Written Testimony submitted by CEO Stenhouse to Senate Committee on Finance and House Committee on Finance

TO: Senate & House Committees on Finance    

re. RI Innovates

Good afternoon, my name is Mike Stenhouse, CEO for the RI Center for Freedom & Prosperity. Today, I’d like to discuss two major concerns with this RI Innovates plan. First, the illegitimate process by which it was adopted; and second, the economic content of the plan itself.

As for the process: Make no mistake: “RI Innovates”, created by the Brookings Institution, was inspired by a national sustainable development agenda, and is an extension of the controversial RhodeMap RI plan, which outraged citizens across the state in 2014.

The plan’s adoption and this hearing itself are part of an illegitimate process that is once again manipulating a special-interest agenda onto our state. After the 38-studios debacle, after the acrimony over the RhodeWorks toll bill, do we still have an appetite to see yet another insider-driven initiative deceptively, unethically, non-transparently, and perhaps illegally forced through our government … all without any true oversight from you, the elected representatives of the people?

First, the potential illegal aspect of this bill. These hearings are mandated by statute 42-64.17-1. This same statue also mandates that the plan “shall set long term goals and measurable benchmarks … and shall give consideration to any impacts the plan may have on businesses employing ten (10) or fewer people.” Not only does this Brookings plan not provide these benchmarks and impacts, but it specifically states on page-16: “no formal cost-benefit analysis has been carried out for “Rhode Island Innovates” given the difficulty of extrapolating impacts and outcomes for the sorts of recommendations advanced here …” This plan openly and purposely defies state law. On these grounds alone, I call on this committee continue and hold open these hearings until this detailed fiscal analysis is provided and publicly debated … because this same statue states that once these committee hearings have been held, the Governor can provide final approval to the plan.

Second, regarding deception, the objectives of this plan can clearly be demonstrated to be designed WITHOUT the best interests of Rhode Island to be paramount. RI Innovates is not about a custom economic development plan for our state. It is about advancing a pre-determined, national ‘urban redevelopment’ or sustainable development philosophy that Brookings and other progressive groups have been advancing for years … the same philosophy that inspired the RhodeMap RI agenda. Allow me to elaborate. In 2013, candidate Raimondo, Neil Steinberg from the RI Foundation, and Bruce Katz from Brookings publicly toured Rhode Island to preview Brookings economic development philosophy – I attended one of the luncheons. Now, three years later, we magically see those same “advanced industries” and “innovation districts” that were discussed then as the center-pieces of plan today. Clearly, Brookings all along planned to push their pre-designed sustainable development or smart growth agenda onto our state.

Additionally, if you look at similar custom Brookings cookie-cutter plans conducted for other states, Nevada and Maine in particular, you will see these almost exact same strategies for “advanced industries” in targeted localities, subsidized by taxpayer money. We must not allow Rhode Island to be used as a pawn of this national agenda.

The administration further wants you to believe that the RI Innovates plan was financed and developed independently. Neither is true. For years, officials from our state government, the RI Foundation, and Brookings have been colluding towards a common goal. Our Center, per information obtained in open records requests, can document the close relationship, and coordination, between this administration and Brookings over the years.

Further, is it just coincidence, or can it be any more obvious of this coordination, that the Governor for months has been promoting innovation officers at college campuses and other innovation themes … and that this report itself is named “RI Innovates”?

Also, Neil Steinberg himself has publicly stated was this Brookings study is a continuation of multiple years of work by his Foundation … translated … a continuation of RhodeMap RI … yet, this plan intentionally hides this obvious connection to RhodeMap RI. Why?

Third, let’s talk about ethics. With regard to the funding, Brookings was commissioned with a $1.3 million grant to construct their report. We were told the study was funded completely from private sources. This may also not be true. As it turns out the study was funded almost entirely by donors, who by the way were also major contributors to the Governor’s election campaign, as well as by the RI Foundation. As we discovered in a January investigative article by the journalism wing of the nationally renowned Heritage Foundation (http://dailysignal.com/2016/01/28/why-a-smart-growth-agenda-in-this-state-arouses-tea-party-property-rights-activists/ ), the RI Foundation has received over $600,000 in public money from RI taxpayers in recent years … about the same amount rumored that it passed on to Brookings. How can we know that this was not a quid pro quo arrangement? Again, just another coincidence? Or part of a coordinated strategy that clearly was not independent?

As head of a 501-c-3 nonprofit myself, if this quid pro quo is true, it is a highly unethical practice and could be a violation of IRS nonprofit regulations. Even if not true, the RI Foundation, and this entire Brookings report, is hopelessly compromised, creating an obvious conflict of interest.

We are all aware of the transparency questions raised about this administration. With this plan, the administration appears to have clearly manipulated the adoption process so as to avoid the public scrutiny and outrage that citizens voiced in 2014 against RhodeMap RI. A year and a half ago, the public had a few months to digest, debate, and speak out against RhodeMap … and boy did they … generating story after story in the media, speaking out at various public meetings around that state, then finally showing up by the hundreds – impassioned citizens, over-flowing the committee room, many being turned away, to protest the final planning committee vote.

