RIPEC: Bring EDC under state control

JOHN C. SIMMONS, executive director of the Rhode Island Public Expenditure Council, released a report on the R.I. Economic Development Corporation, which was commissioned by Gov. Lincoln D. Chafee after the collapse of former Red Sox pitcher Curt Schilling's video game company 38 Studios LLC.
Posted 9/25/12

PROVIDENCE - The R.I. Economic Development Corporation, plagued by inefficiency and lack of direction, should be brought under direct control of the governor’s office and a new state commerce agency, the Rhode Island Public Expenditure Council recommended in a report on the quasi-state agency released Tuesday.

The report, commissioned by Gov. Lincoln D. Chaffee in the wake of the 38 Studios LLC bankruptcy, would place responsibility for growing Rhode Island’s sluggish economy at the highest level of state government, instead of the quasi-state EDC, which lacks the authority to direct or coordinate policy.

“Broadly, Rhode Island lacks a systematic, regular, data-driven approach for evaluating our economy; coordination of existing economic plans; and alignment of responsibility and authority,” the report said. “These limitations result in the duplication of effort and missed opportunities, making it functionally difficult to be efficient.”

To bring state government back into direct control of economic development, the report calls for the creation of a new secretary of commerce, who would report to the governor and control not only a reorganized EDC, but also the Department of Labor and Training, Department of Environmental Management, and Department of Business Regulation. The Commerce Secretary would be appointed by the governor without legislative confirmation.

The system recommended by RIPEC would bring Rhode Island closer in line with how most states in the country approach economic development in a structure very similar to that used in Massachusetts. In commissioning the report after 38 Studios collapsed, Chafee suggested bringing the EDC under the governor’s control as a solution to problems with the agency.

Despite the flaws identified in the current EDC, RIPEC does not recommend disbanding the quasi-state agency, but instead reorganizing and “rebranding” the organization, which has suffered a developed a poor reputation since it administered the failed $75 million loan guarantee to Curt Schilling’s 38 Studios video game company.

Renamed the Rhode Island Commerce Corporation, the agency would be lead by a governor-appointed chief operating officer (also without legislative confirmation) and retain the same board of directors as the current EDC, with the commerce secretary as the chairman instead of the governor.

The report calls for the new Commerce Corporation to dedicate more resources to business development - something RIPEC said only two of 41 EDC employees are now working on directly - with a customer service focus “concierge” function directing businesses to the appropriate program or service.

Other recommendations for the new re-branded quasi-state agency include:

  • Create a new Council of Economic Advisors to do data analysis

  • Form a commerce coordinating council of state agency leaders

  • Perform risk analysis and review of the EDC loan portfolio and prospective loans

  • Establish a system of performance metrics and monitoring

  • Consolidate some of the agency’s conduit financing programs.

RIPEC said it believes the changes, including the creation of the new Executive Office of Commerce, should not require an additional state appropriation and can be accomplished by re-directing resources now duplicated among the agencies being brought under control of the new Commerce Secretary.

Most of the changes can be accomplished through executive order, and RIPEC recommends Chafee make those changes before seeking long-term amendments to state law.

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