We just do Damien walk us through here. Not a whole lot of changes. I think we've agreed to just about everything. Sure. And I apologize for the two colors. I forgot to correct that after I realized that it wasn't two colors, and so Amy got the two color version of this. There are actually three colors if you include the yellow. Yes. So that was usually I like to do a color and then a white. But anyway, since we've got a lot of people splitting hands this morning, for some reason it split the formatting after the third section. So anyway, if you're going through here, I apologize for the micro print. We just got bigger copies to hand around. Just to kind of refresh everyone as to where we're at. First, second, second section, third section. Actually, we're back here. So the first, second, and the second section give authority to the attorney general to enforce investigate complaints that employers committed a willful, substantial, or systemic violation of the employee misclassification provisions in workers comp and unemployment insurance law. They are the same between the house and the Senate. The third section here, this is disclosure language that's necessary for unemployment insurance purposes if the attorney general is going to potentially enforce certain complaints. It is the same between the two. The fourth section adds attorney general enforcement of misclassification for purposes of wage and hour law. It's the same between the two. The same categories, willful, substantial, or systemic violation are applied throughout. Should note, the fifth section here allow a sharing of information related to an investigation with the attorney general for purposes of wage and hour. That's the same between the two. The sixth section, 387, this is also related to wage and hour law and allows enforcement by the attorney general. The reminder as to why we have two sections that allow this is because somewhere in the mists of time and it's great wisdom, this body decided to split wage and hour law into two chapters. Why don't we do this chapter rewrite and take care of it? We could, or I could just leave it there. Yeah, I mean, at this point, everyone's been familiar with it for 45 years. So one end deals with how you actually pay the wages to a person, the other deals with what the minimum wage and overtime provisions are. Section 7 allows for disclosure of tax records by the commissioner of taxes to the attorney general. It's the same between the two. This is, again, necessary for the attorney general's enforcement, potentially. Section 8 is the same between the two. It requires cooperation with the attorney general and memorandum of understanding between the AG and the commissioner of labor as to how they'll share information and so forth related to the enforcement. Section 9, and this is the first spot where I'm going to note that whatever you pass out of here will need an updated date. This is a report back on the enforcement of employee misclassification by the attorney general. It is the same between the two bills. Section 10 would create, in statute, the employee misclassification task force to the best of my knowledge that is still, it exists already by executive order, but it hasn't come out in a while. Is that correct? Looking over at the folks from the Department of Labor who confirmed that it hasn't come out in a while. But this would codify it under the chairmanship of the office of the attorney general. The only question is sort of just to keep my memory refreshed. I think the heart of this bill was the referrals of two separate occasions, or five employees, this is Section 8, Section 3. If the Department of Labor has found misclassification in two instances, they would refer to the attorney general, correct? Yeah, so it's- My question is separate. Do those instances of finding a misclassification have to be substantial or willful, or could it be a vanilla case of misclassification? So the way this is worded is this is an automatic referral if the employer is engaged in just any sort of employee misclassification on two separate occasions in the past five years, or as misclassified five or more employees. And if I reach back in my memory, I believe the discussion with the conference committee last year was that this was kind of setting a basis for what might be systemic. I just wanted to refresh my mind. I know what I agreed to. Right, and then beyond that, they'll work out in their agreement when the willful, systemic, or substantial trigger is reached in other instances where it might not meet that automatic trigger. Before we go any further, I just have a question on 10 where you were. When you say it was set up by executive order, whose executive order, and when? And when, for the last time? Not just under Schumann, right? And it has met on and off over the years, so. 2013, thanks. So the task force has met on and off over the years. More recently, for those of you who remember the misclassification report I submitted last year, the department has been working one-on-one with agencies to address it because of difficulties in getting the whole task force to convene, to discuss something that relates to only two or three agencies. So they don't meet because it's too big of an octopus to pull together?  And it's the department's testimony. I'm paraphrasing and don't want to speak for them. But their testimony last year was that they were having more success working one-on-one or with just two or three other agencies to focus on specific issues, rather than trying to get all, whatever it is, eight or 10 members together. So we have our big difference of opinion between four times per year. Is that the next thing in the quarterly? We quickly assumed you had issues. Yeah. If all conference committees could have such thorny issues done. This is, that is the one issue in here is whether they meet quarterly or four times a year. All right, so quarterly it is. 16 on the next meeting. All right. So the next section is 11, 12, 13, and 14 are all sections repealing the provisions that put the task force in the statute and give the attorney general enforcement authority this repeal. I believe the Senate version has it on January 1, 2024 or July 1, 2024. And the House is a year later in 2025. But otherwise, the repeals are identical. So we can move ahead to section 16, where the Senate version requires adoption of rules. Oh, and this is actually obsolete. So this section, there is a difference in the wording. But these rules have been adopted. They were adopted 15 days earlier than the Committee of Conference was asking. So section 16 can just be struck. In section 17, the House had language around the Workers' Compensation Administration Fund. My understanding is that this language is no longer necessary. The Department has gotten supplemental in the budget, right? I'm seeing a nodding head from Jess on the side here. So that can also be struck. Section 18, this is the study of workers' compensation for state employees with post-traumatic stress disorder or other mental conditions. This has a date that would need to be moved out. But otherwise, it's the same between the two. Section 18 in the Senate, 19 in the House, is the development and dissemination of information materials to educate workers and employers regarding the ability of a worker to receive workers' comp for the cost of prescribed over-the-counter medications. And again, that would have been required by last October 15, so that date will need to be pushed out by a year. But otherwise, the same. Section 19 and 20, same between the Senate and the House, this is in the Workers' Comp provisions and allows claimants to elect direct deposit as a payment method and requires employers or their insurance carriers to notify the claimant of their right to payment by direct deposit. Section 20 in the Senate, 21 in the House, this is a cleanup here in the unemployment insurance. This, the former law required the employers to post and maintain printed statements of the Employment Security Board rules in places that were readily accessible. And this is now being updated to say an employer shall post notice of how an unemployed individual can seek benefits in a form provided by the commissioner and a place conspicuous to individuals. And it has also advised individuals of their rights under the Domestic and Sexual Violence Survivors Transitional Employment Program, which is the complement to UI for individuals who are unemployed because of domestic or sexual violence. So this is really updating the law to reflect what employers do, which is post a put up a poster notifying people how they can get benefits rather than providing a copy of the rules, which are difficult to get through, even if you're an attorney. My understanding is that this happens a lot, too. And that may have. I see the department nodding their heads. So this here, you still would need to update this because it provides the posting requirement. So I think there are, but otherwise I think everything has already happened. So it's just bringing the statute into line with what the department's done. Section 21 in the Senate and 22 in the House is a period of dormancy for the short-time compensation program. What this is, essentially, is it causes the short-time compensation program to stop functioning until revived by the General Assembly or the Joint Fiscal Committee. For a reminder to everyone, the short-time compensation program is a program that basically provides UI benefits when employers cut back on their employees hours in lieu of laying them off. It has not been utilized recently because changes in the unemployment insurance law have made it less attractive than just going through the program core. Is it just regular benefits now? So the way the law works right now, it's not needed. But the idea with the period of dormancy is rather than repealing it so that you then would have to pass a new bill. You're just making it go dormant until such time as it might be needed again. Like another recession. Exactly. If there's another recession, it may be advantageous for employers to have it. And then it's there and can be revived either through a very short bill by the legislature or by the Joint Fiscal Committee if the legislature's not in session. OK. Section 22 in the Senate and 23 in the House would revive the self-employment assistance program, which lapsed in 2017. Yeah. So it lapsed in 2017 through a sunset. So this would bring it back. If you'll remember, historically, it was underutilized. But the thinking was that that was because not many people were aware of it. So this is married to Section 23 in the Senate and 24 in the House, which is a report on the use of the program so that a long-term decision can be made on it based on its use after the department's implemented it with better information rollout than happened in the past to be on the record. Can you update us on where this is because it strikes me that until they market it, no one's going to know about it. I mean, the self-employed people aren't going to know about it unless it's seriously marketed. I can't provide you with an update, but Cameron Wood might be able to. Cameron Wood, for the record, the program doesn't exist currently because it was sunset in statute. So we don't market it because we can't actually. Because you don't have it. We don't have the authority to actually administer the program. So this would bring it back. So this brings it back, and does it charge you with marketing it or just studying it? We would bring the program back. And I think our hope is to do as best a job as we can of letting individuals know that it's available to them through whatever means we can. I think it's doing a better job. Well, your public service announcements. DOL had a series of public service announcements on VPR, which I actually heard. I thought, go, DOL.  This former commissioner has done a really good job of trying to ensure that we are doing a much better job of marketing ourselves. Jess has done a lot of work in that area, along with our communications team and the members. So trying to do better. Could this be something that would be given to people who go to an unemployment seeking direction? It would be for individuals who are eligible for unemployment but choose to start a business as opposed to seeking for work. Or they could do both at the same time and theory they could. I'm asking the whole point of this. Is it enables them to be productive while they're collecting unemployment? And I think that is great. Well, so this is the self-employment assistance program is it's doing self-employment assistance activities full time in lieu of the job search. So activities towards starting a business in lieu of doing the three searches per week that is required to get benefits now. So rather than prepping resumes and so forth, the individual is developing a business plan and working on figuring out funding and marketing and so forth. So if someone loses a job and goes to unemployment, this would be given to them as an option. Or maybe the information would be given to them. Right. And then there are qualifiers that they have to meet to get into the program. In the past it hasn't been given to them to know that it was available. Well, as Damien mentioned, the program Sunset, I believe it was in 2017. So we haven't had the authority to administer the program. I think there was a very short four or five year period of time in which it wasn't active during the beginning or towards the end of the last recession up through, I think, 2017. And we had a handful of individuals inquire about it. And then I think ultimately we only had one individual who actually participated in the program. And so I think the department's position is we're more than happy to bring it back. We think it could be beneficial for some individuals. Well, it could be beneficial to Vermont. What if they build the next Ben and Jerry's? Whatever they build might benefit us enormously. And so for us, I think it's just we're more than happy to bring it back and do a better job of notifying individuals of its availability. Yeah, I think it's great. We're a state of entrepreneurs. I will say just real quick because I'm because we received a letter from USDOL two days ago with some concerns about this. There are two provisions of federal law they just want to make sure are not in conflict. So I'm happy to chat with you about them. But in my initial review, I don't think there's a problem with how it's currently worded. But the two issues are there's the bill allows for up to 35 participants at any given time on the program. USDOL, federal law says you cannot have more than 5% of your total unemployed population on the program. I don't think 35 will ever get to 5%. But I think it's a simple, Damien, it could be just an addition of at no point can we have more than 5% eligible for the program. And then there is another concern they raised with a section that states that the cost of administering the program cannot be in excess of the cost that would be incurred by the state and charged to the UI trust fund had the individuals not participated. That's a provision I'm not entirely sure how they implement it, so I need to reach out to them to get to the clarification. I don't see it being a problem. I'm just letting you go.  