July 2014

Dear Friends:

"Summertime, and the livin' is easy." At least that's what Ella Fitzgerald sang. These days, it doesn't seem that summertime is any easier, or any slower, than any other time of year.

I am pleased to provide our e-newsletter as we reach the season's midpoint. In this edition, we highlight activities of the Ohio General Assembly, provide updates on campaign activities, economic development, our EB-5 business, and highlight one of our great clients.

As always, please feel free to contact me or any of us at Hicks Partners if we can be of help.

Sincerely,

Brian K. Hicks

President & CEO

From the Statehouse

Legislative Recap

Members of the Ohio General Assembly were quite busy earlier this year and are now out for summer recess and campaign season. Governor John Kasich provided plenty of fodder for the legislature this year by unveiling his Mid-Biennium Review (MBR) proposal in March, which was subsequently split into over a dozen separate bills. Additionally, the House and Senate moved a few other high profile bills along with a myriad of smaller measures before the summer recess. Below are highlights from several major legislative actions of the past few months and a few items to watch as the 130th General Assembly comes to a close at the end of 2014.

Tax Changes

The 130th General Assembly has seen a variety of comprehensive tax policy proposals this session. Although not all have achieved passage, most of the measures shared the same general goal of further reducing personal income tax rates and creating a more favorable tax environment for small businesses. As part of HB 59, the biennium budget bill passed in 2013, the General Assembly approved a 10% personal income tax cut phased in over three years. HB 483, passed by the General Assembly, accelerated the tax cut so the full 10% reduction will be effective during the current tax year. Similarly, a 50% increase for a small business tax deduction on the first $250,000 of business income passed in HB 59 was increased to 75%, which is estimated to save over $200 million for small business taxpayers. The measure additionally increased the nonrefundable Earned Income Tax Credit for low income Ohioans from five percent to 10% of the federal earned income tax credit.

Oil and Gas Severance Tax

After failing to win passage previously, Governor Kasich again pursued a severance tax increase on the oil and gas industry through his MBR proposal. The House stripped the proposal from the main MBR, but continued to use the previously introduced HB 375 introduced by Rep. Matt Huffman (R-Lima) as the vehicle to discuss changes to the law.

Negotiations between interested parties continued for months with significant disagreement on the general direction for the policy. The Governor insisted upon a 2.75% rate, while House members pushed for 2.25% rate. This eventually led to a compromise rate of 2.5% for horizontal wells while exempting the first $10 million of receipts and reducing the existing rate on traditional vertical wells. Revenues are to be directed to the Ohio Department of Natural Resources to fund the agency's oil and gas regulatory functions and idle oil and gas well plugging while an Oil Shale Gas Regional Commission would be established to coordinate disbursements to local governments in the shale play based on local impacts.

However, HB 375 remains controversial as it moves through the legislative process. Amid tense debate the House passed HB 375 in mid-May by a vote of 55-38. The Senate Ways & Means Committee held one hearing on the bill before summer recess, but is not expected to act further on the measure until after November elections if they choose to move forward at all. Additionally, Governor Kasich seems lukewarm on the House passed version of the bill and may be pushing for further modifications.

Education

Another MBR bill which inspired enough differences between the House and Senate to warrant a conference committee was HB 487, the K-12 education measure. The bill made a wide variety of revisions to education law and included highlights such as the establishment of the College Credit Plus program which encourages high school students to attend college level courses by allowing districts to partner with higher education institutions, and the creation of a new series of seven end-of-course exams entitled the College and Work Ready Assessments to take the place of the Ohio Graduation Test starting with the incoming freshman class.

Energy Efficiency and Renewables

The 130th General Assembly engaged in much debate on Ohio's Energy Efficiency and Renewable Energy Portfolio standards that were first established in 2008 under SB 221. Senate Public Utilities Committee Chairman Bill Seitz (R-Cincinnati) led the charge to review the law by challenging the costs and underlying assumptions made when the standards were first established. He has also questioned the constitutionality of a controversial requirement that portions of electricity must be generated within the geographical boundaries of the state of Ohio.

