Innovista: State-Driven Economy Struggling Despite $140 Million in Taxpayer Support
When plans for Innovista, the University of South Carolina’s 500-acre research campus, were rolled out in 2005, it was touted as a can’t-miss project that would become a driving force for the area’s economy.
When completed, Innovista will create thousands of research and technology jobs and will have an estimated annual economic impact of $430 million, the project’s developer told The State newspaper in 2005.
Innovista was intended to be a center for research on hydrogen and other technologies, and a magnet for private companies building spin-off products. Nearly four years later, Innovista’s goals remain largely unrealized as a majority of the buildings constructed can’t even be completed for lack of funds. Still, the lack of progress hasn’t soured the academic, civic and business leaders who continue to sing the praises of the $250 million live-work-play research district, which stretches from the Congaree River up past Assembly Street in Columbia.
“We have had our struggles,” USC president Harris Pastides told The State last December. “But (Innovista) will flower and is here to stay.”
However, a close look at Innovista’s tenant list shows that the research campus appears to be withering on the vine. Go to the Innovista website and you’ll find just a handful of entities listed under “tenant profiles”:
- The Arnold School of Public Health, part of the University of South Carolina;
- Collexis Holdings Inc., a Columbia-based technology company;
- Consortium for Enterprise Systems Management, founded by USC, BlueCross BlueShield of South Carolina and IBM “to develop a future information technology talent pool,” according to Innovista;
- Loccioni Group, an Italian-based engineering firm;
- TM Floyd & Company, a Columbia-based information technology consulting firm; and
- VC3, a Columbia-based technology services provider.
Of these only the Arnold School of Public Health is actually operating out of Innovista at present. It occupies a $26 million building on Assembly Street and also has space in the Discovery I building on Greene Street. None of the other entities listed are even close to moving into Innovista, either at the Discovery I location or the Horizon I site near the corner of Main and Blossom streets.
That’s because there’s not much to move into. Both Horizon I and Discovery I are five-story buildings that are largely hollow shells. Discovery I does have the first and second floors completed, but floors 3-5 are unfinished and would likely take months before they would be ready for occupancy.
Still, Discovery I is considerably further along than Horizon I, which lacks even indoor plumbing. Both buildings sit unfinished because there aren’t funds to complete them. Without finished space, it’s difficult to land tenants. Both buildings, originally scheduled to be finished in 2008, are believed to need additional tens of millions dollars more to be completed.
And development hasn’t even begun on Horizon II or Discovery II, the other two buildings that are planned for the development. Those structures were to be privately financed, but funding has been hard to come by. Innovista’s leaders have said the Consortium for Enterprise Systems Management, TM Floyd & Company and VC3 would be tenants in Horizon II, but those companies obviously can’t move in until space is built.
According to John Parks, Innovista’s director, site excavation has been completed for Horizon II and the building is more than 50 percent leased. Work on Discovery II will not likely begin until sometime in 2010 or later, he added.
Of course, high cost may also be a disincentive to private companies as well. Space in Horizon II, for example, will go for $23 a square foot, Parks told The State newspaper last December, which would make it one of the highest priced locales in the Midlands.
Although Parks said the project’s developer has signed several leases with private companies, private-business interest in Innovista to date has been a particular disappointment.
In March 2007, Duck Creek Technologies of Bolivar, Mo., was announced as the first major private sector tenant for Innovista. Duck Creek, a provider of software for insurance carriers whose board includes Columbia businessman G. Larry Wilson, said it planned to lease 22,000 square feet of space in Innovista and bring a minimum of 200 jobs with an average salary of $85,000. But that move never happened.
Next up was Collexis, which announced in October 2007 plans to relocate to Innovista. Less than two years later, it’s not clear that Collexis, which describes itself as a developer of semantic search and knowledge discovery software, will make the move either.
The company, believed to have fewer than 10 full-time employees in Columbia, is desperately trying to keep its head above water financially, having lost nearly $10.4 million last year alone.
Then-University of South Carolina president Andrew Sorensen, a driving force behind Innovista, pinned high hopes on the tech firm in 2007, when he made the announcement about Collexis moving into the research district.
“I am delighted that Collexis will become part of Innovista,” said Sorensen, who retired as president last year and serves as a distinguished professor at the University’s School of Medicine. “Collexis aligns very nicely with our research in alternative energy and fuel cells, the health sciences and computing. It is exactly the type of company that we want to have here.”
Collexis has been closely tied to Innovista and USC almost from the time it began in Columbia:
- In October 2007, it was announced that USC had signed an agreement with Collexis and SC Launch to create a partnership for hydrogen fuel research and funded the project with $200,000. SC Launch is an arm of the South Carolina Research Authority, created by the General Assembly in 1983. SC Launch is partly sustained by contributions to the Industry Partnership Fund, for which contributors receive dollar-for-dollar tax credits;
- Last November, former USC president Sorenson joined Collexis’s board.
- Collexis is a graduate of the USC Columbia Technology Incubator, which has received $572,000 in state tax dollars since its inception.
Today Collexis appears in desperate straits. According to its most recent annual report, filed with the U.S. Securities and Exchange Commission last October, it lost $11.3 million for the year ended June 30, 2008, and the company’s auditors stated that they had substantial doubt as to Collexis’s ability to continue as a going concern.
During the first nine months of the current fiscal year, the company has lost nearly $5.5 million, including almost $1.4 million for the three months ended March 31.
To meet short-term capital needs, Collexis recently sold nearly 40 million shares at 7 cents a share. That effort considerably diluted the company’s stock while netting it $2.7 million. Collexis’s stock, which sold for as much as $12 a share in 2007, currently trades for around 8 cents a share.
So more than half a decade after the Innovista concept was first floated, here’s how things stand: More than $100 million in tax dollars have been spent and three structures (along with two parking garages) have been built, but two of the buildings sit uncompleted because of a lack of money. Of six tenants listed on the Innovista website, only one actually occupies space in the research campus. Of the others, at least one is struggling to remain viable.
As if all the above weren’t bad enough, it was announced recently that the Obama Administration plans to recommend that federal dollars be drastically cut for hydrogen transportation research – one of Innovista’s proposed key focus areas – because the infrastructure is too costly and would take too long to develop.
The empty floors that dominate much of Innovista offer harsh proof of the dangers involved in letting government attempt to drive the economy, rather than leaving it to the private sector. Taxing profits away from individuals and businesses to help fund risky research by academics and advocacy groups is a waste of scarce resources and almost always generates a poor return.
Nothing in the foregoing should be construed as an attempt to aid or hinder passage of any legislation. Copyright 2008. South Carolina Policy Council Education Foundation, 1323 Pendleton Street, Columbia, South Carolina 29201.