If the conference committee wants to have that language added, I could work with Cameron and get that done today. That's a good idea. But I think it's a great idea to program. And it sounds like the language there is essentially ready to go from DOL, so that can probably be pretty quick. The next section, 24 of the Senate and 25 of the House, is a report. Again, the date will need to be moved out by a year, same with the self-employment assistance program report from the commissioner of labor to the two committees of jurisdiction regarding potential approaches to mitigate the impact of a single separation from employment on a small employer's unemployment insurance experience rating and contribution rate. If you remember last year, there was a lot of discussion about the issue where you have an employer who previously has had a pristine record, but they only have five employees and they lay off one. Now the ratio of the benefits paid out for that employee to their actual payroll goes right off and they can skyrocket up to a very high tax rate within the UI program. Whereas if they were a larger employer and they only laid off one person, even if they had a history of doing it, that one person being laid off is a very small impact on them. So some states have done certain things to try to mitigate that impact. And this is just basically looking at a report. If you remember, there was a proposal that was taken out of the bill that would have eliminated the charge against experience rating for an employer that had only paid $1,000 or less to an employee during their base period. The problem there is that that would have exempted some employers who had employed the individual for say five years, but then laid them off a couple of days in the base period. And so it wasn't that the individual was a new or probationary employee. It was just that muck of the calendar as far as the employer was concerned. And so that was the concern about that provision and this was put in its place to see if we can do a more focused response to that. And that brings us to the last section, which is in the Senate version only. And this would be a report by the Office of Legislative Council. Again, the date needs to be moved out. Regarding the history of the exemptions from the provisions of the unemployment insurance law for newspaper carriers and individuals who have formed a single member LLC, including proposed rule changes related to newspaper carriers and the Vermont Supreme Court's decision in the In Ray Borbo Custom Homes case back in 2017, and then identifying any potential legislative changes that the General Assembly may wish to consider. So for those of you who have been here for a while, you're likely familiar with the newspaper carrier's issue. Question of whether they should be exempt or covered under the unemployment insurance law has been at issue in this building for, I think, something like 15 years now. Quite a while. As long as Mike and I have been here. And Mike Bonzi edges. Before that, there were six bills that were put into exempt and might not be passed. Yeah, I looked back. Including those used as justification by Trump. Last night, I was looking back at just some basic history on this for the last 20 years. Back to the through three of my predecessors. So that takes you back there. The Borbo Custom Homes case was a case in 2017 that basically ruled that an individual who's formed a single member LLC, because the UI law refers to an individual in its agency test for independent contractors. If you've formed a single member LLC, you're not covered. And you can be your deemed an independent contractor, essentially. So there were some questions about that. I wrote a brief memo a couple of years ago that would be incorporated into here. And then with a look at statutes from other states, I would point out that I cannot take a position on this. So I'm going to be sharing past reports and basically saying, here's what's been introduced and what the options are. I can't take a position. Both of these are very controversial issues. So all I can do is give you the information. Oh, and the second piece of this report was a request that the commissioner of labor in consultation with the secretary of state submit a report on the number of individuals who, following the Morvo Custom Homes case, formed a single member LLC in our performing services that are now excluded from the definition of employment for purposes of UI after that, based on that case ruling. The only thing I would highlight here is it may be difficult to determine whether someone is actually performing services that are now excluded. You may be able to get the number of LLCs that were formed and whether that is an increase over history, but it's likely going to be difficult to determine how many of those are actually performing services where before they would have been an employee and they would be an employee but for the LLC. And that would be a big piece of the investigation. I'm not even sure that that's information that you could effectively get. Other than calling them all and visiting them. Check it out. Well, and still, then, they might. Yeah. And you do the first part? The first part I could do, and it could the secretary of state help you with that? Well, so I could certainly, I mean, what I would say is if you want the information from the secretary of state, you may just ask them to provide the number of LLCs, and you may want to look at the number of LLCs that were formed since that case and then in the five years before so you can kind of get a track. But I don't know whether the secretary of state will have anything beyond the numbers of the LLCs, but that may give you some inkling. Again, though, it'll be hard to say because are there other changes in law that have encouraged people to form an LLC? I know it's not going to be exact, but if you had the number of single member LLCs formed since the decision and then compared those who the person is, which you find out in the single member, there's a way to check whether they were right prior to forming that or an employee of someone's business that was paying wages. We could cross-check that, then you would see that somebody who had been an employee covered by an employment thing made the step of becoming an LLC. What would be the term to forgive you of the field? The challenge here is that we're looking at the UI statutes. And under federal law with the UI statutes, we're only allowed to use that information for certain things. And we're not allowed to go into specifics for individuals if it's going to go into a public forum. So this is a challenge. This actually relates to one of the other challenges we talked about last year, which is the department publicizing more of its penalties. The UI restrictions are particularly difficult on this. So I think under federal laws, I read it. I'm not sure we can get that information at an individual level to then marry up to the LLCs. I think you can get information on the raw numbers of LLCs, but marrying it up. Could the department get that information and not release any names? Just saying we found 25 people fell into this category. I would have to defer to the department on that. But I would be concerned about whether they could even do that under state and federal confidentiality laws here. And the state laws largely mirror the federal confidentiality requirements, where they can share individualized data for purposes of things like food stamps, but for purposes of research, I think the data has to be shared in an anonymized block. But that's a risk? But what I think I'm saying is that when you have an anonymized block, it's hard to tell which members of that anonymized block from 2016 or 2017 formed an LLC in 2018. You'd have to track that. You'd have to de-anonymize it in order to do that, because you're linking the LLC to an individual, but you don't know. So you're saying that even though they're keeping that confidential, the names of the people, they're just trying to find out for themselves, let's say, how many people are thinking of that in the law. They can't even try and find out how many people are thinking of that in the new law, keeping themself. I have concerns. I mean, I'll defer to the department who deals with this more, but based on what I've developed from my reading of the federal law, I think that you're skating into an area where you're probably crossing that line. I mean, I'd be willing to put some language in here to the extent not inconsistent with federal law. We should do this. Yeah. That would be interesting. It's a serious policy question, and we need to get some facts. I think it's talking about an issue of misclassification, and there are people who are clearly employees. And just by changing, I mean, the Supreme Court said in their decision that this is an anomaly, that we're in this situation from 50 years ago. We wrote a law that talked about individuals, and we have to decide this way. But it goes against the concept of whether a person's an independent contractor or misclassified. So all we're trying to do is get some information as to how prevalent it is that people took advantage of this legal loophole. So I could certainly draft something that says get the information. And you'd likely want to change this, so it's not just since Borvo, but in the five years before and then since. You can actually see a trend on LLC registrations. And then to the extent possible and consistent with federal and state law, the department can try to determine. But my one concern is that for that portion of the report, you'll end up getting a paragraph back that explains why they weren't able to do it for purposes of the law. I can't testify for the department, though. This is just my understanding of the laws, that their restrictions here are pretty extensive. I'm really interested in understanding the scope of the problem. And so I think getting data on how many single member LLCs have been formed in the last however many years makes a lot of sense. And seeing if there was a huge spike, there might be tax reasons that there was a huge spike separate from this issue. And so once we have that data, I think we might have to drill down. But I think understanding why someone might start a single member LLC is going to be even interviewing each person individually, which I don't think is possible. But even if we did that, the answers people might give on that issue could range wildly from what even their original motivations were and how they see those motivations today. So it strikes me as methodologically possible to get that particular data. But I think stopping at the idea of asking about how many following the decision that formed a single member LLC and going back in time is a great start or even a midpoint of this conversation. So I wonder if we could sort of meet in the middle there with that understanding that piece of data and then going from there. So I can redraft that portion to address that issue. With the first half of this, you can certainly leave that in there. My only note would be that this is also something I can do through an individual research request. If you put it in statute, I'll prepare a nice formal report for you with a cover sheet and all of that. So we can do this now. You could do subsection A just by literally sending me an email. And then I put in a research request and we talk about when you need the data. This whole conversation highlights the fact that, in my opinion, a lot of this stuff needs testimony also. It would be helpful to have more testimony on the outside. And with the thing in doing writing a letter for the committee, I don't have a hard time figuring out why we actually need this to be in the conference. Well, let's put it on hold for now and see if we can figure out a solution here. I appreciate the comment you made. I'm not sure we can do a little better in terms of at least figuring whether the people that we identify as signing up for an LLC within some period of time right before that were considered wage earners under the unemployment law before they became established. That would be another factor to say that they'd taken advantage of the decision. Because when this decision came down, when this decision came down, there was a lot of talk in the business community saying, well, now we don't have to worry about the specification anymore. We'll just tell our employees, sign up for an LLC, and we don't have to pay them. And this is people that they wouldn't even have considered as independent contractors. Because it was clear they were working full time for them, and we're in the control. So it's an oddball. It's a kind of a weird decision. I think most people would agree by reading this really, based on the technicality of the way the statute was worded. Even the department was in the courts arguing against the decision. So let's talk among ourselves, and maybe with you guys, and we'll figure out what you do with the section. The only section I see in here is the difference of year. Right, and effective dates there. And the effective dates there. So the Senate has a July 1, 2024 sunset for the AG enforcement provisions. The House has July 1, 2025. Well, and in keeping with the pattern, I guess the real choice here is between not those two dates, but two dates of year