COLUMBUS — When the government forks over taxpayer money to a private company that promises to grow and create jobs, it’s a gamble.

Take for example the case of California-based UltraCell Corp.

State officials recruited the fuel cell technology start-up to Ohio in 2006, luring the company with Third Frontier money and other economic development grants.

UltraCell is working on promising technology that the military wants: portable units to recharge batteries for soldiers using electronics in the field.

But cash flow problems, a sluggish economy, and a lack of immediate orders, led UltraCell to pack up and leave Dayton in August.

By late summer, the state Department of Development and city of Dayton sent letters demanding UltraCell repay $3.2 million.

UltraCell says it doesn’t have the cash but it’s poised to line up military orders for the latest version of their portable fuel cell unit.

That leaves government officials in a predicament: be patient and hope UltraCell returns to Ohio or go to great lengths to try to recoup the money.

“Every situation is a little different. It’s more important for us to have the job creation than the investment,” said Shelley Dickstein, Dayton assistant city manager. “The cash back – that’s all well and good. But it’s really about the jobs and economic engine.”

Mark Barbash, Ohio Department of Development chief economic development officer, said it’s too early to tell whether the state should go hard after the money or take a wait-and-see approach.

The default rate on development department loans is roughly 1.9 percent and the default rate on Third Frontier programs is less than one-tenth of one percent, state officials said.

“Obviously, we want to ensure that Ohio taxpayer monies have the highest potential to get a return. Each case will be different,” said John Griffin, director of the state Department of Development technology and innovation division.

UltraCell recently auctioned off office equipment and other items from its Dayton site since the landlord wanted the building emptied, UltraCell Chief Executive Keith Scott said.

Meanwhile, the state development department is in the final stages of awarding an unbid contract to Arsenal Venture Partners, which has financial ties to UltraCell.

Arsenal and EnerTech are being hired to manage $40 million in state and federal stimulus money in a newly created Energy Gateway Fund. The fund is designed to invest in advanced energy projects, such as wind turbines or a solar farm, that are likely to create jobs within three to five years, Barbash said.

Arsenal and EnerTech will match dollar for dollar the money that the state is committing to the fund. They’ll be compensated from investment returns and fees.

Arsenal manages On Point Technologies, a venture capital fund established by the U.S. Army, which invested in UltraCell.

On its website, Arsenal lists UltraCell as one of its success stories.

Barbash dismissed concerns that the state is willingly working with a company that owns a firm that burned the state. He likened it to the state and a bank both loaning money to a company that later goes out of business and then saying the state shouldn’t use that bank any more.

Jason Rottenberg, a general partner at Arsenal, said Arsenal is a minority investor in UltraCell and had no say in the decision to leave Dayton.

Contact this reporter at (614) 224-1624 or lbischoff@DaytonDailyNews.com.