(Editor’s note: This is an abridged version of a story first published on PBN.com on Nov. 22.)
Gov. Daniel J. McKee has long positioned himself as a champion of small business, both in his six years as lieutenant governor and since he took the helm of the state in 2021. He frequently mentions that he was a small-business owner in the Blackstone Valley before his political career.
In his State of the State address last January, McKee expressed his desire to improve Rhode Island’s business climate, and says he’s scored victories in that effort. Last legislative session, for example, the state eliminated the so-called litter tax paid by businesses that sell food and beverages and has added a $50,000 exemption to the tangible property tax paid by businesses on equipment and other assets.
But perceptions can sometimes linger, fairly or not, and Rhode Island’s reputation as having a less-than-ideal business climate has proven difficult to dislodge.
When you hear people talk about the business climate, what does that mean to you as governor? And is it different from how you thought about it when you were running your own business? The business climate is a great deal about how people feel about the state. And the pride they have in the state. People have choices where they go. They can go anywhere they want. Larger businesses that might have to be anchored here don’t have that flexibility, but smaller businesses that we’ve been really focusing on can go anywhere. So, it’s about how they feel about where they live. And that is why we are investing in things I feel are very important, like the Statehouse.
The Statehouse is the people’s house, and they have a lot of pride. This focus is on building pride and building favorability in terms of what the administration does and how we are contributing.
When you are running your own business, you are happy you have the key in your hands in the beginning of the day to open up the door and key in the hand at the end of the day to close the door. You are not focused on what is happening in your mayor’s office or governor’s office. You are focused on your business, and I understand that.
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Gov. Daniel J. McKee / PBN PHOTO/MICHAEL SALERNO[/caption]
And [business owners aren’t] thinking about state symbols. No, but it does impact how you feel about where you are. So those types of things, you don’t think about but you know about. So, when we are announcing the [Amica Mutual Pavilion] and the new roof there, the general public, including the business community, understands the value of investing that way because they understand it’s going to have something to do with their bottom line. So that is why we are investing in projects to put people to work and have a benefit long term through those projects.
Whether it’s Quonset [Business Park] or the fisheries or the AMP or the health lab. We are already moving along on the housing thing. These are all factors. And it’s not just how people feel about their business in terms of moving forward. But investing in those areas to put people to work is a big deal.
So as far as national rankings, the state has consistently been among the lowest-ranked states in many studies looking at business climate, taxes and things like that. Do you follow these rankings and do they matter? They do. But it matters what ranking you take. Forbes has given us the middle of the country in terms of places to open up a business. You’ve got others. We look at them all, whether it’s at CNBC that’s moved us up to 45th. In that report, we also break that report out as far as progress we are making on jobs development. We [made] a big jump in the last report. And we are showing incremental improvement in other areas. The infrastructure, we continue to invest … including the $20 million we put in the budget to activate $60 million for road improvements in local communities, which is a very successful program.
But also take a look at where we are in other rankings. We have others … that show we are not at the bottom of the heap.
I would note one thing in the Forbes report. Even on business climate, that is where the state scores the lowest. I get that. But we’ve got what we’ve got. It’s what you do to address it. When I meet with business communities … [I’m] helping them level the playing field between us and Massachusetts and Connecticut because that is where our competition is. I’m not really concerned with what is happening in Florida, California or Arizona. I’m interested in what is happening here and who is our competition.
Let’s talk about the things we have gotten done in the last 24 months. If you have vehicles in your fleet, you are not paying taxes on that. That is thousands of dollars. If you have a tangible tax, 75% of businesses in Rhode Island are not going to pay that tax. I paid that as a small-businessperson. That is a $1,000, $2,000 or $3,000 check. I put a small-business [budget] article in the budget every year, tackling small issues. Motorcycle trade-ins now are calculated off the sales tax where they weren’t before. There is no litter tax right now for 4,000 businesses in the state. They didn’t get a litter tax this year. That was $250 minimum, some might be $1,000 or more. You start stacking the things that we’ve done, then this is certainly going to have an impact on these rankings.
But even if it doesn’t, it’s going to have an impact on how people feel about doing business in the state of Rhode Island. Stack it up. This list is not small.
Have you felt the reaction? Do you feel like the business community recognizes the difference? Yes, it’s starting to really sink in. Clearly, people know I’m interested in small business. Just look at what I did with [R.I. Commerce Corp.]. We can do blue-chip [companies] and small businesses at the same time. There is no reason that you can’t, yet we weren’t. Immediately, we made sure we got as many small grants as we could coming out of COVID-19. They know that I opened up the economy quicker than when we were supposed to by several weeks. So, I think every time you do something, the business community recognizes it. We lowered the penalty [interest rate on delinquent tax payments] by 6 [percentage] points … going from 18%, because it was usury, down to what Connecticut and Massachusetts had in that 12%-12.5% range on interest and penalties. These are the kinds of things that might not surface in a CNBC poll, who have their own rigid strategy. But it definitely impacts the way that people feel about what we are trying to do to help the business community.
