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F I S C A L I M P A C T R E P O R T

SPONSOR Cote

ORIGINAL DATE

LAST UPDATED

01/24/07

HB 175

SHORT TITLE

Certified Business Incubators

SB

ANALYST Hanika Ortiz

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$750.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB 67

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

SUMMARY

Synopsis of Bill

House Bill 175 appropriates $750 thousand to EDD for expenditure in FY08 and FY09 for oper-

ating funds for certified business incubators in New Mexico. No single recipient will receive

more than $150 thousand per year, and any single recipient receiving funding must provide a

fifty (50) percent cash match.

FISCAL IMPLICATIONS

The appropriation of $750 thousand contained in HB 175 is a recurring expense to the general

fund for expenditure in fiscal years 2008 and 2009. Any unexpended or unencumbered balance

remaining at the end of fiscal year 2009 shall revert to the general fund.

U.S. Department of Commerce reports that every $1 in public investment in incubators returns

more than $4.50 in taxes and economic growth. Nationwide, 87% of firms that graduate from

business incubators remain in business after five years.

House Bill 175 – Page

2

SIGNIFICANT ISSUES

EDD reports that state requirements for certification of business incubators provide a structure

for success for developing incubators and evaluating the effectiveness of existing business incu-

bators.

EDD further reports that the average cost of starting an incubator is $2.3 million; and business

incubators are rarely self-sustainable. Often the host community must provide the funding and

resources to sustain the incubator in addition to the development costs. State and federal sources

of funding for “soft costs" associated with providing staff and business services for incubators

are nearly non-existent. The challenges of developing and sustaining incubators in communities

that cannot provide this funding are substantial without these outside sources.

ADMINISTRATIVE IMPLICATIONS

EDD has been administering the business incubator certification program since its creation in

2005, and can continue to do so with existing staff and resources.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates SB 67 “Certified Business Incubators"

OTHER SUBSTANTIVE ISSUES

EDD notes that cultivating local entrepreneurs can be an important source of jobs for small, rural

communities that lack the resources and population base to recruit industry.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

EDD further notes since the beginning of the New Mexico Incubator Certification Program in

2005, four business incubators have been certified statewide: two in Albuquerque, one in Santa

Fe and one in Farmington. Other communities statewide, including Hobbs, Clovis, Cuba, Silver

City, Tucumcari and Las Vegas, are in various stages of trying to develop business incubators

and attain certification. A funding source such as this legislation is essential if these and other

communities are to be successful in starting and maintaining effective business incubators. EDD

believes without this appropriation opportunity for job creation and economic growth will be lost

to the communities that cannot identify these resources on their own.

POSSIBLE QUESTIONS

EDD reports that nationwide, 87% of companies that graduate from business incubators remain

in business after five years. How do participating New Mexico companies compare.

AHO/nt