Chafee Fails to Bring GE Capital to Rhode Island
Wednesday, April 13, 2011
GoLocalProv has learned that Governor Lincoln Chafee failed to offer the necessary tax breaks and other economic incentives to bring GE Capital into Rhode Island.
Sources tell GoLocalProv that the corporate giant was considering moving a significant operation to Rhode Island. GE Capital asked what the state could do to help it make the relocation. According to sources, what the Governor offered was so insubstantial that GE Capital decided it wasn’t even worth its time to attend a major meeting that had been scheduled on the deal.
Instead, GE Capital canceled the meeting and is now eyeing Maine as an alternative destination, according to sources in the business community, who were familiar with the negotiations.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTChafee ‘losing credibility faster than the speed of light’
The news comes as opposition continues to mount among business groups to Governor Lincoln Chafee’s proposed expansion of the sales tax. This week, two back-to-back protests were set for the Statehouse, one was organized by the Greater Providence Chamber of Commerce.
“He’s losing credibility faster than the speed of light in the business community,” said Ed Mazze, a business professor at the University of Rhode Island. “I’ve never seen in any state I’ve lived in a governor lose credibility at such speed.” (Mazze said he has lived and worked in seven states, not counting Rhode Island.)
Mazze said the loss of credibility in the local business community puts Chafee in an awkward position when he is out trying to bring other companies to Rhode Island.
Governor did offer a deal
State officials yesterday confirmed that GE Capital had been taking a look at Rhode Island. But Mike Trainor, a spokesman for Chafee, disputed the suggestion that the Governor had not offered the company any incentives to come here. “The Governor did not not offer a deal to GE Capital. I can absolutely confirm that wasn’t the case,” Trainor said. “The Governor was open to them coming and had indicated that he would give them some form of consideration.”
GE Capital is the financial services division of General Electric, a U.S. corporate behemoth that posted $149 billion in net sales in 2010 and ranked fourth in the Fortune 500 list for that year. GE Capital itself reported a net income of $3.3 billion in 2010 and assets worth $576. The company has 50,000 employees spread out in offices in over 50 countries and provides financing for businesses in the aviation, energy, health care, and real estate industries.
Yesterday, a GE Capital spokesman said he was not aware of the possible move to Rhode Island.
Neither Trainor nor officials at the Rhode Island Economic Development Corporation would say exactly what GE Capital operations would have shifted to Rhode Island—or how many jobs would have been created as a result.
‘We should be doing backflips to get them’
“If we’re talking about their corporate headquarters we should be doing backflips to get them, because that would be another Fidelity,” Mazze said, which he said has been “wonderful” for the state economy.
With approximately 3,000 employees, Fidelity Investments is among the largest employers in the state. The company recently announced plans to relocate an additional 1,100 employees from Massachusetts to Rhode Island. Fidelity is also one of the largest beneficiaries of various state credits, receiving approximately $3.4 million in credits in 2010, according to state records.
Had a significant GE Capital Operation moved here, Mazze said it could have had a “major impact” on the unemployment rate, which remains among the highest in the country.
However, Joe Paolino, Jr., a former Providence mayor and state economic development chief, said it would be premature to pass judgment on the failure of the GE Capital deal without knowing exactly what the company was seeking from the state. Yesterday, officials at the Economic Development Corporation declined to reveal any of those details, saying they were bound by a non-disclosure agreement. Trainor also declined to elaborate on the negotiations.
Paolino said there’s no one-size-fits-all approach to luring businesses to move in. He said each company has its own needs—which could be anything from requiring a zoning change, fast-tracked building permits, or funding for job training.
Chafee wants to get rid of largest tax credit program
The EDC alone has approximately 50 tax breaks and other incentives for economic development. (Click here for the complete list.)
In order to successfully close the deal with a prospective company, Mazze said the state has to offer a package of incentives that meet their needs. “Without these incentives, you’re not going to get these companies,” Mazze said. “They have no loyalty to the state.”
Chafee has been critical of special deals offered to attract companies—most notably, the $75 million in loan guarantees the state granted to former Red Sox pitcher Curt Schilling’s video game company, 38 Studios. In his budget address last month, Chafee said, “For too long, our economic development strategy has been targeted toward individual companies instead of creating an environment that fosters broad economic growth.”
In his budget address, Chafee proposed scrapping the Jobs Development tax credit, saying that “very few companies can navigate its complex reporting requirements, and its effectiveness is difficult to determine.” State records shows that Rhode Island handed out $21.5 million in credits under the Jobs Development Act in fiscal year 2010—making it the largest tax credit program the state has.
But Trainor said Chafee is not necessarily opposed to all tax credits for companies. What the Governor is most opposed to, he said, is “one-off deals” tailored to specific companies. Instead, Trainor said Chafee prefers a more “systemized approach.”
Spokesman dismisses ‘naysaying’
Local sources say GE Capital’s alternative to Rhode Island is Maine. Yesterday, a spokeswoman for Maine Governor Paul LePage was not able to confirm that there were any current negotiations between the state and the company.
With the fourth highest unemployment rate and a high underemployment rate, Mazze offered a pessimistic outlook for the state economy, saying there’s nothing on the horizon that suggests those numbers might improve. “We are not only stalled in neutral in economic development … we may very well be going backwards,” he said.
Trainor was dismissive of such criticism yesterday. He said that in the next couple of weeks the state will announce that a new business is coming to Rhode Island, bringing 165 jobs to the state. Soon after that, he said there will be an announcement on a second business, which is expected to produce more than 200 jobs.
“There’s going to be two announcements … that will make a lot of that naysaying irrelevant,” Trainor told GoLocalProv.
At the time of publication, he said he could not go into any further detail on those deals.
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