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Leader Brian Newberry Calls on Speaker to Investigate Potential Tactics by RIDOT During Toll Debate

The following letter to Speaker Nicholas Mattiello was released this morning by House Minority Leader Brian Newberry. The background to this request by Leader Newberry can be found, certainly in part, in this report by Justin Katz about correspondence received by the Ocean State Current-Anchor Rising sent from Rep Mia Ackerman (D, Cumberland, Lincoln) to a constituent.

Dear Speaker Mattiello,

I write to request you open a House Oversight investigation into RIDOT and its tactics with respect to passage of the recent tolling legislation. It has come to my attention that several Democratic members of the House have written letters to constituents explaining their support for the recent tolling legislation by, in part, expressing fear that if they did not support the bill RIDOT might retaliate against their districts by, among other things, slowing down or stalling needed repair work and similar projects. If these members have indeed been pressured it is an outrageous abuse of power by the Executive branch. When I first heard of this last evening I dismissed it as unlikely but then I recalled that the bridge over which you drive to your office was mysteriously closed by RIDOT immediately after you announced your opposition to the original toll plan last spring. I want to stress that all my dealings with RIDOT and in particular their legislative staff over the years have been nothing but professional and in fact their legislative lobbyist has been one of the best and most helpful I have dealt with. I myself have seen no whiff of this pressure. That said, it is quite possible that RIDOT officials are being pressured by higher ranking members of the Executive branch and/or that other Executive branch officials are indeed making quiet threats of this nature. Either way the public deserves a full explanation from the Executive branch and it in the interest of all House members to have this issue publicly aired out.

Thank you for your consideration.

Respectfully,

Brian C. Newberry

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How ‘Bout Some More (Green) Chains on Our Economy?

See, here’s the thing: If my understanding of economics were wrong, Rhode Island’s economy would be humming along right now. Three green-energy provisions in Democrat Governor Gina Raimondo’s proposed budget just redistribute money to companies in a politically preferred industry, forcing us all to pay for profits that the market would never provide if people were free to direct their money where they wanted it to go:

“The governor wants to be as aggressive as she can be to expand clean energy sources,” Marion Gold, commissioner of the state Office of Energy Resources, said in an interview. “The three provisions send a signal to clean energy companies that Rhode Island is a good place to invest their dollars.”

The energy proposals would:

— Extend the Renewable Energy Fund another five years beyond its current scheduled expiration in 2017. The fund, which is replenished through a surcharge on all electric ratepayers in Rhode Island that totals about $2.5 million a year, is used to support grants and loans to developers of in-state renewable energy projects.

— Expand the state’s net metering program, which allows owners of renewable energy systems to sell power to offset their total electric bill. The program would allow “virtual” net metering for off-site systems and third-party ownership of systems.

— Impose a blanket exemption for renewable energy systems from municipal property taxes, unless a community actively chooses to tax the systems.

For people in the industry, it’s profits and investment returns. For those out of it, it’s surcharges, taxes, and socialized costs.

At the House Finance hearing regarding tolls, the Republicans’ plan to redirect some money from renewable energy handouts led to the declaration that it’s one of the few growing industries in the state. That’s because it’s heavily subsidized, and only subsidized industries are able to achieve health in this state.

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Legislator Fears RIDOT Retaliation for Not Voting in Favor of RhodeWorks

Almost from the appearance of Democrat Governor Gina Raimondo’s RhodeWorks proposal on Rhode Island’s political scene, indications of the hard push have filtered out to the public. As the state Senate rushed to pass the enabling legislation last spring and the House resisted, House Speaker Nicholas Mattiello (D, Cranston) and Cranston Mayor Allan Fung (R) questioned the motivation behind the state Dept. of Transportation’s sudden closure of a key bridge a few blocks from Mattiello’s law office.

More recently, with Mattiello now on the other side of the issue, controversy has swelled around a meeting that the speaker canceled with South County officials and the treatment of House Finance Committee Member Patricia Morgan (R, Coventry, Warwick and West-Warwick) by both the DOT director, Peter Alviti, and the committee’s chairman, Raymond Gallison (D, Bristol, Portsmouth).

Now a constituent has forwarded to The Current a lengthy correspondence apparently from Mia Ackerman (D, Cumberland, Lincoln) in which the state representative explains why she intends to vote for the revised toll-and-borrow infrastructure plan. In addition to concerns about the state’s infrastructure and doubts about alternative proposals, the letter states:

I also do not want to be the legislator who voted against this bill. If I do vote against this bill, I have an uncomfortable feeling that if I call DOT with a request for a repair or replacement in District 27, my request will not exactly be a priority. I will have failed my constituents and placed them in further peril by shuffling them to the bottom of the pile, so to speak.

