EDC leadership role in doubt after damning report

The driving force behind the privatization of the R.I. Economic Development Corporation in 1995 was a desire to separate the Ocean State’s volatile and corruption-prone politics from efforts to grow its economy.
Seventeen years and a few very bad economic turns later, the state could soon reverse course and centralize responsibility for steering business activity back in the hands of its top elected official.
For the second time in four years, an independent analysis – this one by the Rhode Island Public Expenditure Council – has found Rhode Island’s economic-development policies directionless and the quasi-state EDC increasingly top-heavy, inefficient and ineffective.
And although the structure of the current EDC is designed to include private-sector involvement in steering the state economy, Ocean State business leaders frustrated with the state’s repeated economic false starts are leading the push for change.
“This [report] laid bare to the public an issue we have known for some time: no one in the state wakes up every day thinking about business development,” said Laurie White, president of the Greater Providence Chamber of Commerce, about the RIPEC report. “It shows very clearly that the state has no economic strategy and no research function and doesn’t do the full-blown data analysis one would expect in a state economic-development agency.”
White said she supported the RIPEC report’s recommendation to subsume the EDC into a newly formed Executive Office of Commerce that would also contain the R.I. Department of Environmental Management, R.I. Department of Business Regulation and R.I. Department of Labor and Training.
“We have been driving home the fact that economic development is not an afterthought and everything else in the government sphere is dependent on a strong economy that can grow and generate revenue,” White said. “We agree that [commerce] should be a cabinet-level function that sits alongside the governor.” White called on Chafee, who offered a muted response to the report when it was released, to announce his intentions with regard to economic-development policy this week.
RIPEC itself is a fiscal watchdog supported by a collection of the state’s leading business interests not normally predisposed to advocating new layers of bureaucracy or increased government authority.
But in this case, RIPEC Executive Director John Simmons, commissioned by Chafee to examine the issue in the wake of the 38 Studios LLC bankruptcy, found that the arms-length relationship between the EDC and state government prevented transparency and accountability instead of promoting it.
Mark Higgins, dean of the University of Rhode Island’s college of business administration, agreed that it “makes sense from a responsibility standpoint” to focus economic-development policy within the executive branch.
Coupled with the creation of the new commerce secretary position, Higgins said RIPEC’s call for a statewide economic-development strategy updated by the governor after every election would force those in the top office, or running for it, to take ownership of the economic-development policy.
The downside of coordinating so much of state government within the executive branch, Higgins noted, is the likelihood that economic-development plans will be scrapped every four years with the arrival of a new governor.
Business Innovation Factory founder Saul Kaplan, who was EDC executive director from 2006 to 2008, said while the debate about the role of state government in economic development is healthy, the EDC’s independence is often overestimated and significance of it overblown.
“Anyone who came in there knew they were dealing with the state – it always felt that way anyway,” Kaplan said. “We just never built that collaboration muscle. We need to operate more effectively across the different silos.”
Chafee asked RIPEC to analyze the EDC and suggest changes to the state’s economic-development structure after 38 Studios, which the agency had approved a $75 million state-guaranteed loan for, collapsed last spring. RIPEC’s answer to 38 Studios is a greater focus on economic-development planning and data analysis accompanied by an effort to improve Rhode Island’s overall business climate, instead of chasing individual deals.
Hasbro Chairman Alfred Verrecchia, who became vice chairman of the EDC board after completing his own critical report on the agency (and was there when it approved 38 Studios’ $75 million loan guarantee) said the RIPEC findings generally echoed his conclusions from four years ago.
On whether subsuming the EDC within an executive office was the best solution, Verrecchia said he wasn’t sure and worried about distancing economic development from the private sector.
“I think the private sector has to take a more active role,” Verrecchia said.
Before RIPEC finished its analysis, former RIPEC Director Gary Sasse, former EDC Executive Director Marcel Valois and Economic Development Foundation of Rhode Island President Scott Gibbs released their own “reboot” plan for the agency in August.
That plan would have created an Office of Strategic Development and Economic Policy reporting to the governor.
Sasse, now at Bryant University, said the RIPEC plan was largely “preaching off the same sheet,” as his group, with the most noticeable difference being the amount of consolidation within the governor’s office in the RIPEC concept.
Response to the RIPEC recommendations from top state leaders was measured.
Senate President Teresa Paiva Weed in a prepared statement “applauded” RIPEC for their work, but declined to comment on the secretary of commerce proposal.
House Speaker Gordon Fox said the report contained “worthy suggestions.
“I like using the term ‘commerce’ and putting all its varied functions under one umbrella, because this is a much broader issue than economic development,” Fox said in an email response. •

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