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RI worst state to do business

July 17, 2012

CNBC, the business news cable channel, doesn’t think much of Rhode Island.
For the second year in a row, CNBC has ranked the Ocean State dead last — 50th out of the 50 states — as a good place to operate a business.
In his report on the 2012 version of the annual study, CNBC senior correspondent Scott Cohn said Rhode Island has “the worst infrastructure, one of the worst economies, and the least-friendly regulatory climate.” He added: “They did catch a 12-pound lobster there a while back, but that doesn’t help.”
The cable channel named Texas as the top state in which to do business, taking the crown from last year’s champ, Virginia, which placed third this year. Rhode Island has gotten progressively worse before it hit bottom. It was 48th on the list in 2008 and 2009, and 49th in 2010 before reaching 50th last year.
Among the factors the study uses to determine its rankings are: cost of doing business, workforce, quality of life, transportation and infrastructure, economy, education, technology and innovation, business friendliness, access to capital and cost of living.
According to the channel’s website, CNBC “measures the states by their own standard: the selling points they use to attract business. We separate those pitches into the ten categories, which are then weighted in the study based on how frequently the states use them as selling points.”
Rhode Island scored in the top half of the country, 23rd, in two categories, quality of life and education, and it actually made it into the top ten, at tenth place, for access to capital.
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That is curious because when Cohn wrote on the station’s website about Rhode Island’s dismal business climate he talked about, of all people, Curt Schilling.
“Among the critics of Rhode Island’s business climate is former Boston Red Sox pitcher Curt Schilling, whose video game company, 38 Studios, went bankrupt in June despite a $75 million loan guarantee by the state to lure the firm there,” Cohn wrote. “Schilling and Gov. Lincoln Chafee, who opposed the loan guarantees as a candidate for the post, clashed in a highly publicized disagreement over the firm’s financial health. Regardless of whether Schilling’s company is the sign of larger problems in Rhode Island, the past several years have been difficult for the state.”
Cohn notes the state’s 11 percent unemployment and that Central Falls is in bankruptcy and “Woonsocket and Providence are dangerously close.”
Is Rhode Island’s ranking fair? “I suppose if you look at it in stark, numerical terms, I’m not going to argue with what they are saying,” Gov. Lincoln Chafee told The Times. “But when I see who is at the top of the list, Texas is number one, they have no zoning there, property and zoning regulations are very liberal.
Gov. Lincoln Chafee said, “there is a balance between being completely pro-business and having a good quality of life. We rank well in high quality of life. We protect our bay and our ponds and our rivers. We try to have good zoning so we don’t have an ugly landscape that confronts us, with a mish-mash of development. Towns are required to have comprehensive plans. I suppose that can be construed as anti-business, but you have to balance it out with quality of life.
At the same time, he added, “We want businesses to prosper.”
One business prospering in Rhode Island is Cranston’s Taco, Inc.
“If you want to cut to the chase on the whole issue,” said Taco’s CEO John Hazen White Jr., “I think that Rhode Island carries a reputation, legitimately so, for being a difficult place or a less than desirable place to do business. One, you have a very high tax rate. Two, you have very high energy costs and, three, the state, whether it’s right, wrong or not, has the reputation of having cronyism in the legislature and therefore a reputation for corruption and I think those things are hurting us.
Those things, along with being a “heavily unionized, non-right to work state,” White said, “are a disincentive for anyone trying to come here.”
One of the problems, White said, is our own fault. “We are the brunt of our own jokes. We laugh at ourselves. Instead of rising up and waving the flag, we sort of just say, that’s okay, we can live with that. We have to stop accepting the notion that we are number 50; we just fall over.”
A “really significant” tax issue, White said, is that “Rhode Island still carries a very heavy penalty for dying if you are a person of any wealth. There is a very heavy estate tax and I’m sure that’s driving people out.” White says that is a personal issue for him because that would likely mean his heirs would have to sell the company to pay the tax.
One Rhode Islander who sees the state in a better light is Grafton “Cap” Willey IV, managing director of CBIZ Tofias, a Providence accounting and tax consulting business and a frequent spokesman on small business issues.
“I’m not so sure it’s accurate,” Willey said of the CNBC report. “I think a lot of those surveys rely on perception and are not aware of the things that have changed in recent years. I think we’ve made some progress, but we had a deep hole to climb out of.
“The change in the personal income tax (from a high bracket of 9.9 percent to 5.99 percent) is a move in the right direction, especially for small businesses. I think we see some signs that they are starting to recognize the problems of overregulation and we’ve had some changes there. It’s pervasive throughout the system, but we are starting to pick at it.
So is it more perception than reality that Rhode Island is a so-called “business Hell?” I think so. We’re doing some things, but we’re not doing them fast enough. The goal should be to get into the top 20 and I think we have a way to go to get there.”
Asked if CNBC’s conclusion sounds right to him, John Gregory, CEO of the Northern Rhode Island Chamber of Commerce, notes that “we always seem to be at the bottom of the pile” when it comes to business-friendly ratings. “I’ve never seen a survey that ranked us higher than 40th. Depending on the criteria, yeah, we’re anywhere from 40 to 50.
As a business person, Gregory said, the CNBC report “is something I would look at – the cost of doing business, workforce, quality of life – that’s all the things I think business person would look at. There’s almost a culture that the state isn’t as business-friendly as it could be.
“On the positive side, looking at the General Assembly,” Gregory added, “I’ve seen some positive changes, but we make changes and the other states don’t stand still waiting for us to catch up.” For instance, he pointed out that Rhode Island was ranked 10th in ability to access capital, “but Massachusetts was first.”
Being in New England means Rhode Island has some “inherent problems,” Gregory said, such as high energy costs. “It is what it is,” he said, “we’re not going to change that.”
Even when Rhode Island gets something right, it still goes awry, Gregory noted.
“Especially in the Blackstone Valley, one of the most successful tax credits we ever gave, that brought in more out of state investment than anything, was the Historic Structures Tax Credit (which gave a credit equal to 30 percent of the cost of a renovation project of an historic building, such as bringing many of the areas vacant mills back to use as either commercial or housing projects). For some reason – and some of it was the abuses that took place that shouldn’t have, it was “Oh my God, it’s too successful, let’s stop it. If you’ve got something that is working for you, why would you turn it away?”
Messages left with the RI Economic Development Corp. and the RI ALF-CIO seeking comment were not returned on Monday.

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