PROVIDENCE, R.I. (WPRI) – The state is seeking more information from three out-of-state companies that have submitted applications to participate in a controversial $42 million small business incentive program, asserting they failed to meet a laundry list of requirements.
R.I. Commerce Corp. President and CEO Jesse Saglio notified the three companies – Advantage Capital, Enhanced Capital and Stonehenge Capital – that their applications filed last month were incomplete, according to a letter dated Oct. 31.
The companies have until Nov. 15 to submit the missing information, Saglio wrote in the letter, which also came with a stern warning.
“Failure to submit all of the outstanding information … will result in no further consideration of the application,” Saglio wrote.
The three companies are seeking to participate in the so-called Small Business Development Fund, a controversial tax-credit incentive program championed by the General Assembly but opposed by Gov. Gina Raimondo.
The second-term governor, along with Commerce board members, have moved to implement stringent regulations surrounding the application, which the companies failed to meet, according to Saglio’s letter.
The missing information included letters of good standing, evidence of compliance with global investment performance standards, revenue impact assessments and information related to retained jobs, according to the letter.
Saglio also noted the absence of required information related to investors and investor commitments, along with a verification that the companies had invested at least $100 million in non-public companies.
In response to a request for comment, two of the companies — Enhanced Capital and Stonehenge Capital — issued a joint statement through spokesperson Bill Fischer on Friday.
The companies had not received any notification from Commerce, according to Fischer, who added the regulations surrounding the application process are too strict.
“Unfortunately, the regulations developed around the application process are outside the scope of the statute and are so cumbersome that it would prevent anyone from submitting a successful application,” Fischer said.
“We will continue to work with Commerce throughout the regulatory process in a good faith effort – as we have – to ensure the program is successfully implemented towards the goal of providing much needed private capital to small businesses in Rhode Island which can help grow the economy and create jobs,” he said.
Two of the three companies applying to participate in the program – Advantage Capital and Enhanced Capital – hired lobbyists earlier in the year to testify in favor of the new tax credits.
Proponents of the program argue it will provide much-needed capital in a state where funding sources for small businesses are scant. But critics insist it’s poorly designed and requires taxpayers to cover two of every three private dollars invested.
“The applicants understand the benefits of these types of funds and have every confidence this program can be successfully implemented as it has in many other states,” Fischer said.
Under the law, qualified investment firms put money into a fund that provides capital to small businesses. In addition to profiting off whatever returns the business generates, the investors also benefit from state tax credits totaling about 64% of every dollar.
The state recaptures some of the investment if the business does well, but Rhode Islanders are on the hook for up to $14 million a year in tax credits for investors, according to the Senate Fiscal Office.
“We hope that you attend to this matter expeditiously and submit information to complete your application,” Saglio wrote.
An earlier version of this story misstated the minimum amount the companies are supposed to have invested in non-public companies.