List those things out and put a dollar figure to it. Take a business that has 20 vehicles in their fleet that [is] no longer paying for that. Take a business that pays even $200 or $500 on their tangible tax and they are not paying that anymore. And we are preparing another small-business-friendly [budget] article this year. We are getting information from the small-business community and the business community at large about the types of things they want to see done.
Regarding small business, you are going to be putting something in your budget proposal? How can we provide some type of tax relief in certain areas? The food trucks right now are certainly an area we are looking at, to provide them with a level playing field between us, Massachusetts and Connecticut. There are some issues that I’ve talked to the cannabis industry about to have them on a level playing field. We are evaluating that and seeing if we can absorb that in the budget.
We are making our list. I think it’s going to have some level of tax reduction that we are going to roll in there. But the biggest thing is we’ve got to be able to balance the budget. So, you know that I’ve asked for a sales-tax reduction. I’m still interested in that. We certainly have people suggesting a sales-tax holiday that other states have. So, everything is on the table.
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CHIEF EXECUTIVE:
Gov. Daniel J. McKee says
his administration has taken steps to improve Rhode Island’s business climate through his annual state budget proposals, and he vows that January’s financial plan will be no different.
PBN PHOTO/MICHAEL SALERNO[/caption]
The last state budget was a record $14 billion, a lot of which was federal dollars. Do you plan on any major cuts in your next budget proposal? I’ve asked my departments to put budgets in front of me that just satisfy legal and contractual obligations. And then we will take it from there. But I would expect this next budget to be one of discipline and with a continued strategy on the three things I am focused on, which are raising academic outcomes, raising incomes and personal wealth, and raising health and fitness levels. And that is explained in the Rhode Island 2030 plan. We are in the process now of updating that plan in a really strong way because we don’t want that document to be stale.
There are certain things we don’t control. We don’t control what is happening in Washington, D.C. We don’t control what the Fed does in terms of interest rates. We focus on the things we control. But those factors could have an impact on long-term revenue, and we must make sure we are smart about and have the discipline to budget properly.
So, if revenue comes in as projected, all things being equal, is there any place within the state government that you might target for a reduction? And then maybe fold that into some relief for business or economic development? We are not looking to raise any taxes and we are not looking to raise any fees. So, we will take it from here and see what we’ve got. We are trying to do what we’ve done in previous budgets. There are so many areas of investment. Let’s talk about life sciences. We are building a new state health lab. And we are putting a public-private partnership together right down on [the former Interstate 195 land], which we are starting to put some businesses down there and jobs. That’s going to be 200,000 square feet of life science space, both public and private.
So, we are going to continue to find ways to use one-time revenue, whether surplus or federal dollars, to invest in projects that put people to work. You haven’t even touched on the fact we still have the lowest unemployment rates that we’ve had over an extended period of time in the history of Rhode Island. So much so, that it’s difficult for us to hire into the government side because there are better opportunities out there. So, we are going to figure the same strategy. Invest in projects that put people to work at the prevailing wage so that they have enough money in their pocket. And then have those projects pay dividends to us for decades to come.
Part of measuring business climate and the perception of that is, do other people agree and see it? So, let’s try and clear the air on one matter – the tax on [Paycheck Protection Program] loans. This is a state that has struggled with the perception that it is not as open to businesses as some people would like. [The PPP tax is] in the rearview mirror. And 95% of the businesses in the state of Rhode Island got the full benefit of the PPP. So, you are talking about a small group of people.
But why did it make sense – knowing what the perception is – to say that even though more states did not do this, we’re going to tax PPP loans? It’s history. And anyone who is still dwelling on that is living in the past. It was a budget decision that we worked through with the General Assembly. That’s where we landed. Ninety-five percent of the businesses in the state of Rhode Island – which never gets repeated, by the way, in your stories – who got a $250,000 exemption were not impacted by that decision at all. A very small percentage were.
You joined local officials in Cranston where everybody celebrated Topgolf opening. Yet there was an undercurrent to that that wasn’t so positive, where the mayor had an issue with the naming of the facility. And again, we are talking about the business climate. How can the state and municipalities cooperate to get more of a united front on the message you are trying to send? Wasn’t that a negative message to businesses: “Hey, leave if you don’t like what I’m telling you”? No, I think it was a message that was delivered privately [before it went public] that should have been handled privately. And the fact of the matter is that it’s in Cranston. I think it was just a good, healthy exchange. I didn’t hear from Topgolf that they were upset about it.
What do you see your role as in terms of trying to improve the business climate and everybody’s perception of it? Well, besides the fact you need to continue to be an advocate for small business, businesses are coming here. We are central on the offshore wind. So, my job is to continue to support renewables. The issue is big for our economy. We don’t have oil wells. We don’t have fracking; we don’t have a gas line. All those things are subsidized heavily in other states. We’ve never had the benefit of a subsidy. We’ve never had the benefit of a [White House] administration thinking that we are central to energy.
So, the question for me is where we need to move and where we need to make those investments. And continue to manage the budget in a way where we get the benefit of surpluses.
