Review of EDC due Tuesday

The nonprofit, nonpartisan Rhode Island Public Expenditure Council on Tuesday will release its review of the Economic Development Corp.

The last big project the EDC was involved in left taxpayers on the hook for more than $75 million when 38 Studios collapsed.

The agency has been scrutinized several times.

Three years ago, a three-month study called for replacing all the directors at the EDC. Review commission chairman Al Verrechia characterized the organization as “a basket of frogs.”

“There’s an enormous amount of energy being expelled, but it’s not being channeled or focused,” Verrechia said in 2009.

Fourteen years earlier there was another reform.

“We used to have an economic development department in this state, and we restructured that into the Economic Development Corp. and the Economic Policy Council, and for a short time it did work,” Gary Sasse, a Bryant University professor, said Monday.

Sasse, a former head of the organization doing this latest review, said the EDC needs a vision and needs to be less of a top-down organization.

“It cannot be a government-dominated system. It has to be a true partnership between business and government,” Sasse said.

“You need the voice of the customer, and the voice of the customer are the business owners as well as the citizens,” said Karl Wadensten, a member of the EDC board of directors.

Wadensten, the only board member who voted against 38 Studios, said that deal relied too much on a sales pitch.

“Don’t come with your assumptions. Don’t come with your opinions. Come with your facts,” Wadensten said.

University of Rhode Island business professor Edward Mazze agreed. He said too much political influence is outweighing business sense.

“On the 38 Studios deal, I think that was very apparent that I’m sure there were junior staffers who looked at the proposal and said, ‘My god, this is an awful lot of money to put into such a risky venture,’ whereas the senior staffers just kept looking at the jobs,” Mazze said.

“If we had a private sector underwriting the 38 Studios deal, do you still think we would have made it?” Sasse said. “It was a government-dominated process that was highly politically leveraged.”

Mazze said he thinks the agency’s ability to loan money should end. He said there’s no capacity for overseeing the money once it’s parceled out, which is another lesson from the 38 Studios deal.

The General Assembly’s Joint Committee on Economic Development plans to hold a public hearing at the State House at 4 p.m. Tuesday to discuss the report’s findings.

Article source: http://www2.turnto10.com/news/2012/sep/24/6/38-studios-report-due-out-tuesday-ar-1183352/

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