Renaming the EDC is not “Doing Away” With the EDC


I’ve heard WPRO’s Matt Allen remark that there are times that you have to hope your leaders are lying to you, because otherwise it means you are being led by people who are completely delusional. It is left as an exercise to the reader, to determine which side of that line we are on, with regards to the economic development legislation pending in the Rhode Island General Assembly.

In a Monday GoLocalProv article written by Kate Nagel, Larry Berman, spokesman for Rhode Island Speaker of the House Gordon Fox, had this to say about the House’s plan to “reform” the Rhode Island Economic Development Corporation…

“The House passed a bold and aggressive plan to do away with the EDC, and yes, the Senate is not looking to go quite that far,” said Berman, noting that if the Senate approved its version, then negotiations would take place between the chambers.

The bill passed by the House (but held for further study by the Senate last night) does not do away with the EDC.

In case you doubt this, let’s go through the House EDC bill in painful detail…

  1. In 75 different places, the House bill strikes through the words “economic development” and replaces them with the word “commerce”, in referring to the name of the quasi-public corporation being authorized.
  2. The bill states that “effective January 1, 2014, the commerce corporation shall assume all rights, duties, liabilities, and obligations of the former economic development corporation, and the commerce corporation shall be considered to be the successor-in-interest to the economic development corporation”; that “the current members of the board of directors of the Rhode Island economic development corporation who were duly appointed and who have unexpired terms shall be considered as directors of the corporation until their terms expire, and thereafter until their successors are appointed and qualified” and that “all functions formerly administered by the Rhode Island economic development corporation’s enterprise zone council are hereby transferred to the Rhode Island commerce corporation”.
  3. The bill places the proposed Undergovernor for Commerce (established in a separate bill, and who is appointed by the Governor, and does not require Senate confirmation) in charge of the renamed Economic Development Corporation and requires the Undergovernor to appoint a “chief operating officer” for the renamed EDC.
  4. The bill mandates that “a representative from the governor’s work force board” and “a representative of a minority business” be members of the renamed EDC board.
  5. The bill declares the renamed EDC “to be an agency under the jurisdiction of the state’s lead agency for economic development” (while also retaining the part of the original EDC authorization which states that the corporation is “a public corporation of the state having a distinct legal existence from the state and not constituting a department of state government”. (Can both of these be true at the same time? Hey, it’s Rhode Island, why not).
  6. The bill adds creating “an organization that is responsive to the needs and interests of businesses of all sizes within the state of Rhode Island and to be structured to be customer centric to enhance commerce in the state utilizing all available resources” to the statement of purpose of the renamed EDC.
  7. The bill adds a requirement for “reviewing annually the current status of venture capital in Rhode Island in conjunction with the full capital continuum needs of businesses in Rhode Island and make such report to the legislature as to the availability of capital for businesses in Rhode Island” to an already existing “venture capital formation program”.
  8. The bill requires the renamed EDC board to create “a capital finance subcommittee which shall be responsible for drafting for board approval a set of guidelines, principals and processes for all loans, loan guarantees and financing programs” and “a set of metrics and reporting requirements to disclose the programs and services offered or provided by the corporation and the effectiveness of each offering”.
  9. The bill requires the renamed EDC to include information on “compliance with the reporting requirements of the general laws” in its annual performance report.
  10. The bill makes the board “responsible for establishing accountability standards, reporting standards and outcome measurements for each of its programs to include, but not be limited to, the use of tax credits, loans, loan guarantees and other financial transactions managed or utilized by the corporation” and for “establish[ing] by January, 2014 a risk management program for all loans, loan guarantees and all other financial commitments into which the corporation enters.”

Now suppose items 1 and 2 were removed from that list of changes. Based on the remaining items 3 through 10, it is amply clear that the EDC is not being “done away with”.  If all of the changes above are implemented, the EDC we have today will still be there, under a new name and a new boss (but with mostly the same board), and with requirements to make a few more reports.  It is also clear that whoever is championing this version of EDC “reform” is heavily invested in making sure that the EDC retains all of its current powers.

Rhode Islanders are right to be skeptical that a change in the government org-chart can significantly contribute to reviving Rhode Island’s economy, though improving the existing structure shouldn’t automatically be ruled out as a small step in the right direction.  What Rhode Islanders can be absolutely sure of is that politicians who defend the status quo, while trying to disguise that fact behind what is little more than a name change, aren’t working towards improving the situation in Rhode Island at all.

  • Dan

    The EDC allows state politicians to make plum appointments and funnel millions to connected businesses.

    Do the math and get back to me on whether they'll ever meaningfully reform it.

  • Phil Hirons, Jr.

    I think an old Speaker Fox quote covers this. Something about lipstick and pigs.

  • Robert Benson

    Does this bill still give the EDC, excuse me, the "renamed EDC," the right to make moral obligation bonds that do NOT have to be approve by the voters?

    What we need in RI is a constitutional convention which among other things would outlaw any state debt obligations unless approved by the voters!

    • Randall Rose

      It's already in the RI constitution, Article VI section 16. Bonds issued without voter approval are not "state debts" and politicians are not allowed to "pledge the faith of the state for the payment of the obligations of others" unless they put the bond on the ballot. That makes all non-voter-approved debt unconstitutional, especially so-called "moral obligation bonds", but I don't trust the RI courts to enforce it. The unconstitutional effort to bail out 38 Studios' "moral obligation" debt with taxpayer money is being vigorously opposed by a left-right coalition — you can sign the petition here:

      More info here — this is one issue that freedom-lovers on the left and right can agree on:

      Let's spend some time fighting the abusers of power together, and not just fighting each other. Petition link again: