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Guest MINDSETTER ™ Ed Renehan: Rhode Island Needs to Get Real

Monday, July 20, 2015


There was much breathless excitement and hype last week about a "Cybersecurity Summit" held at the Naval War College, Newport – an event during which Governor Gina Raimondo predicted a dominant role for Rhode Island in this important, growing sector of the digital economy.

Well - Positioned?

Per Raimondo: “As we look to spark Rhode Island’s economic comeback, we need to support innovative, cutting-edge sectors like cybersecurity. Our state has the potential to create jobs, protect Rhode Islanders, and lead the charge in this industry.” 

Sadly, this is not the case. We are by no means well- positioned to “lead the charge in this industry.” Far from it. In fact, quite the opposite.

As the Wickford-based publisher of, among other things, a line of books focused on Cloud Computing, Big Data, and Data Science, I pay close attention to evolving data security standards, tools, and enterprises. 

The cybersecurity race has been “on” for quite some time. The gun launching the competition went off more than ten years ago. Early starters are already entrenched with significant leads.

Firms making up the Cybersecurity Ventures benchmark “Cybersecurity 500” reside in a range of states and countries. But not one of them lurks in Rhode Island.

Cybersecurity Ventures identifies California-based FireEye as the number one firm in its “Cybersecurity 500” listing. This publicly-traded company, founded 2004, boasts over 2,700 corporate customers located throughout 67 countries, no less than 157 of these customers being listed in the Fortune 500.

The very last company on the same list, Waltham-based CounterTack (founded as NeuralIQ in 2004 and renamed in 2011), has raised $49.5 million in funding from such venture organizations as Goldman Sachs, Fairhaven Capital, Siemens Venture Partners, OnPoint Technologies, Alcatel-Lucent, TenEleven Ventures, EDBI (Singapore), and Mitsui (Tokyo). CounterTack's real-time endpoint threat detection and response platform has been widely accepted and is recognized worldwide as a major enterprise security solution.

The illusion that Rhode Island – currently hosting not one major player – is somehow poised to “lead the charge” in the cybersecurity industry is, to me, a symptom of a larger problem in this state when it comes to envisioning and fostering economic development.

We have to, as the saying goes, “get real.”

Getting Real

Instead of engaging in starry-eyed, hollow, industry-specific, smoke-and-mirrors rhetoric based on casual assumptions rather than hard market facts, we should be imagining and implementing financially-attractive programs designed to draw to our state quality firms across all industries.

This is quite simple to do. Improve the corporate tax situation and otherwise incentivise smart investment – particularly investment tethered to the relocation and/or creation of well-paying, tech-centric, “new-economy” enterprises, in the same way New York State does with its innovative Start-Up New York program.

Start-Up New York fosters the development of high-end jobs by providing a zero tax for ten years incentive for new and expanding businesses (whether already from New York or migrating from another state). By zero tax, New York means: no income tax, no business or corporate state or local taxes, no sales tax, no property tax, and no franchise fees. There's only one caveat: Set-up on or near eligible university and college campuses, and then partner with those schools to develop new products and paradigms, taking full advantage of those schools' research laboratories, economic development resources, and discipline experts. 

After a slow start, and two years into the initiative, 118 firms have thus far joined the New York program, committing to invest a combined $196 million in the state over the next five years, and to create 3,325 new jobs. These firms range across such fields as biotechnology, software/IT, analytics, audio/video, e-commerce, graphics design, wastewater treatment, LED lighting, artificial intelligence, 3-D printing, and semiconductors.

Writing in Forbes, David S. Rose (CEO of the dominant online angel investor platform Gust) points out as regards development in New York's Silicon Alley: “In the Q1 of 2015, for the first time New York edged out California in total number of startup funding applications. Quarterly data from Gust … shows that Silicon Alley had a 22% increase in funding applications for the first quarter of 2015, propelling the rapidly growing startup hub past its long-reigning Silicon Valley counterpart. Elsewhere in the startup and angel investor ecosystem, the total volume of funding applications across the globe jumped nearly 7% over Q4 of 2014.”

Rose credits the role of Start-Up New York (and, to a lesser degree, New York City Mayor Bill de Blasio's Digital.NYC partnership with IBM) in jump-starting this advance.

Compared to such dramatic, straightforward, and no-nonsense initiatives as Start-Up New York, the economic development toolkit developed by Governor Raimondo and Commerce Secretary Stefan Pryor (and incorporated into the recently-passed state budget) seems at best unwieldly, and at worst chincy and pathetic. Not only are the incentives in the various programs minor, they are also misdirected, for they focus almost entirely on native job creation, with a heavy emphasis on construction, when the paramount aim ought to be attracting tech-centric, forward-looking firms and entrepreneurs from out of state.

Governor Raimondo is correct in looking to technology as a growth area from which Rhode Island can and should benefit. But let's throw something more than toothless optimistic rhetoric into the effort.

Edward Renehan serves as Managing Director of the Wickford-based “digital native” publishing firm New Street Communications, LLC. 


Related Slideshow: RI Business Rankings in US

See how Rhode Island stacked up.

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Rhode Island ranks fifth overall in the category of speeding over 20 mph annual premium increase at $482. While ranking third overall  in the category of 2 accidents annual premium increase at $2,721.

Rhode Island ranks ninth overall under the reckless driving annual premium increase at $749. 

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Rhode Island ranks third in environmental quality and 16th in Eco-Friendly Behaviors Ran landing them in 8th overall.

