R.I. governor’s road show seeks to remake state economy
Gina Raimondo spent most of her professional career listening to pitches. But over the past year, the former venture capitalist has found herself on the other side of the table, selling a vision that seems only a little less far-fetched than some of the entrepreneurial dreams that came her way.
Raimondo, starting her second year as Rhode Island governor, has criss-crossed the country to recruit businesses, pushing the idea that her state, one of the slowest to recover from the last recession, could become a thriving technology hub. From New York to Silicon Valley, she has pitched lower costs, respected universities, smart kids, generous tax breaks, and personal attention.
To lure a small Florida lighting company to West Warwick, she offered to share business contacts built during a decade at the venture firm Point Judith Capital. In Boston last year, she told a gathering of business executives, "If anybody's lease is up in this expensive real estate market in Boston, I want you to call me."
Raimondo, a 45-year-old Democrat, is trying to do what her predecessors attempted with mixed success: reinvent the Rhode Island economy. The state, the former jewelry-making capital of the nation, has struggled for decades to find new economic engines to replace dwindling manufacturing.
Rhode Island was among the hardest-hit states in the recession that lasted from 2007 to 2009, with unemployment peaking at 12 percent, compared with 10 percent nationally and less than 9 percent in Massachusetts. Rhode Island shed 8 percent of its jobs — double the rate of loss in Massachusetts — and has yet to regain them all, according to the US Labor Department.
"We were overly reliant on manufacturing jobs for too long," Raimondo said. "I'm trying to move Rhode Island to a place where our excellent hospitals and research institutions play a greater role in our economy, so we can have higher-skill, higher-innovation jobs."
Many believe Raimondo is the person to do it. Born and raised in Smithfield, R.I., she is a Rhodes Scholar with degrees from Harvard University and Yale Law School, and cofounded Point Judith in Providence (it has since relocated to Boston).
She has connections to Silicon Valley, including Laurene Powell Jobs, widow of Apple founder Steve Jobs, and corporate leaders, such as Larry J. Merlo, chief executive of CVS Health of Woonsocket, R.I.; Jeffrey Katzenberg, chief executive of the Hollywood studio DreamWorks Animation; and Sheryl Sandberg, chief operating officer of Facebook Inc.
She also has the help of a generally improving economy; unemployment in Rhode Island fell last year to 5.2 percent from 6.9 percent.
"Governor Raimondo is moving in the right direction," said Edinaldo Tebaldi, an economics professor at Bryant University in Smithfield, R.I. "But the fundamental problems facing the state are still there."
Those problems include a business climate viewed as unfriendly, a reputation for political corruption, and high taxes. Rhode Island residents pay the eighth-highest share of state and local taxes in the nation, according to the Tax Foundation, a Washington think tank.
Raimondo is trying to overcome these hurdles by positioning her state as an affordable tech hub where companies can tap Brown University, Rhode Island School of Design, and other local schools for skilled workers — all while paying reasonable office rents. She has doubled the size of the economic development staff and won legislative approval for a variety of incentives, including a tax break for Rhode Island firms that recruit other companies to the state and student-loan forgiveness for college graduates who start firms in Rhode Island.
She said she plans to spread the $100 million in tax breaks authorized by the Legislature among diverse firms and industries to avoid debacles similar to the one involving the video game company of former Red Sox star Curt Shilling. The company, 38 Studios, went bankrupt in 2012 after receiving $75 million in state loan guarantees.
Not everyone is convinced the governor is on the right path. Brian Newberry, Republican leader in the Rhode Island House, said Raimondo is seeking quick fixes, instead of tackling fundamental changes, such as broadly lowering taxes, to improve the climate for business and investment.
"She sees the state's problems for what they are," Newberry said, "but her solutions for changing them are not the ones I would have chosen."
By the end of her term in 2018, Raimondo wants to create 6,000 to 10,000 new jobs that pay at least $50,000 annually. Over the last year or so, she has made recruiting trips to New York, California, Connecticut, and Massachusetts, spending about $23,000 traveling outside New England, according to her office.
Those who have heard her pitch say Raimondo is straightforward, recalling her venture capital work to highlight her knowledge of how firms grow and succeed.
"That kind of attitude really struck me," said Ed Bednarcik, chief executive of Lighting Science Group, the company that moved to West Warwick from Florida. "She's unique from the people I've met as it relates to her understanding of business."
So far, Lighting Science Group is one of Raimondo's few tangible economic development successes. The company employs about a dozen people in Rhode Island and expects that to grow to about 50 in a year.
But Raimondo counts as a success last year's decision by Citizens Financial Group Inc. to keep back-office operations and nearly 4,000 jobs in Rhode Island, where the bank is headquartered.
She also has her eye on a big prize. Rhode Island is among a handful of finalists, including Massachusetts, seeking the headquarters of General Electric Co., which is considering leaving its longtime home in Fairfield, Conn.
In the meantime, Raimondo keeps selling. She has made about a half-dozen trips to Boston to meet with prospects or tout her state's advantages, including lower-cost housing. The median price of single family home in metropolitan Providence is about $258,000, compared with $420,000 in Greater Boston, according to the most recent data from the National Association of Realtors.
David Begelfer, chief executive at NAIOP Massachusetts, a commercial real estate trade group, said it will take more than housing prices to lure companies away. Ultimately, companies come and stay in Boston for its skilled workforce, major universities, and ecosystem of entrepreneurs, investors, and innovators.
"There are 49 states that are trying to attract businesses from Massachusetts," Begelfer said. "You can offer less expensive spaces and tax incentives, but there are some clear reasons why companies want to be where they are."
Mike Ritz, executive director of Leadership Rhode Island, a nonprofit that offers business leadership training, said Raimondo recognizes that rebuilding the state economy is a long-term proposition that will take years. But she is already creating a buzz in the business community that he hasn't heard in a decade, Ritz said.
At Raimondo's urging, civic and business leaders, unions and management, and Democrats and Republicans, have met to discuss economic issues. Just getting them to the table is a significant step, Ritz said.
"The difference with her is she says, 'Get involved because I can't do it myself,' " Ritz said. "She's smart enough to know she can't."