Ackerman did not respond to a request for additional information, and House spokesman Larry Berman says he has not heard of any similar fears. However, the substitute bill that sparked the exchange between Morgan and Gallison may not alleviate such concerns. Amid new language ostensibly intended to provide oversight of and accountability for the RIDOT, section 42-13.1-15(c)(5) appears to give the director broad authority to waive “bridge maintenance requirements” if he can cite “circumstances” that “eliminate the need for maintenance activities in any given calendar year.”

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A Lesson on Public Policy and Economics in Tolls

It occurs to me that some people might respond to my example of the $40 round trip for me to drive from my house to Woonsocket under the RhodeWorks toll scheme with two points:

  1. You don’t drive a large commercial truck.
  2. Almost no large commercial trucks are likely ever to have a reason to drive from Tiverton to Woonsocket and back.

Let’s put aside the correction that my calculation would apply for anybody in any town to the east of the Seekonk River who wouldn’t go over the Newport Bridge. A more important principle depends on not getting bogged down in specifics because it has to do with opportunity costs.

So, yes, it’s difficult to think of a reason a large truck would have to do a lot of traversing of Rhode Island from Tiverton, although there are such industries as stone and soil delivery, lumber delivery, boat building, and seafood. By implementing a toll, the state government makes it that much less likely that any business needing to make such a trip would set up shop in Tiverton, even if this were otherwise an attractive location. That’s almost $15,000 per year if one truck makes the trip each day, and with the constant threat that the state will just ratchet up the toll. After all, the gas tax now adjusts for inflation, and the governor’s budget calls for school funding from local taxes to adjust for inflation, as well. How likely is it that the $15,000 won’t adjust, as well?

Perhaps businesses that are already in operation won’t find it worth their while to up and leave the state or just change their behavior over tolls (although we’ll see), but most of planning for the future involves creating space for new activities and new innovations. When it comes to making new decisions, whether for an existing business or a new one, that map of tolls will certainly come into play. Back when the Sakonnet River Bridge was in the crosshairs for tolls, local state representative John “Jay” Edwards (D, Portsmouth, Tiverton) repeatedly declared that “a toll is a barrier.” Apparently, he and his peers are not so convinced that 14 tolls are a barrier.

The references to other states are significant, here. In general, tolls are applied to one road on a long stretch. Governor Raimondo’s web of tolls designed to capture all movement around Providence are a peculiarly Rhode Islandish and ugly image.

Now take the idea of that toll and add it to every other thing that Rhode Island does to make itself less friendly for businesses and innovative economic activity. Governor Gina Raimondo has led the way declaring that the state needs to spend taxpayer money on innovation, but what she means is that we must tax everybody and give government a slush fund so it can help chosen companies overcome our unnatural barriers.

If we really want Rhode Island to find sure economic footing for the future, what we have to do is stop creating barriers for those investments and innovations that we can’t predict.

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Mapping Out the Tolls

Just for fun, I took the proposed toll amounts that Ted Nesi tweeted out earlier and put them on a Google Map. If I did this right, you should be able to click the toll locations and see the amount highlighted.

The RI Dept. of Transportation and toll supporters (most of whom represent interests that will benefit directly from the money or are otherwise entangled with state government spending) want it all ways on this matter. On the one hand, they argue that the state must have this new revenue or there is no way to repair roads and bridges. On the other hand, they point out (as at the House Finance hearing) that even if the tolls produced no revenue, it would “only” reduce the amount of money available for repairs (as in, no big deal). This applies on the individual level, implying that nobody will have to shoulder too much burden, but then emphasizing all the money they’ll collect for infrastructure.

Review the map and think like a trucker on routes with which you’re familiar. For example, traveling from my house to Woonsocket would cost a trucker $40 round trip. Taking an alternate route of routes 24, 495, and 126 — which I’ve done anyway, particularly during certain times of day — would cost $0. Zoom out on the map, and one can see just how easy it would be to avoid Rhode Island, or to only enter it where necessary.

In contrast, depending where trucks start out within Rhode Island, a round trip, say up 295 and down 95 would amount to less than an hour of driving yet cost around $30 in tolls. And that’s before RIDOT decides to start ratcheting up the tolls for more and more money.

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The Car-Toll Referendum is a Perfect Example of Something that Belongs in the State Constitution


Subtitle: A rebuttal to Governor Gina Raimondo’s appearance on Newsmakers.

And which concludes with…If Gina Raimondo and Rhode Island lawmakers truly believe that tolling passenger vehicles should be placed beyond the reach of the legislature and are not merely slipping a few words into the law as meaningless political theater, then according to the most basic tenets of constitutional democracy, the referendum requirement needs to be placed into the constitution. And in the absence of a constitutionally-required referendum, it is entirely fair to describe legislators who support the current truck-toll legislation as supporting tolls on trucks now, with a legislative option for tolls on cars later.

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Testimony on Avoiding Tolls and Debt with a P3 PayGo Plan

Transcript:

Good evening. My name is Justin Katz. I’m the research director for the Rhode Island Center for Freedom & Prosperity.

