2008 Alberta Budget delivers on High-Tech promise

In a province swimming in oil and gas, it's tough for the high-tech scene in Calgary to get noticed. But it happened this week.

Last spring, an industry task force led by David Martin, the fellow in the Executive Chairman chair at Calgary based Smart Technologies. As co-founder of a great $400M startup story in Calgary, he understands what is needed to incent industry. Thanks and kudos to everyone that participated in the task force!

The Alberta Government was smart enough to listen ... in Tuesday's 2008 Alberta Budget, Premier Stelmach said "Alberta prospers through innovation and lifelong learning." High-Tech in Alberta is one of the main benefactors of budget increases ... up 9.3% from 2007. I thought the whole thing is pretty well thought out.

And, representative of the boom we're experiencing: Alberta will spend a total budget record of $37 billion vs. $33 billion last year.

To broaden the base of our economy, a new Alberta Enterprise Corporation will receive $100 million, and boost access to capital for early-stage, knowledge-based companies. A new Scientific Research and Experimental Development Tax Credit will provide incentives for businesses to invest in research and development, starting at $60 million and growing over time.
Honourable Iris Evens, Minister of Finance and Enterprise

In addition to the $100M investment and a 10% (max. $400K) refundable tax credit for businesses, Alberta has also matched the Fed's accelerated CCA depreciation on computers, software, green energy equipment and other such things.

Here's a quick summary of all the high-tech goodies in the budget:

Value-Added and Innovation

• Implement strategies to increase upgrading and refining capacity in Alberta
• Encourage technology commercialization and increase the Canadian venture capital invested in Alberta, in part by establishing the $100M Alberta Enterprise Fund;
• Develop and implement a framework that defines roles and mandates for publicly funded organizations that support world class research and innovation in Alberta;
• Introduce a 10% tax credit to stimulate private sector Scientific Research and Experimental Development
• Develop and implement policies, initiatives and tools to help Alberta businesses to improve their productivity and global competitiveness;
• Strengthen and diversify the agriculture sector

Post-Secondary System

• Increase post-secondary spaces available to health and trades over the next two years;
• Reduce the interest rate on student loans by 2.5% to prime
• Increase student participation and completion rates in health, math, science and Career and Technology Studies courses to grow the technology and science sectors.

I like that it incorporates both education and technology ... the Dell and Intuit Canada departure from Edmonton had lots to do with a knowledge worker shortage. Not to mention the region no longer enjoys the cost advantage it had 5 years ago. (I personally still think it's a great place to live, if you want my 2 cents worth).

The budget represented only part of the task force recommendations (although they were certainly some of the good parts) ... it'll be interesting if they will adopt the rest in the future.

I'd personally still like to see flow-through shares of high-tech companies for investors. Without this, the private investment community has a hard time not justifying investing oil and gas ventures ... the refundable tax credit provides an immediate return on investment.

An interesting aspect of the spending is that it's based on oil: US$78 / barrel and gas: C$6.75 / gigajuole. Oil prices have reached all time high over $118 barrel, and gas prices have been soaring. The budget also speaks to what the gov't will do with the surplus revenue. A $1 change in the price of oil means a $130 million change to Alberta's profit situation ... that's not chump change!

On a side note about the prices at the pump this summer, as my buddy Jeff Goguen says: "Don't complain about it ... invest in oil and gas companies that are making money. That way you get the upside, too"

The Canadian Federation of Independent Business and the Canadian Taxpayers Federation are worried that high-tech incentives echo the early 1990s, when provincial intervention in the marketplace left taxpayers holding the bag on lotsa unsuccessful failed private-public ventures.

I think the big difference now in high-tech is that there are many experienced second and third generation entrepreneurs running new businesses, in both Edmonton and Calgary. There is also a lot more private money in the game. So, while some investments will still fail, I expect the success rate to increase, thus reducing the risk of investment. Plus, the payouts are getting bigger ... there's been several $50M to $800M success stories in both cities.

I'd like y'all to let me know what you think of it ... please make comments below!