Sen. Seitz's SB 58 attracted long hours of testimony from supporters and opponents alike. Seitz's bill was modified into a new proposal introduced by Senator Troy Balderson (R-Zanesville) as SB 310. Through conversations with the Kasich Administration and other stakeholders, SB 310 was amended to become a temporary two-year freeze of the standards, providing the opportunity for a study committee to evaluate the law and issue recommendations to the General Assembly for action. Should the General Assembly fail to act, the existing standards will reactivate in 2017 at the 2015 level. Governor Kasich signed SB 310 into law last month.

Looking ahead

Members of the legislature will be campaigning over the summer months, but may return in September for a few session days. Otherwise, activity at the Statehouse will be light until the lame duck session following the November election.

For more information about legislative activities, please contact Zach Holzapfel or Tony Brigano.

Politics

Campaigns Heating up

Campaign season is fully underway and by most accounts, the statewide matchups favor Republican incumbents. Governor John Kasich (R) faces off against Cuyahoga County Executive Ed FitzGerald (D). Gov. Kasich holds a substantial fundraising advantage over his challenger and is favored to win re-election. Rounding out the other statewide executive

office races are Attorney General Mike DeWine (R) versus former Hamilton County Commissioner David Pepper (D); Secretary of State Jon Husted (R) versus State Senator Nina Turner (D); Auditor Dave Yost (R) versus State Representative John Patrick Carney (D); and Treasurer Josh Mandel (R) versus State Representative Connie Pillich (D).

Republican's commanding majority in the Ohio Senate (23 Republicans, 10 Democrats) has contributed to a significant fundraising advantage. With half of the 33-member body on the ballot, Republicans are expected to maintain their significant majority after the November election.

In the Ohio House of Representatives, Republicans hold 60 seats while Democrat's occupy 39 seats. This majority status has also provided Republicans a healthy fundraising advantage. All 99 House seats are up in 2014 and there will be several close races to watch on Election Day. While the House is expected to remain firmly in GOP hands, there will be notable change with a new House Speaker in 2015 as current Speaker Bill Batchelder (R-Medina) is term limited.

Two seats on the Ohio Supreme Court are being contested this year. Justice Sharon Kennedy (R), first elected in 2012, is being challenged by State Representative Tom Letson (D), while Justice Judith French (R), who was appointed to an unexpired term in 2013, is being challenged by Cuyahoga County Common Pleas Judge John P. O'Donnell (D). The Supreme Court is currently made up of six Republican and one Democrat justices.

Ohio Economic Development

JobsOhio

JobsOhio released its quarterly results in late June. According to the report, the first quarter of 2014 saw Ohio companies committing to create more than 5,700 new jobs and make investments of over $1.7 billion.

JobsOhio, which is funded through Ohio liquor profits and thus has an annual budget of well over $125 million, has committed approximately $4.5 million in 2014 to support job growth according to released data. This figure includes two loans for a total of $1 million, $1,580,500 in Workforce Grants and $1,924,000 in Economic Development Grants. JobsOhio has yet to make an award from their Revitalization Program Loan and Grant Fund, which is the successor program of the Clean Ohio Fund.

Ohio Third Frontier

In the past few months, the Ohio Third Frontier (OTF) Commission made significant awards. The 2014 OTF program plan called for awarding up to $210 million this year. Thus far, OTF has awarded $112 million leaving approximately $98 million for the remainder of the year. According to the plan, the following program balances remain:

$29 million for Technology Commercialization Centers
$21 million for Innovation Platform Program (RFP expected to be released in the fall)
$17 million for Commercial Acceleration Loans
$15 million for Industrial Research & Development Program
$10 million for Technology Asset Grants

Last month, OTF approved two significant Technology Commercialization Center awards. The largest OTF award in the past eight years - $25 million - went to the Harrington Discovery Institute (HDI) at University Hospitals (UH) Case Medical Center in Cleveland. HDI is a first-of-its-kind $250M national initiative, powered by a $50 million gift from the Harrington family. It includes the Harrington Discovery Institute and a for-profit, mission-aligned development company, BioMotiv. The UH HDI Third Frontier award will help accelerate the development of new drug discoveries and pharmaceutical companies in Ohio. Hicks Partners was pleased to serve as a consultant to University Hospitals on this major award. More information about UH Harrington Discovery Institute can be found HERE

The Third Frontier Commission will hold a two-day retreat in September to begin planning for the 2015 program.

To learn more about JobsOhio, Third Frontier opportunities, or how Hicks Partners can assist, please contact Emily Turner.