The amazing thing about infrastructure, and this whole issue, is that we’ve got roads that need repair, we’ve got workers who want to repair them, we’ve got a public that wants to pay to fix the roads — the problem is we’ve got special interests who already have the money we’re already paying to fix the roads that won’t let us do it. They’re holding that money hostage; they’re holding our roads hostage and holding the jobs hostage, saying, “You can’t do this unless you come up with new money somehow in your economy to fix this problem.

It brings to mind, actually, something a former chairman of this committee said recently, Steven Costantino, when somebody had suggested that he was in on the scandal of 38 Studios, and he said, “Well, look, I was just doing what I was tasked to do by my superiors,” meaning legislative leadership. That’s not how representative democracy works. The people upstairs are not your superiors; the people in Rhode Island are.

So, I’m basically here to give you the message that you have options. Don’t expect that you’ll be able to go out and say, “We had to fix the roads.” A lot of the benefits everybody agrees on: We need new infrastructure; we need repairs; we need maintenance. Don’t expect you’re going to be able to go out and say, “Well, we had to do it, and this was the only option,” because there are other options.

Continue reading on RIFreedom.org.

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Raimondo’s Putting It Right in Your Faces, Rhode Islanders; React to It

Every day, it seems, we get more evidence that Rhode Island’s ruling elite are done with pretenses about how they believe our system of government should work. It could just be, of course, that they aren’t sufficiently self aware — or sufficiently inclined to think about the consequences of their own demonstrated political philosophy. In that case, though, I wonder why the news media and activists aren’t calling them on something to which we all obviously need to be attuned.

Here it is, with everything short of a highlighting, slipping right by in Ted Nesi’s summary of Governor Gina Raimondo’s appearance on Newsmakers, this week:

As for all those companies howling [about truck tolls], Raimondo said state leaders “are very open to the possibility of coming up with an economic package that would take these concerns into account.” Keep an eye out for that.

This is nothing more nor less than admission that state government is more than happy to create loopholes and buyoffs for companies that are able to bring enough political heat. This is exactly Rhode Island’s core problem, politically and economically. If you can’t get a special deal from the state, you’re out of luck. (And, by the way, special deals can come in the form of hindering competition.)

Since this apparently isn’t obvious to everybody, let’s think it through: The state imposes tolls on large trucks. Either collectively or individually, businesses that are particularly hard hit appeal to the politicians, who craft specific carve-outs elsewhere in the budget — money taken from one pocket is simply placed in another. In order to place money in the second pocket, the government either has to redirect funds from other purposes (mainly by draining down the general fund) or come up with yet another source of revenue.

Why would politicians want to operate this way? Because they get to be the check point. The businesses are now reliant on the politicians to keep the special deal in place, and everybody else sees quite clearly that bowing to the politicians is a necessary part of operating in the Ocean State.

Postscript: For some reason I don’t understand, WPRI reporters Ted Nesi and Tim White let Raimondo repeatedly get away with the untruth that the tolls are capped at $20. Unless I’m missing something, the legislation is quite clear on this point: The $20 cap is on one truck going one way across the state, all on Route 95. These are truly the out-of-state trucks that everybody claims they want to target. The actual cap is double that — $40 during a full day.

It’s especially rich that Raimondo repeats this untruth so frequently, considering that she accuses truckers of lying about their likelihood of rerouting.

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About Hitting Out-of-State Trucks for 60% of Tolls

An assertion made repeatedly by pro-toll people at the House Finance hearing on Thursday was that out-of-state truckers will pay 60% of the bill. A commenter on this site just made the same point:

At the hearing it was said that 60% of the toll revenue would come from out of state large trucks. I don’t understand why toll opponents want only RIers to pay for road repairs, especially as those large trucks do significant damage.

The first point to make in response is that the objection isn’t to people out of state helping to pay for our infrastructure. The problem is: To get out-of-staters to pay 60% of tolls, Rhode Islanders have to pay the other 40% on top of all of the already-high taxes and fees they pay to government. The argument is akin to expressing disbelief that somebody objects to paying $4,000 more for cable TV on the grounds that the bill is actually going up $10,000, but is discounted by $6,000. In other words, it’s the kind of argument that only sounds good in government debates in which facts and the truth don’t matter.

Speaking of the truth, though, unless there’s a new source for this 60% claim, it comes from a study by CDM Smith. Unfortunately, as I’ve written before, that study doesn’t account for diversion. In October, I found:

Just for illustration of the effects that change could have, if we apply the diversion evenly across all routes and assume the extreme that all diversion would come from out-of-state truckers, then the percentage of traffic more than flips. In-state trucks would account for 60% of all truck traffic in the state.

Applying rough ratios for a multi-trip discount and assuming the discounts would all go to in-state truckers, they would still be responsible for nearly 57% of all tolls, or $34 million per year, if the goal is $60 million in revenue. That’s more than $10 million larger than implied by CDM.

