State money for startups: CAPCO program sparks debate.

• Author: Schwab, Robert
• Position: Certified Capital Companies Program

Boon or boondoggle?

That was the question proposed to Colorado legislators last spring when conservative lawmakers took aim at a $200 million program designed to finance the growth of small, usually technology-oriented businesses in Colorado.

It was a time when the state was falling far short of cash for all its programs, and the dream of a technology-driven economy in Colorado was undergoing a rude awakening. Business principles of profit and loss were being applied to every techie's paycheck, dropping many of those darlings of the state's 21st century business boom into the growing ranks of the unemployed.

Yet the Certified Capital Companies Program, called CAPCO for short, was touted as an investment in the future.

The taxpayer-funded $200 million, to be invested in Colorado startup companies over more than a decade, is intended to stimulate job growth. Supporters of the program said it was coming just at the right time: in the wake of tens of thousands of high-tech sector layoffs.

Opponents said the tax money was needed elsewhere.

But so far, CAPCO has survived. A second round of $100 million in taxpayer funds is to be allocated to investment companies in 2004. Before then, the program will be audited to determine how well the first $100 million is being put to use. And some attempt to alter or reform CAPCO is likely to occur in the early stages of next year's general assembly.

Gov. Bill Owens' administration would like to see that. Bob Lee, director of the governor's Office of Economic Development and International Trade, which is responsible for CAPCO, said only $8.3 million of the first $100 million available through the program so far has been invested in job-creating businesses during CAPCO's first year.

At a time when Colorado's economy is in the dumps, Lee says, that is much too little, and it warrants consideration of abolishing the program.

The governor reluctantly signed the legislation to create CAPCO three years ago, and administration officials were hoping legislative opposition to the program this year would give them an opportunity to tighten up regulatory control of it. Their primary concern is seeing the state get a better return on its money.

The tech economy in Colorado in early 2001, when CAPCO was created, was still thought to be booming, although business spending on tech had already begun to slow, a harbinger of the national recession.

CAPCO was billed as an economic-development program, one that used state...