Sunday, July 13th, 2014

Starter Ideas For Improving Rhode Island’s Economic Competitiveness

This is the third and last part in my series on Rhode Island. You can go back and read part one and part two if you missed them.

Justin Katz, writing at a web site called the Ocean State Current that appears to be published by a libertarian think tank in the state, is unhappy with my proposals. In fact, he’s giving a point by point rebuttal to my six part toolkit, which you can read here, here, here, here, here and here. I think it’s fair to say he thinks Rhode Island needs much more radical change than I prescribe, and can’t rely on a gradual approach among many other complaints.

Right or wrong, here is my thesis. A free market agenda along the lines of a Tennessee or Texas is dead on a arrival in Rhode Island. It’s simply not possible to pass. Among other reasons, this is because the people of Rhode Island by and large have some degree of progressive orientation. That’s very different from say Indiana, where every other person you meet on the street has Tea Party sympathies, and it takes a lot of police possibilities off the table. I also believe that most progressives in Rhode Island genuinely want to see a better economy in the state. Hence my pitch is aimed at providing analysis and policy recommendations that might have a chance at appealing to the Rhode Island electorate, and thus have some hope of getting implemented or affecting how people think about the issues. If Katz & Co. prefer a different approach, I’m all in favor of the marketplace of ideas.

By the way, even if you go on Atkins or some other rapid change program of weight loss and are successful, the weight seldom stays off as we know. Slow and steady changes in lifestyle are the best way for sustainable change.

Today I want to give a starter set of policy ideas for changing the trajectory in Rhode Island. I won’t claim these are a panacea or represent a comprehensive to do list, but you have to start somewhere. This is an expanded list from my City Journal piece.

Taxes and Fees

1. Seek a “grand bargain” on revenue neutral tax reform. Here the idea is not necessarily to reduce tax revenue overall, but to adjust the levers to make the system less onerous on entrepreneurship and small business. One conceptual idea – and I stress this is a hypothetical – might be to raise the income tax on top earners making over say $500K/yr (a shibboleth of the left) to eliminate the 7% sales tax businesses pay on utility bills. I’ll be returning to the matter of utilities again as it’s an important issue.

2. Repeal the $500 minimum corporation tax. Rhode Island shouldn’t add insult to injury by making a business that loses money pay a tax on top of it just for the privilege of existing. I know at least one person who killed off a side business just for this reason. To be sure it was a hobby, but hobbies sometimes germinate into actual full time businesses.

3. Waive permit and other fees for the first year for new businesses. So many startup businesses don’t even last a year. Why not wait until we see until there’s at least baseline viability before socking them with a bunch of fees? You could easily implement this by charging in arrears. Obviously you’d have to be careful to avoid burdening the system with people getting “just in case” permits such as creating tons of shell companies, but I think this can be managed.

4. Reform unemployment insurance. Benefits are too high and ideally Rhode Island should be closer to the national median. But this would be hard to achieve and a start at reform can be achieved without it. The focus here would be eliminating market-distorting cross-subsidies that favor frequent users of the system, and revisiting business successor rules that punish people for buying and saving failing or bankrupt businesses.

Regulations and Mandates

5. Reform temporary disability insurance (TDI). This is one that wasn’t on my radar until I heard Republican gubernatorial candidate Ken Block call for reform. But when I looked into it this appears to be an even bigger problem than he suggests. Rhode Island is one of only five states with mandatory TDI. The others are California, New York, New Jersey, and Hawaii, all states with fortress industries and such that make them most definitely not Rhode Island’s peer group. It has the second highest benefit levels. It has a state run monopoly system. It allows employees to double dip. And I believe Rhode Island’s program is one of only two along with California that has a temporary caregiver leave component. I’d completely repeal mandatory TDI. But again, reform of some sort should be possible without triggering political nuclear war. Eliminate the state run system and tell businesses to buy coverage from the marketplace. Eliminate double-dipping. Make temporary caregiver leave a one time only or one per decade type benefit instead of annual recurring one. Put a lifetime cap on weeks of benefits and beyond that claimants should utilize long term disability coverage. Again, whatever we think about the idea of this system, Rhode Island is a huge outlier here and has little leverage to lead the way on this.

