An independent study commissioned in the aftermath of the 38 Studios fiasco has urged the reduction of the Rhode Island Economic Development Corp.’s powers and the coordination of state business development in the hands of a new commerce secretary.
The new executive would report only to the governor, the Rhode Island Public Expenditure Council said.
“The EDC is in need of considerable rebranding. The agency also lacks clearly delineated responsibility and regularly established metrics to measure outcomes,” think-tank RIPEC said in a 140-page report that called the corporation disjointed.
The secretary could oversee a renamed Rhode Island Commerce Corp., the RIPEC recommended. “Due to the poor reputation of the EDC, the first step in this process is to rebrand the new quasi,” the report said.
Gov. Lincoln Chafee had ordered the study in May after 38 Studios, the video-game company owned by former Boston Red Sox pitcher Curt Schilling, went bankrupt. Two years earlier, the EDC had provided the company a $75 million loan guarantee, backed by the state’s moral obligation, to entice the company to move to downtown Providence from Maynard, Mass.
The controversy triggered widespread resignations on the EDC board, including that of executive director Keith Stokes.
Schilling laid off his entire staff of roughly 300 workers before filing for Chapter 7 liquidation in June. A federal bankruptcy court in Wilmington, Del., reassigned the case to Rhode Island Superior Court.
Court documents show 38 Studios owing the state $116 million among its $151 million in liabilities.
Chafee spoke only briefly at a state capitol press conference in Providence. “Too much emphasis is on what went wrong. We’re working on some positives,” he said of the EDC before leaving.
Rhode Island, according to the report, lacks a systematic, data-driven approach for evaluating its economy; coordination of economic plans; and alignment of authority. “These limitations result in the duplication of effort and missed opportunities, making it functionally difficult to be efficient,” the report said.
RIPEC conducted 75 interviews with more than 100 people in the public and private sectors. “One of the things we found in our 75 interviews was that it was said by many that they are the engines of business generation and the state is the brakes,” RIPEC executive director John Simmons said at the press conference.
Critics of the 38 Studios deal said the generous concession by the state reflected a desperate need by Rhode Island officials to attract businesses, especially in high tech. Rhode Island’s 10.7% unemployment rate in August was second only to Nevada’s. Its 37% reduction in manufacturing jobs from 2001 to 2011 marked the biggest decline among states, according to federal Bureau of Labor statistics.
Moody’s Investors Service rates Rhode Island’s general obligation bonds Aa2, while Fitch Ratings and Standard & Poor’s each assign AA. State leaders told Moody’s they would back the moral obligation commitment.