later. Right, so it'll be July 1, 2025, and July 1, 2026 would be the two sunset options, based on your current positions. I just want to speak a bit about this. I think it's on January 1, 2026. Well, what time of year is it? It's on August 29. So is there any reason why I can't do it? Just split the difference into January? January? Let's just do earlier rather than later. Well, I think you want to be careful, because you're eliminating those task force. You're eliminating the AG. If we find that this is something that's working after we get the report, and if we put it in January, we're actually going to have to deal with it a year before. OK. So I'm thinking that. So what are these two dates? So it's discontinuing the task force and discontinuing it. Yeah, so basically the Senate position right now is a five year sunset, and the House is a six year sunset on it for the AG enforcement piece. So the rest of it, it's really only the first 10 sections or so. I prefer the House position. So we'll talk to Amy before. Yeah, we'll talk among ourselves. Sure. I'll talk to you guys and on that list. I can tell you now that our response is going to be to essentially just clean up, you know, take out the sections that are no longer needed, because they've already passed the rules, or the motion that is gone, and move the dates, you know, update the dates. That was going to be our response. So we'll start there, and then you work on here. And I'll add the language that Cameron highlighted for you. Oh yeah, I'm going to sustain. And then really that is just the only question is the former section 25 of the Senate bill. Right, right. And Amy, you were saying you could do all of that without the exception of the... I can get all of this done. I've already updated the dates. You've done it. No, I'm sorry. I'm sorry. Any in section 25, you could do all of A and half of B. No, I can do A. You can do... I think I would say that it probably makes sense either for the LLC data, ask for it directly from the Secretary of State, or if you're looking for some sort of review, ask for it through the DOL, because I don't have access to that data. And so if they're going to look for any gaps in their confidentiality rule, where they might be able to share anonymized information, I don't have any access to that confidential information, so you don't want to do that through me, because the response will be... It's illegal for us to share that information with you. But you're saying A you can do without statute. That's what I wanted to say. A I could do... Yeah, you don't need to put that in the bill for me to be able to do it. If you put it in the bill, the only difference if you put it in the bill is I'll prepare a formal report rather than an informal memo. There are some other reasons to highlight it publicly. Right. And so I mean... I'd say there are other reasons to highlight something, those concerns publicly. I think that we want to make sure that going forward, we are not encouraging any further opportunities for misclassification. Is that our objective? So the more we highlight areas that are full of concern, that doesn't bother us. So just to move it along, I would ask the department if you could get us any endowment, any statute that would prohibit you from... We got a list of 500 LLCs that were just formed in this period of time with the names of those people. You can't look at those names and say of those names, 40 of them were wage earners covered by UI before they... Without any names whatsoever. And if you can show us that you can't do it, then we don't even really need to put in to the extent permissible by law. But if you can do that, it would help us know the extent that people are playing that decision. Thank you. And then do either of you have to ask Secretary of State for that information because I think it would be good to have. We'll figure out how to... Maybe I just want to know if it's legal first. Oh, well, there's that. I think we were in agreement that we should get the first part of the information. The first part. Good morning, committee. We're on the record. Good morning, Mr. Chair. Good morning, Mike. Thank you. So, before we get started, I just want to apologize to the committee and to everybody on the sideline who expected us to start taking a step to nine o'clock. We had a conference committee meeting on S-108 that hold over from last year. I didn't anticipate that we were going to do a full-blown walkthrough of the bill again. I didn't realize the Senate hadn't done that. The House had done that already. And it was an expectation that we were here to sign off on it. So, I'm very anticipating to go on an extra 35 minutes on that. So, it's my apologies. So, we're here to begin looking at H-641. So, David has just prepared a little summary for us, and then we'll continue on the testimony from there. So, David will be... Sure. ...get us rolling. So, good morning. I'm David Hall, Legislative Council. So, the bill that we're discussing as introduced is H-641. And that is an act relating to promoting... I forget the technology, economic development. Ish. The point is, here's what's relevant. Since that bill was introduced, there were a lot of bills this year given the deadlines that were advanced. Some work continued to happen after the introduction. So, what we would be working from this morning is actually a draft strike-all amendment to that bill, which is posted. And in the biggest possible picture, the bill proposes a couple of things. One is a change in the veggie program that would allow incentives to be basically awarded in the form of a loan, and then some details go along with that. And then the other part is some changes from this Think Vermont Innovation Initiative within the Agency of Commerce. So, rather than going through word by word and point by point what all the nuance is because there's a lot, my role here to be helpful to you would be to orient you on what we have now, how things sort of work, where they exist, where they live, and then I will allow the proponents of these proposals to offer to you what their recommendations would be. So, if that's acceptable to you, that's how I would propose a procedure. All right. So, a couple of things. I prepared this summary regarding a lot of the acronym-based programs that might be involved in H641, specifically veggie, vebsie, VEDA, and what those mean, how they work. So, I know a lot of you, to some of you this is maybe refresher, some of you it may be new, but the first thing here, the Vermont Employment Growth and Center Program, which would be the basis of the first part of the bill, veggie and vebsie. So, while veggie is the program, remember that vebsie is the council that oversees that program and oversees TIFFS, right? So, vebsie, it's an 11-member board. Nine of those members are appointed by the governor based on certain criteria. There's one House member, there's one Senate member. Vebsie oversees veggie and TIFFS, right? And also, vebsie maintains the cost-benefit model, which was developed many years ago, has been tweaked from time to time, but it's kind of like that black box where we put all the inputs and it spits out all the outputs and helps us figure out the value of things like incentives and TIFFS investments. It's an important aspect of the program. So, that's vebsie. I just wanted to talk about the veggie program, how incentives work. I've tried to distill this down to six steps, and it's pretty complicated. There are a lot of people who know a lot more about it. There's a lot more detail, but I want to just go through the basics. So, a veggie incentive, remember, is a direct cash payment to a business that meets certain performance requirements, right? It's not really a grant. It's not really a tax credit. It's an incentive, and it's a cash incentive. And you have to check all the boxes to get paid, okay? What are the boxes? Well, they are new qualifying jobs, new payroll, and or new capital investment, all right? So, basically, the business comes to vebsie, specifies the performance requirements that it aims to achieve each year for up to five award years. So, in a nutshell, I come in to you, your vebsie, I say, in award year 2012, I'm going to create X number of new qualifying jobs. I have this much payroll, and I don't have to, but I can also say, and I'm going to do $10 million in capital investment, okay? Those are my targets. Those are my performance requirements. So, vebsie approves an application, not the incentive, but the application to get into the program if it meets certain criteria, and chief among those, the major pieces of the program are that the benefits to the state outweigh the costs to the state, okay? So, using that cost-benefit model, knowing everything we know from the application, vebsie has to find that this is going to be a net fiscal benefit to the state, right? Otherwise, you're, you know, participating. The other part is this but-for test, which we all know and love, which says that absence but-for this investment to be growth either would not happen at all or it would happen in a significantly different and less desirable manner, right? So, you've got to check those boxes just to get in the door. All right. Now, we don't have to dwell on the details or calculating the value of an incentive, but I've tried to simplify this in formula because it's a little bit complicated. It's not just like, okay, you create five jobs and we'll give you $10,000. That's not how it works, right? You have to come in and first bullet, figure out what that net new growth revenue to the state is. What's our benefit? Let's say it's $10 million. Well, you don't just get $10 million, right? The whole deal here is that the state and the business are going to share the proceeds of this growth, right?  And the most the business would ever get would be 80% of that. Unless it's an enhanced incentive, that's not what you thought. So, after you've got B, the potential share of the net new revenue, you have to do a couple of other calculations. You have to figure out what they call the incentive percentage, which is all of your payroll performance requirements. I mean, your net new revenue divided by your PPRs. You have to calculate qualifying payroll. This is a very important thing. This is payroll performance, but minus background growth, right? The whole theory, maybe you remember this, we've talked about it, is that we don't want to give awards because you're just growing at the rate your business would grow anyway, right? That's background growth. Now, it's a controversy about whether it should be business-specific but the bottom line is, we're trying to factor out and just incentivize new stuff over the background, okay? So, once we figure out that, we calculate the value of the incentive by multiplying D by C, spits out a number, and then here's another really important point. We essentially divide by five. There's some adjustments for when the first year award happens in the application year, but essentially, you don't just get it all at once, right? And you don't get it up front. You get it after you've hit your targets and then you get it in installments. And that's an important thing because that's over five years, right? Okay, so you earn your incentive if, first of all, you maintain the base level. You don't get to dip back down. You have to at least maintain. And then, you have to meter-exceed your payroll performance requirement. That is an absolute trigger, right? You have to add the amount of payroll that you said that you would. And then, you also either need to hit the jobs or the capital investment. It could be both. You could pitch both. You don't have to, but it's payroll plus one of those things. And that's for each award year. All right. Well, so how do you get paid? That's all the front end. The back end, actually, is at the Department of Taxes. Okay? So this is a two-part dance, first council all the way to the point of April 30th, and we go to tax. We submit a claim to them annually. You have to do it annually, whether you made it or not. You have to tell them how things went. And if tax fines that you've hit all the targets, then you get paid. Incentive payments are made directly in cash. Business gets a payment worth 20% of the total incentive each year for five years, provided to earn the incentive and maintenance growth. And then remember that the total possible time frame here because of that tail is actually nine years possible. So if I came to you again, I said, award year one, this, to this, award year three years or four and five. And I hit my targets in five and I maintain. I'm going to get paid for the four years after award year five. So we could be in this relationship for a long time, right? I'm not going to spend a lot of time on recapture, reduction and repayment because it's pretty technical about what happens and what happens if something bad happens.  Or they can reduce the amount of your award if you didn't make as much capital investment as you said you would. And you could be required to pay the state that. That's at least possible. They have the authority. There is an annual reporting requirement. There is a confidentiality piece about proprietary business information. We don't need to get into that. There are a couple of enhanced incentives. You have worked on this. You may remember if you're in a qualifying labor market area, you can get a little more benefit. And then there's also green veggie. In that sector, you can get a little more benefit. Lastly, and this is important, is the annual program cap. So you may be curious, why is there a cap if we are just incentivizing growth that never would have happened anyway? There's no actual cost to the state, so why do we even limit? Well, I think from the very beginning there has been just because people are worried about authorizing payments that exceed a certain amount. So right now in statute, there are, for each calendar year, we have this bifurcated system. The max in the calendar year that Vepsie can approve is $15 million initially. And then it's only $10 million for final approval. So if application kind of happens in phases, and you come in the door and you get the initial approval, they can do up to $15 million. But the final sign off though is limited to 10. Calendar year, first come, first served. And if it looks like you're going to go over that cap, then the council has to go to the governor and say it looks like we could go over the cap this year. We've had a lot of growth. We would like to bump up that final approval cap from 10 up to as much as $15 million. That approval is by the Joint Fiscal Committee, not by the governor. And the Joint Fiscal Committee can request and receive whatever documents and information materials it needs to find that increasing the cap would be a net benefit these days. Okay? So that's veggie. And you order VEDA. Before I go further to VEDA, any veggie questions, any Vepsie questions? Yeah. How long has this program been in existence? I don't actually know. Because before it was Vepsie, it was EATI and I was even longer ago, so I don't know the total. 