1. An iconic local property is empty, with its famous corporate tenant gone. Politicians want to see the place occupied and thriving, but the developer says he needs government support. Think it’s the Superman building? Think again – this was Boston’s Downtown Crossing, longtime home of Filene’s Basement. Back in 2010 Steve Roth, chairman of the developer that owned Downtown Crossing, boasted about using a “blight” strategy in New York City: “I was thinking in my own awkward way, that the more the building was a blight, the more the governments would want this to be redeveloped; the more help they would give us when the time came. And they did.” After hearing this, an outraged Mayor Menino threatened to seize the Downtown Crossing site by eminent domain, and eventually revoked Roth’s permits; a new developer is now in place. Here in Providence, High Rock Development says the economics of the Superman building won’t work for the firm without a public subsidy to convert it into apartments – and High Rock also says it won’t sell, leaving the structure in limbo. Spokesman Bill Fischer told me High Rock won’t rule out mothballing the Superman building, either: “That’s not a political tactic; it’s just sound real estate to take a step back and say, who can we get in there?” The tale of Downtown Crossing, though, illustrates why Rhode Islanders are wary: developers know they have serious leverage when they control the fate of a beloved local landmark, and they may not be afraid to use it.

2. A programming note: I’ll be away next week but never fear – Nesi’s Notes will be as good as ever. I’ve commissioned thought-provoking guest posts from four Rhode Islanders that are sure to spark some debate. Plus, my colleagues Dan McGowan and Tim White will be posting their usual must-read reports on the blog as always. (And yes, the individual entries are called posts – not “blogs.”) Check in every day and follow @NesisNotes_WPRI on Twitter. I’ll be back June 4.

3. Speaking of Dan McGowan, here’s his weekly dispatch to the Post: “With Gina Raimondo and Angel Taveras already jockeying for position ahead of their seemingly inevitable Democratic gubernatorial primary next year, it will be worth watching how aggressive the Young Democrats of Rhode Island get in supporting either candidate. The group – whose president is former Anthony Gemma spokesman Alex Morash – recently voted to amend its bylaws to allow the organization to endorse candidates in primaries. ‘It is important to have more young people involved in the democratic process and we want to assist people running,’ Morash told WPRI.com, adding: ‘The next step will be forming a PAC.’ The change to allow endorsements would seemingly benefit Taveras – the board is filled with progressive organizers – but Morash said it’s too early to tell which candidate will win the Young Dems’ support.”

4. An important clarification to last week’s column item about the proposed Ocean State Regional Water Authority. I wrote that the authority would be exempt from oversight by the R.I. Public Utilities Commission, but that’s an exaggeration: the commission wouldn’t have oversight over any sale or lease agreement entered into by the authority, but water rates and water quality would be overseen. Providence Water Supply Board Chairman Brett Smiley, who backed the proposal, acknowledged to me the outlook for passage this year isn’t promising, but he’s not giving up. “I think the bill is a complex piece of legislation that has many good things that’s going to take people a while to digest,” Smiley said. “It may be a two-session endeavor.”

5. A fascinating longread from The New Republic: “The Science of Loneliness: How Isolation Can Kill You.”

6. Time for a checkup with the congressional delegation. … President Obama has nominated Jack Reed’s legal counsel and senior policy adviser, Kara Stein, to serve on the SEC. “Kara is a real expert on securities law and a dedicated public servant,” Reed said in a statement. “She has earned bipartisan trust and respect. Her departure will be a loss for my office and a real gain for the SEC and those it protects.” … Sheldon Whitehouse got some favorable publicity for gently correcting Chuck Grassley on the definition of “court-packing.” The publicity was less favorable for Whitehouse’s ill-timed Senate speech about Oklahoma tornadoes and climate change. … Ben Veghte of Social Security Works took to HuffPo to defend David Cicilline after PolitiFactRI‘s latest ruling, writing: “Rather than misinterpreting his words, [Cicilline] should be congratulated – certainly given the benefit of the doubt – for having such a keen understanding of the issue that he could respond to a question in a live interview so thoughtfully.” … Jim Langevin is concerned about implementation of President Obama’s Affordable Care Act, telling WPRO: “Obamacare was designed to exempt over 96% of businesses from the employer-responsibility requirements; however, that has proved little consolation to many Rhode Island small-business owners I have heard from who are attempting to make sense of the new law.”