6. Perform a post-Obamamcare health insurance mandate review. Rhode Island has more items of mandated insurance coverage than any other state. Coming from Illinois – a blue state mind you – I was stunned at how much individual health insurance costs in Rhode Island. Obamacare seems to have largely standardized coverage and I would suggest defaulting to its coverage guidelines. If Rhode Island has items that go beyond this, it should eliminate any where at least ten other states (including at least MA and CT) don’t already mandate it.

7. Pass a clean semi-monthly payroll act. Until last year, Rhode Island was the only state in America that required companies to pay their employees weekly. That was changed to enable bi-weekly/semi-monthly payroll, but only for businesses whose average pay is twice the minimum wage and can post a surety bond, get the written permission of any unions affected, and recertify with the state every four years. You know what I call that? Progress. That’s good news. But in keeping with the continuous improvement theme, the legislature should follow-up with a clean semi-monthly payroll bill.

8. Create a “most favored nation” regulatory policy with regards to Massachusetts and Connecticut. It’s hard to argue that neighboring states have different core values. So their regulatory systems should be considered prima facie adequate for Rhode Island. Unlike California, a big and rich state, businesses are not going to jump through hoops for the privilege of serving small and economically challenged Rhode Island. So to make it easy, I suggest harmonizing regulations with Massachusetts (and if possible Connecticut) to create a mini type of EU style common market effect. This could be implemented via a most favored nation policy saying that “If it’s legal in MA or CT, it’s legal in Rhode Island. If you’re licensed to do it in MA or CT, you’re licensed to do it in Rhode Island.” Rhode Island is really subscale to be running its own regulatory system anyway, so outsource it.

This doesn’t even scratch the surface of what’s needed on the regulatory front. Many of you probably saw the recent Thumbtack survey that ranked Rhode Island the worst state in the country for its small business climate, as rated by small businesses themselves. Metro Providence was ranked the second worst metro. Fixing this is actually much more critical than taxes in my view, but also harder as many of the worst regulations around land use and such are at the local level. So this is where local reformers should focus.

Utilities

When I spoke to the Rhode Island House of Representative earlier this year, the other speaker was a representative from CVS sharing his perspectives on what that company looks for in places to invest. One item he mentioned as important is utility costs. Hence my thought about utility taxes above. But beyond that, Rhode Island’s electric bills are among the highest in the country and gas prices are high too. There needs to be a focus on bringing those down. Lowering electric rates doesn’t deprive the treasury of much and actually saves money on government electricity purchases. Unfortunately, as someone pointed out to me, in Rhode Island it works just the opposite; because it doesn’t appear to be a tax, the legislature feels free to pass laws that send rates through the roof.

9. Kill Deepwater Wind by any means necessary. Deepwater Wind is a crony capitalism fiasco of epic proportions involving an offshore wind farm. Billed by some as the “next 38 Studios”, it’s actually even worse as the price tag will be hundreds of millions of dollars. IIRC, the increased cost to governments alone from purchasing inflated electricity will be $1.5 million a year. The environmentalists I know don’t even like the project. The only plus side to anybody other than cronies appears to be reduced electric rates on Block Island. Well, I may have cheaper electricity, but I don’t get to live on an amazing island. Nevertheless, if it’s important to bring those rates down, then direct subsidies would be cheaper.

10. Partner with other New England states on increasing gas pipeline capacity into New England. A while back City Lab ran a story talking about a new gas pipeline under the Hudson River into New York City. As you probably know, gas is dirt cheap right now because of plentiful supplies from fracking in places like Pennsylvania. But that doesn’t help if the gas can’t get there. The Northeast has been under-pipelined. But as you can see, New York City is seeing the infrastructure investment to bring this online. New England isn’t. Here’s the money chart showing the price spikes this produces:

I’m not sure why no new pipelines have come into New England, but I’d certainly make it my business to find out. By the way, some residents do heat their homes with natural gas. I did when I lived in the state. So beyond industrial customers, think about what that chart means to struggling Rhode Islanders’ winter heating bills.

Sadly, the state seems to be moving in the opposite direction as the legislature passed more laws this year that will at first glance raise rates still higher.

Infrastructure

11. Cut to Invest With a Major Infrastructure Bond. Bruce Katz at the Brookings Institution likes to talk about a principle called “cut to invest.” That means making cuts in current spending in order to invest in critical items like infrastructure. Rhode Island’s infrastructure is in rough shape so that approach is needed here. Interest rates are rock bottom right now so there’s no better time to borrow. As the Fed dials back on quantitative easing, the window may start closing on this. Rhode Island needs to identify cuts in ongoing spending sufficient to finance payment on a major infrastructure bond targeting roads, bridges, and schools. I’m not talking about adding any new road capacity here, just doing things like rehabbing or replacing the existing crumbling bridges and obsolete school buildings.