15, 20 years? Do you know if anybody has succeeded? Oh yes, definitely. And Vepsie does a great annual report as tons of information. You don't get business specific stuff. You could aggregate data, but it tells you basically how many applications, how many new jobs, what the total outcome was, new growth, new revenue, new investment. So yes, if success is have people gone through the program, hit the targets and receive payments, then yes, it has been successful. It's a rebate after you hit the targets. Is it a cash-based performance incentive? It's not a tax credit because that's what the original one was. It's not a tax credit. It's a rebate. You need the requirements to get money back. Well, so I'm hesitant to accept the term rebate because rebate means you paid something and then you got part of it back. And the only basis for payment here is that you hit business targets that you have specified in an application. So it's completely independent of your other relationships to the state, to taxes, to anything else. It's solely dependent on what was in your application for targets and did you meet the targets? Okay, my understanding, David, is that you have to prove you paid the payroll taxes. Those are to the state. So those are, I don't know if it's income or unemployment or whatever your state payroll tax usually is. This is my understanding. Sure. Okay, I could be wrong.  And then once you hit those markers, then they would rebate back to whatever percentage. Sure, fair enough. Yes, the new payroll is the single most deciding criteria. There are others, but yes, tax department has that information. Did you add these people to your payroll? Did you meet that target? Did you go from 1.2 million to 1.6 million employee payroll? And I think some of the difficulty of tracking that is one of the reasons why we're here talking about a new proposal. Yeah. We'll hear from tax about that. Yeah. Okay. So... Emily? Sorry.  The calculation process. Mm-hmm. Do you have a sense of the origins of that? The substance of it. How 20% was chosen? Sure, fair enough. Well, look, here's my understanding. There was an EATI. People got really upset that people were getting incentives without proving growth. Tom Kovett and Sue Messner and a few other people sat around their room and came up with a formula and a model for a cost benefit and spat out what used to be in statute. A few years ago, we rewrote this chapter to go through methodically step by step, and here we are today. Thank you. Yeah. The issue with the original EATI was the clawback issue. Mm-hmm. Trying to get the money back after it's been paid and they didn't perform. Yes. That was a big issue. That was a tax threat. So, um, I'm going to switch over to Vita. It's shorter. There's less because Vita does a lot more and there's more people here that are more knowledgeable about what they do. But the reason that I wanted to just speak briefly and orient you in that universe is because Vita is a different theme, right? So where we have Vepsi, we have this council that oversees these problems and do tips and incentives based on cost benefit, et cetera. Vita is a lender, right? Vita was created by the state. It is a public instrumentality. It has a CEO and officers and loan officers and lots of employees in a beautiful building and it operates in tandem with banks and then separately to make loans to businesses for different purposes, right? It is typically, I mean, you know, if you've spent the many years that I have listening to Joe and then others talk about Vita, they operate separately from the state. They don't get all their general funds. They're not an agency. They are in operation to themselves. Now, they do have the backing of the state to the extent that it is authorized, at least by statute, to issue bonds and those could be of different kinds. And there is some moral obligation of the state implicated by the amount of outstanding bonds and the amount of outstanding loans of Vita issues. And that is still capped by statute, what the outstanding amounts can be. There have been movements in years past to eliminate those because of Vita's independence and to give it more flexibility in its self-autonomy and underwriting. So far, there still is that nexus to the state. However, Vita is Vita. Vita is not part of ACCD. Vita is not part of Pepsi. Pepsi is not part of Vita. So they are separate fees. And they have lots of different programs and I'm sure you'll hear a whole lot more about it, but everything from commercial financing to energy loans, infrastructure, brown fields, wastewater improvements, agricultural loans. Vita was authorized by statute to create a non-profit for emerging technologies since we had V-SET, which operates in Burlington. So that's a separate animal. Now, why is that relevant? Because in 8641, the proposal so far is essentially to thread into the veggie program an incentive that could be a loan from Vita which may be forgiven over a matter of time if you hit your targets or if you don't, you have to pay them back. And so at the biggest possible level, that's why these two institutions are being married in this bill. So that's all I'm going to say about those first parts. The second part is this Think Vermont Innovation Initiative. And I'm bringing you to Act 197 of 2018 because there already is a Think Vermont Innovation Initiative and I frankly haven't had time to chat with folks about whether this new proposal is supposed to be part of that or replace it. I have drafted it so that the old is repealed and the new is something new. And that's something you're all going to work out with the proponents of the measure, but I wanted to at least explain to you what there is now so you'll know the difference between that and what is new. So brushing off the dust, it's been a couple of years now. You created in session law, so this is not a codified permanent program necessarily. I mean it's law, but I don't know if it was intended to be permanent because it's in the white books, not the green books. And there was only a one-time appropriation to it. There was this Innovation, Think Vermont Innovation Initiative created to respond to growth needs of small businesses with 20 or fewer employees by funding innovative strategies that accelerate small business growth and meet project criteria specified here. It would enable the state to invest in projects with grants that can be accessed more quickly and with fewer restrictions than traditional federal initiatives. So this is short. The process commerce in consultation with VEBSI would adopt a schedule and process for getting grant proposals on a competitive basis, distribute grants across geographic areas of the state and distribute grants across diverse industry sectors and business types. Grants would only be for one fiscal year and you can't get one for more than two fiscal years with a single recipient. So the funding, the matching requirements, the Secretary had to require that a grant recipient provide a matching grant one-to-one and then the eligibility criteria are here. You have to provide workforce training recruitment that's otherwise not eligible for some sort of state or federal program and that serves an immediate employer need to fill job vacancies to establish or enhance a facility that attracts small companies, remote workers, et cetera. Remember, this is in the remote worker bill. Enable or support deployment of broadband. Leverage economic development funding outside state government such as new market tax credits programs, small business innovation grants. Support growth in the aerospace aviation or aviation technology sectors. You may remember how this made its way in or provide technical assistance to support small business growth and the head have outcomes and measures. The last thing I wanted to show you in the money piece there was here to $150,000 appropriated for this purpose. So that's what's essentially on the books since 2018. Flexible grant program requiring a one-to-one match for certain purposes. I think I can stop there and if unless you have questions now, get out of the way. Thank you, David. Very helpful. Good morning. Thank you so much for having me in, Mr. Chair and committee. It was wonderful to see you all again this year. So last year, did you want to... A quizzical look for my commission. So last year we came in with some suggestions on some changes to the veggie program that led to some really great discussion. Those changes came out of a report in study that had been done in 2017. So we spent a lot of time talking about were those the best ways to implement the outcomes that we were looking for. We went back to the drawing board in this season and spoke with some economists, did some research, and have tried to come back with something that maybe could achieve those outcomes that we were looking for, but in a different way that mitigates some of the risk that was of concern last year. And so what I'd first like to talk about is the convertible loan program that we're proposing in partnership with VEDA. So we can go through the language or can just sort of talk about more of the impetus. But I guess I'll start with how we got here. So we've seen that about 72% of veggie applicants have under 100 employees at the time of application. When we look at the completed, those that have finished in the program, those tend to be Green Mountain Coffee Roasters, dealer.com, some of our more robust businesses. Now, at the time of application, a lot of those businesses were smaller and grew quickly, but we're looking at how do we help our smaller businesses be successful. And we did some research from the work of Timothy Bartik, who I know that the state auditor has talked about his work and I was introduced to his work through the state auditor and I appreciate that because I learned a great deal from reading that. And in his most recent book, he talks about how can policymakers really make incentives work better. And the first thing he talks about is upfront payments. And I think this is especially true for our small businesses. The $5 upfront has a much greater value than if it's paid out over nine years. Now, the nine years payout has been put in place to really protect the state. And so we're looking at this partnership with Vita as a way to continue to protect the state. So the idea is that a business with under 100 employees would still apply to VEXE. There would still be mandatory criteria that have been put in place but that they would also, if approved by VEXE, be able to apply to Vita for what we're calling a convertible loan. So the incentive value that's run through the model that David discussed before would be the maximum incentive that could be authorized. And that would be done through Vita as a loan with three years without payment. At the end of those three years, if the targets that were set were made and that would be verified by Vita and by the tax department, that loan would be converted into a grant. So those incentive dollars, instead of being paid out from the tax department to the business, would be lent to the business from Vita and tax department would pay Vita if the targets have been met, if those benefits have been realized by the state. Megan, are you using the same criteria to evaluate as you are now? Or is there a thought of changing? There's a few other changes. So that's sort of the structure of how it worked. So some of the other changes we've looked at is nine years too much, too long for a small business to be able to project how their growth is going to be. And I think where a business terminates and that's not to say they aren't successful because they may meet their first year targets and second year targets and third year targets. They've created the benefit and they've received the incentive for those targets. But year four and year five, they may not be able to project out too. Doing nine years worth of a projection for a small business can be difficult. So one of the changes we're suggesting is making this a three year. So the max, you're looking at three years of what your growth would be and that's based on three years worth of benefit to the state. So it would be a smaller dollar value. Just for this program. Right. It's not a suggestion to change that. Right, it's for this program we're looking at that three by three rather than five by five. In addition, the labor market in Vermont is tight. It's hard to find employees. And so one of the conversations we had with Mr. Bartik was about, you know, what is the value the state is looking for? It's new jobs or increased wages. So we've, for this program, we've taken out our heads up and really focused on payroll increase. And if that payroll increase is found through new jobs, that's a benefit to the state. If that payroll increase is found through wage increases to existing employees and the tax department can talk about how they can base that on average wage so it's not just our CEOs are getting huge bonuses but on the average wage, then that's also a benefit to the state. And that investments and capital investments, so if you're looking at meeting market growth demands and you know that you're not going to be able to find 100 production employees in Vermont, you may post 100 production employment jobs in the newspaper and everywhere else you can but you're going to fill 10 of those. If you can invest in machinery equipment that creates the productivity that you need and instead are able to create 10 higher wage, higher skill level technician