As little as 10 percent or 11 percent of tax credits issued by the Oklahoma Capital Investment Board goes to Oklahoma firms, Tulsa Sen. Tom Adelson said Wednesday.

“How is that useful to the state?” he asked.

That percentage may have improved somewhat since then, but not enough to change the overall picture, he said. Referencing a 2006 performance audit of the  board, Adelson had earlier set the estimated in-Oklahoma investment at about 6.5 percent, but revised that upward after further review.

Adelson and other lawmakers on a joint task force were questioning Devon Sauzek, OCIB president, on why so little of the $62 million or so that OCIB said amounted to direct investment(out of $965 million raised by OCIB supported venture funds) went to companies with an Oklahoma presence. Adelson himself pegs OCIB’s direct investment at closer to $42 million than $62 million. It invested in 18 venture funds in 2006, according to the audit.

“You’re actually subsidizing economic development in other states,” Adelson said.

Information supplied by Sauzek showed that OCIB provides 7 percent of total venture capital, with other private investors contributing 93 percent.

The board’s response, that Oklahoma investment is not a measure it tracks, did not sit well with the legislators, who are studying some of the numerous tax credits Oklahoma offers.

To date, Adelson said, out of 212 companies in which funds were invested, only 26 were Oklahoma based, two of those have gone out of business and five have relocated to other states.

The vast majority of OCIB activity benefits out-of-state companies, the senator said.

“That’s a hard sell for Oklahoma taxpayers,” Adelson said.

Oklahoma City Rep. David Dank, co-chairman of the task force, said members want to know why OCIB tax credits are being used for out-of-state businesses, although they were created to bring jobs to Oklahoma.

“I think we’re finding out that there are far too many dollars that are being invested in companies and corporations outside the state borders,” Dank said.

He said the panel’s focus will be on that issue, and the “who, what, where, when and why” of the results of OCIB’s activities, on which he said relatively little information has been supplied.

“I think we have a lot more questions to have answered before we would even consider allowing them to continue to use taxpayer dollars,” Dank said.

Sauzek said the board’s efforts meet the requirement that $2 be invested in Oklahoma for every $1 OCIB guarantees, but lawmakers said that calculation includes more than just the board’s own direct investment.

The OCIB president said the board has discussed investing more in Oklahoma, based upon the funds in which it invests.

Sauzek acknowledged to Adelson that other, co-investment is included in the board’s estimated $138 million in equity capital invested in 31 Oklahoma companies in its Venture Investment Program. He said that program has resulted in 10,685 direct jobs with $250 million in payroll and 16,570 total jobs with $409 million in payroll.

Sauzek said another effort, the Oklahoma Capital Access Program, has made more than 1,500 loans through state banks, with $47.5 million in loans going to Oklahoma companies. He said these resulted in 1,460 direct jobs with $43.7 million in payroll and 2,545 total jobs with $77.6 million in payroll.

The OCIB official said that the board’s activities have had an overall economic impact of about $1.5 billion.

He said OCIB has about $100 million in contingent tax credits on its balance sheet. He also acknowledged that it has a $5 million contingent liability.

“It’s a risky asset class,” he said of the venture capital market.

Sauzek said that market has been especially hard hit by the struggling economy.

“We have experienced some losses,” he said.

OCIB is asking that the life of its tax credit programs be extended past 2015, when it is scheduled to sunset, to 2030. Sauzek said that when OCIB makes an investment, that constitutes a commitment of 12 years or so, and it can take three or four years to identify investment targets.

Answering a question from State Auditor and Inspector Gary Jones, Sauzek said his contract to manage the covered funds totals $360,000.

During his own presentation, Rep. Mike Reynolds, R-Oklahoma City, said the statutes creating the OCIB were repealed, and questioned whether it is operating legally. He said it was initially created as a state entity, but was later made private.

He noted a provision in the Oklahoma Constitution prohibiting the state form having an equity position in a private company. The lawmaker also said that, using state employment-tax data, he has been able to verify only 18 Oklahoma jobs created by companies in which OCIB has invested.

Reynolds said he has been rebuffed when he asked for details on how much the board has invested in particular companies, being told that he is seeking proprietary information.

Sauzek said that OCIB has supplied Reynolds with check registers, records of draws and distributions, lists of funds and companies and other data relating to its activities. However, he said that actual financial statements of individual companies are considered proprietary. He said the board cannot give out information whose disclosure could damage a company.

Jonathan Small, fiscal policy director with the Oklahoma Council of Public Affairs, said that OCIB’s strict focus on the private risk capital industry would leave out a lot of firms listed on the stock exchange. He said the board exists to promote one form of capital generation over others, with taxpayer funds.

OCIB’s activities mean that other businesses’ have to pay higher taxes, Small said. He estimated that, if such tax credits were eliminated, state income taxes could be cut to about 3 percent.

Small also joined those who argue OCIB’s activities are not transparent, saying that the public does not have access to a lot of information about its interactions with the companies in which it invests.

Small said that access to taxpayer funds makes up 78 percent of OCIB’s assets. More than $19.5 million in tax credits have been sold over the past four years, he said, and OCIB has liabilities of more than $42 million in commitments and loan balances. In its last two audited fiscal years, he said, the board had recognized losses of more than $7.4 million in its equity holdings. He said its borrowing increased every year from 1993-2007.

Dank questioned how obligations in other states qualify as a public purpose under a 2010 attorney’s general that found some tax credits “constitutionally infirm.”

Sauzek replied that OCIB legal counsel has determined that its tax credit programs are constitutional.

Dank said he also cannot see how out-of-state investments meet the other criteria set out in the opinion—adequate consideration, controls and safeguards, “when over 50 percent of these employers probably never set foot in Oklahoma.”