As the Sakonnet River Bridge debacle shows, this money is going to be spent one way or another. Better to do it now on the state’s terms instead of later when it will cost a whole lot more to, for example, fully replace decayed structures that could have been saved if they’d only been properly maintained.

Under no circumstances should Rhode Island issue a bond without the full necessary funding stream for repayment allocated up front.

12. Investigate shared startup/co-working facilities. Instead of paying companies to set up shop in Rhode Island, invest the sales effort into luring operators like TechShop to create locations in Rhode Island. These types of co-working facilities can reduce the cost of capital and risk of entrepreneurship. I’m not a big fan of government building these directly, but they are a key part of the startup infrastructure of a community these days.

Miscellaneous

13. Build more Quonsets. NYU economist Paul Romer has advocated for a “charter city” concept in developing countries along the lines of a charter school as a way to bypass dysfunction. Rhode Island already basically applied that concept at the former Quonset naval base. Quonset is everything Rhode Island is not. They’ve invested in first class infrastructure. They have a single zoning classification, business friendly performance-based development standards, pre-permitted sites, a single point of contact for approvals, and a 90 days to groundbreaking pledge. Port users even have a tax advantage in that they are exempt from the Army Corps of Engineers import duty because the state instead of the feds paid for the port improvements. The result: 9,000 jobs, including 3,500 created in just the last few years.

Why not replace this model elsewhere by partnering with towns to create more Quonsets? When I pitched this idea at a RIPEC event, an economist with Beacon Hill Institute in Boston wasn’t a big fan. He critiqued it on two basic points. One is that the businesses who located there probably would have been elsewhere in Rhode Island. The other was that the $10,000 a job in infrastructure investment was too high.

I think the first criticism is fair and must be true to some extent. Additionally, some of the jobs are directly port related and there isn’t another deepwater port handy that I’m aware of. However, there’s no hard data on this and my assumption would be that at least some of the non-port jobs must represent a net gain to the state. In any case, Quonset is the best thing going in the state right now, so why not give the model another chance? Also, keep in mind that a state like Tennessee paid $250,000+ per job for a VW plant. $10K/job – not in subsidies, but infrastructure – is small potatoes as these things go, particularly in state where the infrastructure is decrepit. I’m pretty sure if I told the legislature they could create middle class jobs at $10K a pop in infrastructure, they’d sign checks all day long.

At Quonset, the state is the developer. For new sites, I’d look to partner with a private developer, with a state authority as infrastructure partner and approval provider a la Quonset.

I won’t suggest this list is anywhere near where the state needs to be. It doesn’t address key issues as the local level like regulations that hobble building, or the corruption/cronyism issues. But hopefully this provides at least some tangible first steps that could get the state pointing in the direction it needs to go.

As with my guiding principles list, some of these items were originally suggested by other people.

34 Comments
Topics: Economic Development, Public Policy, Strategic Planning, Sustainability, Technology, Transportation
Cities: Providence

34 Responses to “Starter Ideas For Improving Rhode Island’s Economic Competitiveness”

  1. Rod Stevens says:

    Of all the ideas, I like the “Build More Quonsets” the most. I can’t imagine firms are moving from one part of the state to this place simply for regulations. And if they are, what’s this tell you about those other places? We need a lot more experiments like this if we are going to turn America around.

  2. Thanks, Rod. I think the majority of the point re:Quonset would have been about new inbound investment, not people relocating. If a plant or warehouse was already going to chose Rhode Island, they might get sucked into Quonset instead of locating elsewhere. Again, no hard data but it’s reasonable to think that way on its face.

  3. Jim Jackson says:

    Wow we are on the same page on so many of these ideas.

    Regarding more Quonsets. A good idea on its own merits. One thing you miss is that the State has pumped a LOT of taxpayer money into Quonset through roads and infrastructure. The outlying areas of the State not only don’t benefit from this but the jobs are far away also. Build a Quonset in each County and spread the wealth around. Tiverton, East Providence, Woonsocket, Johnston would all be great areas with lots of free land for a Quonset.