jobs or upgrade the skills of your current employees, then that will allow that business to remain in Vermont and not have to look elsewhere where there is a much larger unemployment rate and workforce availability. So this program would focus on the capital investment and have a payroll growth mandate of minimum. Now, again, the incentive is based on the target so there was a minimum of what they would have to target but they could go about that to get the incentive they're looking for. If a company meets their payroll target, then they're eligible to have the loan converted and the conversion of the loan would be to the percentage of the capital investment they made. So if they said we're going to make a million dollars of capital investment and they made $750,000, of that 75% of the loan would be converted and 25% would be a traditional loan that VEDA has underwritten and would have the terms already arranged of how that repayment would come. And the benefit to that is also that the business now knows what their repayment schedule is and it's not a 30 days you have to pay us $250,000. It's a more reasonable repayment and I think small business or smaller medium sized businesses are also more likely to be taking on debt for capital investments. It's not something they're going to capitalize on their own. So they're willing to carry that debt. We do have some businesses who would like to testify about this program and the benefit that it could do. So hopefully we can arrange that sometime. One of them is Hermit Tushbury and Brattleboro who are capital intensive businesses. They would not apply for the current veggie program because of the nine year payout and they can't make this project go but for that because they need capital up front. A program like this would be an exciting opportunity for them to move forward with an expansion that they've been thinking about for years. So they'd like to come and talk about that. Clarification question and then another global question. So let me know if I heard you correctly. If the loan recipient fulfills all the qualifications within the three years, their loan is converted into a grant for 75% or 75% is converting a new grant in 25 Cedars loans? Sorry. So the conversion is based on the capital investment, the percentage. So if they met their capital investment goals, they met their payroll goals, the entire loan would be converted into a grant. If they only met a certain percentage of their capital investment, it would be that percentage that was converted. So the payroll qualification, the payroll target would have to be met. And that's, you know, we're looking at, that's really the benefit to the state is either new jobs or increased wages. And the second question I have was, so we went from, I understand that going from nine years is difficult for small businesses in terms of planning. And so how did we come up with three years? We're looking at, you know, where, where do we see the fall off happening? Where's, in the current program, it's not an immediate drop-off. And we do see that folks have success in a few years of targets. But you have to meet and maintain for four years. So you meet it year one, you maintain it for four years. And year two, you meet it year two, you maintain it for four years. By drop-off you mean people that you've given funds to and then they kind of fail? Well, they haven't, we haven't given them funds yet. So it's where they're saying in year four, three years ago we projected this, things have changed, you know, and we're not going to meet that target. Or we expected to do this larger capital investment, and we're going to do a portion of it, but we're not going to do all of it. So, you know, again, I think we used the word terminated. That should not be correlated with not being successful, because if we're looking at, you know, one year of an award, two year, the second year of an award, and it really is broken out that way, that there is success in a few years. But I think in order, you know, if we're looking at how do we make an upfront payment work best for a small business and protect the state, limiting it to a term that we've seen more of the success happening. Just a quick question. So that three year moratorium, is that where the business is sort of plateau? And that's why you've limited it to three years? Three years, right? Well, that's, I mean, I think that's where we're seeing that that's where they're able to meet what they were projecting. It's sometimes it's, you know, they have this, what they're projecting and then they find incredible success and blow it out of the water. But, you know, I think with a small business, we have to look at what's a reasonable business cycle. And I'm just, this is all... Give us some examples of success. Of success that have completed? Yeah. Businesses. Yes. Well, so, I can give aggregate data about numbers of jobs created, but not business specific of jobs created. Of our completed projects, myelin technologies in St. Albans has completed, revision ballistics has completed, and completed would mean that they have met all of their targets for each year that they set targets. Dealer.com, Green Mountain Coffee Roasters, Commonwealth Yogurt, Albany College of Pharmacy, Vermont College of Fine Arts, and Green Mountain Coffee Roasters, the second award have all completed. Now, because this is a nine-year program that started in 2007, we'll expect more completions to come through. There are 53 in total active and complete businesses, so there are businesses who are in the active cycle of the program that I think we're expecting a few to complete this year. Sure. One, the great overview that you just gave us when you started. Do you have that written down somewhere? We do have a white paper. Okay, great. Do we have that already? And I just... Just respond. Thanks. In one of your reports or perhaps in the white paper, is there data on sort of the number of businesses that drop off at each number of years? We can get you that. Okay, that would be great too. Thank you. And then I assume we're going to get into more details about the targets around wage increases. Yes, right. And then we go deeper on this. Or do you want to talk? Whatever you'd like. I'll wait on that. Okay. Because we're going to spend weeks and weeks on this. Weeks and weeks. Okay. I have a feeling. I think the number of the people in the room and how long you spend on something is not a direct report. I'm curious about the cost of administering that 2080 split that David went through at the beginning. And I'm curious about the cost of administering these programs and how much of that 20% this takes up. So thinking about the time of the tax department, your time, council's time, all of that. How much of the cost of administering those programs lines up with the amount that we are sort of as a state coup then? I can see if I have that figure in our annual report of what the total, if we don't have it in the report, I think we can pull what the, that 20% benefit would be for everyone that's been. Thank you. But we do. I think the tax department has one full-time employee who works on this. And Betsy has myself. Who work on this. And then the council's not stipending it. The council, eight of our members receive a $50 a day stipend. And the day is when they're at the meeting not for the work that's done in advance. I'm not sure how the House thinks. The legislators get nothing. That's right. How do you get expenses? You don't get expenses? No. I give you a thank you. That's only two of them. That's only two of them. And the last question is about the size of the businesses. We talk about small businesses and I know that small businesses and sort of a national economics framework is very different from how we actually think about small businesses on casually. And 100, less than 100 employees still seems very, very large to me by Vermont standards. And we've talked about this before. And so I'm curious about if you have a sense of the focus here is really like the 75 to 100 employees or if we're really going to be getting at the businesses that have less than 30 and if you have projections of what the kinds of businesses that would be able to access this. I mean we have the data on who's applied to veggie or who's active, what the size of the businesses are. I think a lot of the concern last year was around the mitigation of risk. I'm not sure. I came up as much in this committee as it did in some of our Senate conversations about the risk to the state and so the importance of having Vita as a partner to underwrite and having a secure interest. If we're talking about micro businesses the risk is higher. And I think when we're looking at what size of the business that's going to scale and the cost benefit model really looks at scalability of the business that whether it's 20 employees or 60 employees scaling is still where this will be and I think I would say anecdotally at this point though we can certainly do more research on when a business has the capital in hand to be able to do the capital investments rather than needing to take on debt to do that and so in a incentive like this be more attractive to work as an incentive for those dollars to really make a difference and to be willing to take on debt there may be businesses who could participate in this and say I don't want to carry the debt on my books I'd rather look at the other look at veggie and we are looking at this as a pilot program that would be an alternative to veggie so you could do both you would have to sort of pick a lane and the other part to that is because we're trying to mitigate the risk if Vita says this company is not someone that we'd be comfortable underwriting then they could apply for the traditional veggie and I guess I was thinking more about a business like Hermit Thrush that I'm not sure if they were being if they were offered veggie and sort of discouraged from even applying at the RDC level and if there's maybe a lot of small businesses that have sort of been discouraged from veggie because it doesn't make sense given how small they are and what the risk would be and so they'd be sort of we have a large supply of sort of smaller businesses who would be interested in this and weren't interested in veggie I'm just trying to understand what the landscape actually looks like for who's going to be accessing this I think Hermit Thrush will be able to speak for themselves but they have not been discouraged certainly I think the RDC is excited about the possibility of this project and has been for years because it's a project that's been talked about and it's so the business has been the one saying you know we don't we need the capital up front and that's why they're looking at this as an alternative that could be really beneficial to them rather than that I think there are potentially some small businesses who do see the administrative load that comes with the veggie program filing a claim for nine years there's a lot of workbooks that take place and if you don't have all of the employees to support that looking at this program would also lessen the administrative side for the business would also lessen the administrative side on the tax department to talk about what that looks like for them but there's a lot of administration that goes into the nine years of claims that is outside of the FCS so we have oversight of authorization of the veggie program but we don't have oversight there's the entire life it's with us for six months to a year and then it's the tax department for nine years really changing the subject I know access to capital is going to be really hard for cannabis businesses and I'm wondering if cannabis businesses will be eligible for this that is a conversation that I think in terms of the traditional veggie if if the business is operating within state law we don't have any federal in our traditional veggie there's no federal oversight there's no federal money involved so that a cannabis business in theory would be able to apply if they can say yes we comply with state laws but they don't have to make it big just VEDA but VEDA would have a problem so in this program we have to VEDA has the underwriting authority but in terms of VEPSI's role and we've had some conversation with them about cannabis producers and but that's where we're at in terms of what the state law allows now federal law yeah I touched on it a little bit out of just the cost administrative costs of the state there's also a cost to the businesses to do this my understanding is that there's a lot of work that goes into it for a company to be able to explain it better than I do whether it's individual positions or if it's individual salaries but my understanding is that one of the reasons we have big companies do it is because they've got the land power and the ability to learn all technical expertise small businesses don't and even if they wanted to some of them would choose not to do it because it's just way too much for them to take on so there is a lot so this program is the only program that as I understand it the tax department has 100% verification of they verify every claim that comes in and the claims can get complicated because there are grace periods if you miss the first year target you have time to make up for it but then you've got your two targets so it gets complicated the business has to submit who their qualifying employees are what their wages are are they receiving benefits with the non-qualifying employees are what their capital investments have been and there is an individual at the tax department who I frequently hear from businesses is their absolute favorite state employee because he spends a great deal of time talking whether it is a large business very small business talking how to do this both the first year that someone is participating in the program he has a conversation with every business about how to file a claim and then throughout the process when he's reviewing claims having conversations about what was submitted and what he's seen verifying against what was submitted for W-tubes so it is complicated but they get a lot of assistance as needed in order to get through that process but they have to submit the names of the employees wages of the employees social security numbers if your goal is 10 employees or 