On the broader argument about user fees, as I’ve written often before, it would generally be a good thing to transition from broad-based taxes to user fees, but that’s not what we’re getting, here. State and local governments have maxed out the taxes they can collect from Rhode Islanders, so they’re using this stuff about a “user fee” as an excuse to raise even more money. By all means, get people who use a service to pay for it, but when we’re already paying for it and won’t be getting that money back, increasing revenue is simply a money grab for special interests.

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Experts Who Miss the Obvious

A Sunday Providence Journal article by Kate Bramson is worth a quick look by way of raising the question of why experts seem to miss the obvious. A few quick hits, starting with this, from “labor economist” Paul Harrington:

“Older workers are going to retire at some point or other, and it’s going to be followed by a generation with less labor-force participation and less work experience” than earlier generations had, Harrington said. “To me, figuring out, ‘How do I get work experience for young people in urban areas?’ — that would be a top priority.”

This isn’t a difficult problem. Eliminate the minimum wage, lighten up mandatory benefits for employees (including both those imposed as regulations and those imposed as entitlement taxes), and end policies that attract low-skilled workers from other countries. Rather than non-living-wages for legal and illegal immigrants, you’d have additional spending money for lower-income households and young adults with work experience.

Then there’s this, from University of Rhode Island Economics Professor Leonard Lardaro:

“We’re much more about the here and now, and we never allocate enough resources for investment,” Lardaro said. “The result? Our physical infrastructure — roads and bridges — are among the worst in the country. The skills of our labor force are nowhere near what we need…. We have to be much more of a society that allocates toward investment, and we’re avoiding it.”

Various data points make this hypothesis suspect. We already spend a great deal on education, for example, which is ostensibly done as an investment. Meanwhile, younger “productive class” Rhode Islanders are leaving the state, which indicates a willingness to risk a little short-term discomfort for a long-term improvement. Even if we look at insiders, we see long-term thinking: The labor unions fight for things like longevity, and pensions are a central focus of their activism, while insiders put in some years of long hours and relatively low (or even no) pay on various boards and councils or in the legislature, with the expectation that they’ll be able to cash out with a cushy patronage job or benefit in some other way.

The people who set Rhode Island policy do plenty of long-term thinking. The problem is that we allow them to use government to serve their own interests. Fix the general mindset that such systemic corruption is acceptable, and the state’s seemingly intractable problems will begin to clear up. Unfortunately, the Raimondo-Mattiello Era is proving to represent a mad dash in the opposite direction, leaving us only the hope that the dash indicates a sense that we’re almost to the point of collapse.

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UPDATED: Frias Shows Raimondo Doubletalk on Taxes

One really has to go out of one’s way not to see evidence that Democrat Governor Gina Raimondo and the rest of Rhode Island’s political establishment is not interested in coming to correct answers so much as saying anything to get their insider deals over the (ostensibly) legal finish line. In today’s Providence Journal, Steven Frias notes that Raimondo’s friends at the Brookings Institution proclaim that “Massachusetts and New Hampshire show the way forward,” but gloss over the degree to which cutting taxes made a difference:

In 1979, the Massachusetts High Technology Council (MHTC), a trade association of high-tech companies, declared that the “single most important step to stimulate the growth of the high technology industry in Massachusetts is real tax relief.” MHTC explained that the “higher cost of living and doing business in Massachusetts can no longer be offset by the proximity of MIT or Boston’s active venture capital market, or the cultural and environmental amenities.” Instead, MHTC insisted “Massachusetts must reduce the tax burden,” particularly for property taxes and income taxes.

MHTC and Citizens for Limited Taxation, an anti-tax grass roots organization led by Barbara Anderson, joined forces to support a voter initiative known as Proposition 2½. Proposition 2½ was designed to reduce property taxes and limit future property tax increases to 2.5 percent per year. To control spending, Proposition 2½ also repealed state laws that gave school committees fiscal autonomy and mandated binding arbitration for police and firefighter unions.

In passing, we should observe that Frias has hit on another of Rhode Island’s problems. Whether because of the state’s size or its long history of corruption, the “business backed” groups that should offer a counterweight to state government as the MHTC did in Massachusetts — think chambers of commerce, business associations, and RIPEC — have simply been bought into the insider system. In RI, they are now almost completely controlled by people with high (often six-figure) salaries who are more worried about losing access to the political font than losing ground for their members.

More relevant to the governor’s budget, though, is the tax-limiting reform: “Proposition 2½ was designed to reduce property taxes and limit future property tax increases to 2.5 percent per year.” Raimondo is headed in the opposite direction.

As I noted last week, her Funding Formula Working Group suggested getting rid of the legal requirement that local taxpayers must pay at least as much toward education each year as they did the prior year, instead requiring them to increase taxes every year for inflation and/or for enrollment increases. (The report did not suggest that this ratchet should go in reverse in times of deflation or dropping enrollment.)

