Before the Jobs, Aerospace & Technology
Subcommittee of the House Economic
Development & Small Business Committee

Proponent Testimony on Sub. HB 6
By Danial Navin; Director of Taxation & Public Finance
for the Ohio Chamber of Commerce
Tuesday – September 18, 2001

Mr. Chairman and Members of the Committee,

My name is Daniel Navin and I am the director of taxation & public finance for the Ohio Chamber of Commerce and also in representation of our affiliated organization, the Ohio Small Business Council. Today I am here to testify in support of Sub. HB 6, legislation designed to accomplish several purposes but primarily to minimize the burden on our state’s existing small business community and on those Ohioans who are would-be entrepreneurs contemplating establishing their own business, particularly in technology-related fields.

We believe the most salutary component of the package is the net worth exemption for high-tech incubator companies during their early years of operation. The major characteristic of the franchise tax on net worth is that, generally, it applies to companies who are not profitable but yet have assets that make their balance sheet look relatively good. Many thriving businesses today have struggled mightily in the early years of the company, just as the owners of those businesses have mortgaged themselves to the hilt to, hopefully, turn the corner to profitability and expansion. This net worth exemption is a strong, long-overdue step toward facilitating entrepreneurship across the state.

Along the same lines, the Capital Access Loan Program mitigates, though it doesn’t solve, the problem of newly-formed companies in key industries being able to obtain capital without either incurring an intolerable debt burden or giving away an ownership interest in the business. Easier accessibility to capital for general operations or, as importantly, fixed asset purchases, will give more business-oriented Ohioans a better opportunity to start and keep their companies in our state over the long term.

The job retention credit represents another tool for our state to protect its existing tax base. In the economic development world of today, states and local communities must not only attract companies looking for a place to expand, but also protect what they already have. This is because not only is our state in competition with other states for expansions, often plants within the same company are in competition with each other to remain open. With global competition demanding greater efficiency and financial considerations becoming paramount for any company or its shareholders, companies can’t keep unprofitable manufacturing plants or other facilities open. The bill’s job retention credit has sufficient safeguards that permit Ohio to successfully compete to maintain its important existing tax and employment base.

The expansion of tax increment financing (TIF) to distressed communities in an incentive district up to 300 acres gives those areas a useful tool to develop land in commercially or industrially viable ways. We don’t profess to claim that this program is the magic silver bullet that will push dormant projects in distressed communities over the top toward breaking ground. However, it does give those communities flexibility in establishing financing sources that are so crucial to establishing the potential of a project and moving it along.

Finally, with respect to the brownfield credit, we are hopeful that it will incentivize more companies or subsequent purchasers who own environmentally contaminated sites to incur the substantial liability risk of cleanup. As many of you know, site cleanup involves significant expenditures of money, time and liability exposure. We appreciate the efforts of Rep. Hollister in pushing to include this credit as part of the package.

Mr. Chairman, that completes my testimony and I will be happy to answer any questions.