10 positions and you've hired for 10 positions and 3 people left and then you hired 4 more people and 2 people left then it gets complicated and the first question is what for would that be applied to this program it would be we've looked at are there other ways and it would still be in there and that's why we would have the mandatory payroll increase similar to why we have the background of calculation and the traditional veggie and my understanding from Jeff Carr I wasn't here at the time is that that was the specific reason for putting background growth and is that the council has been selected because of their qualifications in business and in industry and representing various areas of the state to look at the but for claims and documentation background growth was added as there is no crystal ball we put background growth saying we're not going to incentivize what this expected growth could be for the industry anyways it was sort of the 2,000 suspenders I think you were about to get into this before we started questioning so I apologize from what I can read here and correct me if I'm wrong so the part of some of the changes are based on payroll and not headcount for criteria for determining success or whatever but it's based on so the payroll it has to it has to increase by at least the annual increase in the employee cost index on the initial 3 years so I guess in relation to the but for if it feels like it would be difficult to determine if the program is if the loan was necessary if somebody is just meeting what the regular requirements of business growth would be not requirements but there would still be the but for of saying you know what is why are you saying this incentive is necessary so we still have that provision in so whether it's that they're going to show that they they just can't in order to make these investments in order to grow or it's we're being courted by other states we're looking at other states or we're just not we're not going to do this quickly the but for I think it's important to remember that it's twofold it's not just but for this we wouldn't do this in Vermont the but for is but for this incentive we wouldn't do this project or would do it in a significantly less desirable manner for the state but I I'm curious but again it's that I mean the but for we can't it's too difficult to quantify and that's the challenge but if we're not having we're not starting at a place of going above and beyond sort of what the reasonable expectations for a certain sector or business is then at that point it almost feels like we're just and especially for small businesses and we're just picking and choosing who's successful I know that's not what we're trying to do here but it was just to get to the same levels what other businesses would be doing in this industry except in this case the state is contributing towards their success well it wouldn't it would be the incentive is considered after that but I think there's an out front piece of this right but the and how do we and how we calculate what the incentive will be is it's after that sort of similar to background growth rate but we're looking at UCI this came at a suggestion from Jeff Carr and we've had tax do an initial look at you know is this a good measure because it is a national measure it takes we're hoping some of the constructive criticism away from background growth or response to that but you can't be growing under that you have to grow at least that the expectation what we would see because you still need to benefit the state you still have to show a net benefit in the cost benefit model so if you hit the minimum and you're not doing much investment you're not going to see an incentive so looking at what's a good starting point I think we're open to the conversation of what makes sense but that's our starting point one of the things that I've been frustrated with getting this sort of message out in particular last year our workforce development which would allow people to collect unemployment while they're getting certification so my question for you is especially with the small employers of under 30 that Emily mentioned have you ever thought about taking the show on the road and going to I have thought about it because they're thinking about the micro breweries in the southern part of the state they're popping up all over yes we've been talking I think we've been having more and more conversations with our regional development corporations or Goldstein and I have gone instead of just talking to the directors of the regional development corporations actually going out and talking to their board and visiting with some businesses I think that's something we'd like to do more of candidly in addition to Veggie Vepsi also covers TIFF TIFF was in the news somewhat in the last year so that took some time some concentration you know it's reaching out to potential small businesses of 30 or less and I've shared our white paper with the Small Business Development Center director on this program talk to the director there and I think part of the conversation is the assistance that small businesses need in navigating the program and and making sure that the correct information is also out I've heard from some folks who have said we haven't moved forward with the project but I'm not going to leave the state well we don't want you to leave the state we don't have to threaten to leave the state we don't want to leave things up but if there's a way to get this project if you know the state is going to reinvest in you some of the revenue that you are creating would that help get this project to us and if it would help get this project to us then this program may be good fit to you so the marketing, getting the word out there is something that we certainly are trying to figure out how to spend more time doing it okay the veggie program costs the state money that's the risk because you give cash payment back when they qualify and all the criteria is met this would not necessarily be money from the state it would be a loan forgiveness from beta so what's the risk to the state revenue to the state departments if beta is the one would we transfer to beta we are asking for an appropriation for this program which we don't have for the veggie program that would go towards loan loss reserve fees interest rate buy down so that appropriation would go directly to beta so that's the states and beta having a security just in order to if there was a default in order to the tax department would still be doing the same administrative work the tax department would be doing less administrative work because we'd be looking at payroll increase based on the average wage increase rather than doing a full-on headcount means a full-on check every person so this would be more cost-effective more tax department I don't want to speak for them believe that would be an outcome thank you Megan we're all alone in a place today sorry it's us it might be best for you to start thinking about letting Megan finish and then that way we can get go completely through what she wants to tell us and then we can start digging into language and then figuring out the works for this whole time after my question starting next starting next and I guess it kind of plays off what you were saying that time was focused on the mitigation risk and I was thinking about the failure of the business to meet the requirements and then obligated to pay to be that amount I was curious what happens in the case that the business failed to meet those requirements because it's not a good business model and then they fail and declare bankruptcy how is what happens to us at that point the loan amounts that we've already given to them so we'll Vita would have the security interest and maybe I can let Cassie yeah no so I think those thoughts Cassie is going to come out and testify too so let's wait until she comes up so we can understand what Vita's role will be we can have that discussion with Vita and Emily so this is probably a good point to take a break and so committee back here at 11 please be prompt and we'll continue on continuing our discussion with Megan alright before I go back into this just going to make a quick pitch that the council members from the Verona Economic Progress Council will be coming to the state house tomorrow for lunch and we would love for you all to stop by and get to meet the members of the council in the cafeteria I think we're going to get there around 1145 and we'll be there until about one I will have cookies available either homemade or doing some really great downtown economic development by purchasing them from someone somebody made them cookies better than I do so we'll do our best at 1115 to 1215 we're going to the workforce summit report here downstairs but after that we have lunch and we'll wander up try to meet everybody at some point if it's possible this year and next year we should think about we could bring the council here to sit in with the committee and have a little round table discussion that would be really great I think the council would solve would be excited for that opportunity I think it would be very helpful for this committee and it may be helpful for the committee across the hallway to be able to sit down and understand how the council actually conscience in how it works and who the members are thank you so the second for just before we move on to the second round just to clarify so this is VEDA's in the first program we're talking about the convertible loan it is VEDA's money VEDA's going to the market if the loan is converted they're reimbursed through the tax department if the business fails it is VEDA's money that's why we have the underwriting so it's not the state's money that's at risk here so VEDA will go to the market to provide these loans but they be reimbursed through the tax department so similar to how tax currently pays the business because it would be taxed yes so same sort of withholding account so we're talking about the Vermont incentive investment program this is looking at again the workforce shortage is in the Vermont and the need to invest in capital to stay competitive the program is targeted at companies with over 100 employees who would be making at least $20 million in capital investments that would be the threshold to participate in this program if they breach that criteria and we know that there's 13 out of 14 counties there's at least one business who meets that 100 employee threshold that they could receive an incentive based on a model that's currently being work done by Tom Kovat and Jeff Carr for capital investments $20 million with the criteria that payroll is maintained within 10% of where they are at the time of application and this recognizes that our regionally significant employers are often multi-state or multinational businesses who are making decisions about where they're investing and if they're not investing in Vermont what that means down the line for Vermont is they're ready to expand and add employees or if they're looking at consolidation opportunities Vermont needs to be able to stay competitive with our regionally significant employers to maintain them here and invest in that capital here this program would be run more like a traditional veggie program where they're made as the targets are met and the targets would be around that capital investment something that we had talked about before is that the inclusion of these two new programs within the existing statute language muddies it a little bit it would be nice to separate it out and say these are two new programs pilot programs this is what it looks like it might help us to really just focus on those and combine everything veggie into the same consideration would you agree with that I think so I never want to create more work for David he said he was bored great let's separate it because these are pilot programs and I think the important factor is that these are alternatives to veggie so if a company with 100 employees in one of our in a region is looking at doing capital investments adding employees aren't making 20 million dollars for the investment they're still can apply to veggie but really looking at if you're doing that level of capital investment and there's a decision made of which facility are we going to do this at we want them to make that investment into Vermont because maintaining that level of payroll is not significantly important for the local and state economies just because I know we haven't worked out what the tax benefit is like the incentives we're saying to create this incentive for businesses with over 100 employees invest in more than 20 million dollars in their physical plan and the benefit will be worked out right so like veggie the model statute says that it will use a model that's agreed upon by joint fiscal committee the original model for our veggie was created by Tom Covett and Jeff Carr that would for this new model those same two players are in place looking at how do we model this situation where we're investing in capital in order to maintain regional important companies in the state I don't want to say worry but I hate to kick that can down the road so do you think Jeff Carr and Tom Covett are close to figuring out what they might look like I think they are I think it would be better for us to have those parameters especially if we have to defend it on the house floor and I want to start colleagues to say we really think instead of just trust us we'll go back to you in a few months I know Commissioner Goldstein is working closely especially on this program on the convertible loan I've been doing more legwork on that and I know that we've got we're looking at how of modeling what that incentive would look like for a company and showing the benefit of having that up front loan that can be converted as opposed to the loan payment I know there are communications about what the timeline is to get that this is a loan this is more a loan this is not a loan this is like a traditional cash and senate as targets are met they would receive a cash and senate or not as targets are met as claims are filed and verified can you indicate what section it all looks like it is all intertwined it's everywhere I mean it's throughout the 641 it refers to both programs throughout to talk about in this section