Growth Capital for Targeted Industries at Center of Rhode Island Economic Plan

Using the state’s regional advantage, the Rhode Island Economic Development Corporation (RIEDC) wants to create high-wage jobs in targeted industry sectors and establish new equity and financing programs that provide growth capital to sustain the ventures, the agency announced last week.

 

RIEDC released an economic growth plan with the goal of increasing the percentage of jobs that pay above the national average from its current 40 percent to 60 percent over the next 10 years. The average private sector wage in Rhode Island is $38,700 -- $4,600 less than the national average and much lower than neighboring states Connecticut and Massachusetts.

 

The advantage of being located in a “knowledge-rich corridor” that expands from Boston to New York City and encompasses 86 colleges and universities is the formation of a strong R&D and entrepreneurial base, the report states. Rhode Island can build upon this base by targeting industries that depend on knowledge resources and workers, according to RIEDC. The report recommends expansion and attraction efforts within six of these high-wage sectors, including Health and Life Sciences, Marine Trades and Defense Technology, Advanced Manufacturing and Industrial Products, Information Technology and Digital Media, Financial Services, and Consumer Products and Design.

 

Access to capital at all stages of development is a prominent action item within the strategic plan. The plan calls for establishing a $20 million Growth Capital Guarantee Program by restructuring the existing Rhode Island Industrial Recreational Building Authority (IRBA) program. A bill is expected to be introduced in the Rhode Island General Assembly this week that would reduce IRBA’s guarantee authority and establish a new Growth Capital Guarantee authority to assist companies in obtaining growth capital for non-conventional assets such as patents, proprietary processes, software, systems, trademarks, copyrights, brands, contracts and licenses. The current IRBA program, which was created in 1958, addresses company needs only in machinery, equipment and real estate.

 

To provide Rhode Island companies with capital to create these new jobs, the plan calls for establishing a partnership that makes available new debt and equity products through an existing $200 million growth capital products portfolio. The alliance between RIEDC, the Business Development Company of New England and the Business Development Company of Rhode Island is designed to complement existing RIEDC programs and provide up to $2 million in junior debt and up to $5 million in mezzanine equity capital. Additionally, the plan calls for the alliance to consider investments in Rhode Island companies from the $30 million mezzanine fund, MB Capital III.

 

The strategic plan outlines two specific actions to address workforce issues. First, the Community College of Rhode Island 21st Century Workforce Commission will propose recommendations in the coming months for preparing students for jobs of the future and retraining current workers in emerging fields. Second, the newly established 21st Century Workforce Development Subcommittee – a partnership for RIEDC, the Department of Labor and Training, and the Governor’s Workforce Board – is charged with providing recommendations for realigning the state’s current workforce development programs.

 

To increase research activity and new company creation, the Rhode Island Research Alliance will expand its activities to assess collaborative research opportunities and begin assisting with the preparation of collaborative proposals to major funding agencies, including the National Science Foundation and the National Institutes of Health. The plan also calls for expanding and relocating the Slater Technology Fund’s new life sciences incubator. Both of these actions are key recommendations from the Rhode Island Science and Technology Advisory Council’s (STAC) report of activities for the state to pursue in 2008, which was presented to Gov. Carcieri and legislative leaders in early 2007.

 

Although currently facing a projected budget deficit of more than $300 million, Gov. Carcieri’s fiscal year 2009 budget recommendation included level funding for RIEDC and economic development initiatives included in the FY08 budget. This includes $3 million for the Slater Technology Fund, $1.5 million for the Rhode Island Research Alliance and $100,000 for the STAC.

 

RIEDC’s Economic Growth Plan 2008 is available at: http://www.riedc.com/files/2008_economic_growth_plan.pdf

 

Gov. Carcieri’s FY 2009 budget recommendation is available at: http://www.budget.ri.gov/CurrentYear/GovernorsBudget.php