Amended Issue 1 Implementation Bill Quickly Emerges from Finance Committee, Set for Wednesday Floor Vote

Gongwer News Service - December 6, 2005

Gongwer News Service

Issue 1 was a hit at the polls last month, and implementing legislation for the research and development bond package proved to be a one-hearing wonder in the Senate Tuesday.

The Finance & Financial Institutions Committee unanimously reported the bill (SB 236) after hearing from a handful of witnesses and adopting nine non-controversial amendments. The full Senate will vote on the measure Wednesday, and, barring any unforeseen complications, the House is expected to follow suit next week and send the bill onto the governor for his signature.

With a bipartisan deal having been struck on the bill, the panel’s speedy turnaround occurred with no hitches and – except for one witness’s observation – absent the complaints that oftentimes accompany such a fast-tracked process.

The bill appropriates only a portion of the $2 billion in bonds approved by voters 54-46% on Nov. 8, in part because the biggest chunk of the debt – $1.35 billion – is for the continuation of the current public works program for local infrastructure needs. Those monies won’t be needed until fiscal year 2009 due to the bond authority that remains from the last 10-year issue. (See Gongwer Ohio Report, December 2, 2005)

Office of Budget and Management Director Tim Keen said the bill: appropriates $100 million in each year of the current biennium for the Third Frontier research and development program; appropriates $30 million for the existing Job Ready Site program in the FY 2005-2006 capital biennium; amends the two-year budget bill (HB 66) with operating money for the aforementioned programs; establishes $4.1 million in general revenue fund debt service appropriations for the Job Ready program and non-GRF debt service appropriations for the two initiatives; authorizes the issuance of debt by the Ohio Public Facilities Commission and creates two new funds for Third Frontier and Job Ready proceeds.

Mike Suver, deputy director of legislative affairs for the Department of Development, said that as part of the bipartisan agreement that required more consideration for rural areas of the state to receive funds, the Third Frontier Commission, which approves projects with input from an advisory panel and outside evaluators, is expanded from three to nine members in the bill. The governor will appoint all of the additional members, who will represent the six regions of the state: central, west central, northeast, northwest, southeast and southwest.

“The bill also specifies that the lead organization on all Third Frontier Project awards be an in-state entity that has substantial presence in Ohio while specifically prohibiting the state from taking an ownership interest in any project it supports,” Mr. Suver explained.

Additionally, Mr. Suver said the bill: requires that the primary benefit of the project must occur in Ohio; provides for refunds plus interest from grantee firms that fail to meet program requirements; includes several minority outreach provisions; requires the commission to establish procedures for public inspection of projects and mandates regular reports on those state-funded initiatives.

The amendments, including four proposed by minority Democrats, mostly clarified provisions and brought the measure more in line with the bipartisan deal struck in August to gain the supermajority legislative support required for ballot placement. Two witnesses requested further changes, but panelists only adopted the agreed-to amendments before voting out the bill, which was referred to the committee earlier in the day. Those provisions:

–“clean up” bond language;

–substitute “shall” for “may” in language regarding the DOD director’s requirement to bring discretionary grants to the Controlling Board for approval;

–state that higher education institution’s are not eligible for Job Ready funds;

–limit to $5 million each grant issued under the Job Ready Site Program;

–require Senate approval of the governor’s appointments to the Third Frontier Commission;

–add “economic distress of the community” to the criteria by which Job Ready projects are selected; and require DOD to note the amount of projects done in Priority Investment Areas and their impacts, to the extent possible, in its annual report on the program;

–require the Third Frontier Commission, if the project recommendations of a third-party evaluator are rejected, to issue a report detailing why another initiative is to instead receive the money; and require DOD to develop rules for the reports within six months;

–mandate biannual DOD reports to the Third Frontier Commission on projects and the sharing of “all relevant data” to ensure accountability; and require the posting of bond program information on the agency’s Web site, and;

–clarify that repayment of state support aside from grants is required for entities that default on their project agreements.

Prior to the panel’s adoption of the amendments, Policy Matters Ohio research analyst Jon Honeck asked members to consider further changes to better conform the bill with the constitutional amendment’s stated aims of “accountability, integrity and transparency” with respect to the three bond programs, and the charge to include “economically disadvantaged businesses and individuals in all areas of this state.”

Among other things, Mr. Honeck asked the committee to consider “additional safeguards” that would: require companies that benefited from Third Frontier money to make their products available to state and local governments at the “lowest, best” price; expand the Third Frontier Advisory Board to include representatives of minority business and labor, a community economic development expert in areas targeting the disadvantaged, and an environmental advocate; require performance audits by the state auditor; and mandate competitive bidding for all DOD program administration contracts.

“We urge the committee to consider these issues carefully, and not to rush to pass Senate Bill 236 before they have been adequately examined,” Mr. Honeck said.

Christopher Derrington, of the Ohio Center for Innovation and Commercialization and Ohio Commercialization Ventures, asked the panel to include language that would allow a non-profit group such as his to “aggregate the deal flow” for enterprises in rural areas of the state. “I don’t really see a focus on rural areas” with the programs, he said.

The current Third Frontier initiative has channeled $212 million into mostly urban areas of the state, and $18 million in “pre-seed capital grants” to only Cuyahoga, Franklin, Hamilton, Lucas and Montgomery counties, Mr. Derrington said. “Rural Ohio high technology entrepreneurs also need access to investment capital.”

“I think you’re right on target” with the concept, Sen. Ron Amstutz (R-Wooster) said, but added: “We just have to figure out how to do it.”

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