Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Economic Development, to which was referred S.B. No. 1648 entitled:

begs leave to report as follows:

The purpose of this measure is to appropriate funds for deposit into the Hawaii Strategic Development Corporation Revolving Fund to be utilized for increased investment in Hawaii venture capital activity.

Your Committee received testimony supporting this measure from Hawaii Technology Trade Association, Hawaii Venture Capital Association, HMS Hawaii Management, MN Capital Partners, LLC, Hawaiian Electric Industries Corporate Venturing Group, Allegis Capital, and three individuals.

Your Committee finds that the availability of venture capital in Hawaii directly affects the economic growth potential of the State's innovative high technology companies. Most of Hawaii's budding companies require a number of rounds of funding before they can grow substantially. However, this funding must come from professional venture capital firms with the leverage to provide the high capital investments required. If these venture funds are not readily available in the State, Hawaii's most promising companies must find the funding elsewhere thereby increasing the likelihood that they will relocate outside of Hawaii. Your Committee believes that the Hawaii Strategic Development Corporation (HSDC) has done a superior job in leveraging its limited resources to attract substantial investments in Hawaii's companies. Your Committee finds that the State must make further efforts to continue and support the successes of the HSDC and ensure that Hawaii's businesses have immediate access to the resources they need to be successful.

Your Committee has amended this measure by replacing the appropriation with provisions that provide that any professional investor that invests in the HSDC shall be considered a taxpayer that has invested in a qualified high technology business pursuant to section 235-110.9(e), Hawaii Revised Statutes. This measure, as amended, will attract private sector resources to the HSDC to fund the corporations programs. In return, investors shall be eligible to claim the high technology business investment tax credit under section 235-110.9, Hawaii Revised Statutes.

As affirmed by the record of votes of the members of your Committee on Economic Development that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1648, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1648, S.D. 1, and be referred to the Committee on Ways and Means.