Washington Gov. Chris Gregoire, in the spotlight this week as a possible candidate for U.S. solicitor general, took a break from a brief tour of Eastside technology companies to sit down with TechFlash for a wide-ranging interview on subjects including the tech economy; taxes on Microsoft and other tech companies; and major public infrastructure projects, such as the 520 bridge, that affect Seattle technology workers.

Among other things, Gregoire discussed the importance of fostering green technology in the state, through smart-grid projects and other initiatives. We also quizzed the governor on her own tech usage, but she made it clear that she doesn't exactly qualify as a gubernatorial geek, despite recognizing the importance of technology in the state's economy.

Continue reading for edited excerpts from the conversation. Also sitting down for the interview was Bryan Mistele, the CEO of traffic technology company Inrix, whose Kirkland office Gregoire was visiting.

Q: You're here at Inrix, and you just came from Nintendo, two success stories in the region. But how do you ensure that companies are able to continue growing, and remain headquartered in Washington state, given what's going on with the state budget?

Gregoire: Tough times. We had to take a look at revenue this year. When we did, we proceeded to raise the threshold (for business and occupation taxes) for small businesses. We didn't raise it for just three years when we looked at the service side for B&O tax increase. We raised it permanently. We know that small business is the backbone of the economy. If we really want to get going, that's where we've got to incent. So we raised that threshold to make sure, up to a certain limit now, there's no B&O tax. So we need to keep doing things like that.

I'm fascinated by that study. [A Florida research firm says the Seattle region has the nation's best economy.] That says we have the foundation. Well, that's high-tech. So that's quite instructive, I think to the Legislature, to understand why it is that we have insulated ourselves from the dramatic downturn in other metropolitan areas across the country. Because of that foundation, we've got to do everything we can to foster it.

Q: During the budget deliberations, there was a proposal at one point to tax custom software as retail goods, not as a service. At the same time, Microsoft uses its Nevada subsidiary to reduce its royalty tax on software licensing. How do you view those two issues, and where would you put the tax?

Gregoire :Well, as soon as there was testimony that that would hurt our high-tech area, the custom software, people abandoned.

On what Microsoft has done, there was an attempt to try and get them to come back with that, back into this state. We were trying to find a way to make sure that happened. Again, every attitude you can see by the Legislature was to try and bring what had left back and retain what we had here. Anything that's a disincentive to that isn't going to get a shot.

Q: Would you like to see Microsoft record those royalty revenues here ...

Gregoire: Yes

Q: ... to therefore pay the tax here?

Gregoire: I'd like them to have everything back here. I'm upset that they think they have to send anything out of state. So I'm willing to try and look at ways that would be an incentive to them.

Q: Traffic. Obviously a very big issue, and you addressed the 520 bridge and the waterfront tunnel in your comments to employees here. What role will those projects play, ultimately, in ensuring the continued economic development of companies like Inrix and Nintendo and others?

Gregoire: Let me just say, when I was looking at the recommendations from a cross-section of people about what would we do in terms of the replacement of the viaduct, the business community weighed in with me. In particular Boeing. Knowing full-well that if you did nothing, and just tear down the viaduct, as has been suggested, you can take I-5 and double the congestion there. I was driven, in my decision, significantly by whether we were going to keep the economic opportunity in the state. So that's important. But, even with that tunnel, we will not have the same capacity that we do today.

That's where Bryan comes in to try and help us understand, OK, what will that traffic do then, because we need to make other kinds of decisions. We're looking now at I-5 and asking the question, do the off-ramps on I-5 add to the congestion in Seattle? We think they do, but we don't know the answer to the question. That's why I'm so excited to come here and see what they've got. Those are the kinds of questions that Bryan can answer for us.

Q: Many technology employees commute from Seattle to the Eastside and back again. I completely understand the desire to move forward with 520 on schedule. Are you empathetic at all with the view of having some kind of light rail or non-vehicular transit over that bridge.