    KILL Deepwater. The Deepwater history is like a corruption road map. They present a 31.5 cent rate to National Grid (NG) who rejects it. The legislature passes a special law allowing an illegal (by the power deregulation laws) 3% kickback to NG on this power. Then they allow NG to accept a price that does NOT include the $100 million cost for the undersea power cable connecting the wind farm to the mainland and Block Island. Hence the 24.5 cent rate we ended up with. The PUC rejected the deal because they stated a study showed a $500 million dollar excess cost to ratepayers over 20 years. The legislature once again passed a special law forcing the PUC to only look at the illusion of jobs created by Deepwater and the media. Jobs to date NONE. Meanwhile the tooth fairy will apparently pay the $100 million under sea cable cost in the form of some fee at the bottom of everyone’s electric bill.

    Rhode Island’s high healthcare costs are in part driven by the monopoly BCBSRI has over healthcare. They conspired to keep prescriptions from being filled by other than CVS along with CVS and yet one person was criminally prosecuted – BCBS paid a fine. Corporations are people – that’s what SCOTUS so they should do more than pay a fine.

    Bringing in more natural gas is a no brainer. We have a shortage yet NG is giving away gas boilers and furnaces. That should be stopped till the shortage is dealt with.

    One thing you miss entirely is that Rhode Island cannot afford to be more expensive than its neighbors. Our sales tax is more expensive than both Massachusetts & Connecticut which have several big shopping areas within easy reach of RIers. Many RIers also work out of State so it’s easy to shop on the way home. Rhode Island’s sales tax needs to be a point less which would bring in MORE income than having it almost a point more because it will keep people shopping at home and make it more likely big ticket items will be bought here by out of Staters.

    The gas tax which funds our roads is something else that needs to be less than our neighbors for the same reasons. When I buy gas in MA I am killing our DOT funding but when it’s 10 cents less a gallon it’s difficult for me to rationalize that at that time. We actually have an advantage over CT but they are not situated close to a large RI pop. I think the MA tax advantage is 7 cents but we are raising the gas tax automatically now.

    Rhode Island never goes after high profile businesses that are building or relocating. Bristol Myers Squibb just built in Devens we may have made some half @ssed attempt but we should have thrown the refrigerator at them. They will spend $1 billion just on their campus when they are done and have over 1,000 high paying jobs. The core for more bio tech companies to move here.

    Finally you can’t reform RI w/o killing corruption here. The Mafia put suits on here and were elected. They steal from us openly and no one blinks an eye.

    Massachusetts wouldn’t lend 38 Studios a penny to stay because they looked at the books. Why is no one in jail for that? DeepWater having 2 laws created to exist over incredible opposition and no one thinks cash exchanged hands? I have so many real examples of this – the money stolen from the landfill – announced by the RISP AFTER the statute of limitations had run out. A company stiffs the State out of $23 million and we sell the only money making asset owned by the State to them? I have details on that – etc etc etc etc

    I could write a book about RI corruption and examples of how the State and the media conspire to look the other way.

  4. Chris Barnett says:

    Jim, I noted a contradiction within your post. If neighboring states are close enough to drive to for jobs and shopping, then nowhere in RI is too far from anywhere else in RI to commute.

    Checking Google Maps, the NW/SE and NE/SW distance is about 60 miles, about 90 minutes’ drive unless you’re on I-95 the whole way.

    Quonset is maybe 30-45 minutes’ drive from the far corners of the state per Google Maps, which means that most drives would be less than that. That doesn’t seem such a horrendous commute.

  5. John Morris says:

    @ Chris,

    Yes, but the reality is that a pretty high % of RI residents in places like Providence & Pawtucket do not have easy access to cars.

    The state has a lot of stuck, isolated poor. One should be realistic about what Quonset can and cannot do.

    From the Olneyville post.

    http://www.gcpvd.org/2014/01/15/the-suburbanization-of-olneyville/

    “According to ProvPlan, as of the 2000 census (the most recent data available) 59.5% of households in the Olneyville area have automobiles this compares to 52.5% Downcity.”

    The best long term strategy is to push dense inclusive development into the core (Providence/Pawtucket) The good news is the location of the colleges & Amtrak line makes this pretty easy.

    “Investigate shared startup/co-working facilities.”

    Providence actually was known for “co-working” long before the idea was cool.

    RISD students, artists, designers, musicians packed a number
    of old mill and industrial buildings throughout Providence & Pawtucket. To a large extent, the “hipster” art comic (Fort Thunder, Brian Chippendale, Paper Rad) aesthetic was created in Providence. Considerable national buzz was being generated.

    http://www.artandeducation.net/paper/providence-relational-aesthetics-and-the-underground/

    Sadly most of the artists were evicted over time and many of the buildings torn down. Considering the importance of RISD as a school- its pretty shocking it hasn’t created more of a design and architecture job base.