this is how this program will work I agree with Charlie I think there should be one piece about the small business another piece to talk about I think the original thought was there are still pieces that pull enough pieces that pull from veggie talking about the mandatory criteria in the process of going to council that the original thought was to weave it in the original thought at the agency level was to weave it in but I agree that it can make it hard to really look at them as individual programs so both of these are pilot programs why do we weave all of this into the statute now instead of creating these two pilot programs to see if they work and then we sunset them so that we come back and have a real conversation on evaluating them and then at that point we would weave them in if they were working again I think the thought was that there was enough similarity there was enough pulling from the veggie statute that to just rewrite all of that in this would have been complicated but that's something we can certainly look at is making them separate pilot programs instead of weaving it into statute I think it may be easier maybe easier I think also are we looking when we look at the cat we are asking for a raise in the cap taking a temporary raise for the pilot project which is yeah instead of a permanent raise in the cap yeah so I think the cap that we have suggested is instead of a $10 million cap it would be a $25 million cap that would include all three programs we once have gone to the emergency board for an increase in our cap so that's not to say we're necessarily expecting to reach the $25 million cap but that we feel comfortable with that and I as it is based on the benefit to the state there I think there are questions about why we need a cap at all if this is based on the net benefit to the state but could you talk about how often VEBSI has come against the cap what percent of the annual cap has been used on a yearly basis and that is in our annual report so 2015 we this is the last page of the statute as well of the bill in front of us 2015 it looks like we needed to go for an increase in 2011 and 2012 we needed to have the increase in the cap so that's the increase between initial and final we can request the increase from $10 million to $15 million yeah that's so in this pilot we're talking about with these two different programs we're talking about an appropriation we're talking about to help VEDA with administering it and potentially loan and administration and the second is really looking at increasing the cap to go along with this program so there would be no appropriations for us with the second program okay everybody clear on that as we're talking about yeah okay I just want to clarify what I thought I heard you say that wages would need to stay stable within 10% does that mean that wages could go down by 10% not wages but payroll would need to stay within 10% so there could be some flux up to 10% in payroll for those that need the criteria of the regionally significant 100 employees or more and $20 million worth of investments exactly on the individual worker but overall payroll correct and there's nothing in there about median wages the way there are in the other programs no this is specifically this is specifically about maintaining our regionally significant employers and the capital investments that are we want to happen in Vermont rather than other states so then those are those losses I know Doug was here earlier but in terms of the ease of calculating that I'm just thinking about the ease of calculating the median wage are we talking medium or average yeah I want to come and talk to us about what it would be good to have tax talk about what their process would be they did identify that they would have a process that would be a lot more identified than what their current process is to identify the median wage and median right because right now you have to employee by employee and this is overall payroll it's just one line I think the immediate thought of okay what would we say you increase payroll talking about the convertible loan program you need to increase payroll what are the immediate reactions how do we know if they're not just going to give the CEOs big bonuses and there they'd increase payroll that doesn't get to now it's good to have more wealth than the state throughout but we want to see workers getting those wage increases so the tax department has identified that they would be able to do that through a median wage a much more simplified process any questions for Megan Megan do you have more information on the second program can you talk about the 10% leeway on each side for payroll again is that well 10% leeway I mean if they went above 10% increase we're not going to they're million dollars their payroll line is a million dollars and they go to 1.1 million that's 1 or you go down to 900,000 I think the key of recapture for this program would be going down you know if they went if they doubled their payroll we're not going to cut them off does that use the median does that also use the median average or whatever you use or is that just everything I think it was the one line that we were looking at I'm a little confused I think the 10% is really about the loss so if that we need to clarify that in the language that that's certainly the intent we're not going to be concerned if they go above sure can you share with the committee some of the businesses that you think might have been able to invest if we could we could be able to invest if this incentive was here to paint a picture for us what this might have looked like and retained employees instead of lost them there's somebody you have in mind a poster child for this type of program so there is a company that we're talking to who may be willing to come in and testify about the opportunity someone that we've met with or even Milton again, Brett Long, Deputy Commissioner the idea this is really targeted at the businesses such as Mack Moulding GE Husky larger businesses that have a major presence in Vermont but also have operations outside of Vermont and are constantly looking at investment alternatives they're basically saying we've got plants in some cases all over the world and we're trying to decide where to put the next investment dollars we want to make sure that that investment has a competitive chance of coming over on so we've got we have someone that we're hoping is going to come in I don't want to there's certain confidentiality pieces I don't want to fully disclose without their permission of what they're looking at but we do know and I think again this wasn't a project that we talked about when we see a plant close in Bennington where they've said they've made capital investments in facilities in another state you know I think there's a question of if something like this had been available could those capital investments have been made here and when the the headquarter decision is made of where we're going to focus does that keep Vermont in the running surprisingly there are no more questions so what happened to me oh I have to leave more of okay, Megan thank you thank you very much Cassie we're following up again if we work with David and actually drafting a different so it's a standalone piece and then get it back to you great the other pieces of follow up with I'm not going to say time to that but talking about the time frame for that we'll see actually he's in there this afternoon so we may ask a little bit about this too you have a pile of questions for me that were were you I know that I have the for more data on the years question and you had a wait was there a wait question through us good morning Cass good morning thank you record Cassie Polina CEO of Vermont economic development authority thank you for inviting me David already gave a nice overview of EDA I'm the relatively new CEO been here since April 1st last year and I'm pleased to be here in support of the program that Megan has laid out I am happy to answer any questions I do want to start by just saying that it may sound like semantics but I want to highlight the importance of the fact that it's a convertible loan program not a forgivable loan program for us at VEDA that's important because I don't want our existing constituents to think that VEDA suddenly has a forgivable loan program and that folks that may be running into financial difficulties could come to VEDA and say oh I heard you had this forgivable loan program and I can't make my payments can I have a loan program so and it's just one of those things where also traditionally when you enter into a loan contract at the beginning of the stage you know it's not forgivable so I think that the semantics here are important that it's you achieve these goals and it becomes convertible to a grant and that's a better way of and the other important part which Megan did clarify is that VEDA will be making these loans these are direct loans on our balance sheet this is VEDA money we are making the loans so we are underwriting them and this fits very nicely into what we do every single day we do equipment financing all the time the dollar size for our equipment loans is probably a little bit smaller than the numbers that you've been hearing this morning if I were to exclude say our solar portfolio which is a lot of equipment loans on average it's you know around 150,000 but it's important to keep in mind that VEDA partners with other lending institutions so we're not financing 100% of the project we're financing under statute we can only finance up to 40% of the project so we are bringing in other lenders and I think that's also a positive for this potential program here because it's a way to leverage more money and get the banks and the credit unions and other lenders involved and by having this as a low interest rate and it's important that when we first started talking about this there is an interest rate that the borrowers have to pay as opposed to having there be no payments whatsoever but at 1% when you combine that with the bank loan it's a very attractive blended rate so those are really positive features combined with that it's three years and then you get that conversion where the tax department where the money would be so we think that this could work well because it would also bring potential borrowers to Vita that would bring other business as well so there may be the equipment piece but there may be other business expansion piece that would kind of follow in with that so it's a natural so with that I'm happy to take any questions just to ask my question that I asked a second earlier the the risk of a business in this instance getting these loans not achieving the payroll or capital investment standards and then the business fails and declared bankruptcy are those the loan that we gave them is that part of it or can we create some exceptions for that bankruptcy like student loans for example can't declare bankruptcy so anyways what happens in the case where business fails and declares bankruptcy so it's a Vita loan it's a direct loan we've made that decision we're going to take the loan of money so if the borrower cannot repay that is our potential loss we're going to take collateral and we're going to underwrite these the way we underwrite every other loan that we do so we're not creating necessarily any different criteria that we would loosen up our credit standards if you will so we'll take collateral and if they declare bankruptcy we have that happen all the time from time to time and we have to go through that process and recover what we can and that's why part of the bill contains a million dollars part of that money is for loan loss reserves part of that money is for the interest rate subsidy because we'll lose money even if they don't declare bankruptcy Vita will lose money at 1% because we have our costs we have to borrow that money at higher than 1% to lend out that 1% so we need to make ourselves stay in business so there's interest rate subsidy involved and then there's loan loss reserves and then there's the administrative costs of running the program so normally we charge a 1% origination fee that covers our underwriting loan closing everything else and that would be also included in that million dollar task so are you concerned at all the attempt here is to give these loans to smaller businesses which are more risk adverse are you concerned that there is a higher that there might be more businesses in these loans that might be failing I forgot what the number of percentages of small businesses that fail is that's our largest volume of small businesses we do a lot of small business lending startups sorry to interrupt so there is a higher risk with a 3 year payback a 3 year program as opposed to a 9 year program no? the way this would be structured is 3 years interest only at 1% the 1% requiring those payments was important in my mind because we can monitor whether they're doing what they're supposed to be doing yes we ask for financial statements most of the time we get them some of the times we don't but if they're not paying that 1% then there's probably a problem so there's the monitoring involved but this is this is what we do is make loans to small businesses so I'm not sure I understand is the question that you think this will attract higher risk small businesses? yes that would be but we financed other veggie we have a lot of crossover and I don't think that it's higher risk I'm not sure we're going to use our same underwriting criteria so what it will underwrite is we're going to assume that they are not going to meet that threshold and that loan that interest only obligation is going to convert to a regular loan that they will have to amortize over the course of what makes sense for that and if it's equipment financing it's generally the life of that equipment so it's 5 to 7 years let's say that's typical equipment loan so we're going to underwrite it and if it works that's how we look at things and that's how we're going to make our decision is will it meet our underwriting criteria that we have in place already so we're not changing any underwriting criteria to make it different for this program and again it is uncomfortable underwriting if it is a higher risk when they're doing the review higher risk small business that business