Providence mayoral candidate Brett Smiley released on Tuesday the first piece of his economic development plan for Providence: reforming the structure of the Providence Economic Development Partnership by moving its revolving loan functions into a new, independent program.
His plan puts the loan-making decisions in the hands of underwriters while allowing the business and civic leaders who sit on the board to use their expertise to shape our city’s economic policies.
In the plan, Smiley notes, “City Hall still remains a place where you need to ‘know a guy’ in order to get something done, and PEDP is a shining example of this breakdown in fairness. Everybody should have an equal opportunity to gain access to PEDP loans regardless of their personal connections to City Hall.”
He also adds, “Those who serve on the PEDP loan board are political appointees, and while they are often well-respected local leaders, few possess banking or loan underwriting experience. Instead of being asked to advise on broad economic policy, they are asked to rubber stamp staff recommendations on loans. This mismatch of expertise and expectation is the foundation of PEDP’s inefficient business practices.”
According to an October report, of the 136 current PEDP loans that have been granted, over one third are more than 121 days past due, leaving the city on the hook for over one million dollars in expenses. These loans are intended to be an investment in the city, not a gift to city businesses.
Smiley points out key advantages
Smiley’s plan to separate the policy-making and loan-granting functions of the Partnership has several key advantages:
It allows for qualified underwriters to manage the loaning process.
It protects the city’s economy from unpaid debts and prevents leniency in missed payments as a result of personal relationships with those in city government.
It ensures equal access to loans, particularly for minority- and women-owned businesses that are disadvantaged by the current system.
It allows those who sit on the Partnership’s Board of Directors to advise on economic development strategy rather than make loan decisions outside their expertise.
It would include expanded offerings, such as a focus on micro-loans accompanied by training and technical assistance.
Using Seattle as a guide
Smiley’s approach is based on large measure on the best practices exhibited in Seattle, Washington. Since 1997, a neutral body called Community Capital Development (CCD) has offered loans, as well as technical assistance and training programs, to local small businesses based on business practices rather than political connections.
Smiley concludes, “By taking the politics out of these loan award decisions, we will refocus the Providence Economic Development Partnership on its true mission – helping to set the economic development direction of the City of Providence and making fiscally responsible loans that provide businesses and key industries with job-creating and growth potential with the capital they need to thrive.”
Related Slideshow: 7 Strategies for Rhode Island Economic Development in 2014
What will it take to move the Rhode Island economy forward in 2014? GoLocal talked with elected officials, candidates, and leaders for their economic development plans in the coming year.
Below are key elements of the economic priorities for Governor Lincoln Chafee, Speaker of the House Gordon Fox, Senate President M. Teresa Paiva-Weed, House Minority Leader Brian Newberry, gubernatorial hopefuls General Treasurer Gina Raimondo and Ken Block, and RI Center for Freedom and Prosperity's Mike Stenhouse.
"My goal is to have the state continue to focus on the fundamentals. We will invest in education, workforce development and infrastructure , and provide aid to cities and towns to lessen the burden on property taxpayers. I’m confident that these investments and our focus on the basics will allow Rhode Island to exceed Moody’s predictions.”
"Among the many pieces of legislation the House will address will be issues of higher education affordability, expanding apprenticeship opportunities, and offering help to our manufacturers. We will also look closely at our tax structure to make sure we are competitive with our neighboring states, including the corporate tax and the estate tax, and I will carefully review the recommendations of the commission studying our sales tax.”
Greg Pare, spokesperson for the Senate President, said that the Senate is planning to issue recommendations soon on workforce development initiatives to address the skills gap among Rhode Island job seekers.
"An example of a proposal anticipated in that report is the elimination of state’s Indirect Cost Recovery on the Job Development Fund, which is about $1.2 million this year. Those funds would be directed towards job training and skills development programs to provide immediate impact and help workers gain the skills necessary to succeed in today’s economy."
"To grow our economy, we need to make Rhode Island a leader in manufacturing again. Great things can happen at the intersection of government, higher education, and the private sector. Rhode Island is lucky to have thriving institutions in each of these three sectors, and we need to foster collaboration among them to find solutions to our challenges, and spark our economy.
By promoting partnerships in high-growth areas, [Rhode Island Innovation Institute] will help grow our manufacturing base, and create new, high-quality jobs."
"First, we need to fix Rhode Island’s broken Unemployment Insurance program. The state’s Unemployment Insurance tax, paid by employers, is ranked worst in the country by the Tax Foundation. It is one of the factors that makes Rhode Island an uncompetitive place to do business. Also, it is inherently unfair that a large group of businesses are effectively subsidizing the payrolls of a small group of businesses who misuse the system. There is a simple change to state law that can fix this problem."
"Rhode Island’s temporary disability tax (TDI) is broken, and places an unnecessarily high tax burden on Rhode Islanders. This tax, paid for by employees, will be reduced by changing the way we manage the program. As Governor, I will substantially reduce the cost of purchasing this insurance by requiring that Rhode Island’s program adhere to national norms."
"To best encourage new job creation, I propose the following tax incentive: exempt from future capital gains taxes any new investments in Rhode Island-based businesses. This change would create a powerful incentive for investors who are deciding where to locate a new business, or where they relocate an existing one. This proposal has the potential change the economic playing field for Rhode Island."
“It would be overly ambitious to set being #1 as a goal right now, but we think 25, the middle of the pack, is a reasonable goal to set, one we think we should pursue, and one we can achieve,” said Newberry. "One of the initiatives is a requirement that every bill receive a fiscal evaluation before it can be heard by committee, better insuring that legislators know the real cost of the legislation they are acting on."
"Another proposal would exempt social security income from RI state income tax, making Rhode Island more tax-friendly for our seniors and keeping them here rather than migrating to more tax-friendly states."
“Strong action is way overdue here. Nearly 60% of Rhode Islanders now believe that the state is headed in the wrong direction. We think they’re right, and our central goal is to get it turned around."
Repeal or rollback of the state’s regressive sales tax; or the requirement that families have no choice on what schools best educate their children; or punitive estate taxes that drive wealthy people to other states; or restrictions on out-of-state companies to sell health insurance in RI; or the minimum franchise tax, which stifles entrepreneurship; or corporate welfare, to level the playing field; or even renewable energy mandates that drive up costs for every family and business …"