    There is something about the way the city relates to this student/ post student group that has killed off emerging energy. Not enough affordable housing near the core, not enough live work space, little co-working energy & an overall bad small business climate are doing a lot of damage.

  6. John Morris says:

    From the Wikipedia

    “RISD is annually ranked as the top art and design school in the United States. U.S. News & World Report ranked RISD first amongst Fine Arts programs, above Yale University and the School of the Art Institute of Chicago.[8] Within subdivisions of Fine Arts, the school was ranked 1st in graphic design, printmaking and industrial design; 2nd in painting; and 3rd in ceramics and photography.”

    A short list of RISD alumni

    Nicole Miller (Fashion Designer)
    James Franco (Actor/ Artist)
    Jenny Holzer (Artist)
    Janine Antoni (Artist)
    Josiah McElheny (Artist)
    Seth MacFarlane (Actor/Animator/ Director)
    Kara Walker (Artist)
    Shepard Fairey (Artist/ Street Artist/ Designer)
    David Byrne (Artist/ Misician) Dropped out
    Dale Chihuly (Glass Artist)
    Roni Horn (Artist)
    Shahzia Sikander (Artist)
    Julie Mehretu (Artist)
    Brian Chippendale (Comic Artist/ Musician) Dropped Out
    Andrea Zittel (Artist)
    Mary Boone (Art Dealer)
    John Cheim (Art Dealer)

    More than a few of these people are more than a little successful. Chihuly & Fairey have massive “brand” business.

    The list also included all kinds of leading industrial designers and illustrators- not all household names.

    One doesn’t see much spin-off energy from all this.

    More importantly, for every huge “star”, RISD churns out 50-100 working artists who might appreciate a lower cost alternative to NYC.

  7. Jim Jackson says:

    @Chris I can drive from Bristol to Brockton center in the same time it would take me to get to Quonset. Improvements by Massachusetts to 24 around the Taunton area have mitigated what was a traffic issue there at times. Meanwhile nothing has been done or is being planned to mitigate the nightmare that is the East Bay road system. At rush hour getting out of Bristol towards Providence or in is often faster through Fall River at least when the Braga wasn’t being worked on.

    It’s the same amount of time to Quonset whether I go around through Providence or over $773 million in bridges (adjusted for inflation from original construction costs) paying a toll but saving on gas.

    RI roads are a disaster. Luckily for me I can escape out Rt 24 pretty easily. Getting to Bristol from Providence in any type of traffic can add another 20+ minutes to a commute.

    I don’t know where you are from Chris but its not Rhode Island from the sounds of it.

  8. Jim Jackson says:

    @Chris the population centers of RI all border Massachusetts while Quonset is an hour away tucked into a sleepy part of the State oh and there is no direct route from 85 North – one has to get off 95 and hit local traffic before getting onto another highway.

    In other words Massachusetts is close by and Quonset isn’t.

    If someone needed to take a bus from Smith Hill in Providence to Quonset for work for 8AM they would leave their house at 5:15AM and getting out at 5PM gets them home by 7:30PM.

  9. Jim Jackson says:

    That should be 95 North above.

  10. John Morris says:

    Getting to a core issue- Rhode Island has few area’s well suited to car oriented development. The state has 3 critical advantages-

    Access to Northeast corridor rail

    Elite Colleges- located near the rail line

    Natural Beauty/ beaches within short distance.

    No amount of “infrastructure” spending will turn Rhode Island into Indiana. A lot of the current infrastructure seems to be about spending $10 to get 3 back.

    It should think more like Vancouver.

  11. John Morris says:

    Not to say Rhode Island shouldn’t spend on Infrastructure- but it has to be the right kind that returns much more than it costs.

    Simply saying the state should spend more evades the problem that a lot of the state’s infrastructure was a poor investment and shouldn’t have been built in the first place.

    Rhode Island also needs more low investment/ high return stuff like canoe landings on the Blackstone River, better bike paths etc.. Few things have helped the Mon Valley more than The Allegheny Passage bike path to DC.

    IMHO, Quanset may be a good concept with a good return but it’s not easily replicated.

