The investors in the program do not put money at risk in venture capital investments. They are secured creditors making a good rate of return on their investment. Daniel Sandler. Ref

"It's one of the biggest rip-offs out there, and there are some real doozies." Julia Sass Rubin. Ref

CAPCO managers get to keep almost all of the profits plus the money that they invest. Julia Sass Rubin. Ref

"It's a straight transfer from the taxpayer to the Capco" [venture firms].

"It's a very convoluted and complicated piece of legislation"

"It's difficult to understand why anyone would do this, except that they don't understand it."

"It's a crummy deal for the taxpayers,"

Julia Sass Rubin Ref

In my view, these programs are a recipe for disaster rather than a catalyst for growth. Daniel Sandler. Ref

Completely distorts the normal market model, essentially handing a gift of "pure profit" to venture capital companies.Julia Sass Rubin. Ref

We don't know who is getting the credits, what they're doing, or how much money they're getting."

"There's no way to tie (the credits) to any of the activity that's happening."

"I don't know why it was designed this way with no accountability."

"We don't know who is getting the credits, what they're doing, or how much money they're getting."

"It is impossible to know how much the credits will end up costing."

Paul Brewbaker, chief economist, Bank of Hawaii. Ref


"They're feeding at the public trough. We need to make sure the pigs are getting fatter."

"If they're not getting fatter then why are we feeding them?"

Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i


A "raid on state treasuries: George Lipper, who studied similar legislation for the Iowa Department of Economic Development. Ref

Daniel Sandler, Faculty at Law, University of Western Ontario.

Julia Sass Rubin, M.B.A., Ph.D., a Rutgers University professor of public policy, and previously a fellow at the Brown University's A. Alfred Taubman Center for Public Policy, and has studied the CAPCO program for more than four years.

Paul Brewbaker, chief economist, Bank of Hawaii.

Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i

George Lipper, National Association of Seed and Venture, studied similar legislation for the Iowa Department of Economic Development.

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Colorado
"It's a scam," said Colorado state Treasurer Mike Coffman - "I don't think there's anyone who thinks this is a good deal for Colorado, with the exception of those companies who lined their own pockets." Ref

CAPCOs are "flawed beyond repair." Colorado Treasurer Mike Coffman Ref

Colorado state Treasurer Mike Coffman, said he "sincerely hope(s) that the legislature drives a stake through the heart of this monster and doesn't allow it to come back in some mutated form." Ref

Taxpayers funds lobbyist and legal costs - The Colorado audit also noted the capital firms had spent $471,503 on lobbyists in Colorado... In addition, the firms' legal costs came out of the state allocation. Colorado state Treasurer Mike Coffman Ref

"the program amounts to corporate welfare at its worst" and that it is "destined to do little more than soak taxpayers." Mark Hillman, who replaced Mike Coffman as Colorado state treasurer. Ref

"I think this state would be hard pressed to design a program that cost the taxpayers more and delivered less," Bob Lee, the head of Colorado's Office of Economic Development. Ref

"We became convinced the model was flawed, the program wouldn't work, that jobs would not be created and the taxpayers would not be getting a good return on their investment," Lee recalled in an interview Thursday. Bob Lee, head of the Colorado Office of Economic Development. Ref

An investigation by The Colorado Springs Gazette, found CAPCO programs lost more than 130 jobs in Florida and created fewer than 50 jobs in New York. Both states had CAPCO programs in place longer than Colorado. Bob Lee, head of the Colorado Office of Economic Development. Ref

A most inefficient means to raise venture capital - A legislative audit in Colorado noted that "CAPCO programs are a most inefficient means for the state to raise venture capital" and questioned whether any jobs created were attributable solely to that financing. Ref

"The program is structurally flawed, and it needs to be fundamentally changed, or it needs to be abolished." Rocky Mountain News. Ref

In addition to the poor job creation figures, a recurring criticism of the CAPCO model in most news accounts and state audits appears to be that all or nearly all of the risk is borne by the state. The CAPCOs receive the full tax credits and management fees regardless of the quality, quantity or success of the investments made. State Science & Technology Institute. Ref


Skepticism of the CAPCO model is not limited to Colorado, however. Since Louisiana passed the first CAPCO bill in 1983, the model has been riddled by criticism. Louisiana has revised and restructured its program nearly every year since 1989, after it was determined little impact could be shown for the initial investment. Ref

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Florida
"It's a heck of a deal, I think it's terrible public policy." Tom Gallagher, Florida Chief Financial Officer Ref

Last year, the Florida legislature withheld the second installment of its CAPCO tax credits after learning the state had lost more than 150 jobs from its initial $150 million investment. Ref

$75 million and just 174 jobs - Imagine the state gave you $75 million in tax money to invest in new businesses to create jobs. Imagine that, rather than creating jobs, the companies you invested in lost 174 jobs in the first four years. Imagine you got to keep all the money anyway, without ever having risked a penny of your own. Sound too good to be true? Nothing Ventured, Millions Gained, Palm Beach Post Ref

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Louisiana
Called the program "expensive and inefficient" and said "the greatest and most immediate beneficiaries of the CAPCO program are CAPCO companies and their owners." Study commissioned by the state of Louisiana. Ref

"If you're going to set up something, look at what we did and do the exact opposite." Mike Williams, of the Louisiana Department of Economic Development referring to CAPCO. Ref

A 2000 report for the Louisiana state legislature concluded the state had awarded more than $600 million in CAPCO credits since its inception, but had only seen $180 million in CAPCO-related venture capital deals. Ref

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Missouri

Not being used for the intended purposes 66 percent of funds generated by venture capital programs through its CAPCO legislation were not being used for their intended purpose of providing capital for start-up or expanding state businesses. In Wisconsin, an analysis by the state audit bureau found the $50 million CAPCO program enacted over three years ago had generated only 157 jobs. Missouri state study cited in the Milwaukee Journal-Sentinel Ref

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New York
2002 annual report on the New York CAPCO program revealed it had lost 88 jobs, but with a $280 million cost to the taxpayers. Ref

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Rhode Island

The Rhode Island General Assembly is considering legislation to increase the supply of early-stage equity capital in the state. This is a very worthwhile goal. Unfortunately, the vehicle being proposed to reach that goal, the Certified Capital Company (CAPCO) program, would not accomplish this objective. Rather, it would transfer $100 million from the citizens of Rhode Island to a small group of out-of-state individuals in a particularly egregious form of corporate welfare. Ref

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Wisconsin
$50 million and just 157 jobs - In Wisconsin, according to an analysis by the state audit bureau, the $50 million program had generated just 157 jobs by March, more than three years after the allocations began. Ref

$75 million and just 174 jobs - Imagine the state gave you $75 million in tax money to invest in new businesses to create jobs. Imagine that, rather than creating jobs, the companies you invested in lost 174 jobs in the first four years. Imagine you got to keep all the money anyway, without ever having risked a penny of your own. Sound too good to be true? Nothing Ventured, Millions Gained, Palm Beach Post Ref

A Wisconson audit found the CAPCO credits generated 316 new jobs at a cost of more than $90,000 apiece, other programs created jobs for $556 to $22,727 each. Critics have called the program inefficient because the investments are funneled through the insurance companies. Ref

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