Lawmaker Calls for Major Changes at EDC
Thursday, July 19, 2012
With the Economic Development Corporation (EDC) facing scrutiny regarding another failed loan guarantee, one local lawmaker is calling for more “public oversight and accountability” at the agency.
State Senator James Sheehan on Wednesday called for a review of the $5 million loan guarantee awarded to Capco Steel in 2010. The EDC said this week that it has been making payments on that loan since February and $4.6 million is still owed.
Sheehan is questioning why a steel fabricating company would have received state-backed funds during the recession.GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST
"This may or may not have been a bad decision by EDC, but, the lack of transparency about Capco Steel's default makes one question the wisdom of the initial decision," Sheehan said.
Capco received a $5 million loan guarantee from the Industrial Recreational Building Authority (IRBA) as part of $26 million in financing it obtained though Webster bank. But the company has been unable to recover from losing $85 million in contracts during the recession and is now down to 100 employees, according to owner Michael Caparco.
Several months after Capco received funding, the EDC’s board voted to give former Red Sox ace Curt Schilling’s a $75 million loan guarantee to move his video game company (38 Studios) to Rhode Island from Massachusetts. Last month, the company filed for bankruptcy, leaving the state on the hook for as much as $100 million.
"38 Studios made one seriously doubt the ability of the EDC to effectively run and oversee another loan guarantee program (Job Creation Guarantee Program) although the two situations may be quite different," Sheehan said.
Governor Chafee has already tapped Rhode Island Public Expenditure Council (RIPEC) John Simmons to conduct a full review of the EDC. His report is expected to be issued in September. Chafee has said he plans to hold off on hiring a new executive director until the report is released.
Former executive director Keith Stokes resigned in May after 38 Studios’ financial problems became public.
As of June, the EDC had 42 employees and carried a total payroll of $2,938,451.
Sheehan, who serves as co-chairman of the legislature’s Joint Committee on Economic Development, said he believes one of the options for the EDC could be to make it an “in-house” state department rather than a quasi-public agency. He also said it’s time to reconfigure to agency as a whole.
“Perhaps it could be recast as a Department of Commerce with a core mission to improve the overall business climate in the state, which has been ranked in the bottom 10 in the nation in four national surveys,” Sheehan said. “Further, the newly reconfigured 'EDC' should not be permitted to make the kind of investment decisions alone, such as those as 38 Studios, that are better left to seasoned experts in the private sector."
Dan McGowan can be reached at [email protected].