  12. EngineerScotty says:

    Item #1 needs to be reforming the state’s corrupt politics. Without that, nothing else matters. With that, many of the other things on the list will take care of themselves. (Not all of them).

  13. Jim Jackson says:

    @John, do you realize that Rhode Island beach water quality was rated among the worst in the Nation?

    http://www.nrdc.org/water/oceans/ttw/ri.asp?loc=rhode%20sland

  14. John Morris says:

    The Infrastructure issue in Rhode Island is probably similar to the Pittsburgh region. Southwest Pennsylvania consistently tops lists of substandard infrastructure- but (surprise!) the city is starting to thrive.

    Reason is that a large amount of that old infrastructure supports fading post industrial areas- or worse promoted wasteful sprawl that hurt the city.

    I’m actually betting on fading road infrastructure to drive a new focus on core development.

  15. John Morris says:

    @John, do you realize that Rhode Island beach water quality was rated among the worst in the Nation?

    No, I didn’t- but it demonstrates how wrong the old development patterns are.

  16. Chris Barnett says:

    Bad shore water quality demonstrates mainly that there are combined sewers from 100 years ago. Midwestern cities have the same issues in their rivers.

    Jim, I wasn’t disagreeing that road investment is needed. That’s one of the things that most places do with a base closure area: build good road access so trucks, cars, and buses can get there.

  17. Jim Jackson says:

    @Chris you’re right Providence dumped billions maybe hundreds of billions of raw sewage into the Bay until a new billion dollar run off system was installed. It’s still not finished but they only dump during peak rain now like today when it poured out. If you see flash flood warnings its likely the Bay is polluted.

    Correct about the roads. My gripe is that RI continues to concentrate spending in the same areas. At some point pumping State money into Quonset is detrimental to taxpayers elsewhere.

  18. John Morris says:

    “Bad shore water quality demonstrates mainly that there are combined sewers from 100 years ago. Midwestern cities have the same issues in their rivers.”

    Yes, the problem is largely sewage & runoff, which also reflects the sprawling growth of waterfront communities.

    Cranston had 29,407 residents in 1920 and over 80,000 today while Providence went from 237,595 to 182,911. Warwick went from 13,481 in 1920 to 82,672 in 2010.

    Every Mcdonald’s parking lot in a place like Olneyville means more runoff problems & a fading tax base to pay for sewer upgrades in Providence.

  19. John Morris says:

    A 1999 report studies how sprawl has contributed to Rhode Island’s decline.

    This quote is incredible but probably accurate.

    “Rhode Island developed more residential, commercial and industrial land in the last 34 years than in the first 325.” Land use grew at 9x the rate of population growth.

    Somehow- I doubt output in real dollars increased by 9x.

    http://www.growsmartri.com/pdfs/costs_of_sprawl.pdf (PDF File)

    Can Rhode Island afford to continue this pattern or even continue to support the cost of maintaining this waste?

  20. wkg in bham says:

    If Quonset is working out so well given its awkward location, think of how successful more ideally located facilities might be. I think this is one area where RI has a true advantage. Even though Providence has been a port city for 400 years or more, the port facilities seem skimpy.

    From Part one of this series I was told that recreational boating was “big” in RI. I sorry I don’t see it. Of course, all I can judge is what I can see from Google satellite view and street view. Go down to my old home town of Cocoa/Cocoa Beach/Merit Island, Florid and see what “boating is big” looks like. Pollution of the bay could explain this.

    Doesn’t look like fishing (commercial or recreational or even culinary) is much of a big deal. Again this could be due to pollution.

    It would seem getting Narragansett Bay cleaned up should be a very high priority.

    Got to agree with Engineer Scotty: get political corruption cleaned up and a lot of the other problems will go away. I suspect that a lot of the infrastructure problems noted above are due to pervasive corruption. Corrupt systems aren’t just dirty at the top – their dirty from top-to-bottom.

    Lastly, bring back a new version of the America’s Cup.

  21. John Morris says:

    Search Rhode Island boats or Rhode Island Marinas on Google images. Recreational boating is pretty huge.

    The Fishing industry in Rhode Island is in relative decline partly due to catch restrictions but is still pretty huge. (An Industry support group claims an impact of about a billion $)

    I agree with your point about exploiting the water more. The state needs to play to its advantages and not undermine them. Ferry’s are a big part of Rhode Island’s transportation system

    RISD is a leading school for industrial design and fine craft design. Could a premium boat building industry develop? Could one take it further and become a center for water technologies & robotics- perhaps by collabrating with MIT?

