Jencunas: Raimondo a Major Factor in Bringing GE to RI
Thursday, January 07, 2016
When GE picks its new home, it will be a defining moment for Governor Raimondo. If the Fortune 500 company chooses Rhode Island, it will validate the governor’s approach to economic development. If another city is chosen, especially if that city is Boston, it will prove how difficult it is for the Ocean State to compete for jobs.
Raimondo is taking an approach to economic development that’s familiar to prosperous states run by Democrats. The blue-state model emphasizes the benefits of being near major universities, having a well-educated population, and (to a lesser extent) the cultural benefits of being somewhere with prominent artistic and theatrical institutions. Bolstering these advantages is targeted tax incentives, usually in the form of lower tax rates for a certain period of time. This is the strategy that has worked in cities like Boston and Seattle, where these advantages are important enough for companies to tolerate the higher taxes and stricter regulations.
Republican controlled states do things differently. They rely on low tax rates, both on companies and the high-earning executives who decide where companies go, and a friendly regulatory climate. When these low taxes are combined with corporate subsidies, the deal is often better than anything a higher-tax, blue state can offer.
No state in America has been more successful at creating jobs than Texas. While Rick Perry is best known for his faulty memory and disastrous Presidential campaigns, in his home state he presided over tremendous economic growth. From 2000 to 2014, Texas created (depending on what economic model is used) between one-fourth and one-third of all new jobs in America. After 2007, Texas created almost all the net new jobs in America. This was made possible by the oil boom, but also by the aggressive approach Perry had to wooing companies with huge subsides and a friendly business climate. This is why the state’s economy remains relatively strong even as oil prices continue to drop.
Nobody expects Rhode Island to become Texas. The politicians would never cut taxes enough and the voters would never tolerate the lower level of government services.
Where Rhode Island can compete is against the other blue states. That’s why GE’s decision is so important. If Providence is the new home of GE, instead of the company choosing one of the usual suspects for big companies, it will be a magnet for other companies. Rhode Island will have shown how an energetic governor and hands-on leadership can overcome a lot of obstacles for attracting jobs.
Whatever the outcome, for Providence to be included is a testament to Raimondo’s strengths at communicating with corporate executives. For a state where economic development once meant lavishing subsides on a risky start-up run by a celebrity baseball player, this is a huge step in the right direction. Importantly, unlike 38 Studios or the default-plagued PEDP loans, there is only upside to going after GE. Even if the state doesn’t become the company’s next home, it didn’t cost anything to compete for the jobs.
I didn’t support Governor Raimondo in 2014, but being a finalist for a major corporate headquarters is a big win for her leadership and economic development strategy. In 2013, under Governor Chaffee, somebody who talked about landing a Fortune 500 headquarters would been considered optimistic to the point of delusion. Now, it’s a serious possibility.
Though the governor deserves credit for getting Providence so far, losing to Boston would be a bad sign for the Ocean State’s future. To again quote Joe Paolino, “Providence needs to be the Stamford, Connecticut to Boston’s New York.” This means that Providence lets companies be close to Boston and all its advantages while also paying lower rents and still enjoying a high-quality urban experience. If GE chooses Boston, higher rents and all, it will show how much ground Providence has to make up to be appealing to major companies.
Leadership is essential for economic development, but it can’t do the impossible and convince corporate leaders to overlook glaring flaws. GE’s decision will show how severe those flaws are for Providence and Rhode Island, and whether or not any governor, no matter how skilled her sales pitch is, can convince big companies to make the Ocean State their home.
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Related Slideshow: 5 Economic Projects - Can Raimondo Get Them Done?
#5 Wexford-CV Properties
The Raimondo administration continues to work with the 195 Commission to seal the deal with the Baltimore-based Wexford Science and Technology for development of prime real estate on the former highway land. While a proposal was made back in June for a mixed-use project, the negotiations between the state and the life sciences have been mostly behind the scenes, with a key vote taken on the proposal taking place Monday night -- in closed session.
"It is important to note that a P&S while an important milestone, is still just a step in the development process," said Commission spokesperson Dyana Koelsch. You can see the plan as presented on the Jewelry District's website HERE. Will we see shovels shortly?
#4 General Electric
Reports that the Connecticut giant is eyeing a move elsewhere — with Rhode Island on that short list — has many a Ocean Stater excited at the possibility. The Boston Globe not surprisingly made the case that their state should top the list (taking a dig at the others), saying that the "Boston area is on the short list of contenders for the headquarters and its 800 people, as GE’s search focuses on high-cost states in the Northeast. In relation to those states, Massachusetts compares favorably on its business tax climate."
However a Connecticut State Rep told the Hartford Courant a month earlier that Rhode Island as an option “wouldn’t surprise him.” Said State Rep John Frey in November, “It's been expressed to me by a couple of people at GE that they've been impressed by what the governor has done with state employee liabilities." To say a GE coup by Raimondo would be monumental for Rhode Island would be an understatement.
#3 Citizens' Campus
The Rhode Island-based banking powerhouse has indicated that is looking for a vacant location state as a potential new campus for 4,000 + of its employees — while maintaining its headquarters downtown at One Citizens Plaza. There is little indication at this time however of consideration of a vacant parcel of prime Providence real estate just to its HQ's south (that being the Industrial National Bank “Superman” building); the bank is indicating that keeping its support facility in Cranston is still an option.
“The lease for our service and support facility in Cranston expires in 2018. We are exploring several opportunities ranging from renewal to potentially consolidating some of our staff and back office functions at a new location in Rhode Island," said Citizens spokesperson Jim Hughes. Watch to see how Citizens moves forward -- and what, if any, role Raimondo has in the process -- and outcome.
#2 Superman Building
The arguably most iconic building in Providence — and Rhode Island’s - skyline lost its last tenant in 2013, and a year later an appraiser deemed it to have “zero value.” A failed effort to utilized tax credits and public investment by High Rock Development has left watchers asking if and when anything is going to move into the historic (if slightly aging) building.
Former Mayor and real estate developer Joseph Paolino, who has been a vocal supporter of trying to get Citizens Bank into Superman, told GoLocal, “I think the biggest problem [in the city] is Superman, because it depresses everything around it. Paolino, who bought three properties nearby downtown back in 2014 — said the revelation that the Industrial National Bank building was empty had cost him a mortgage with a major lender.
Whether there is an opportunity for a Citizens Bank move, or a new developer to re-package a viable mixed-use proposal, if the Superman building is still empty in several years' time, that is not a win for anyone -- not the city, not the state, and not the Governor.
#1 195 Rollout
When Raimondo took office, she understandably made a number of changes on the 195 Commission. A tax stabilization agreement (TSA) structure was finalized this past summer, and the Commission has the Wexford biotech proposal moving forward — but how much more development, and how soon, will the Raimondo administration be able to accomplish what it pledged it would do?
Raimondo called for the 195 land to be a manufacturing hub during her campaign — and while year one might have been setting the stage, the next years are critical for the state — and Governor. Will she usher through her proposed Innovation Institute?
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