Changes come slowly to EDC

Reforming the state agency at the heart of the 38 Studios LLC loan guarantee has been as deliberate, modest and incremental as the video game company’s collapse was sudden and spectacular.
Since proposals for the dissolution of the R.I. Economic Development Corporation began last summer, the agency has instead evolved, becoming smaller, more streamlined, slower moving and more risk averse.
Surrounded by calls for urgent change, Gov. Lincoln D. Chafee has twice nominated new EDC leaders with previous experience inside the agency.
Although far from an outsider, the latest nominee, Marcel A.Valois, adds the distinction of having been one of the leading voices for EDC change last year.
The former vice president of the Economic Development Foundation of Rhode Island, Valois co-authored “Reboot the RIEDC,” the EDC report that suggested breaking the agency down into parts, including a strategy office in the governor’s office and a university-supported research arm.
Some of the suggestions in the report have already formed the basis for piecemeal changes at the EDC, but according to Chafee spokeswoman Christine Hunsinger, Valois’ appointment should not be taken as an endorsement of the other structural changes suggested.
“I believe the nomination is a demonstration that the goal is more important than the structure,” Hunsinger said about whether [Valois] agrees with the governor’s vision that the EDC should create an environment where businesses can grow.
Chafee’s position that the EDC was never fundamentally broken means significant structural changes to the state’s economic-development apparatus have always been more likely to come from the General Assembly.
In the Senate, a bill put forward by Sen. James Sheehan, D-Narragansett, follows Rhode Island Public Expenditure Council suggestions to rebrand the EDC the R.I. Commerce Corporation and establish a wide series of performance measures, goals and reporting requirements for financial programs.
The new agency would have to comply with state purchasing laws and submit annual reports on how each loan or guarantee is meeting tightened underwriting standards. Sheehan is chairman of the Senate Commerce Committee, where the bill, which is attached to Senate President M. Teresa Paiva Weed’s “Moving the Needle” legislative package, is being held for study until the House releases its own set of economic-development bills later this month.
While the Senate bill would keep the structure of the EDC intact, making the quasi-state agency follow public-purchasing rules and additional reporting requirements could make its programs less effective.
The EDC’s ability to borrow and loan money with speed and some political independence has historically been its most important strength.
It’s also what allowed state political leaders to use it as the vehicle to launch the ill-fated $75 million 38 Studios loan guarantee.
Sheehan described his proposal as a middle ground between the status quo favored by Chafee and some of the more aggressive proposals for disbanding the EDC that have come out of the House.
“There are a range of opinions, from the governor saying let’s keep what we have and hire new people, to others saying blow the whole thing up,” Sheehan said. “To me this is a middle position.”
With competing visions of economic development in the state, finding something Chafee, Paiva Weed and House Speaker Gordon Fox can accept may be the only way a change actually happens.
Sheehan supports the Public Expenditure Council recommendation to create a new cabinet-level commerce secretary who would oversee the EDC and other business-related functions in state government, but said he left it out of his bill because Chafee has not been interested in it.
Another piece of the legislative puzzle is that Valois needs to be confirmed by the Senate before he can take over as EDC executive director.
That has proven to be a sticking point before. Last fall, Chafee attempted to replace several members of the EDC board of directors who left after 38 Studios, but the Senate didn’t hold confirmation hearings on them before the end of the year.
After his nomination, Valois noted that many of the ideas in the Reboot report had either been adopted in some form or were a part of pending legislation. Perhaps most notably, the state is now collaborating with Rhode Island universities to do economic research, a priority in both the Reboot and Public Expenditure Council reports.
But Valois said he doesn’t see his return to the EDC, which he led from 1995 to 1997, as an endorsement of Reboot or any other policy prescription.
“This is not about me imposing any of my ideas,” Valois said. “This is a public-private institutional effort, along with the governor.”
Valois said areas he expects to work on at the EDC include changes to workforce training and “focusing on world-class assets and educational institutions.”
Asked if there were any structural changes he may want to explore, Valois said he hadn’t yet had an opportunity to get an inside look at the organization and detailed understanding of its operations.
In Valois, Chafee appears to have found someone the business community can rally behind.
“I think it is a great choice,” said Greater Providence Chamber of Commerce President Laurie White about Valois. “We have long advocated for an economic-development professional at the EDC, and he would fit that squarely.”
Improving Rhode Island’s poor business-climate reputation has been an objective singled out in a number of reports. Before his appointment Valois had been working with the Chamber on a “reputation-management” project for the state.
In addition to the Economic Development Foundation of Rhode Island, a private nonprofit real estate developer focused in the northern part of the state, Valois’ resume includes time as area vice president of the Penske Automotive Group, executive vice president of the Blackstone Valley Development Foundation Inc. and Woonsocket planning director.
White said based on his work at the Highland Corporate Park in Cumberland, Valois’ biggest strength could be his understanding of real estate and finance.
“Marcel could bring an expedited and clear approach to understanding the competitive aspects of the marketplace, and strong understanding to go through the types of financing programs that are relevant,” White said. •

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