7. Lincoln Chafee, 60, isn’t sure whether Hillary Clinton, 65, will have the stamina to mount a 2016 presidential campaign. When the Brown Political Review asked the governor whether he thinks Clinton will run, Chafee replied: “I do, at least that’s her plan right now. I don’t know whether the fatigue will set in, whether she can really keep this up. She’s going to do a book and then go on a book tour and eventually, it’s going to catch up to her. It seems like we just ended ’12 but that’s the sport that we’re in.”

8. What’s going on in Coventry? The rural community of 35,000 has been fertile ground for a slow-moving taxpayer revolt against obligations run up by the town’s various government jurisdictions. Most famously there’s the Central Coventry Fire District, which is just months away from liquidation after running a deficit of nearly $1 million [pdf] in 2011-12. Among other debts, the tiny fire district has an unfunded pension liability of $3.3 million. (The numbers are hard to pin down because, unlike cities and towns, Rhode Island’s 91 special districts don’t file financial audits with the state.) And then there’s the bizarre case of the orphaned Coventry Teachers Association/School Related Personnel Pension Plan, which has an unfunded liability of $23 million that town leaders say isn’t their problem. As Tim White and I reported this week, the retirements of hundreds of Coventry workers are riding on whether a solution is found, and state leaders are quite concerned. It’s understandable that Coventry taxpayers may be frustrated about the town’s fiscal situation, but it’s not clear how these two revolts will end.

9. WGBH was kind enough to include me on the panel for this week’s episode of “Under the Radar,” Callie Crossley’s program about overlooked news stories across New England. My contributions were Rhode Island’s weak economy and the Superman building. (Hey, it’s mostly a Massachusetts audience!) The show airs Sunday at 6:30 p.m. on 89.7 FM, so I hope you’ll tune in.

10. Set your DVRs: This week on Newsmakers – Attorney General Peter Kilmartin. Watch Sunday at 10 a.m. on Fox Providence. This week on Executive Suite – a look at Rhode Island’s agricultural revival with Farm Fresh Rhode Island’s Noah Fulmer and Blue Skys Farm’s Christina Dedora. Watch a special showing Monday at 10:30 p.m. after the news on Fox, or catch it during the usual times: Saturday at 10:30 p.m. or Sunday at 6 p.m. on myRITV, or Sunday at 6 a.m. on Fox. Dan McGowan will be here next Saturday morning, and I’ll be back in two weeks. Have a good Memorial Day Weekend!

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

The Rhode Island Senate voted 31-6 on Wednesday to raise the state’s minimum wage from $7.75 to $8 an hour on Jan. 1, which would be the second increase in as many years. Massachusetts’ minimum wage is already $8, while Connecticut’s is $8.25; the federal minimum wage has been $7.25 since 2009.

Among the 31 senators who voted for the $8 minimum were two of the chamber’s six Republicans: Senate Minority Leader Dennis Algiere, R-Westerly, and Sen. Chris Ottiano, R-Portsmouth. They’re not the first Republicans to back a hike; Govs. Lincoln Almond and Don Carcieri both approved increases on their watch.

Two Democrats broke ranks with the rest of their party and voted against raising the wage to $8: Sens. Marc Cote, D-Woonsocket, and Leo Raptakis, D-Coventry. Notably, increasing the minimum wage was not part of Senate President Teresa Paiva Weed’s economic-development package earlier this year.

The Senate bill sponsored by Erin Lynch, D-Warwick, was referred to the House Labor Committee, which held a hearing Feb. 5 on Warwick Rep. David Bennett’s bill to raise the minimum wage to $8.25 next year.

