A single piece of legislation this spring encapsulates grand visions of the state’s economic future and specific strategies for shifting Vermont’s businesses and workforce into high gear.
The omnibus economic development bill passed the House on Wednesday with overwhelming support. But representatives voted on a substantially different bill than the one senators approved in late March.
A conference committee will be named this week to work out the differences between the two versions. The following rundown explains where the two bodies agree and where there may be room for compromise. Look for italics to see how the Senate and House versions jibe.
Their decisions won’t solely affect businesses. Months of work by the Senate and House Commerce committees distilled wide-ranging economic interests into the bill — from telecommunications and affordable housing to entrepreneurialism and the effect of industrial parks on agricultural land.
In a statement, House Speaker Shap Smith summed up S.220 as a vehicle for smaller businesses to get access to capital, stronger workforce training initiatives and further development of cellular and broadband infrastructure “to continue the growth of our tech sector.”
“Our economic outlook is brightening thanks to our low unemployment rate, new startup businesses, and the hard work of private sector entrepreneurs,” Smith said in a statement. “S. 220 builds on Vermont’s strong foundation by providing capital to new tech businesses, creating a fund to recruit and retain Vermont employers and investing in Vermont’s workforce. I’m particularly excited that this bill targets investments to Vermont’s growing technology sector, which has produced growing companies like Dealer.com, MyWebGrocer, Draker and Inntopia.”
Bill Botzow, chair of House Commerce and Economic Development Committee, said the bill will bolster economic development efforts in Vermont. “We pride ourselves on our quality of life in Vermont, and we must continue to supplement it with a thriving business environment,” Botzow said. “Specifically, I am pleased that we are able to assist those in the small business sector who would otherwise be unable to start or expand their business.”
One-stop shop Web portal for businesses
Lawmakers are trying to streamline the state’s business services by creating a single portal for interaction with the many agencies that deal with businesses in Vermont for registration, taxes, legal issues and commercial support.
The House version goes one step further than a simple portal, though. “We wanted to make sure it’s more than just a business services site,” Rep. Bill Botzow, D-Bennington, told the Senate committee at an April 23 meeting. His group wants the portal “to market the state of Vermont.” The House plan channels business inquiries as quickly as possible to regional business liaisons for personal and customized assistance.
The Secretary of State’s corporation division recently revamped its website for improved clarity and direction.
Vermont Enterprise Fund
S.220 quickly became the vehicle for Gov. Peter Shumlin’s proposed $4.5 million fund to help retain and attract major employers. The fund is temporary, and only would be paid for if surplus revenue is available at the end of the current fiscal year, which closes at the end of June.
Shumlin’s plan came after the bill had already crossed over to the House, so the committee of conference will be the Senate’s first official crack at this section. Sen. Kevin Mullin, R-Rutland, has expressed his desire to make the fund permanent. However, the budget bill passed by the Senate on Tuesday stipulates that the fund will sunset June 30, 2016, with any remaining balance to revert to the General Fund. The House version sunsets the fund on July 1, 2015.
Vermont Entrepreneurial Lending Program
When Shumlin announced his plans for the Enterprise Fund, he also made a half-million dollar commitment to entrepreneurial initiatives — an idea very much at the heart of the House’s economic development vision.
The Entrepreneurial Lending Program will not directly loan $500,000. Rather, the set-aside will be used as a “loan-loss reserve” to cover potential defaults. The cushion is a way of making a finite line of credit go a little further, because the reserve absorbs some of the lenders’ risk.
The program will replace and broaden an existing lending system for technology companies. The Entrepreneurial Lending Program will make loans available for a wider variety of businesses in seed, start-up and growth stages.
Although the Enterprise Fund has garnered much more attention for its high price tag — and new territory Vermont is entering in the world of business tax incentives — lawmakers made sure that the entrepreneurial lending program would get the first $500,000 from any surplus, putting the Enterprise Fund second in line for extra money at the end of the year.
The Senate version did not include the $500,000 appropriation to establish the loan-loss reserve. But committee members have indicated they support it, and the appropriation already passed the full Senate in the budget bill.
Workforce
Vermont’s dwindling population of working-age residents is a major concern for the state’s economy, and it has an affect on Vermont’s credit rating. Policymakers are keen to build up a more skilled workforce to help Vermonters access new opportunities and earn higher wages. They also want to ramp up and better target the state’s investments in workforce development, as a way of retaining and attracting successful businesses.
The Senate and House plans employ very different strategies toward that goal. The Senate’s version of S.220 is a high-level directive for a new workforce education and training leader who would better coordinate workforce development initiatives throughout the state. The House also establishes this new position, but members there also spent weeks crafting a detailed workforce development structure. The divergent approaches may be a source of contention when S.220 goes to a committee of conference.
An area where the Senate may be more receptive to House changes is the Vermont Strong Scholars and Internship Program. The new loan forgiveness program would relieve a portion of school loans administered by the Vermont Student Assistance Corp. It’s designed to target financial aid toward industries Vermont wants to grow, to raise enrollment at the state’s colleges and universities, and to keep young Vermonters in the state.
Access to capital and credit
Businesses and policymakers alike have lamented the limited access to capital for start-up and growth-stage businesses in Vermont. Many say that small- and medium-scale investments are particularly hard to come by. The economic development bill aims to address that in several ways, in addition to the entrepreneurial lending program described above.
The existing Vermont Agricultural Credit Program would be expanded to include forest products and silviculture. This provision is unique to the House version of S.220.