This year, before the press conference to introduce the Brookings plan was even concluded, we found out that the state’s planning council had already approved the RI Innovates as Rhode Island’s official economic development plan. The administration, obviously did not want to give the people of Rhode Island a similar opportunity to speak their voice as they did with RhodeMap. With this Brookings plan, there were no public meetings and there was no opportunity for the people to voice their opinion. This is not democracy. This is just more of the same, secret back-room manipulation to force through another unpopular initiative. And yet here we are, poised to rubber-stamp yet another sham initiative via yet another corrupt process.

As with RhodeMap, how can unelected members of an obscure planning commission, not accountable to voters, have the authority to adopt such a critically important issue for our state – even before the public had the chance to digest the plan? And effectively bypassing General Assembly oversight? It is your responsibility to make such important policies for our state. What value does this hearing have it the plan has already been formally adopted? In a legitimate process, this hearing would have been held before the planning council vote. As members of the General Assembly, how do you feel about this decision being taken out of your hands? In this regard, I am asking you to support Senator Lou Raptakis’ demand that a formal adoption bill be drafted, submitted, properly considered under regular rules, and voted on by then entire General Assembly.

As for the plan itself, a few major points to make. First, while I may not have the same credentials and experience that the authors of this plan hold, I do have a degree in Economics from Harvard University. To its credit, the report does make many valid observations about some of the challenges and shortcomings of our state economy. However, the special-interest, crony subsidies to a few insider industries – and only in targeted communities – can be seen as nothing more than a perpetuation of the same 38-studios style corporate welfare that has scandalized our state and weakened our economy. Because of the government subsidized, top-down, big industry approach to arbitrarily chosen ‘advanced industries’ in this plan, I have referred to it as “Trickle-down Socialism”.

There is virtually nothing in this plan that would benefit the average family or small business owner who does not fit into one of the narrow silos designated for preferential government treatment. This is patently unfair and inequitable, as the average taxpayer will also be asked to fund these special interest tax breaks.

Considering the well-publicized mismanagement at the DOT, the DMV, the recent SEC charges against the former EDC, and other catastrophic failures of government institutions, how many of us truly trust that our state government is capable of or should even attempt to directly manage Rhode Island’s entire state economy? This Brookings plan clearly suggests that it should.

If implemented, the RI Innovates agenda would empower the government with risky “venture capital” type authority that would further crowd-out the competitive markets in the private sector and lead to more government control over our lives.

As for parallels with the RhodeMapRI plan, which if you recall, Speaker Mattiello said because it was also not adopted by the General Assembly, it should “remain on the shelf”. Well, RhodeMapRI is not on the shelf. It is alive and well in this Brookings plan:

A central component of the RhodeMap RI plan was to identify and develop “Growth Centers”, where high-density communities would be subsidized and built, centered around core companies and mass transit. In the Brookings plan, the name has been changed to “innovation districts” where, similarly, massive taxpayer funded subsidies would fund the development of specified advanced industries in specified communities.

And where does the property come from to develop these innovation districts? During the RhodeMap debate we warned about eminent domain abuse. In the Brookings plan it clearly suggests that in order to build these innovation districts that the state should “assemble and prepare more pad-ready commercial industrial sites”. How else does the government acquire land if not by forcing someone to sell it via eminent domain? In fact, in the Brookings plan, three $$$ are assigned to this “land assembly” action item … the highest such spending category in the plan – estimated at over $10 million per year. In fact, today, the Senate Judiciary committee is considering a bill (S2409) that would restrict private-private eminent domain abuse by excluding economic development as a valid excuse to seize the property of any Rhode Island land owner.

Also, on Thursday, House Finance will hear a bill (H7833) that could abdicate local planning and zoning authority to local planning boards … one more step away from the duly elected members from our city and town councils. Planning boards that are stacked with pro RhodeMap RI supporters.

Let’s connect the dots: The state using eminent domain to seize land, with unelected bureaucrats now with the authority to control local planning zoning ordinances … all in order to see these taxpayer funded innovation districts established as part of federal agenda that has no concern for RI.

And lastly, there is the common theme of “diversity” or social equity in both RhodeMap RI and RI Innovates, which, while important in their own right, have little bearing on any legitimate economic debate.

In conclusion, our economic analysis does not conclude that Rhode Island’s economic woes are caused by a lack of strength in a few advanced industries. Any reasonable economic analysis, unencumbered by a pre-ordained agenda, would understand that it is at the family and small business level that our problems begin, not at the top. Our families and businesses are over-taxed, over-regulated and we are driving them out of our state.

A strategy that advocates for broad-based tax reforms that help all of us, not targeted preferential tax treatment to the few insiders, should be central component of any legitimate economic development plan f