S.B. 554 would amend existing law to reinstate a portion of investment capacity, and associated tax credits, that had been reserved for investments in Sunflower Technology Ventures. (The remaining portion of that reserved capacity would be reinstated for investments in Kansas Venture Capital, Inc. in 1998 S.B. 487.) As part of the larger network of the Kansas Technology Enterprise Corporation (KTEC), Sunflower Technology Ventures was to provide funding for early-stage technologically-oriented companies but never became operational. The reinstated capacity in S.B. 554, which would total $6,021,345, could be transferred to qualified buyers of KTEC's interest in Ad Astra I and Ad Astra II. However, the bill would not require the sale of KTEC's interest in the Ad Astra Funds. Investments in these funds would be eligible for 25 percent tax credits ($1,503,086). Purchasers of KTEC's interest in the Ad Astra Funds also could claim tax credits for additional investments in the Funds. These credits could be claimed until exhausted.
The bill would include limited liability companies in the definitions of "Kansas business" and "Kansas venture capital company" in the Kansas Venture Capital Company Act.
Finally, the bill would require KTEC to remit to the State Treasurer for deposit in the State General Fund any payment reserved for the sale of KTEC's interest in the Ad Astra Funds.
S.B. 554 would provide an incentive for privatizing the Ad Astra Funds. The state, through KTEC's limited partnership, contributed a total of $4.8 million for investments in Ad Astra I and II. Private sector limited partners contributed a total of $1,750,000 to the Funds. This bill stemmed from the adverse publicity surrounding direct public investments in the funds and comments of several members of the Joint Committee on Economic Development concerning such direct investment in the Funds.
Rich Bendis, President of KTEC, testified in support of the bill. Mr. Bendis indicated that KTEC would take the following steps if the bill passes. KTEC would: (1) retain an investment banker to represent KTEC and act as financial intermediary to evaluate and conduct the sale of KTEC's interests in the Ad Astra Funds; (2) conduct the sale through private auction or other bid process to obtain the highest competitive price; and (3) subject the final sale to approval by the KTEC Board of Directors.
The bill would add "limited liability companies" to the Kansas Venture Capital Company Act because such companies did not exist when the enabling legislation was passed.
The Senate Commerce Committee's amendments were made to accurately reflect legislative intent related to the authorized amount for reinstated investment capacity and to clarify that tax credits could be claimed only by those investors who seek to purchase KTEC's interests in the Ad Astra Funds.
The House Committee on Economic Development amended the bill to authorize purchasers of KTEC's interest in the Ad Astra Funds to claim tax credits for additional investments in the Funds. In addition, the House Committee deleted the provision that the bill take effect upon publication in the Kansas Register.
The House Committee of the Whole amended the bill to require KTEC to remit to the State Treasurer for deposit in the State General Fund any payment received for the sale of KTEC's interest in the Ad Astra Funds.
The Division of the Budget's fiscal note indicates that, according to KTEC, the fiscal impact of a sale of KTEC's interest in the Ad Astra Funds would depend on the value of KTEC's interests at the time of sale, and how the returned funds would be spent. KTEC reported it could complete a sale of its interests in the Ad Astra Funds within current staffing and expenditure limitations.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.