The House bill also diverges from the Senate version by taking a three-pronged approach to access to capital for small businesses:
- studying the opportunities and limitations of crowd funding
- ordering the Department of Financial Regulation to conduct outreach and education events about small business capital opportunities such as the Vermont Small Business Offering Exemption and other securities registration exemptions
- ordering the Department of Financial Regulation to update the state’s small business securities exemptions “to recognize and reflect the evolution of capital markets”
A creative financing initiative worked out in recent years with State Treasurer Beth Pearce, the short-term Clean Energy Loan Fund created in 2013, would be made permanent in both versions of the bill.
Building on that fund’s success, the treasurer would be authorized to establish a credit program with up to 10 percent of the state’s average cash balance. This idea is in both the Senate and House versions, but membership on a related advisory committee is much broader in the House version, which would sunset the committee in July 2015.
Industrial parks
Industrial park planning and loans are in the bill, as well. The legislation ensures that industrial parks are eligible for loans through the Vermont Economic Development Authority. The House version stipulates that not only development, but also planning and improvements for industrial parks would qualify for financial assistance through VEDA.
The Natural Resources Board must update its master plan policy to provide more efficient master plan permit amendments for industrial parks. One more section would tweak the way industrial park expansions are evaluated, especially when it comes to mitigating impacts on primary agricultural soil.
The sections on industrial parks are either identical or very similar in both the Senate and House versions of the bill.
Incentives and other programs
Vermont’s Downtown and Village Center Tax Credit Program would be broadened to include technology upgrades as eligible projects. The maximum tax credit available for such endeavors would be $30,000. This change is included only in the House version of S.220.
A new domestic export program for agricultural and forest products would be established in conjunction with the state’s “Made in Vermont” designation program. Similar international export programs have proven effective, the committees heard in testimony. This program is included in both versions, but with more detail and with appropriations in the House version.
The bill also orders the Agency of Commerce and Community Development to support networking events designed to connect investors and entrepreneurs. Rep. Paul Ralston, D-Middlebury, referred to the original appropriation request for such events as a “doughnut fund.” He said if you just get people together and feed them doughnuts, they’ll make things happen. The money for the doughnut fund was subsequently stripped from the bill, however. The networking initiative is not included in the Senate version.
Telecommunications
Telecommunications are regarded as essential infrastructure for economic development. The bill addresses a few related issues that are also being tackled in a broader telecommunications bill, H.297.
First, a streamlined permitting path for telecom projects, scheduled to expire July 1, would be extended by three years. Instead of securing both municipal and Act 250 permits, certain telecommunications projects are allowed to go through the Public Service Board for a Certificate of Public Good. The simpler process was instituted to help jumpstart telecom buildout by not bogging down the projects in permitting processes.
Some municipalities felt they were shut out of those conversations, so new provisions have been added to create more of a space for them, and to help ensure more responsiveness to municipal perspectives.
The telecommunications sections are not included in the Senate version of the bill.
Affordable housing
Businesses frequently cite a shortage of affordable housing as one of the barriers to operating and growing in Vermont. To help spur new mixed-income housing projects and mixed-use developments, S.220 would reduce the range of housing projects that require Act 250 environmental permitting.
Several tiers of “priority housing” are also established in the legislation. Depending on the size of a community, a certain number of housing units must be part of a project in order for it to be considered “priority” and therefore subject to streamlined Act 250 jurisdiction.
Lawmakers propose raising the income ceiling for affordable housing, too. Instead of 60 percent of median income, individuals and families could earn up to 80 percent of median income and maintain eligibility for qualified affordable rentals.
The House Commerce Committee retained the Senate’s provisions on affordable housing.
Studies
In preparation for a constellation of development projects underway in the Northeast Kingdom, the bill orders a demographic study of the NEK projects’ economic impacts. This study is not requested in the Senate version of the bill.
The Department of Tourism and Marketing is the subject of a pilot program to use Results-Based Accountability as an evaluative tool for government operations. A report on the success of tourism and marketing efforts will analyze the return on state investments in that department. This section is identical in the Senate and House versions of the bill.
Another study would explore the feasibility of creating a Vermont Products Program to brand products that are “manufactured, designed, engineered or formulated” in-state. This study is requested in both versions of the bill, though the Senate asked for it with more detail.
What’s now a study of energy policy and rates for Vermont manufacturers started out as a proposal for lower electricity costs for energy-intensive industrial operations. The study will examine how a rate differential would affect other ratepayers, and whether it would conflict with the state’s standing energy policies. This study is substantially similar in both versions of the bill.
The Department of Financial Regulation would be required to study and recommend changes in regulatory structure to remove unnecessary barriers to private lending and open up new private capital markets. This provision is the same in both the Senate and House versions of the bill.
Lending
The bill also clarifies that state statutes surrounding unlicensed loan transactions do not apply to “interbank clearinghouses,” which refers to a hub for automated transactions between two insured depository institutions. This provision is only contained in the House version of the bill.
Finally, the legislation carves out a regulatory exemption for lenders who operate on a micro-scale. Known as de minimis lending, the exemption allows people to make up to three mortgage loans within a three-year period without obtaining a mortgage loan license. This provision is the same in both the Senate and House versions of the bill.
Legal issues
Laws regarding computer crimes would be tweaked slightly. The Senate version proposed drastically raising fines for computer crimes, but the House rolled most of them back.
Trade secrets violations also are in flux. Both the Senate and House versions propose awarding litigation fees to the winning party in a trade secrets lawsuit. The Senate version suggested a five-year statute of limitations once a violation is discovered, but the House version would keep it at three years.
New rules would be established regarding contractors’ intellectual property rights for work on state projects. This provision is nearly identical between the Senate and House versions of the bill.
UPDATE: This article was updated at 3:45 a.m. on May 1, 2014.