    Ultimately, the poor business climate, high taxes and stifling regulation work against that.

  22. Jim Jackson says:

    @John everyone here including myself but not you has stated that unless the corruption is cleaned up here nothing will change meaningfully.

    Do you feel corruption is a non issue? I made reference to a few specific instances – I can expand on those or detail further – as I said I could write a book about it – a large book.

    When our credit unions went under the State decided to bail those people out. Most people in the State had no savings in credit unions so why were we being held hostage? They blamed the entire thing on a single person in a single credit union. The credit union insurer which used had ‘Rhode Island’ in it’s name had no connection to the State. An independent audit years before recommended that they join the NCUA but they declined likely due to fear of an audit. When the State took over the assets and debts of the bad credit unions the Procaccianti Group’s outstanding $15 million dollars in loans were never paid back. Then they wanted to buy the Westin from the State. The one single asset the State owned that made money via the CCA. The press brought up the loan issue. It was settled for less than $3 million when with interest and penalties the debt had ballooned to $25 million.

    That’s a corrupt deal. Yet as a I said the CU collapse of 45 credit unions costly RI nearly $1 billion was blamed on one person who was tied to the Mob.

  23. John Morris says:

    Of course corruption is a huge issue and a good reason any plan to cut to “invest” will likely end badly at this time.

    A) They probably won’t cut

    B) Money will probably be wasted, misallocated or stolen.

    Aaron seems a bit naive about that. Invest in what? Invest by who?

  24. Rod Stevens says:

    My wife and I considered moving to Rhode Island, but decided against it. On the plus side, it was close to a lot of family, the city-state is a manageable size where you can get to know people and have an influence, the downtown is charmingly well preserved, and there is lots of water for sailng. The negatives included a lack of career opportunities, provincialism, relatively high housing costs, bad schools, and lack of wilderness areas.

    From afar, the central issue seems to be lack of identity, of not knowing what strengths to play on. Rhode Island had a reputation for Mafia influence, but presumably the corruption today is less orchestrated and more at the petty level. The bigger issue is lack of strategy, of what this place is good at and will make and sell to the world. Without this, the place will have no springboard story to inspire change. It is fine to support big organizations like toy companies, drug store chains and art institutes, but for Rhode Island to succeed, to come out from under the shadow of Massachusetts, it is going to have to do something more broadly and differently at the grass roots level, based on the skills of the people who live and work there. The good news is that the place is small enough to have real community discussions about what this strategy should be, about who the state is.

  25. Jim Jackson says:

    @Rod, corruption here is at anything but a petty level.

  26. Rod Stevens says:

    @Jim Jackson

    I mis-characterized “petty”, particularly when you’ve had a governor land in the big house. My point, though, was that before you had the Mafia systematically dividing things up and controlling them, and now that corruption seems to be more at the individual level. Not?

  27. John Morris says:

    “for Rhode Island to succeed, to come out from under the shadow of Massachusetts, it is going to have to do something more broadly and differently at the grass roots level, based on the skills of the people who live and work there. The good news is that the place is small enough to have real community discussions about what this strategy should be, about who the state is.”

    Since when has success been created by a “community conversation” rather than the free voluntary relations between individuals.

    The central problem is that once a place goes down a road, businesses & individuals become invested in it- even if its wrong and destructive. The political safe bet is almost always to double down on bad bets. (In this case – sprawl & crony capitalism)

    http://en.wikipedia.org/wiki/Public_choice

    “While good government tends to be a pure public good for the mass of voters, there may be many advocacy groups that have strong incentives for lobbying the government to implement specific policies that would benefit them, potentially at the expense of the general public. For example, lobbying by the sugar manufacturers might result in an inefficient subsidy for the production of sugar, either direct or by protectionist measures. The costs of such inefficient policies are dispersed over all citizens, and therefore unnoticeable to each individual. On the other hand, the benefits are shared by a small special-interest group with a strong incentive to perpetuate the policy by further lobbying. Due to rational ignorance, the vast majority of voters will be unaware of the effort; in fact, although voters may be aware of special-interest lobbying efforts, this may merely select for policies which are even harder to evaluate by the general public, rather than improving their overall efficiency. Even if the public were able to evaluate policy proposals effectively, they would find it infeasible to engage in collective action in order to defend their diffuse interest.”

