Rhode Island’s Brand: Don’t Even Try to Make It Here


A week ago, I wondered why the state’s top marketing officer would reside in the quasi-public (as in less-under-public-control) Commerce Corp. (aka, CommerceRI).  Today, the Providence Journal has an op-ed by Connecticut business owner Harry Kenworthy, who learned the hard way never even to try to do business in Rhode Island, at least not by the books:

June 24, 2013: upon bidding for RFP #7468369, Lean Process Services, my firm was told we needed to be registered with the Rhode Island secretary of state’s office as a foreign entity (since our business was registered in Connecticut). I paid the $150 fee on June 26, 2013.

Our bid was not accepted, so I saw no need to do anything more with the state, as was the case, in our experience, with other states.

Thanks to a failure of state officials to inform the company about the rules of the game, a habitual disconnect between state agencies, and the money-grubbing, red-tape-weaving policies of the State of Rhode Island, Kenworthy’s company found itself owing the state government $1,902.50 in fees, fines, and minimum corporate taxes as the folly wore on, all to simply bid on a job.  In typical Rhode Island fashion, the company was able to get a reprieve of $500 of that total when another agency — our friendly quasi-public CommerceRI — “intervened.”  (Kenworthy has owned a second home in Narragansett for two decades, so it’s not impossible he had some connection within that agency.)

This anecdote is Rhode Island’s doom in a nutshell.

As I intimated the other day, plenty of Rhode Islanders strive to start businesses and seem to do OK for as long as their operations are small enough not to have to follow all of the rules.   Once they begin to solidify their establishments, however, the state’s burdens start to weigh on them.  This state of affairs clearly helps insiders and established players by limiting competition and putting a premium on being able to work the insider system of clearing hurdles and having friends who are able to stand them back up when they’re occasionally tripped up by them.

Perhaps the biggest hangup that Rhode Islanders need to understand in order to fix this problem is that it cannot be done without shrinking the size and reach of government.  For evidence of this proposition, one need only flip through the rest of the newspaper.  An article on page A3 touts “A lower minimum corporate tax in R.I.” John Simmons, of the government-satellite think tank, the Rhode Island Public Expenditure Council, notes the benefit of improving people’s “perception” of doing business in Rhode Island, but the $50 reduction of the $500 tax would have taken all of $150 from Kenworthy’s ordeal ($100, after the CommerceRI intervention).

Meanwhile, the article highlights the increased earned-income tax, which is simply a wealth-redistribution program, with this change costing the state budget millions of dollars that have to be found somewhere else.  Such programs are one reason the state can’t do obvious things like eliminating minimum corporate taxes for the privilege of theoretically being able to do work in the state.

Another article, on the front page, fills out the theme of a state government that makes it difficult and costly to live and operate in Rhode Island:

  • A higher minimum wage will make it more expensive for businesses to expand and add employees.
  • Those receiving Social Security (i.e., those who are older and less likely to be working or trying to raise families) will see their tax burdens lifted, more money that the state will have to find elsewhere in the budget.
  • In a civic echo of the challenges that caught up Kenworthy, even small-time political novices will have to create separate accounts (with in-state banks) for their campaign money, providing the Board of Elections with paper copies of their bank statements at the end of the year, and those who reach $10,000 in donations or expenditures will have to find other people willing to act as their treasurers and take responsibility for the finances.
  • Any property owner with a cesspool — even a fully operational one away from any body of water — will have to subtract the cost of replacing the system from the value of the property when selling it

Any politician, bureaucrat, or activist who claims a desire to help Rhode Island and turn around its economy — and perhaps prevent its losing a seat in Congress due to a fading population — shouldn’t be taken seriously unless he or she intends to do so by reducing the cost of state and local government and withdrawing fingers from their meddling in every aspect of human, animal, and plant activity within the state’s borders.

  • Rhett Hardwick

    This state of affairs clearly helps insiders and established players by limiting competition

    Almost anywhere, after an agency has been in business long enough, they develop favorites. If not favorites, at least organizations able and willing to play the game and not make life difficult for the agency.

    Even if Mr. Kenworthy had been the low bid, that would have been no guarantee. Most states provide for the “lowest qualified bid” (my phraseology may not be exactly right). Exactly who is the most qualified bidder is determined by the agency putting out the RFP. So, is it “helpful” if the agency “knows you”?

  • Rhett Hardwick

    “Any property owner with a cesspool — even a fully operational one…”
    I think this is national, and driven by the feds. Mass has basically the same rule, but there is local option and some few municipalities will “pass” an operating cesspool. Fortunately, URI is a leader in septic system design. There are numerous “alternative systems”, but try building one. There is some local option. Not always good, I have been told by one municipal official “I’ve got three years to go, I’m not learning anything new”.

  • Henry Bowman

    All more reasons that I’m glad I will be gone from Rouges Island by this time next year.

  • Keith R Wahl

    The challenges exist, but it can be done. We started Made From RI LLC ( http://www.MadeFromRI.com ) and not only sell a wide array of products made here in Rhode Island but we have started production as well. Some of these products use unique processes and Rhode Island is the only place in the world that they are made. Over the Christmas season, we shipped more than 70% of our order west of the Mississippi. People need to have a presence and put their money where their mouth is before the conditions you mention can change…. we will and have. NEVER say NEVER. The difference, with us is that we (I) have experience in Big Data and Business Intelligence with some of the world’s largest businesses to navigate the pitfalls you mention (and help others to do so as well). I would love to see a political article come out about how to navigate the “impossible” and how things can be done and improved. Any takers to work with me on that challenge?

    • Dave Fraser

      Glad to hear you’re successful in RI. But most small business owners (like me) are absolutely sick to death with the overwhelming burdens of taxes and regulations this state imposes. And it’s not just me…. every national survey in the past few years ranks RI as “worst for business” or “highest taxes” or something similar.

      RI taxes and regulations need to be reduced.

      • Keith R Wahl

        I am not denying that. However, we are outliers… outsiders. The business environment will not change until we utilize our power and be smarter than the problem that these political system that we are part of presents. My challenge remains. When do we get beyond criticism and start solving problems. The gauntlet is down… I am daring people to pick it up.

        • OceanStateCurrent

          The reason it seems like people only complain is that the solutions are actually very simple. Dramatically cut taxes, which means cutting spending, and sweep through laws and regulations eliminating entire volumes of them. No discussions of “solutions” will do any good until those two objectives are acknowledged, and that’s going to take a wholesale political change in the state.

          • Keith R Wahl

            But how do you get a business started today? We have the problems identified and everyone thinks that the problems are a target rich environment. However, if you are going to wait for the political solution to come, that just is not going to happen. Time to be smarter than the problems and navigate between the obstacles, find the ways between. The non-political solutions exist… some of them inadvertently created by the political system (gallery exemptions as an example). The best revenge is living well… take up the challenge and defeat the beast. My challenge remains…. who else is willing to take up this gauntlet and fight rather than lay down and die in a sea of political excuses… that is just the coward’s way.

    • Keith R Wahl

      I have placed a challenge before everyone and would like to offer some light a the end of the tunnel for those who have trouble seeing it (and yes, it means someone has to hustle). If anyone wishes to find out more about this thought and methods of navigating the system as it exists today with a focus on changing it tomorrow… and a journalist who wishes to write about solutions to problems from someone who has done this on multi-million dollar projects from Belgium to New York to Rhode Island, contact me.