Friday, November 06, 2009

Creditworthy? Bredesen has Tennessee buying now to pay later

According to this morning's Tennessean, the state continues to give money away to corporations while hoping for future returns via TNInvestco:
A stretched state budget won't upset those plans because there are no up-front costs to issuing tax credits ... and the state won't have to forego those revenues for another three years because of the way the program is set up.

The timing of the state initiative comes as credit markets remain tight and there's been a reduction in the amount of funds raised nationally by venture capital firms ....

Venture capital funding plummeted more than 80 percent during the third quarter, and U.S. firms raised just $1.6 billion, the lowest amount since 2003, according to the National Venture Capital Association ....

TNInvestco will last 10 years, during which time the state expects to recoup its $120 million investment, although there is no guarantee. Any additional profits due to the state will go to the Tennessee Rural Opportunity Fund, which provides loans and technical assistance to small, disadvantaged and early-stage businesses in rural parts of the state.
What a kicker. No funds for disadvantaged and early-stage businesses in urban parts of the state. TNInvestco is state money going into private corporations and if those corporations succeed the money will be put into smaller private businesses outside of cities. And besides hoped for rivulets of future benefits that might eventually trickle down if and when the economy turns around, how does TNInvestco help most Tennesseans more than it helps commercial interests?

By the way, the Tennessean also reports that the main investor behind media giant SouthComm, which includes the Nashville Scene and the City Paper, is likely to be one of two beneficiaries of $40 million in TNInvestco tax credits next year. That would be a shot in the arm to SouthComm's investors and present a batch of ethical dilemmas on whether the foundering mainstream media should be rescued, even if indirectly, by state government revenues. Whether TNInvestco goes to pay reporter salaries or not, the flush of our money will take pressure off media investors to make funding of the same old flawed journalism models easier.

1 comment:

  1. Really appreciate your perspective. Re urban opportunities: The new TNInvestco funds (as well the previously existing funds that are partnering to create those funds) are targeting potential high-growth funds (translates as high-tech, Intellectual property-centered or driven by game-changing business strategy or processes); and, given that such firms are much more inclined to locate in urbanized areas (with research universities), it seems there is inherently much more opportunity via TNInvestco for urban communities. That's why some returns are earmarked for possible (by no means assured) allocation to the Rural Opportunity Fund. State ECD's BERO division has also targeted rural areas. Whether it works or not remains to be seen; meanwhile, there seems to be a somewhat balanced and sensible effort underway to spread the benefits around the state. Again, time will tell.