Deal Flow

To life, liberty, innovation, and the pursuit of jobs

The Wexford Innovation Center is envisioned as the jewel in the crown of Rhode Island’s 21st century Innovation Age economy

Photo by Richard Asinof

All the dignitaries tossed their shovels of dirt in the ceremonial groundbreaking for the Wexford Innovation Center complex on Sept. 25.

By Richard Asinof
Posted 10/2/17
The groundbreaking ceremony for the new Wexford Innovation Center on Sept. 25 was the apparent opening act for a celebration of Gov. Gina Raimondo’s first 1,000 days in office. The chair of the 195 Commission likened it to pulling the first pickle out of the jar; with the promise that the next one will be easier. What metrics will be employed by the state to measure job creation and retention remains an unanswered question.
How will the state address the future infrastructure needs that new jobs create: housing, schools, grocery stores, transportation, playgrounds, and access to affordable health care? Will the R.I. Department of Transportation consider restrictions on the current overload of large truck traffic on Point Street? What kinds of affordable housing options are envisioned as part of the new Innovation and Design District? How will residents of the West End and the South Side of Providence be able to interact with the new Innovation Center, if at all?
It is sometimes made difficult to celebrate the accomplishments of Gov. Gina Raimondo because of the blatant proselytizing of those accomplishments in an aggressive public relations campaign. At the same time, it is equally difficult sometimes to listen to those who complain bitterly about her leadership, denouncing it in very partisan tones.
The biggest problem that Rhode Island currently faces is a diminished revenue stream. The reality is that the options for cutting spending and reducing government programs are much like the pursuit of a pot of gold at the end of the rainbow. It is worthwhile to remember that one of the original motivations for the implementation of the Unified Health Infrastructure Project, or UHIP, now sometimes called RI Bridges, was that it would pay for itself with reductions in waste and fraud in spending.
At some point, the leadership of the R.I. General Assembly needs to recognize new revenue streams are needed. What shape those new revenue streams take will be the true innovation work that is required to grow the Rhode Island’s future economy.

PROVIDENCE – This week in a slick public relations push, Gov. Gina Raimondo will celebrate her first 1,000 days in office, with some 22 events scheduled, beginning on Monday, Oct. 2.

Another way to view the festivities, perhaps, is to say that her 2018 campaign to be re-elected governor has unofficially kicked off.

The groundbreaking for the Wexford Innovation Center, held a week ago on Monday, Sept. 25, must be seen in that context as an impressive warm-up act, a grand finale staged before the show actually began. The new Innovation Center, envisioned as the jewel in the crown of Rhode Island’s future Innovation Age economy, was hailed as delivering on the campaign promise made by Raimondo to rebuild the state’s economic future – and create new jobs.

The groundbreaking occurred under the clear blue skies of an unseasonably hot autumn morning, with what seemed like an interminable hour-long speaking program, enabling all the VIPs a chance to share in the glory, addressing some 150 movers and shakers [and reporters] who had gathered on what was termed by Raimondo as “for too long, nothing but dirt” of the former I-195 highway land.

Everyone was sweating profusely by the time the 17 dignitaries’ shovels finally dug into the pile of dirt in front of a John Deere excavator carefully posed to frame the money shot.

The former Jewelry District had now been officially consummated, so to speak, as the Providence Innovation and Design District. To life, liberty, innovation, and the pursuit of jobs.

The first pickle out of the jar
Here are some brief snapshots from the event:

The entire Rhode Island congressional delegation was present, although Rep. David Cicilline had to leave to catch a flight back to Washington, D.C., before being able to talk, because the speaking program had taken so long.

House Speaker Nicholas Mattiello sat next to Senate President Dominick Ruggerio, Rhode Island’s current odd couple, awaiting their chance to speak at the very end of the ceremony. That image was worth more than a thousand words.

Brown University President Christina Paxson, calling herself the president of a “research university,” said the real benefits of the public-private partnership created to build the Wexford Innovation Center was that it would “leverage the talent we have.”

Joseph Azrack, chair of the 195 Comnission, likened the accomplishment of getting the partnership together to build the Wexford Innovation Center as “getting the first pickle out of the jar”; the second pickle is much easier.

Without tenants, Azrack continued, there can be no development; and capital is the lifeblood of development.

When one of the speakers said, “The world is changing, and our job is to get Rhode Island ready for those changes, Azrack responded: “Let’s get onto the next pickle.”

The emcee at the groundbreaking was Stefan Pryor, the secretary of CommerceRI, who invoked a commentary from Rabbi Yehuda in a Rosh Hashanah prayer book, linking Torah study with work. “Let us give thanks to the tradition that sanctifies work. Let us honor those who toil and sustain the world in both noble and humble ways,” Pryor quoted from the prayer book.

Tim Rowe, the founder and CEO of the Cambridge Innovation Center, one of the anchor tenants of the Wexford Innovation Center, claimed that innovation was a somewhat mysterious process. “What we know less about is the process of innovation, what actually causes it to happen,” Rowe said. “None of us know exactly what happens…”

What Rowe did not talk about was the fact that failure is often an intrinsic part of the innovation process.

The jobs equation
Raimondo said that the project, the first phase of the development, would create thousands of jobs at every level. The initial phase, a 195,000-square-foot building, will take two years to complete, cost $88 million to build, and employ roughly 1,000 construction workers, with Johnson & Johnson, Brown University’s School of Professional Studies, and the Cambridge Innovation Center as the anchor tenants.

