Small state, big issues

A STEP INTO HISTORY: Gina M. Raimondo's gubernatorial election win in 2014 marked the first time, going back to the Colonial era, that a woman held Rhode Island's highest office. / PBN FILE PHOTO/DAVID LEVESQUE
A STEP INTO HISTORY: Gina M. Raimondo's gubernatorial election win in 2014 marked the first time, going back to the Colonial era, that a woman held Rhode Island's highest office. / PBN FILE PHOTO/DAVID LEVESQUE

Editor’s note: In celebration of Providence Business News’ 30th anniversary, staff writers and contributors examined the stories and trends that defined the region’s business scene for the period.
The state of Rhode Island, small in population and size, carries an outsized political reputation. Specifically, it has struggled to move past a history of political corruption and poor choices in economic development.

But Rhode Islanders have also moved ahead, making history by electing a first woman governor, Gina M. Raimondo, and embracing changes that have led to a larger national profile for good reasons, among them the landmark 2011 pension-reform legislation.

On the economic-development front, over the past 30 years, the state has reorganized its efforts to attract business and jobs, and to increase partnerships among industry and government.

In 2004, after a nearly decade-long effort, the General Assembly and state voters authorized the Separation of Powers Amendment to the state constitution, ending the longtime practice of lawmakers sitting on quasi-state agency boards. At the time, it was described as a win for good-government advocates.

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Another major government reorganization came under former Gov. Lincoln C. Almond, when the R.I. Department of Economic Development was merged with the R.I. Port Authority into the new R.I. Economic Development Corp., focused on building the state’s economy.

The agency, responsible for distributing incentives for job creation and economic development, eventually ran into turmoil. With the support of then-Gov. Donald L. Carcieri, the EDC guaranteed a $75 million loan to 38 Studios LLC, a video-gaming company run by former Red Sox pitcher Curt Schilling.

The company later spiraled into bankruptcy and defaulted on its state loan, triggering multiple lawsuits and ongoing investigations. The issue continued to divide Rhode Islanders in 2016. In March, the U.S. Securities and Exchange Commission announced it had filed civil charges against the state’s economic-development agency, as well as bond underwriter Wells Fargo Securities, accusing them of fraud.

Rhode Island taxpayers, meanwhile, have made several payments on the bond debt, and officials have said that if the state steps back from that commitment to bondholders, it will pay dearly with a certain downgrading of its bond rating by ratings services.

The debacle set in motion several reform measures, and helped fuel the creation of a successor to the R.I. Economic Development Corp. The R.I. Commerce Corp. was created in 2014, designed to be an umbrella agency to oversee the disparate commerce functions for the state, providing a more streamlined, predictable and responsive office for the state’s business community.

Stefan Pryor, the former education secretary in Connecticut, in early 2015 became the state’s first commerce secretary, overseeing the Executive Office of Commerce, which now includes Commerce R.I., the R.I. Port Authority, the Department of Business Regulation, and the housing and community development functions previously overseen by the state’s Department of Administration.

The state has had a colorful political history over the past 30 years, marked by corruption and financial scandals.

In 1994, corruption reached the highest elected office in the state, when former Gov. Edward D. DiPrete admitted taking $250,000 in bribes to steer state contracts to his friends. He was, by that time, out of office.

In the state’s capital, Providence Mayor Vincent A. “Buddy” Cianci Jr. was twice forced to resign his office, initially in 1984 following a no contest plea to an assault charge. In April 2001, Cianci was indicted following an FBI investigation on charges of bribery, extortion and other criminal conduct. In 2002, he was forced to leave public office after he was convicted on one count of conspiracy. He would serve five years in federal prison.

After his release, he became a radio personality, then ran once more for Providence mayor. He lost to current Mayor Jorge O. Elorza. In January 2016, Cianci died. City officials agreed to hold a public viewing at City Hall, which drew several thousand people.

More recently, former R.I. House Speaker Gordon D. Fox was sentenced to three years in federal prison for stealing $108,000 in campaign funds, accepting a $52,000 bribe and filing false tax returns. The conviction followed an 18-month investigation led by the U.S. Attorney and the R.I. Attorney General, as well as the IRS, FBI and R.I. State Police.

According to his plea, Fox admitted that he used money from campaign donors to pay the mortgage on his house, pay car-loan payments and American Express bills, run up at retail stores. He admitted accepting the $52,000 bribe from the owners of the Shark Sushi Bar and Grill to help it obtain a liquor license in Providence.

In 2015 Rhode Island had made history of a different kind, electing the first woman governor, Gina M. Raimondo.

Now in her second year in office, the Democrat has presided over controversial issues, including the recent adoption by the General Assembly of truck tolls to help finance road and bridge repairs. She has also shifted the focus of economic-development efforts, introducing budgets that place greater emphasis on attracting outside companies to Rhode Island.

The fiscal 2016 budget, approved by the General Assembly largely as introduced by Raimondo, included more than $40 million in business incentives, including $25 million to attract a signature project to the still-undeveloped I-195 Redevelopment District.

The fiscal 2017 budget proposal has a similar approach, offering incentive programs intended to attract outside investment. •

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