Time for EDC to boost transparency

[Editor’s note: This is the second installment in a two-part series]

R.I. Economic Development Corporation Executive Director Keith W. Stokes is realigning the agency in a form he says will better serve businesses and grow jobs. As part of the reorganization, Stokes has placed a new emphasis on data collection meant to demonstrate how well state economic-development incentives work. He recently spoke with Providence Business News about the effort.

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PBN: Can you talk about the reorganization?
STOKES: I’ve been on the board for almost 16 years and the last 18 months as director and I think the challenge [during that time has] been that Rhode Island has not had a consistent, easily understood, implemented economic-development strategy. … We’ve changed policies, programs and focus in literally midstream. What I hear consistently from business leaders and from government leaders interested in business is that we need some predictability and continuity. And then you need to communicate those programs, products and services.
And then we need to have some sort of return on investment and evaluation of the performance, how effective it is. I think the general sense is people need to have a more predictable and better-communicated strategy through the EDC and I think you’ve heard that through the board meetings.
You have now a new board, a new governor and I think the first five months have been a lot of discussion about … our focus, our strategy, our plan, what’s the governor most comfortable with, what are the market needs? And I think at the [Aug. 22] board meeting it was my sense we’re over the hump. That was not a board meeting where we were really talking policy, strategy, planning. I think we were getting into the transactions.
And I think even the discussions within the transaction were how do we evaluate their performance, how do we make it better, is it relevant?

PBN: When you talk about the state’s return on investment, what kind of timeframe are you talking about?
STOKES: We’re doing it now. Our research people …[are] working on right now coming up with some performance-evaluation measures of each of our programs individually and then collectively and the coming up with a reporting system that the general public can read and understand, that the board can clearly understand and build their decision-making around it. This is something we haven’t had at the EDC and many economic organizations had not done. But this is something that I’ve been pretty passionate about. Because really at the end of the day it justifies the public investment in economic development and it gives us the ability to go back to the legislature and say you need to continue to make these strategic investments in either legislation or appropriations or a combination. And it just hasn’t been done.
It’s not rocket science. I will disclose that Tim Cole, who’s our research manager, he’s meeting with Ed Tebaldi at Bryant University. …
We’ve got some talent out there. There are partnerships we should be building on and bringing in more of the economists and the work that they’re doing and piggybacking on some of the New England forecasting indexes … and apply some of those data points to Rhode Island performance.
The good news is we’re right there with all of that. The challenge is it’s a tough economy; government has let people down. I recognize that. Government meaning all government at all levels. People don’t feel that government is warm and fuzzy at this point.
We have to recognize at this point, being the EDC, in some cases we represent government. We’ve got to do a better job communicating who we are, what we do, what the relevancy is, what the return on investment is. We’ve got to be probably more engaged, more transparent than most other agencies and I think that’s what we tried and attempted to do and we’ve worked hard at it.
We’ve got a great relationship with Paul Dion [at the R.I. Department of Revenue] and they’re trying to understand [job-creation numbers].

PBN: Hasn’t the EDC had trouble getting those numbers because the Department of Revenue cites taxpayer privacy?
STOKES: Those are still relevant issues. Our goal is not to release the individual personal income tax liabilities of taxpayers. Our goal is to have a sense of, if we’ve made an investment in a company, and there’s been a credit, or an incentive or an inducement, what’s been the performance of that? That’s something we’re looking at and having a discussion with them about. …
If company X receives X amount or Y amount of credits, which have a value of $5 million, then how did that $5 million perform? And if in the contract they had at the EDC that $5 million translates into 100 jobs with an average salary of $50,000, then we need to be able to certify that those jobs at $50,000 are real, they paid their taxes and here is the tax bill that’s paid. We’re going to present that case. We’re not going to get into individual circumstances or maybe even the job specs. … But we want know if you received a tangible state benefit, we want to know that you perform on that benefit by creating jobs and those jobs have created their fair share of taxes.

PBN: As you develop the metrics, are you talking to recipients of incentives?
STOKES: Yes. We have to have some case studies. Our attorneys are reviewing what can be presented. In some cases, it might be redacted information. At the end of the day, economic development in the public domain is exactly that – the public domain.
So the trade-off for a private businessperson to have access to public capital or public incentives, inducements and credits is they’re now in a public domain. We have to find that balance here of protecting private interests, proprietary rights but also providing them access to some level of a subsidized assistance.
You’re always trying to find that balance and then properly reporting it to the people and the media. And every day, every transaction – I’ve been involved in thousands of them over my career – they’re all a little bit different and they’re all a little bit unique.
So you try to come up with a system versus more of a program you can work within and that there’s enough flexibility that respects the rights of a private entrepreneur but also meets the standards of the media and the general public that they should have a right to know where their dollars are going.
It’s a lot of work and we’ve been looking at models of other states. It’s all a little bit different. I think we’re a little ahead of the curve as far as where we’re thinking we’d like to go as far as other states that, for whatever reason, haven’t taken on this type of interest.
It’s … something we’ve been hearing loud and clear from our constituents and now we have to fit it in the context of doing business. •