The enterprise, which will be the recipient of tens of millions of tax incentives from the state, is projected by the state to generate some $100 million in additional revenues for the state over the next two decades.

In terms of Raimondo, there are many in Rhode Island who, to quote Taylor Swift’s lyrics, “The haters are going to hate, hate, hate, hate.” Do not expect them – from Republicans to radio talk show hosts to conservative ideologues – to acknowledge that, as noted by many of the speakers at the groundbreaking, Raimondo demonstrated a persistent willingness to push and prod to get Wexford Innovation Center done.

That said, the pursuit of jobs and the political mantra around job creation still remains a problematic equation, particularly when talking about the biotech innovation industry cluster.

The ghosts of job creation past
With the upcoming court battle between Raimondo and R.I. Attorney General Peter Kilmartin over the release of documents related to the 38 Studios investigation – along with the recent finding of the federal audit that found that Betaspring and the state’s economic development had wrongfully spent job creation funds – it is worth revisiting previous reporting by ConvergenceRI on the job creation conundum.

In early 2014, ConvergenceRI wrote:

“At the end of day, the metrics don’t matter, argued J. Michael Saul, [the former] deputy director of the state’s economic development agency then known as the R.I. Economic Development Corporation. “It’s all about jobs – jobs, jobs, jobs, jobs, jobs,” Saul said, dismissing the reporter’s questions about benchmarks for measuring the success of the investments.

Saul’s arrogant response was part of a lengthy, two-hour-long interview that took place at the agency headquarters during the first week in March of 2010.

Saul was promoting the concept of a new state bond – a $50 million small business loan fund – an idea that he said had already been floated with key legislators and EDC board members.

Some of the money, Saul told the reporter, would be used to recapitalize the federal Small Business Loan Fund that was now depleted, having run out of money to loan.

The interview took place less than a week before Gov. Donald Carcieri’s fateful conversation with Curt Schilling at a fund-raiser at Schilling’s home in Mansfield, Mass.

Soon Carcieri would allegedly hijack plans for the $50 million state bond to support small businesses in Rhode Island, increase the amount of the fund to $125 million, with $75 million earmarked for Schilling’s 38 Studios deal.

[Saul along with agency director and co-defendant Keith Stokes later settled in court a lawsuit brought by the state of Rhode Island alleging fraud for failure to inform the R.I. EDC board of directors about the full financial risk of the deal.]

The ConvergenceRI story continued: “Lost in the onslaught of 38 Studios disaster was the gaping hole in Saul’s “jobs, jobs, jobs” response: the reality was that the agency had failed to track and tabulate the job creation data for the previous five years – from 2005 to 2010 – of the loan fund’s operation.

Instead, it relied on data supplied by the companies at the time of the loans had been granted, with the projected numbers of retained and new jobs. Although a number of companies receiving loans had gone out of business and defaulted on their loans, their numbers were still being included in the agency’s job creation totals for the loan fund.

Companies in Rhode Island that received some $16.7 million in loans between 2005 and 2010 were asked once a year to update the number of people employed, but only about half of them complied, according to agency officials. “We do make an annual request to companies for updated information, however only about half of them consistently report,” Sean Esten, then financial portfolio manager of the agency’s Small Business Loan Fund, told the reporter in 2010.

“We’ve never put that information into a spreadsheet to track it,” Esten said. “There’s a big pile of that. I don’t have time for that.”

[It was Esten’s memo complaining about the lack of financial scrutiny in the 38 Studios deal, saying that a $10,000 micro-loan received more financial scrutiny than the Schilling deal – a concern that was allegedly squashed by Saul and Stokes – that was considered potential key evidence in the fraud lawsuit.]

[See link to ConvergenceRI story below, which goes into detail about the problems identified by an auditor about how the state had managed $2 million grant funds from the federal State Small Business Credit Initiative that went to Betaspring in 2011. The audit report said that Congress had never intended for the program to fund business incubators.]

Are job metrics still relevant?
As the Wexford Innovation Center project moves forward, it would seem to be important for CommerceRI to develop a robust, transparent way to measure and benchmark job creation metrics tied the new innovation center, beyond the initial construction jobs.

One of the constants about nurturing new startup companies is that many of them will fail, only to be reborn or absorbed into other enterprises. What is the state’s strategy to measure job creation and retention for those firms?

A second concern is: how many of the new jobs created will be filled by Rhode Island residents, versus candidates from Massachusetts commuting to Providence?

A third concern is how best to capture the wisdom and knowledge of the Slater Technology Fund, a successful seed investor in new companies in the innovation ecosystem, in the ways that they have developed their metrics around job creation and retention?

A fourth concern is how best to leverage the acumen of Rhode Island-based firms such as EpiVax, one of the first pioneering biotech firms in Rhode Island, which was founded in 1998.

A final observation
Walking away after the conclusion of the groundbreaking event, ConvergenceRI encountered Mark Huang, the director of Economic Development for the City of Providence, riding his bicycle back to his office.

Huang, it seemed, was the only participant who had ridden his bike to event; most others, it appeared, had driven. The parking lot in front of the headquarters for Nabsys, which sits adjacent to the site, had a big sign that said “full.”

A few who were in attendance at the groundbreaking had no doubt walked from their offices.

In building the new Wexford Innovation Center, even with the new pedestrian bridge now under construction, the larger question is how connected it will become to the larger city neighborhoods within Providence.


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