EB-5 Initiative

MidAmerican Global Venture Update

MidAmerican Global Ventures, our public-private partnership that promotes foreign direct investment through the US EB-5 Immigrant Investor Program, has had a busy and productive few months.

In April, MidAmerican traveled to the Pearl River Delta region of China as part of the US Department of Commerce SelectUSA program. There we met with companies and prospective investors in Hong Kong, Shenzhen, Dongguan, and Guangzhou.

In May, MidAmerican attended the Association to Invest In the USA (IIUSA) conference in Washington, DC. According to a new report released by IIUSA, the EB-5 program is having a significant positive impact on the U.S. economy:

Since 2005, EB-5 has attracted more than $6.5 billion in foreign direct investment supporting over 131,000 American jobs
In 2010-2011, EB-5 investors contributed $2.6 billion to US GDP, generating $346 million in federal taxes and $218 million in state and local taxes
In 2012 alone, EB-5 investors contributed $3.4 billion to US GDP, generated 42,000 American jobs and over $713 million in federal, state, and local tax revenue.

We hosted two delegations from China in recent months and we will be hosting a delegation from Eastern Europe and another from Asia in late summer. We also hosted a reception on July 9 that was attended by developers, bankers, lawyers, accountants, and others interested in bringing more EB-5 investment to Ohio.

In September, MidAmerican Global Ventures will participate in the China International Fair for Investment and Trade (CIFIT), in Xiamen, China. In addition, MidAmerican will meet with prospective investors in Shanghai, Beijing, and Guangzhou. We expect to market our first projects on this important trip.

Learn more about MidAmerican Global Ventures at http://www.midamericanglobal.com/

or by contacting Brian Hicks or Keith Conroy.

Ohio Hosts

Republicans to Cleveland! Democrats to Columbus?

Cleveland will host the Republican National Convention in Summer 2016. Landing a national

political convention is an extraordinary achievement; great credit must be given to Governor Kasich, Cleveland Mayor Frank Jackson, Ohio Republican Party leaders Matt Borges, JoAnn Davidson, and Bob Bennett and many Cleveland business leaders who stepped up to the table to provide financial backing.

National political conventions are big business. More than 30,000 people are expected to attend the Cleveland RNC event and the impact to the local economy will be more than $200 million.

The City of Columbus remains in the running for the 2016 Democratic National Convention. Democrats are expected to select their host committee in late 2014 or early 2015. Good luck Columbus!

Having attended five national conventions, Hicks Partners has deep experience in organizing and managing political convention events and activities. We look forward to assisting clients as they seek to make a splash in Cleveland and possibly Columbus in 2016. If you would like information on how we can help, please contact Zach Holzapfel.

Client Spotlight

VentureOhio is the unified voice for the capital sources and other organizations that finance or support high growth companies in Ohio and seek to make Ohio a hub of potential entrepreneurial activity. VentureOhio was founded in 2013 and now counts more than 90 members, including investors, support organizations, service providers, educational and research institutions and individuals.

VentureOhio focuses on policies and programs intended to increase early stage capital availability in the state and enhance programs, such as Ohio's Third Frontier, that have increased the number of high potential companies started and growing in Ohio. The non-profit organization engages in activities intended to educate Ohio's investors and entrepreneurs, improve institutional technology transfer and commercialization, support productive tax and regulatory changes, and tell Ohio's entrepreneurial success stories to audiences inside Ohio and across the nation.

In May, VentureOhio released a report showing that 176 Ohio companies need to raise more than $523 million of early-stage capital over the next 18 months to support continued growth and job creation. The results of the VentureOhio survey-the first of its kind for Ohio-were based on responses from 28 angel investment groups, entrepreneurial signature programs, venture capital funds and business accelerators across the state. The results confirm the substantial near-term need for early-stage capital in Ohio.

The survey was conducted from April 16-May 16 and asked Ohio venture investors to report confidentially on the capital currently being raised by their portfolio companies, as well as the capital these companies planned to raise by the end of 2015. According to survey results, $85.27 million is needed in the angel stage while $437.85 million is needed in the early-stage of the funding continuum. The survey does not cover all Ohio entrepreneurial companies and therefore, the total capital needed by the state's entrepreneurial community for job creation and economic growth is likely higher.