An outside group reviewing the Rhode Island economic development agency that guaranteed a $75 million loan for former Red Sox pitcher Curt Schilling’s failed video game company says the agency lacks focus, doesn’t effectively measure its performance and should be brought under the control of state government.
A report released Tuesday by the Rhode Island Public Expenditure Council recommends a restructuring of the quasi-public Economic Development Corp., including its absorption into a new state office of commerce. It also calls for a much broader overhaul of economic development efforts that it says are unfocused and recommends that the state mandate a comprehensive economic plan.
“Nowhere in the hierarchy of state government is there a clear responsibility for economic development, or for which entity should spearhead coordination of this effort,” the report said.
Under RIPEC’s recommendations, the board that runs the current EDC – to be renamed the Rhode Island Commerce Corp. – would remain in place, as would its executive director. But economic development efforts would be overseen by a new commerce secretary – a member of the governor’s cabinet – and coordinated across agencies.
Gov. Lincoln Chafee commissioned the report after the collapse of Schilling’s company, which laid off all its employees in May and filed for bankruptcy protection in June. The state lured 38 Studios from Massachusetts to Rhode Island with a $75 million loan guarantee approved in 2010, and Rhode Island is now likely on the hook for some $100 million related to the bonds floated to support it.
The EDC has been without a permanent executive director since Keith Stokes stepped down as 38 Studios’ financial problems came to light, and half its board seats are vacant after a wave of resignations. Chafee has been waiting for the report from the business-backed RIPEC before making any decisions about a permanent replacement for Stokes.
Chafee introduced RIPEC Executive Director John Simmons at the Statehouse on Tuesday at the report’s formal unveiling but did not stay for the presentation. In brief remarks, the governor said the report contains “a lot to digest” and that “good things” will come from its recommendations.
Judy Chong, a spokeswoman for the EDC, said the agency had no immediate comment.
Simmons said the agency is in need of major “rebranding” – in part because of the 38 Studios debacle – and needs to become more responsive to businesses, which view it as an impediment. He noted that only two of its 41 employees have been working directly on business development and recommended that the revamped agency focus on growing existing Rhode Island companies – and nurturing startups – rather than wooing out-of-state companies.
RIPEC also looked more broadly at economic development in Rhode Island, which has struggled with one of the highest unemployment rates in the country. The review found that the state lacks a strategic vision, resulting in “duplication of efforts and missed opportunities.”
To remedy that, the report calls for state government to take a much more direct role.
“We have not changed the economy in Rhode Island in the last 20 years,” Simmons said at a briefing for reporters on Monday. “We have not had a plan for it. Fundamentally, this is about the state government doing its role.”
The new commerce secretary would be appointed by the governor but would not be subject to Senate confirmation. The head of the revamped EDC would also be appointed by the governor, and the Senate would have no say, under RIPEC’s recommendations.
The commerce office would include not just the new EDC, but also fold in the Departments of Labor and Training, Business Regulation and Environmental Management. The Office of Regulatory Reform would also become part of the new secretariat.
Simmons said much of the report could be implemented by way of executive order, though some aspects would require legislation. He said he expects the recommendations will get “fair consideration.”
The General Assembly’s Joint Committee on Economic Development is holding a public hearing at the Statehouse on Tuesday afternoon on the report’s findings.