is still welcome to apply for the traditional veggie so the underwriting is not changing the terms are changing only in the sense you've got 3 years of interest only and then it could convert if they meet those thresholds if they don't meet those thresholds it would convert into a traditional loan and that's where we're taking that risk if they haven't met those thresholds is it because they changed their business plan and they didn't make the capital investment or they didn't hire the people but they still have cash flow and can we pay the loan hopefully that's the case if they didn't meet the thresholds and they've got other financial strain on the business we're going to have to take a look at that from a to a work out perspective and figure out well maybe we need to give them longer to pay it back or take additional collateral or something of that nature to work with them this is kind of normal but just because you said it that you deal with a lot of businesses that do fail I take that back I'm just saying that it happens it wouldn't be in business if that happens so that's my question do we know how much money Vita is losing you're not losing what our loss rate is is that okay what percentage of the businesses they were supporting are not making it I can't answer that question but I can tell you from what a bank does is look at they have loan loss reserves and they have like loss rates so being the type of lender that we are we do take more risk than bank so our loss rate is higher than say a traditional conventional bank and on our small business portfolio it's a little bit higher than say our sub five which is our largest program where we lend to larger businesses but the small business it's still pretty decent it's around 80 basis points is our loss rate and our loan loss reserves we set aside about 3% against that portfolio so it's really not bad at all I'm just gonna drop it to this one too so if this is a little different animal than what you normally are looking at and so does it make sense that the businesses that you'd be looking at under this program you would look should you be looking at them the same way you would look at any other business that comes to you because you're kind of like a lender of last resort that this is a little different than that so should there be a little higher criteria on your approval standards? I talked to Joan a little bit about this the other day and it's something I'm going to talk to my lending team about there may be some cases and some room to so normally we lend up to 90% on collateral which is higher than a bank ghost and that's where and we're the subordinate lender so that's where Vita adds the value in a project we take that and there's the 10% equity so often times it's really hard to make a deal work even that 10% finding that additional collateral and so that's where we might have to really sharpen our pencils on some of these deals if it's one of these projects and say it's an existing business and you've got a strong primary source of repayment say it's the cash flow typically so it's not a startup it's collateral that's where we may be able to say you know what we're going to take that extra risk we've got the reserves from the state so but we have to do it case by case you know we've got our policy in place and so it's got to be you know this is an exception and this is how we're going to look at it we can't just sort of open the doors wide open on all of these we're going to throw the policy out the window because that creates a lot of potential for losses so it's really a case by case underwrite but that's where I see the opportunity to stretch a bit on these because that's where I think the need is when you don't have the collateral you've got an existing business and I don't know if permanent brush is one of these but that's where it's really hard Chairman just anecdotally I would say that there's probably less credit risk than in Vita's normal portfolio from what we have normally seen as Vita, as veggie applicants they tend actually to be relatively strong businesses with relatively good market share and business plans which is why they're in the situation of being fast growing I think probably everybody understands the problem with being fast growing is that it chews up a lot of capital you have to buy more inventory you have to fund payables it uses a lot of cash but the typical veggie borrowers don't go out of business they might not grow as quickly as they thought they were going to grow and therefore not make their targets but they typically aren't businesses that actually go out of business You acquire any money in the municipal bank? No we borrow from a couple of large banks we have a commercial paper program and then we have another bank that we have so term debt as well as a line of credit I'm just looking at municipal bond rates it's under 1% about 5 years you're confident about it Yeah, no it's we're not at 1% our commercial paper is our lowest most affordable but it's all short term as well and that's where the moral obligation that David referenced earlier the moral obligation I just want to clarify something that you said earlier or understand the process better is it possible that VEPC would approve someone and then you would not? This is drafted yes so it could meet the VEPC criteria but not meet the credit criteria Thank you Yeah the way you describe it the thing isn't successful then it converts back to a traditional loan and so there is a there is a risk that the business takes on as well I mean one of the reasons they're going through this is because capital and they want to get it as cheaply as they can I assume for small businesses because they need it as cheap as they can but there's other alternatives for them too I mean they can consolidate things they can go and do all kinds of other kinds of loan options I mean is that something that is that correct? Maybe I can help there the idea of this program is really focus on the fact that the current program delays the payments for so long if your business is really growing quickly you need the money now you don't need it in 8 years so the idea is to try to come up with a way to be able to help a growing business to fund the cash needs that it has as a result of the fact that it's growing now rather than way out in the future and if the cash flow doesn't keep up with that then that's more of a concern to a regular loan Additionally if a smaller business their incentive may be $60,000 $60,000 paid out over 9 years isn't for a small growing business it's not insignificant but I think there's more questions about 4 and that but if it's up front that investment, that incentive dollar goes a lot further and that's some of the national research that we've seen Any question about the why 1% is that should it be more or is it do you choose 1% because that's one of the national nationally other similar programs that are charging that sort of loan that amount just seems like an incredible amount Yeah, well I think that the original discussion was zero so I kind of asked for something something that was more expensive Well it was more the monitoring piece and you know it's, Lita does we do loans, we don't do grants and in no way to monitor that it's hard to know what's going on I agree and I think that 2% seems like an extremely low amount also but if there's a national company that's going to say well I'm not this this isn't enough to keep me here I'm going to go to somewhere else to get a similar loan Is that loan rate similar to 0% or 1% or 2% Well then again I think it was when we first started talking about this and comparing it to the existing veggie program which is all grant there is no sort of loan component of it so I don't think that a magic sort of behind that 1% to keep this as an incentive if the pain is so high that it's but we can look at it Let's, we have one presenter here and if we have further questions for someone that's on the sidelines we'll bring them back up but we're starting to expand around the room and I'd rather keep this focused if we can thank you I have a series of questions I promise to be brief but just wondering is, I know Mike used the term lender of last resort that's not always true so I'm just wondering about in terms of the borrowers that you deal with do they have to prove that they're not able to get financing from somewhere else No, okay so the benefit is that they get a lower interest rate they might get more favorable terms they might get a loan to value whatever the collateral is I should copy out that we do we do borrow money from USDA World Development under their intermediary re-lending program and there is a compliance requirement in there that says that the borrowers say that they could not get money elsewhere but that's not a huge part of what we do right okay so we are not the lender of last resort so the reason why I ask the question is that why would a business go to a commercial bank instead of going to this program well we can't so by statute we can only fund up to 40% of the project so if the request and the need say veggie says okay this applicant is eligible for 500,000 we could only finance 40% of that 500,000 we have to bring in a bank to finance the rest of it and is that 40% the total financing package or is the total cost of the project total cost of the project okay so they could put in 60% equity and borrow 40% from there and does that happen ever? okay so that's where I'm getting to is businesses that may not need this lower interest law under that incentive might apply because it's available okay the second question is just in terms of the availability or the performance of similar programs in other places are you aware of or have experienced with your counterparts at other development authorities and what they've done with something like this? not in great detail one of our lenders came from Connecticut and he had said that Connecticut had something similar to this but I don't know in great detail the success of it and where it is and out there for a few years but I couldn't tell you with any real accuracy much about it okay I have a general question about Vita just kind of wrap my mind around everything I've known for the last two years what is it feels like that if you were in a state agency you'd be able to do all this stuff already why is Vita a state agency or I think we're causing what is your relationship with the state? so we're not an agency but we were created under state statute for instrumentality of the state so we are we are as David slide our board is comprised of five members that are ex officios and ten afforded by the governor but it's actually a great model because it gives us enough independence to be able to do a lot of things like borrow money from J.P. Morgan and TD Bank and make these loans and fund ourselves but there are strings to here so I don't know who came up with it but I think it's a pretty good model it just feels like this is a great model which sounds like it is and it feels like this state is I have to come to us for statutory changes to provide these grants which you guys think are valuable and could benefit from others why why even maintain that statutory relationship with the state I don't think that's up to me but we do benefit from the moral obligation that the treasurer gives us that's really a big that allows me to borrow money more cheaply and easily it would be great if I could figure out how to do that without the moral obligation yeah let's just, yeah, thank you that's a really good question that's a really good answer so Charlie, sorry, back to your question it's hard to know what other VEDA-like entities are doing because there just aren't any that are really VEDA-like so in Connecticut it's not a VEDA-like entity that was doing this, it was more at the state level so if you look at what are other states doing, you're mostly going to be finding it at the state agency level I struggle with that one a lot you know, what are other states doing some of the ones that I look at sometimes to see what they're doing like Maine has the finance authority of Maine, they do a lot of great things but they get huge appropriation from the state every year you know, to the tune of like $10 million every single year there are certain things that they do a lot of it is to guarantee the small business loans they act like the SBA so it's hard to find other VEDA-like entities to compare ourselves to but I that's a great question because I'm always looking so if I may follow we've asked you to get in some different things over the last couple of years like the broadband program that's probably subject for a different matter but we'll have to find that out sometimes as to how that's going I'll give you the two second answer we've done one long and there's one more in the works it's a little bit of a tweak but we'll see how it goes it's slow going I think that the potential applicants are getting their stuff together with their feasibility studies and the CEDs so I do think it will probably get slammed with several apps all at once but right now it's all sort of percolated I think a lot's waiting for after town meeting yeah so you've done one loan so far so how did the vetting of that go the vetting I mean you have to go through a process of vetting that company to make sure that it can meet its obligation to you there was what was a very small loan we were thinking that the money that we got that the audience dealt with two or three applications but the loan was only for a few hundred thousand dollars so you know we've worked out a system with the Department of Public Service and they do a lot of the technical side of it to make sure it meets the criteria in the legislation as far as underserved and unserved and the technology side and we get their blessing in a certificate so that the vetting of that and that's how we set it up in statute and then I did a report that went to them the commissioner read it since there's only one loan it was pretty short but I mean you go through your process of making sure the company is all the underwriting any more questions or can I see thank you very much thank you thank you we'll come back we'll come back to this next week I haven't made the agenda yet but we'll be working on this in seven old follies I think next week