I didn’t see confirmation in the governor’s budget documents that this provision made it in, and the budget legislation isn’t available, yet, but Lynn Arditi has reported that it is, presumably as part of the governor’s effort to make the districts’ complaints about charter funding go away by throwing more money at them.

Bottom line: The Raimondo-Brookings plan is an attempt to work around the problems we all know are destroying the state.

UPDATE (2/3/16 7:58 p.m.):

Well, there it is on page 167. Local taxpayer funding of schools must go up by the greater of inflation or the increase in student enrollment. Municipalities can still calculate the increase per student (to account for decreased enrollment), but inflation must still be included. (Of course, this per-student approach is tricky, because it’s not clear what number counts. If the district projects an increase, for example, even after years of decreases, does that mean the budget must go with the district’s estimate? In RI, the safe bet is that the answer is “yes,” if the district challenges the number.)

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With Raimondo Budget 2.0, Welcome to Second Class Status, Rhode Islanders

Anyone who thought Rhode Island had reached its peak for governing in favor of special interests learned from Governor Gina Raimondo’s budget, released last night, that a whole new level exists. The overarching assumption is now that a few connected insiders in the state government, in nonprofit groups, from private companies and investment firms, and from Washington, D.C., think tanks and agencies can and should map a course for our shared future and spend our money to make us get in line.

“Nearly every item is directly targeted toward a particular narrow group of recipients,” said Justin Katz, research director for the Center. “It’s the kind of budget a chief executive puts forward when she doesn’t trust the people of her state to make their own decisions.”

In ways small and large, the vision of the budget is what one might expect to be crafted in the halls of the progressive Brookings Institution, with its recent report funded by private interests (mainly Raimondo donors), and the federal Department of Housing and Urban Development, which got its hooks into the Ocean State through the RhodeMap RI plan.

Continue reading on RIFreedom.org.

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Constitutional Amendment Limiting New Tolls to be Heard Alongside the Rhode Works Bill


Today, the Rhode Works plan, which creates a system for tolling trucks across the network of Rhode Island highways, will have its first hearing in the RI Senate Finance Committee….the Senate Finance Committee will also hear a bill today to send to the voters a constitutional amendment which would require that any future car tolls be directly approved by voter referendum….and there is no reason why both bills shouldn’t move through the legislative process together — unless, of course, the plan all along has been to use truck tolls as a stepping stone towards car tolls.

Any legislator who votes for the Rhode Works bill without also voting for the constitutional amendment will be voting for truck tolls now with an option for car tolls later.

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If Non-Freedom Economic Development Doesn’t Work… Try, Try Again

Those who find Rhode Island’s governance maddeningly self serving, obtuse, and inept might have difficulty getting past the opening portion of this Sunday column by Providence Journal Assistant Managing Editor John Kostrzewa:

The difficulty of matching unemployed workers with available jobs, a problem called “closing the skills gap,” has bedeviled Rhode Island governors for decades.

Despite spending millions of dollars, the state still has tens of thousands of out-of-work or underemployed people and thousands of employers who complain they can’t find the help they need.

Now, Governor Raimondo is trying again.

She and Scott Jensen, her hand-picked Department of Labor and Training director, have started a new effort, called Real Jobs Rhode Island, that puts the design of skills-training programs in the hands of business managers who know what they need, not state bureaucrats. They already have handed out $5 million in grants to 26 teams of private companies, nonprofits, educational institutions and industrial associations.

In other words, to the list of now-discarded pretenses that used to allow us to pretend that we lived under a representative democracy, we can add the idea that government can take economic development on as one of its core responsibilities without undermining our free marketplace of rights and opportunities. No longer is the State of Rhode Island pretending that it’s confiscating our money in order to improve our neighbors’ capabilities. No, having failed to educate the public and having restricted our ability to make the economy work, the state is now simply confiscating our money to let businesses shape the population to their own needs.

Of course, the businesses aren’t alone in this. Kostrzewa also cites some progressives studies in support of the idea that the state should shift even more of its emphasis toward catering to the immigrant population that it has been luring here in order to justify its many social service programs:

“We need more resources focused on helping adults learn English so they can gain skills they need to support their children’s education and so they can get better jobs,” said Mario Bueno, executive director of Progreso Latino, in the report.

The referenced report is by the Economic Progress Institute, which Kostrzewa strangely characterizes as simply a “nonpartisan research and policy organization based in Providence.” He could have added that the institute is housed with a sweetheart rental agreement at the public Rhode Island College, after having been birthed (if I’m not mistaken) with funding from the private nonprofit Rhode Island College Foundation, which is currently under scrutiny for helping Governor Gina Raimondo hire a cabinet member outside the reach of the state’s transparency and ethics laws. The institute has also received funding from the state government and, as Kevin Mooney reports, is among the left-wing organizations supported by the Rhode Island Foundation.

Incidentally, Progreso Latino is also on the Rhode Island Foundation’s list of grant recipients, but its funding comes mainly from state and local government, having received over $600,000 from the state last year and almost $900,000 from the federal government.

