CITY/STATE: Three Economic Big Ideas For Rhode Island
Monday, June 03, 2013
Given economic, fiscal, and other conditions in Rhode Island, what should be done to improve things? I’d like to share three ideas today, one tactical, one strategic, and one impossible dream.
The Tactical: Permit Fee Holiday
This is an idea that any city or state could implement. It involves making permits and other various business fees payable at the end of the year instead of in advance. In effect, this creates a one year “fee holiday” for new businesses.
Everybody wants more startup businesses of every type, ranging from tech companies to corner diners. But the startup costs of a business can be significant, especially for undercapitalized “bootstrap” style startups. There are legal entity incorporation fees, business license fees, etc. along with other permits needed for all sorts of things.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTWhy not make as many of these free for the first year as possible? This doesn’t even involve simplifying permitting or setting up one stop permit shops for business (though these are desirable as well). The businesses would still need to get the permits, but simply wouldn’t pay until year two. So many businesses fail within the first year. Why not wait to see if they are viable before charging them money?
This probably couldn’t apply to everything. For example, you wouldn’t want to make it too easy to set up a bunch of dummy corporations. But doing whatever is possible to lower the barriers to entrepreneurship would be a good thing.
The Strategic: Regulatory Harmonization with Massachusetts
A more difficult but potentially more beneficial item would be regulatory harmonization with Massachusetts. Trying to negotiate with them would be pointless. Trying to beat them is nearly impossible. But neither is required. Simply pass a law that says, in effect, “If it’s legal in Massachusetts, it’s legal in Rhode Island. If you’re licensed to do it in Massachusetts, you’re licensed to do it in Rhode Island.”
What a scheme like this does is in effect creates a common market between the states, similar to the European Union except not based on treaties and bureaucracy. A state like California can get away with bespoke regulations like proprietary emissions standards. California is a huge and rich state, so businesses simply can’t ignore it.
By contrast, Rhode Island is small and not rich, so companies and people will not pay and price, bear any burden for the privilege of living and doing business here. But by in effect joining forces with Massachusetts, you’ve now got a market of seven million, which is more attractive.
This approach also reduces to some extent border arbitrage, and lets Rhode Island and Southern Massachusetts function as the integrated economy that they are. There will still be fiscal policy disparities, but you can’t fix everything at once. But anything reasonable that reduces barriers to doing business in Rhode Island is a good idea.
The nice thing is that Massachusetts is culturally compatible and has a strong regulatory system. I am not suggesting imitating Texas or something like that. In general, their rules are pretty good. That’s not to say the state is perfect or scandal free. But then again, neither is Rhode Island under its current system.
The Impossible Dream: Public Service Reorganization
My impossible dream idea is really more of a thought experiment designed to show what the small size of Rhode Island as a state potentially enables. That small size means the state is really not even as a big as a decent sized metropolitan area. Yet services are allocated to levels of government similarly to other states. Let me explain.
Traditionally some services in America are provided at the state level – say corrections, interstate highways, and auto registration – while others are done at the local level – like fire, zoning, etc. Rhode Island divides services between state and local government basically the same way as everyplace else even though the small scale of Rhode Island means that some services might be feasibly and more effectively delivered at the state level even though some of them are traditionally local services throughout America. Given that Rhode Island is smaller than some counties, it would be like delivering the service at the county level in most other places.
Take voter registration or certain other “county clerk” type functions. These might potentially be run statewide rather than by city and town. Do we really need 39 of everything? Although Rhode Island is geographically ideal for centralized services, geopolitically it is actually more fragmented than normal because of the lack of county government which normally serves as a “shared services” layer in other places.
Given New England’s history of town government, this seems impossible. Also, government rollups can be tricky. For example, unlike in corporate mergers, when government functions are consolidated, nobody ever seems to lose their jobs and everybody’s salary and benefits get harmonized to the high water market. Still, there are intriguing potential benefits, such as fixing things once versus having to fix them 39 times.
The point of this suggestion is to show the way to think about the state. What does its unique small size or other unique attributes enable Rhode Island to do that other places just plain can’t? This is where we can generate competitive advantage.
Aaron M. Renn an opinion-leading urban affairs analyst, entrepreneur, speaker, and writer on a mission to help America’s cities thrive in the 21st century. In his blog, The Urbanophile, he has created America’s premier destination for serious, in depth, non-partisan, and non-dogmatic analysis and discussion of the issues facing America’s cities and regions in the 21st century. Renn’s writings have also appeared in publications such as Forbes, the New York Times, and City Journal. Renn is also the founder and CEO of Telestrian, a data analysis platform that provides powerful data mining and visualization capabilities previously only available in very expensive, difficult to use tools at a fraction of the cost and with far superior ease of use.
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