Rhode Island’s economic-development arm has yet to find a cure for its 38 Studios LLC hangover.
In the 10 months since Curt Schilling’s video game company ran out of money, the R.I. Economic Development Corporation has seen its activity-level drop across nearly all key programs compared with the previous 10 months.
Nowhere has the slowdown been more apparent than the state’s public-financing programs for Rhode Island businesses.
Since May 2012, the EDC has approved $1.4 million in loans, loan guarantees or grants to nonstate entities, according to a review of agency meeting minutes. The majority of that was a $1 million loan guarantee for Enow Inc., a startup, now in Warwick, that makes solar-energy systems for trucks.
But in the 10 months prior to last May, the EDC approved $12.5 million in loans, loan guarantees or grants – $20.5 million if you count $8 million in federal pass-through financing for the Greater Providence YMCA.
Either way, the quasi-state agency is experiencing an 80-90 percent decline in the amount of resources it puts to work to create jobs.
Combined with the slowdown at the EDC-affiliated Small Business Loan Fund, plus the suspension of Providence Economic Development Partnership financing last year, it means a significant amount of capital that could be flowing into businesses and the economy is tied up.
There are likely several reasons behind the slowdown at the EDC, starting with the direct upheaval that consumed the agency between May and July of last year, resulting in the effective ouster of five board members (with three more trying to leave) and the executive director.
Then there is the public-perception problem that the Small Business Loan Fund blamed for slowing its financing pipeline. In some cases businesses that would have applied for loans, or contacts who would normally refer eligible candidates, thought the agency had shut down, EDC director of financial-programs Sean Esten has said.
In other cases, businesses were wary of doing business with the state after it sued those involved in the 38 Studios deal, including advisers and financial services firms that helped facilitate the transaction.