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.
"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 dmcgowan@golocalprov.com.
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Comments:
louis rizzo
7:16am on Thursday, July 19, 2012
employees jumping ship ..need to protect those PENSIONS
Gary Arnold
8:36am on Thursday, July 19, 2012
Why all the focus on the EDC, it has always been a stooge for the GA aka our lawmakers. The GA is the problem as they are not qualified or capable of directing the EDC or the state of RI. Look at where we are in this state, a complete waste of resources. It is the GA (lawmakers) that have continually lead us down a path of decay and corruption. Not one single quality effort has gone into PLANNING to revive RI, not one.
Harold Stassen
12:36pm on Thursday, July 19, 2012
Senator Sheehan calling for "changes at EDC" is like rearranging the deck chairs on the Titanic. In the case of 38 Studios and now Capco, qualified professionals have openly questioned the EDC's staff ability to understand and oversee these complex projects. Very comforting.
Notice our Governor has been silent on the Capco Steel matter.
David Beagle
3:43pm on Thursday, July 19, 2012
This state is pretty much dead last in ANY economic development, disbanding the EDC would do little but create a stir of where to put all the democrat hacks that work there.
Lance Chappell
8:11am on Friday, July 20, 2012
Sheehan is only underscoring the problem his party has created with the EDC. This is another failed government agency that needs to go. The one party government operation at the state house has become fat and lazy and out of touch with the people. People are fed up and in some cases, are leaving the state. They have given up on this state. RIEDC has been a dumping ground for political hacks and union reps. Their record on attracting industry in this state is horrible. The first step to turning this state around is a cleanout of that statehouse. Unfortunately, 18% of the incumbants are running unopposed! That is a sad. The apathy has begun to settle in.