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James Cournoyer: Tolls – Resist the Urge to Create a Big Bang Wrapped in the Worn Flag of “Economic Growth” and “Creating Jobs”

Dear Members of the General Assembly,

Please vote against Governor Raimondo’s and Speaker Mattiello’s Rhodeworks plan that calls for Tolls and more Debt.

RI may have the worse roads and bridges, but we are also saddled with one of the highest Debt burdens in the nation – both on a per capita basis and as a percentage of Gross State Product. We simply do not need more debt.

The Governor explained to us in October that the RIDOT, which has a stunning $450+ million budget this year, was “dysfunctional” and that they “never produced start-to-finish budgets and schedules”. That is precisely the reason our roads are in such disrepair. It is NOT due to a lack of funding; rather, it is due to a lack of planning and oversight, and gross mismanagement.

Tolls will simply add to RI’s already notorious national reputation of being “anti-business”.

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Taxpayer Warning on the Education Funding Formula Working Group

To little fanfare, the state’s Funding Formula Working Group released its report making “Recommendations for Improvement of Rhode Island’s Permanent Foundation Education Aid Formula.” The tone of the coverage, such as it was, seemed generally to be that the working group acknowledged some challenges that the formula might be modified to addressed but was under such constraints in what it could recommend that it didn’t suggest anything particularly newsworthy. Given all of the work that the RI Center for Freedom & Prosperity has done reviewing education data while research the plausibility of school choice in the state — particularly in developing the RI-DIMES model to predict the effects of school choice policies — the report contains a few points that might be worth raising in the future.

For the moment, though, taxpayers should take special note of this line, which deserves more attention than it received (if it received any):

The funding formula maintenance-of-effort language for cities and towns should be strengthened to account for reasonable factors such as inflation and enrollment increases.

Under Rhode Island law, local taxpayers must give their school districts at least the same amount of money as in the previous year, and they can calculate that amount per pupil, to reduce funding if enrollment drops. A change that imposed an inflation ratchet or that made bigger budgets for increased enrollment automatic while leaving smaller budgets for decreased enrollment to be fought in the political arena would be a significant step against local taxpayers, imposed at the state level.

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Whatever the Townspeople Think of Development, Subsidies Are Another Matter

Writing in the Sakonnet Times, Tom Killin Dalglish previews a meeting between the Tiverton Town Council and Legacy Venture West Development on Monday (January 25) to discuss details of its interest in a large shopping center on the largely vacant Tiverton Industrial Park land owned by the town government:

The idea of an outlet center was first broached publicly at a council meeting in late November, when Legacy Venture West Development (Legacy Development) of Kansas City and the Town announced they had reached a “stand still” agreement on Nov. 23.

That agreement allows each side an exploratory period of 90 days to study the possibility — to do due diligence — without the risk of intervention by other potential purchasers.

If the whole deal goes through, Legacy and the Town of Tiverton have agreed to a purchase price for the acreage of $8.25 million.

Likely at the top of the list to be discussed by the Council and Legacy at the upcoming Jan. 25 meeting will be the level of public financing that Tiverton and the State of Rhode Island might be prepared to offer, and that Legacy might seek.

The first question that the town will have to answer is whether the proposed Tiverton Glen development on the other side of Route 24 ultimately met such opposition because Tiverton residents want to use town government to stop all large-scale development or because the specific location presented unusual problems, particularly traffic on Main Road. Additional subsidies that the developer might seek from town and/or state taxpayers will complicate matters.

Continue reading on Tiverton Fact Check.

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Somebody Bites in I-195 District (Looking for Subsidies)

John Bender and Ian Donnis are reporting on RIPR that Wexford Science & Technology has signed a purchase and sale agreement for a couple of I-195 parcels:

Baltimore-based Wexford Science and Technology and real estate developer CV Properties have signed a purchase and sale agreement for two parcels of land and plan to develop a three-phase project on the vacant former highway land with research and development space, offices, hotel and residential space and other attractions. …

The cost for the parcels of land, (numbers 22 and 25) was about $6.6 million, according to Dyana Koelsch, spokeswoman for the I-195 Commission, the agency tasked with developing the land.

The company intends to request subsidies from the Commerce Corp.’s huge slush fund, created through a refinancing gimmick in Governor Gina Raimondo’s 2016 budget proposal. That detail, along with any tax deals from the city and state, as well as other details, will be important for evaluating whether the deal puts most of the cost and risk on the company or on Rhode Islanders. With construction initially expected to begin next year, it will also be awhile before the success of the business model is known.

With Wexford’s two lots gone, 14 of the original 18 parcels available on the land remain available. In total, Wexford’s purchase covers 27% of the land freed up by the highway rerouting, not counting that which is set aside for parks.

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Let’s Not Get Carried Away with Education Rhetoric

Lieutenant Governor Dan McKee makes several points with which I agree in his op-ed, today, in the Providence Journal, but Rhode Islanders should keep two things in mind if the truly want an education system that helps turn Rhode Island around.

