PROVIDENCE – Rebuild Rhode Island, a signature economic-development incentive of Gov. Gina M. Raimondo, could be curtailed under the 2020 state budget, with tighter per-project and aggregate-spending caps and a new expiration date.
The House Committee on Finance budget sets the new maximum authorization for the program at $200 million, $50 million more than the current ceiling. But a new requirement would retroactively move under that cap some $41 million in sales and use tax exemptions, effectively negating the overall expansion.
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The R.I. Commerce Corp., which administers the Rebuild program, has authorized $111 million in incentives for large-scale development over the past four years. Commerce RI has approved another $41 million in sales and use tax rebates, which reimburse project developers and building owners for sales tax spent on construction materials and equipment purchases.
If the House finance budget moves forward, and the sales and use tax incentives are rolled under the Rebuild cap, Commerce RI will have about $48 million left in capacity for the program, enough for three or four more large projects.
The House fiscal 2020 budget provides a $10 million appropriation for the Rebuild credit fund, which is used to pay previously authorized tax credits once construction projects are completed. Developers do not receive the incentive until the building construction is complete and it receives a certificate of occupancy.
The House finance budget also sets an 18-month sunset on the program – Dec. 31, 2020. And it requires sales and use tax incentives to count toward an existing per-project limit of $15 million.
Through a spokesman, House Speaker Nicholas A. Mattiello, D-Cranston, said the House budget increases the capacity for Commerce to operate the program in a competitive manner for the next year.
Beyond that, he wrote, the shorter horizon is intended for reevaluation.
“The intent in the budget was to try to rein in the program and give it a shorter horizon in order to reevaluate it,” he wrote. “We are near full employment and there are still weaknesses in our economy. I would like Commerce to reevaluate its programs and come up with policy initiatives to make our state more competitive and improve our economy.”
Raimondo’s budget requested $100 million more in long-term capacity for the program and sought $15 million in an appropriation for the Rebuild credit fund.
Supporters of the Rebuild program say it should be left alone, and argue it’s working to attract significant development investment in Rhode Island.
Projects that have received substantial Rebuild incentives include the Wexford Science & Technology innovation center, now nearing completion in Providence, and a manufacturing-plant expansion for Amgen Inc. in West Greenwich.
The sunset and the funding restrictions are problematic because they will discourage investment, said Karl Wadensten, a Commerce RI board member who’s served under three administrations.
“People are starting to get used to things now, and saying, ‘Hey, there’s some opportunity here,’ ” Wadensten said. “Gina did a good job of getting this going. The Commerce board and the staff [have] taken it seriously. Now that we have critical mass, you want to start reining in the horns?”
More construction activity has come through for Rhode Island in the past four years than under previous administrations, he said. “I seriously ask the House to rethink this and think long range and what’s best for Rhode Island. We’ve had very few deals go south.”
Scott Wolf, executive director of Grow Smart Rhode Island, said organizations involved in historic-building rehabilitation, development and economic development are lobbying now to try to get the sales and use tax provision removed from the plan. The shortage of capacity could slow down revitalization, he said.
“We think there is a lot of pent-up demand for historic rehab development in Rhode Island, particularly in our more-economically distressed cities, such as Pawtucket, Central Falls, Providence and West Warwick,” Wolf said. “One of the best paths to economic self-sufficiency for these cities is economic development of their older, underutilized buildings.”
In a statement, a spokesman for Commerce RI said the economic-development agency is thankful for some changes in the budget, which will facilitate development involving small manufacturers and historic buildings. “We continue to work with legislative leaders to further refine the budget as it pertains to Commerce so that we can continue Rhode Island’s economic progress,” wrote Commerce spokesman Matt Sheaff.
A spokesman for Senate President Dominick J. Ruggerio, D-Providence, said discussions are ongoing in that chamber about the Commerce budget.
Mary MacDonald is a staff writer for the PBN. Contact her at macdonald@pbn.com.