RI is behind Washington and New Hampshire who are in the six and seven spots respectively, and in front of Connecticut and Hawaii who come in at the nine and ten spot. 

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Rhode Island is 2015's 4th Worst State to be a taxpayer, according to a recent WalletHub report. 

Rhode Island ranks 48th of 51 with an average state and local tax price of $7,159 which is good for a 27% difference from the national average. 

The states that are directly behind Rhode Island are Wisconsin at $7,159, Nebraska at $7,298 and Illinois at $7,719 for a 37% difference from the national average.

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Rhode Island has the highest vehicle property taxes in the country, paying an average of $1,133 according to a report from WalletHub.

Virginia and Kansas are the two states just ahead of Rhode Island in the 49 and 50 spots, paying $962 and $905 respectively. 

RI also ranks 42nd in average real estate tax, paying an average of $2,779, according to the WalletHub report.

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WalletHub has ranked Rhode Island as the 7th worst state to be rich in in a recent in depth analysis of 2015's Best States to be Rich or Poor From a Tax Perspective

On a scale with 1 being the best, and 25 being average, Rhode Island ranks 37th in low income earners, 42 in middle income earners and 45th in high income earners. 

To see the full report, click here. 

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Providence-metro ranks at the bottom for job creation in 2014  

Rhode Island has been ranked amongst the worst in job creation, according to a recent survey done by Gallup. 

Gallup gives the Prov-metro area an index score of 23, the lowest score is the New York- New Jersey area with 20. 

Salt Lake City, Utah and Austin-round Rock, Texas rank the highest with a score of 37. 

See the rest of the rankings here. 

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The 2014 state rankings by Forbes has just been released and Rhode Island moved up two spots from #48 in 2013 to #46 in 2014.

What does Forbes say about RI's business environment"

After Michigan and Illinois, Rhode Island has experienced the third worst net migration out of its state in the country over the past five years. With a recent unemployment rate of 7.6%—lower than only Georgia and Mississippi—residents are leaving the state in search of jobs. Rhode Island has been stuck in the bottom five overall for six straight years. One plus: labor costs are 5% below the national average, which stands out in the expensive Northeast.

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Tax Foundation

Findings from The State Business Tax Climate Index were released this morning by Tax Foundation which found Rhode Island to have the 45th best tax climate for businesses for 2015. The state's rank has not changed since last year after The Index analyzed 100 different tax variables in multiple categories. 

Read more about the report here

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After conducting an online suvery consisting of 1,050 individuals from both parties across the nation, WalletHub ranked Rhode Island as having America's 33rd fairest tax system.

Click here to view the poll's entire findings

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Providence is the second worst city in America for small business, according to a new survey conducted by Thumbtack.com and the Kauffman Foundation.

More than 12,000 small businesses in 82 cities across the country participate in the survey. Providence received an overall "F" grade for small business friendliness.

Full Survey Results Here.

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The Economist

Small Business Friendliness Grade: F

The Economist grades states on an A+ to F grading scale for its small business climate.  Rhode Island is one of just 6 states to earn an "F" grade.

Overbearing bureaucracy and excessive licensing is stifling small business in America. 

Read More About The Economist Grade Here

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CNBC ranks each state in cost of doing business, economy, technology and innovation.

Rhode Island's unemployment rate as of May 2014 was 8.2 percent. This is RI's lowest unemployment rate since August 2008.

Read More About CNBC Ranking Here

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Forbes ranks each state in business costs, economic climate, and growth prospects. RI is third worst in 2013.

The most damning in the commentary:

After Michigan, Rhode Island has experienced the second worst net migration in the country over the past five years.

Read More About Forbes Ranking Here

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#39 ChiefExecutive.net

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The most damning in the commentary:

Sky-high unemployment rate bespeaks continuing terrible business climate.

Read More About ChiefExecutive.net Ranking Here

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Tax Foundation

#46 Tax Foundation

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Rhode Island and the other states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.

Read More About Tax Foundation Ranking Here

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Wallet Hub

#24 Wallet Hub

Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.

Rhode Island ranked #50 for worst roads and bridges, but ranked #4 in safety.

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#47 ALEC

ALEC ranks each state in economic performance and outlook.

Although Rhode Island ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.

Read More About ALEC Ranking Here

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Kauffman Foundation

#50 Kauffman Foundation

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Entrepreneurial activity generally is highest in Western and Southern states
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Read More About Kauffman Ranking Here

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Free Enterprise

#47 Free Enterprise

Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.

Rhode Island has continued to feel the direct impact and ripples from the recent recession—it ranks 47th overall in economic performance. However, positive rankings of 15th in talent pipeline and 16th in innovation and entrepreneurship suggest the existence of a foundation on which to build the future.

Read More About Free Enterprise Ranking Here

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The Pew Charitable Trusts

#40 The Pew Charitable Trusts

The Pew Charitable Trusts ranks each state in job growth and job creation.

Rhode Island added 6,223 jobs in 2014.

Read More About The Pew Charitable Trusts Ranking Here

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10th Worst in Gallup's Annual Ranking of State Job Markets 2014

Rhode Island has been ranked 10th worst for job creation in Gallup's annual ranking of state job markets in 2014 with a job creation index number of 21

Rhode Island is one of two (Connecticut) states to rank in the bottom ten each year since 2008.

The 2014 State level findings have were drawn from 201,254 interviews with employed adults across the nation. 

See the full list of rankings here. 


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