Raimondo’s 195 Wexford Job Claims Are False, According to a GoLocal Investigation
Friday, January 06, 2017
Governor Gina Raimondo has repeatedly claimed that the $32 plus million in public subsidies will create 1,000 new permanent jobs in Rhode Island. After weeks of requesting information about tenants, rents, and job creation, GoLocal was finally able to secure actual job numbers for the project and then fact check those claims.
In fact, actual jobs created will be closer to 80 to 90, at a cost of more than $32 million.
Raimondo’s Jobs Numbers Inflated
As an example, the project claims 706 permanent jobs will be created by building de facto spec space for Cambridge Innovation Center (CIC), but CIC itself promises only a handful of jobs.
The CIC is a tenant of Wexford and CIC will be leasing the state-subsidized office space for lease. The practice of claiming tenant space as job creation is specifically flagged by federal watchdogs as improper (see below).
“Where's the due diligence that provides a basis for these estimates? Assuming fixed proportions based on square footage is almost certainly going to prove overly optimistic,” said URI Professor of Economics Len Lardaro, when alerted to the job claims.
As one example, as part of the 1,000 new jobs being created is the claim that Brown University will be creating 100 new jobs. However, Brown only anticipates creating 15 jobs at the outset.
“Of the 100 university positions expected at the Innovation Center upon its anticipated opening in early 2019, approximately 15 will be new jobs — our School of Professional Studies currently employs approximately 85 people and expects to grow to approximately 100 prior to the opening of the new space,” according to Brian E. Clark, the Director of News and Editorial Development at Brown University.
While the Raimondo administration’s claims for the Brown jobs growth numbers were misleading, the Wexford/Cambridge Innovation Center (CIC) jobs claims appear to be manufactured at best.
The state’s $32 plus million in subsidies to Wexford support the construction of a facility that at launch will only have Brown and CIC as tenants. The Governor is claiming that CIC will create 706 jobs, but in fact the space will have desks and spaces for start ups. CIC does not and will not create jobs, it creates space for start-ups to rent and provides ancillary services.
Former Director of Administration Gary Sasse said he questions what qualifies as "new" jobs for the project -- and what that means in light of the tax incentives.
"Brown is already here and CIC is an office space leading agency, so would Brown not have expanded its Professional Studies program "but for" the incentive, and are most of CIC clients local and already here? I would need to know this and answer other questions about research tenant space before trying to assess the number of real permanent jobs generated and their cost and value added," said Sasse.
Melissa Withers who runs Providence’s Founders League, which leases chairs, desks, and offices to start-ups as part of its program, told GoLocal that her office supports 50 operations currently.
“We have just over 50 members and yes we can accommodate more," said Withers.
The only two elements of the claims of the project that appear to be supportable are the Aloft Hotel which the 195 Commission claims will produce 57 jobs (an estimate from CV Properties). And, the project will produce eight retail and food jobs according to information provided to the 195 Commission by Wexford.
Tenant Jobs Questioned
Federal guidance has specifically warned entrepreneurs and economists not to count “tenant jobs” in job creation data.
At the federal level, a vendor for the U.S.’s EB-5 immigrant investor program warned of counting tenant jobs in job creation.
As proving the creation of tenant jobs is difficult, EB-5 investors tend not to include these jobs in their totals. However, investors choosing to do so must include in their business plans an independent analysis proving that the development area has an unmet need for the tenant’s services and that the tenant jobs would not be created if not for the new development. In this case, investors must be wary of committing to projects that rely heavily on tenant jobs to meet the job creation requirement.
"Controversies about the cost and benefit of CommerceRI tax incentives will continue absent a professional independent evaluation of each deal," added Sasse. "It is naïve to expect the agency providing firms with preferential tax deals not to attempt to place them in the best possible light."
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