First, McKee’s core prescription is that Rhode Islanders should change their state constitution to “guarantee[] every Rhode Island student a right to a high-quality public education.”  It’s the sort of proposal that sounds good while giving the impression that it won’t actually change anything.  Who could argue against such a thing, stated broadly and with no details?  We need to know what the proposal actually means, though, especially when the state constitution already requires the General Assembly (i.e., the state government) “to adopt all means which it may deem necessary and proper to secure to the people the advantages and opportunities of education.”

If some provision of state law and budgeting is standing in the way of adequate public schools (collective bargaining for teachers, say), one could argue that the General Assembly was not authorized by the constitution to implement that law or, alternately, that the General Assembly is obligated to change the law.  An amendment such as McKee advocates might bring this right to a more individual level that would grant Rhode Islanders standing to sue the state, but in the State of Rhode Island as it currently exists, what might be the outcome of such lawsuits?

I suspect we’d see demands for more spending.  That’s the one thing on which every powerful force in the education establishment can agree.

From there, the second point responds to McKee’s assertion that “if our public schools performed as well as those in Massachusetts, earning power in Rhode Island would jump by $1.5 billion to $2.1 billion annually.”  To the extent that greater education increases each person’s earning potential, Rhode Island would likely find its students increasingly likely to leave the state.  Investing in education doesn’t do much good for the economy if the state’s policies prevent Rhode Islanders from realizing their potential as entrepreneurs or even just as workers.

And if the end result of a right to “a high-quality public education” is to drain more resources out of the economy to fund the beat of Rhode Island’s ruling class, then even if the net result turns out to be better educated people, they’ll have even less opportunity in the state when graduating.  Then, just as Connecticut is losing GE, we’ll lose even more of our children.

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​​Tolls – ​Strong Caution for the Companies Currently Negotiating to Cut Their (So Far, Only Theoretical) Losses

​Dear Potentially-Toll Affected Company:

Look, it’s completely understandable what you’re trying to do. There’s a real possibility that the government – the State of Rhode Island, in this case – would lay a heavy financial burden on your operation. It’s natural, when a heavy blow seems inevitable, to try to lessen it. And the state officials who are talking to you are not dumb. While some of them very much want this new revenue stream, they also know that if you leave the state (or decide to work against their reelection), the political repercussions for them could be bad. Depending upon the number of Rhode Islanders you employ, maybe real bad.

​So to shield themselves and try to make you happy – or at least, less unhappy – these state officials are offering to partially offset your losses to tolls through an abatement – perhaps of registration or other fees.

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Toll-and-Borrow a Car-Toll Trap

Reading Steven Frias’s commentary in today’s Providence Journal points toward a possibility that should really be emphasized as the General Assembly embarks on a session during which some are saying truck tolls are a done deal.  Frias notes decades of resistance to tolls, in Rhode Island, and emphasizes that:

In the past, new taxes have been expanded after efforts to avoid the tax led to revenue shortfalls. For example, in 1969, Gov. Frank Licht’s investment tax was adopted. It was an income tax limited to only interest paid on savings accounts, dividends, and capital gains, which significantly impacted a small minority of taxpayers. But after millions were withdrawn from savings accounts in Rhode Island banks and reinvested into tax-exempt bonds to avoid the tax, the investment tax ended up generating far less in revenue than originally estimated. As a result, in 1971, a state income tax was imposed on all.

In particular Democrat Governor Gina Raimondo’s toll-and-borrow scheme is practically designed to ensure that tolls expand to cars if the actual collections fall short of the estimates (and they will).

Some have wondered why the governor is so insistent on rushing forward with a revenue bond when a general obligation bond would be sure to pass at the ballot box and would save the state tens or hundreds of millions of dollars in interest.  I’d argue that this financing mechanism would be contrary to the state constitution if we had a real judiciary, but even if that isn’t the case, why waste taxpayer dollars?  One obvious explanation is that unnecessarily high interest on the debt makes RhodeWorks a twofer for Raimondo’s friends and backers, funding work for the Laborer’s union and a windfall for Wall Street investment types.

Another explanation could be that people in state government have their eyes on much more revenue — revenue that’s relatively easy to ratchet up and that doesn’t count in some measurements of the state’s tax burden — by taxing cars.  From this cynical perspective, we can observe that placing a debt of the state on the rickety planks of such a narrow bridge makes it likely that the revenue source will prove inadequate, practically obligating the state to expand the base, specifically to catch the driving piggy banks that can’t simply route around the state: those of us who live here.

Such a cynic might also expect that the governor has the calendar worked out with the expectation that she’ll have moved up to bigger and better things by the time this becomes clear.  (She certainly has the investment experience to know how to structure the bonds to ensure the delay.)  But even without that level of cynicism, it’s reasonable to conclude that one truly “done deal” should be the end of the political career of any legislator or executive who brings any tolls to the state as part of this particular project.