    Rhode Island probably has a much greater degree of self selection than average. People who don’t fit the mold or disagree find it pretty easy to leave or stay out. (Look how many people commenting considered moving to Rhode Island)

    Somehow the state needs to step outside and let private investment drive decisions.

  28. John Morris says:

    I am mildly bullish that Rhode Island will hit enough of a financial wall to allow change.

    If Aaron’s plans to give the crony’s more to “invest” speeds the collapse of the status quo it might be worth it.

    Clearly there are a lot of people waiting till the road is clear. (See last line of Atlas Shrugged)

  29. Jim Jackson says:

    @Rod The Mafia here was never stamped out. The grandchildren and great grandchildren of the people characterized by State Police Chief Walter Stone at the McClellan hearings as being ‘uncooperative’ with authorities thus creating an atmosphere allowing organized crime to flourish put on suits and ties ran for office and were elected.

    They now steal from RI taxpayers with impunity. You’ll read a front page story and piece a couple of things together in your mind then wonder why aren’t these people in prison? Never mind that why wasn’t there any investigation when everyone in the State KNOWS a crime was committed.

    When the State Police announce that nearly $100 million was stolen was the RI Resource Corporation (RI creates a lot of quasi public corporations so they can issue bonds without taxpayer approval which is constitutionally mandated) AND in the SAME story details that the statute of limitations has run out so they can’t prosecute nor name names well it’s enough to make one THROW up.

    Find my short blurb about the Proc group buying the Westin while settling an unpaid debt over 12 years old to the State for 12 cents on the dollar leaving the State short of $22 million while we sold the only money making asset of the ‘Convention Center Authority” (yes another quasi public bond creator).

    Supreme Court Chief Justice Bevalaqua had to step down due to Patriarca Family criminal ties. His replacement Fay was running a side business and who knows what else out of RI’s supposedly most respected position. This was in the 80’s.

    The real story of the DiPrete Governorship and his criminal issues would take a whole chapter in a book. How his son was let off the hook. How the State refused to acquiesce to comity with the US Attorney’s office so they could have taken the case and gone after DePrite on much more serious charges. Instead he does a year in work release first selling insurance but the Feds told the State a criminal can’t sell insurance by law. On and on and on.

    Read my first post about DeepWater now see where Gordon Fox is under investigation then think about why the State wants to pay back 38 Studio bonds they have no obligation to. Keep outside investigators out of the State at all cost. It’s always been about that.

    Fox office and home was raided by FBI agents and IRS agents. The RISP stood by like dummies. They were notified or involved and neither was State DA Kilmartin – Why was that do you think? Occasionally outsiders get a peak but this will be thrown under the carpet too.

    And taxpayers will look and think as taxes go up and nothing gets better – Why aren’t these people in prison?

  30. Rod Stevens says:

    @Jim Jackson,

    Sounds like the classic dilemma for Italians: do you put up with it because of lifestyle and family ties, or get out? Either way, your information sends a class message to outsiders: “Don’t come here.” It sounds like a place to avoid. Sicily has been down for hundreds of years. This places don’t always self-correct.

  31. John Morris says:

    Sprawl in Rhode Island does seem partly driven by people trying to escape extreme corruption & taxes in the older urban areas. Although anyone who really is bothered has left the state.

    IMHO, the fact that it has not been completely evacuated proves how strong many of its advantages still are. Doesn’t hurt that many of it’s neighbors like Connecticut are such a disaster.

  32. Jim Jackson says:

    @Rod Stevens At least point ethnicity is not the issue. It’s far beyond that. I have a home here and an elderly family member. When they pass I’ll sell and never look back.

    Rhode Island lost $1 billion in personal income – those are census stats while actually gaining population. That’s another negative that has been downplayed when it tells the whole story. Yes taxpayers are leaving this corrupt sewer where the ‘beautiful beaches’ are unfit to swim in. Where the pension plan actuaries have their heads in the sand.

    We are the State that will become Detroit. It’s only a matter of time. The Politicians are rearranging the deck chairs while we continue to take on water.

  33. Jim Jackson says:

    @Rod that income loss and population gain was from 2000-2010.

  34. John Morris says:

    “We are the State that will become Detroit. It’s only a matter of time. The Politicians are rearranging the deck chairs while we continue to take on water.”

    The problem is not that Rhode Island is unattractive but that it seems to lure suckers in spite of what should be corruption that would kill other places.

    The Detroit collapse scenario would be better than an eternal living death of lost potential.

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