This week, D.C. Auditor Deborah K. Nichols released a report on something called the “Certified Capital Companies” program. It was a scheme created in 2004 by the D.C. Council whereby insurance companies would get a tax break in return for providing seed financing for small businesses in the District, thus “stimulat[ing] the creation of high-wage jobs,” as the program’s Web site puts it.
Since the law was enacted, according to the report, $76 million has been invested the program—-including $50 million in foregone city tax money. For that investment, 31 jobs were created. Allow LL to do the math: That’s $1.6 million in lost city revenue per job.
Nichols says the CAPCO program has had a “negligible impact on economic development” in D.C., and she recommends the council end the program.
The full report, done per a request from councilmember Mary M. Cheh and Kwame R. Brown, has yet to be posted to the Auditor’s Web site, but the executive summary obtained by LL paints a dismal portrait of the Department of Insurance, Securities, and Banking’s oversight of the program. Nichols writes that the agency [f]ailed to verify information”; “[f]ailed to conduct mandated annual reviews”; “[c]ertified businesses to participate in the program that did not meet CAPCO requirements”; “[f]ailed to encourage CAPCOs to invest in businesses that complied with CAPCO’s investment strategies”; and “[f]ailed to establish a standard to measure the economic impact of the CAPCO program.”
This program has had some winners: Three venture-capital firms tasked with administering the program—-Advantage Capital, Enhanced Capital, and Wilshire DC Partners—-have netted more than $5 million in fees for their lackluster efforts. And clearly an unknown number of insurance companies got significant tax breaks thanks to the program.
What does it all mean? Well, for one thing, DISB chief Thomas Hampton can expect some tough questions from Muriel Bowser this afternoon when he appears before her Committee on Public Services and Consumer Affairs for a performance oversight hearing.