7 Indicators for the Future of RI’s Economy

Stuck

As Brookings Institution's report unveiled, the Rhode Island economy is stuck and the assessment was chilling. The report wrote in its overview of the Rhode Island economy:

"Currently, Rhode Island appears to be an economy adrift without growth drivers strong enough to advance its economic development. Three major findings bear notice:

• Rhode Island’s economy has lost growth capacity and is now a middling performer

• Rhode Island’s advanced industries base shrunk

• Without distinctive new growth drivers the state’s economy will remain adrift"

Job Growth

A recent story by GoLocal reported that job growth is somewhat stagnant and economic strategies have, at best, not sparked growth yet. 

"A GoLocal review of Raimondo’s performance shows that job creation has been virtually stagnant in her first two-years in office despite handing out tens of millions in taxpayer subsidies to a range of primarily out-of-state companies.

In contrast, Governor Lincoln Chafee, Raimondo’s predecessor, produced more than twice as many jobs in his last two years in office.

According to Rhode Island Department of Labor and Training data, Chafee created 13,436 jobs in his final twenty-four months while Raimondo has only created only 6,699 in the same time  — less than half of Chafee’s job creation."

Aberration or Forward Momentum

For decades, URI Professor Len Lardaro has been releasing monthly reports on the health of Rhode Island's economy. His report issued just days ago that unveiled December 2016's data show a vastly improving economy:

"Rhode Island’s economy ended the year on a very positive note: the Current Conditions Index reached its highest value for all of 2016 in December, 83, as ten of the twelve CCI indicators improved. For the second half of 2016, the CCI essentially remained at or around a level of 75, something we haven’t seen very often during this recovery. 

Rhode Island’s second-half performance is highly noteworthy in light of the variation in the quality of our state’s economic performance throughout 2016. Early on, Rhode Island stumbled badly, even though the national economy encountered only a short-term blip in its growth rate."

But, Cautionary

While Lardaro's Current Condition Index overall found an index score of 50 in December of 2015 to 83 in December of 2016, Lardaro is cautionary:

"Although we are moving in the right direction, especially with our improved momentum at year’s end, the pace of our progression remains far too slow, as evidenced by our Q2 performance. If we wish to sustain our enhanced cyclical momentum, it will be necessary for us to continue reinventing our state’s economy, based on well-defined and sustained structural changes. Is our state government up to the task? 

Superman

Nothing kills momentum more than having your tallest skyscraper in your capital city vacant for almost four years. Reports in September of 2016 showed that PayPal was in the mix to take significant square footage in the empty bank building was encouraging -- then, rumors that PayPal might need even more space and stories that other companies may be interested. 

The greatest indicator of interest in the building is that more tours of the building have been scheduled. The tours usually are a precursor to a big financial ask at the State House by developers. Think swallows returning to San Juan Capistrano.

As GoLocal reported in September:

"PayPal's future in Rhode Island is clearly an unknown, but the Superman building may not be the location of choice for the estimated 60,000 square feet that the online finance company needs.

PayPal, founded by Tesla's Elon Musk and super Donald Trump supporter Peter Theil, is red hot and is seeing tremendous growth. In its latest financials, the company reported revenue growth of 15% to $2.650 billion for the quarter.

According to Commerce Secretary Stefan Pryor in an interview with GoLocalProv.com, “We in Commerce organize visits to some of our key properties, and in the case of this company, we've helped to facilitate visits to properties across Rhode Island. There are multiple properties in consideration.”

“We've also been in touch with [High Rock] as well during this time. It's often the case that a single tenant won't have a footprint big enough (for a building). In general, we have conversations about how to advance this,” said Pryor, of talks with the developer of the Industrial National Bank Building, who refers to it as the Superman Building."

195 Development

Other than Superman building, nothing may be more of a point of frustration than the lack of progress at the 195 land. Hundreds of millions in federal and state tax dollars were spent to move the highway, re-route the city, and all with the intention of opening up premier developable land. The development of the land would spark an economic resurgence.

But now decades later, Citizens Bank has built their mega-campus in Johnston, the new General Electric jobs are in the old Providence Journal building, and the only job creating development is Wexford (yet to break ground).

A GoLocal investigation unveiled:

"A GoLocal investigation into claims of job creation by state officials at the 195 Wexford project are at best hyper-inflated.

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. 

38 Studios Rebuild

The saga of 38 Studios continues today, Wednesday February 15. GoLocalProv's lawsuit against the Governor and law enforcement agencies to release the State Police interviews in the failed criminal case is scheduled for hearing in Superior Court.

Can trust be rebuilt in government without a full review of issues?

As Gary Sasse told GoLocal recently, "The story of 38 Studios was a trifecta of political and economic failure. It began with an ill-conceived business plan centered on an economic strategy of government picking winner. It was compounded by the manner in which the public investment was structured and the loan managed. It ended with an incomplete due diligence by the General Assembly of how investors evaluate risk and set prices for public debt."