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Money for Nothing and Your Taxes for Free

Not being privy to behind-the-scenes discussions (which, come to think of it is a core problem of government-driven “economic development”), I’m not going to trash the tax credit deal given to Greystone of Lincoln.  It could be a modest early success in a generally wrong-headed strategy.  That said, something in Kate Bramson’s Providence Journal reportage gives me the impression that the free taxpayer money didn’t ultimately save or create any jobs that wouldn’t have been saved or created, anyway:

In an interview after the meeting, [David Buehler, Greystone of Lincoln general manager,] said the Virginia expansion was “certainly a strong option being considered” because there’s room in the company’s facility there, and that space has the necessary power, compressed air and other infrastructure.

“I don’t know how this all would have played out without the incentive program, but what I can tell you is certainly it was a strong factor to say, ‘Let’s go with this. It sounds like a sound decision,'” Buehler said of the Rhode Island expansion.

A guy whose company just inked a deal for a free half-million dollars isn’t going to tell a reporter that the taxpayers’ money bought the state a sunrise.  At best, this money continues Rhode Island’s trend of helping established players grow a little bit over time, while taking resources and opportunity from the entrepreneurial sector.  At worst, it was just another expensive shiny thing for politicians to flash in the cold sunlight to make it seem as if they’re doing something that’s “working.”

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The Retirement Board’s Incentive to Protect Inside Interests

Today’s Providence Journal Political Scene includes a section on the race for seats on the state Retirement Board.  I’ve long been saying that the state needs to run its pension system with the kind of honesty that might leave the government and the system itself open to criticism.  Among the first steps for that to happen would be the Retirement Board’s lowering the discount rate that the actuaries use to make the liability seem smaller, not by a measly half percentage point, as it did to kick of then-treasurer Gina Raimondo’s reform push, but by 3.5 percentage points or more.

By law, the Retirement Board consists of:

  • 3 elected or appointed government officials or their subordinates (any or all of whom could be or be married to active or retired members of the system)
  • 1 representative from the League of Cities and Towns
  • 5 active employees eligible for the system
  • 2 retirees in the system
  • 4 public members (any or all of whom could be or be married to active or retired members of the system)

By design, in other words, one-person shy of a majority has a direct, personal investment in the fund.  In theory, of course, the other eight members have the health of the state and the burden on taxpayers in mind, but that’s become nearly a laughable proposition in Rhode Island — at least that anywhere near all eight would see that as their primary objective.

The incentives for public officials and even people who volunteer to serve on the board as private citizens are entirely unbalanced from the incentives for those in the system, and hard-fisted union tactics can easily swamp a will to do right by taxpayers.  As for the other side of the ledger, a look at the three candidates running to represent the pension-system members gives some sense of their incentives, looking at fiscal year 2014 data from RIOpenGov:

  • Roger Boudreau: retired at 51 (now the president of the Rhode Island Federation of Teachers), having contributed $80,689 to his pension over 30 years. Latest reported annual pension payment: $42,334
  • Michael Boyce: retired at 48, having contributed $24,855 to his pension over 31 years. Latest reported annual pension payment: $28,818
  • Joanne Matisewski: retired at 54 (now working in financial services), having contributed $114,706 to her pension over 30 years. Latest reported annual pension payment: $51,148

The returns on these employees’ investments are obviously well above 7.5% per year, and they have every reason to keep their investments growing.  It doesn’t take all that much cynicism to think that they might decide it’s better to keep the people of Rhode Island from having a true sense of the commitments that their elected officials have made on their behalf.

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Despite Fights Over Less, Teacher Contract Quietly Pressures Budget with $1.7 Million

After about 30 minutes of plucking line items out of the Tiverton school district’s proposed budget for fiscal year 2016, at a January 22, 2015, presentation to the Budget Committee, Superintendent William Rearick wrapped up with, “That’s really the budget in a nutshell.”  Left out of the nutshell were any details about the cost of the proposed teacher contract, even though the basic terms were decided and tucked into the packet handed to Budget Committee members.

After another half hour of discussion, mostly about the prospect of all-day kindergarten, Budget Committee Chairman John Souza asked whether the School Committee was in the middle of any negotiations.  Still, no details were provided.  “I won’t ask you,” Souza assured Rearick, as if the details were a secret.

Some members of the public, and even some members of the Budget Committee, were therefore surprised when, in mid-September, the school department announced that the deal was complete and, in fact, it matched the terms that had been made public eight months earlier.

The announcement of raises was all the more surprising coming months after a heated argument about whether the district could afford to go forward with all-day kindergarten after the elector budget won at the financial town referendum in May, giving the district no increase in local funds.  With all of the debate over finding around $127,000 to fund all-day kindergarten, nobody on the School Committee, in the school administration, or in the public pointed out that the committee was preparing to increase teachers’ pay by $255,281 for the first year of a new contract.

Continue reading on Tiverton Fact Check.