PDC’s Seeds Unlikely to Grow

By Ben Shelton

You may remember Sam Adams’ February promise to give $500,000 to small businesses around Portland. Currently, a five-member board, appointed by the Portland Development Commission, is is seeking an investment manager for the Portland Small Business Seed Fund. Public venture capital programs, however, don’t pay; they ignore real business solutions and starve money from the critical functions of government.

If the mayor wants to promote business growth, he should focus on mending Portland’s business environment by reducing tax and licensing burdens on successful businesses, which may pay almost 4% to the city and county alone. Lowering these costs would create positive incentives for all entrepreneurs and investors, instead of rewarding a few handpicked companies.

This story reflects a statewide problem. The Oregon Business Development Department operates with the same methodology on a much larger scale. Its budget reached nearly $420 million in the 2007-2009 biennium. The Oregon Innovation Council, a function of the Department, awarded $28 million to seven initiatives during that period. The state invested tax dollars in wave energy, solar innovation, food processing, manufacturing, and drug research. So far, the payoffs are not easy to quantify, but the state continues to support the program.

Investing money is a risky game. Innovation is hard to spot. In public venture capital programs, government leaders want to invest in businesses that seem progressive. However, unlike Wall Street, leaders aren’t using their money, they’re using ours.

Ben Shelton is a research associate at Cascade Policy Institute, Oregon’s free market public policy research organization.