Gregoire: Absolutely. But we've been at this for over a dozen years, and the fact of the matter is that bridge is quite vulnerable. I am not an engineer, but I took a tour from a boat and looked up and saw what the engineers were telling me. Even I can see the vulnerability. If we have a sustained, relatively short period of 70 mile-an-hour winds, we could lose it. If we had an earthquake like what we had in Olympia, we could lose it.

So, we can argue forever, we can process to death, just as long as we understand how vulnerable we are, and if we lose it, we will shut down the economy here. So we have got to move forward. The subject has been debated. I am very clear that 520, when we replace it, will be ready for light rail. Light rail is not ready for it. There is no plan, there is no money. At some point in the future we should do it. Fine. It will be ready when light rail is ready. Light rail is not ready today, so I'm not going to hold it up while looking for a plan, and looking for a vote, and looking for the money. We don't have time.

Q: Bryan, as an employer on the Eastside who has a vested interest in traffic, what are your views on the 520 bridge? Putting you on the spot here in front of the governor.

Mistele: This stretch of road, right here, literally right outside our window, is the most congested stretch of road in the entire Pacific Northwest. So obviously we care very deeply. A lot of our employees live in Seattle, and commute over here to Inrix. We've had to shift times that people start, so that they don't have to spend their evenings or mornings stuck in traffic congestion, which impacts meetings that Inrix has.

So we're very concerned that we increase the overall capacity of people that can get over that bridge, especially during peak hours. Because as you know, sometimes literally it will take an hour to an hour-and-a-half for someone to get from Microsoft over to downtown Seattle, depending on the time of day and day of the week. We have plenty of data to back that up. Our employees care very passionately about that. So we're very encouraged to hear. We don't want to hold up what's going on on 520, we want to speed it up, and get the work done as quickly as possible.

Q: Did you locate this close to that bottleneck on purpose?

Mistele: No, we did not. It is ironic that we can look out our window and literally see the most congested stretch in the Pacific Northwest.

Q: Governor, broadly, what role will technology and the technology industry play in driving the economy in the next five to 10 years.

Gregoire: We in this state have identified three sectors that we consider to be the jobs of tomorrow. They are in green, they are in health care, and they are in high-tech. So we're doing everything we can to get ourselves ready. So we're enhancing our slots in our community and technical colleges, in our four-year universities, particularly those we call the high-demand.

I've talked to Dr. Romer directly (chair of the President's Council of Economic Advisers) and she says the single greatest investment that you can make as a state is in a workforce in those three areas. This is our bread and butter. High-tech is our home right here. It's much of what our relationship is in export. We're the most trade-dependent state in the nation. Much of our export is as it relates to high-tech.

And we hope that there will be a marriage in our state, by the way, between high tech and green. So smart grid, by the way, is a wonderful intersection between the two. So I am going in September to the World Expo in China and Shanghai, and I will have a day there, and the exclusive topic is going to be smart grid and the export of our technology to China.

Q: What technology do you use in your daily life?

Gregoire: Oh, I'm pretty inept. (Laughter)

Q: Do you use a BlackBerry?

Gregoire: Let me just say this, I have one. I use it, but I'm not good.

Q: And you said at Nintendo that you're not a big gamer.

Gregoire: No, but I like Wii. I was being serious, my daughter's favorite wedding present was a Wii game.

Q: Do you use PC or Mac?

Gregoire: Well, hmm. (Long pause. Laughter.) ... PC.

Q: Wait, is there more to that?

Gregoire: No, no, no. You're thinking I'm -- but I'm not.

Note: Staffers explained afterward that Gregoire just isn't an avid tech user. We also asked Gregoire about the speculation that she's being considered for U.S. solicitor general, to replace Supreme Court nominee Elena Kagan. She gave essentially the same response as she did to other reporters, noting she hadn't been contacted by the White House and that she's committed to guiding the state out of the recession.