Investment procedures and process scrutinized at Capitol hearing of Dank Committee
Published: August 24th, 2011
At the latest state Capitol hearing of the bi-partisan task force focused on tax credits, business incentives and other breaks intended to bolster economic activity that would not otherwise occur, state Rep. David Dank noted that the programs considered were among those deemed “constitutionally infirm” in a 2010 formal opinion by then-Attorney General Drew Edmondson.
Dank said, “I think infirm means sick, and I hope we can look for a cure.” Devon Sauzek, president of the Oklahoma Capital Investment Board (OCIB), defended the process that has led to a steady stream of losses in recent years.
Sauzek worked for the board when it was a state entity, earning some $65,000 a year. In response to one question, he disclosed his firm draws down $360,000 in compensation for running the private entity that now runs the public program.
Jonathan Small, fiscal policy director at the Oklahoma Council of Public Affairs complimented Sauzek for responding to probing questions about the program, but made clear his organization’s view that OCIB does not meet any definition of serving an essential government function or a public purpose. Small contended creation and operation of OCIB “was a very specific departure from traditional state government actions.”
As policy drama or theater, highlight of today’s deliberations could have been the tough questioning of Sauzek, or the uncharacteristic agreement between Small’s presentation, and points made by Democratic state Sen. Tom Adelson of Tulsa.
As he began to speak, Sen. Adelson, a venture capital investor himself, said he had many areas of agreement with Small’s presentation: “There will be some redundancy, despite our political differences.” Adelson was critical of the OCIB structure, saying the Legislature “has no way of knowing the true financial condition of OCIB. And, aspects of the current balance sheets were inaccurate.”
Adelson succinctly made the case against the program as it now operates: “Why are Oklahomans sending to other states their tax money for out-of-state job growth, economic activity and investment?” Adelson said the current program is a failure, but he thinks state government should be involved because “the private sector is not going to make these investments in Oklahoma.”
State Rep. Mike Reynolds presented both in the morning and the afternoon sessions. He spoke longest in the morning, saying he had been scrutinizing OCIB’s practices for years. He told reporters that his investigations of the board “are responsible for 70 percent of the paper stacks you see in my office.”
House Appropriations and Budget Chairman Earl Sears of Bartlesville asked only a few questions, with comments pointedly aimed at gaining full disclosure from OCIB and other state entities guiding the use of tax credits.
Also participating was state Auditor and Inspector Gary Jones, who focused repeatedly on audit procedures and accountability in the tax credit systems, including the two scrutinized in the afternoon: the small business venture capital formation incentive, and the rural venture capital fund.
One presentation came from former state Treasurer Scott Meacham, who while in office helped craft the moratorium still in effect on the credit programs. Now working for the State Chamber of Oklahoma, Meacham was critic of the ways the venture capital and rural venture capital programs operate, but laid out a series of changes that could be made to give the program transparency and effectiveness.
Legal authority for the Oklahoma Capital Investment Board Tax Credits resides in 74 OS Section 5085.1 et seq., 74 OS Section 5085.7 (Tax Credits)
The legal basis for the small business venture capital formation incentives is 68 OS Section 2357.60 et seq.
The rural venture capital formation incentive act is based on the provisions of 68 OS Section 2357.71 et seq.
Dank was fair and balanced toward all who testified, but made a comment at the day’s end concerning the business venture capital formation incentive, and apparently touching on Meacham’s five-point effort to craft a more palatable approach. He said, “I told the Chamber leadership that for my purposes I don’t even want to see a first cousin” of the past approach to the incentive.
Chairman Dank said next month’s sessions would be held on Wednesday, September 7 and Wednesday, 28. The focus of those hearings is not yet determined, the Oklahoma City Republican said.