Sponsors: Representatives Pettigrew, Skinner, O'Brien, Conway, Hunt, Cooper, Cairnes, Eickmeyer, Jarrett, Sullivan, Kirby, Simpson, G., Ruderman, Hatfield, Moeller, Chase, Kenney, Morrell, Hudgins and Murray.

Brief Summary of Substitute Bill

• Creates the Small Business Incubator Program to assist start-up and existing firms with viable products that are located in economically distressed or disadvantaged areas.

Majority Report: The substitute bill be substituted therefor and the substitute bill do pass. Signed by 10 members: Representatives Veloria, Chair; Skinner, Ranking Minority Member; McDonald, Assistant Ranking Minority Member; Blake, Chase, McCoy, Ormsby, Pettigrew, Priest and Rodne.

Minority Report: Do not pass. Signed by 2 members: Representatives Condotta and Kristiansen.

Business incubation is a dynamic process of business enterprise development. Incubators provide hands-on management assistance, access to financing and orchestrated exposure to critical business or technical support services. Most also offer entrepreneurial firms shared office services, access to equipment, flexible leases, and expandable space.

An incubation program's main goal is to produce businesses that are financially viable and freestanding when they leave the incubator, usually after two or three years. Approximately 30 percent of incubator clients graduate each year.

Some incubators accept a mix of industries while others concentrate on industry niches. Forty-seven percent of incubation programs identify themselves as mixed use. Thirty-seven percent of the incubators focus solely on technology companies. Seven percent of incubation programs are dedicated to manufacturing.

The Washington Small Business Incubator and Assistance Act of 2004 creates the Small Business Incubator (SBI) program which will be administered by the Department of Community, Trade and Economic Development (DCTED).

The DCTED will award grants to qualified SBI organizations for the construction and equipment needs of the SBI facility. In order to receive the grant, the qualified SBI must show that it has the resources to complete the project in a timely manner and that the state grant is not the sole source of funds. In addition to the facilities funds, the DCTED can provide operating assistance, up to a maximum of $125,000 per year, to a qualified SBI for support services and the operation of the SBI facilities.

(3) daily management support services essential to high-quality commercial operations; and

(4) technical resources that enable entrepreneurs to transform private activities into

To qualify for money under the SBI Program, an SBI organization must be a nonprofit 501(c)(3) organization focused on developing small businesses in an economically distressed or disadvantaged area. They must also have a sound business plan and meet other standards set by DCTED.

The substitute allows small business incubators that are partnerships between a 501(c)(3) nonprofit organization and a government or quasi-government agency to qualify for the SBI program and the associated loans and grants. The substitute also absolve the DCTED from any required duties of the program if no funding is provided by the Legislature.

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of session in which bill is passed.

Testimony For: The SBIs are proven and useful economic development tools. There is a demonstrated need for at least 20 SBIs in Washington. The success rate for incubated companies is 80 to 87 percent. The start up costs for businesses using a SBI are reduced by 40 to 50 percent. It is documented that for every $1 of public investment, the SBI clients generate $45 in tax revenue. Besides the state funding, the SBI can blend the funds from numerous sources, including federal government, local governments, community colleges and private sources.

Persons Testifying: (In support) Representative Pettigrew, prime sponsor; Linc Ferris, Washington Small Business Incubator; Wendy Ceccherelli, Washington Community Alliance for Self-Help; Tom Keegan, Peninsula College/Clallam County Economic Development Council; Tom Sterge, Washington Association of Small Business Incubators; John Bankston, HUB Contractors Association; Jacques M. Dulin, Clallam County Business Incubator; James Haguewood, Clallam County Economic Development Council; and Timothy J. Smith, City of Port Angeles.

Majority Report: The substitute bill by Committee on Trade & Economic Development be substituted therefor and the substitute bill do pass. Signed by 27 members: Representatives Sommers, Chair; Fromhold, Vice Chair; Sehlin, Ranking Minority Member; Pearson, Assistant Ranking Minority Member; Alexander, Anderson, Boldt, Buck, Chandler, Clements, Cody, Conway, Cox, Dunshee, Grant, Hunter, Kagi, Kenney, Kessler, Linville, McDonald, McIntire, Miloscia, Ruderman, Schual-Berke, Sump and Talcott.

Summary of Recommendation of Committee On Appropriations Compared to Recommendation of Committee On Trade & Economic Development:

Effective Date of Substitute Bill: The bill takes effect 90 days after adjournment of session in which bill is passed.

Testimony For: There are more than 950 small business incubators across the country, and at least six of them are in Washington. National research shows that for every $1 in public investment in small business incubators, $45 in local tax revenue is generated. There are great success stories from incubators in the Tri-Cities and in Tacoma. There are at least four communities that would like to start incubators in the near future should funding be made available by the Legislature.

Persons Testifying: Lincoln Ferris, Washington Association of Small Business Incubators.