Rhode Island’s first minimum wage was 90 cents an hour in 1956, which would be $7.69 in today’s dollars, according to the U.S. Bureau of Labor Statistics’ CPI inflation calculator. In 2013 dollars, the value of the minimum wage has averaged roughly $8.20 over the last half-century; it peaked at $10.69 in 1968 and bottomed out at $6.79 in 1995. Here’s a chart showing the nominal and inflation-adjusted wage over time:

Christine Ferguson

If you care about public policy in Rhode Island, there’s one article you have to read this week: “36 Hours Behind Rhode Island’s Health Exchange,” a new Governing magazine story by staff writer Dylan Scott.

The centerpiece of President Obama’s Affordable Care Act are the new health-insurance exchanges, online marketplaces where residents will be able to comparison shop for coverage and access federal subsidies to help them pay premiums. It’s modeled on the Massachusetts Health Connector, which was set up in 2006 by the Romney administration.

Rhode Island is one of 17 states that are setting up their own exchanges as the law’s architects intended, and the state has $65 million to get it up and running. Now the staff is scrambling to prepare for the Oct. 1 start of enrollment on the exchanges, as Scott explains:

Everybody around here, most of whom have spent some time in the private sector, emphasizes how creating the exchange, which centers on launching a complex yet functional and usable website, is more like working at a commercial start-up. This isn’t some entitlement program with automatic eligibility and a strict set of benefits. Dharma Yechuri, a private consultant who came from Blue Cross/Blue Shield in North Carolina, explains that the whole enterprise boils down to getting a segment of state government to think like “a product-centered business.”

Ian Lang, the exchange’s director for marketing and communications, puts it another way: “We’re asking people to change their buying habits. We’re asking them to buy this product.” In many ways, that’s a totally new role for government.

As we discussed when exchange chief Christine Ferguson appeared on Newsmakers recently, it’s an open question whether Rhode Island was right to create its own exchange rather than, say, try to join the Massachusetts Connector or create a regional grouping. (RIPEC looked at some of the questions in this study.) But now that the path has been chosen, it matters whether the people in charge get it right, particularly since health care is one of the few bright spots left in the Rhode Island economy.

Read the full story here.

The new Pension Investments site includes the portfolio’s investment returns over multiple time periods, its current asset allocation, its total hedge-fund fees in 2011-12 and the State Investment Commission’s monthly meeting reports, as well as an FAQ about expenses.

The information on hedge-fund fees will be closely scrutinized after Raimondo came under harsh criticism from a Forbes.com blogger for her decision to use the alternative investment vehicles. The data shows the pension fund spend $16 million on investment expenses in 2011-12, an amount that will presumably rise significantly this fiscal year because many of the hedge funds weren’t part of the portfolio for all of 2011-12, limiting fees.

In 2011-12, the costliest hedge funds were Och-Ziff Capital Management Group’s OZ Domestic Fund II LP, which got $1.9 million in fees, and the D.E. Shaw Group’s D.E. Shaw Composite International Fund, which got $1.81 million. All of the pension fund’s initial commitments to 20 hedge funds totaled between $20 million and $75 million, with the two largest commitments going to OZ Domestic and Brevan Howard LP.

The hedge-fund portfolio earned a 9.36% return during the year ended April 30, beating its benchmark but trailing the entire pension fund’s 13.38% return over the same period, according to Treasury data compiled by Bank of New York Mellon, its custodial bank, and Cliffwater LLC, its hedge-fund advisor.

• Related: Chart: How Raimondo has changed RI’s pension investments (April 4)

Meanwhile, Rhode Island PBS was kind enough to include me on the panel for last week’s “Lively Experiment,” along with Richard Licht, Gary Sasse and Maureen Moakley. Topics include economic development, the various scandals in Washington, and whether Richard deserved that raise. The video is up now – check it out:

The field of likely 2014 candidates for governor of Rhode Island has come sharply into focus over the last week thanks to three key announcements: Democrat Ernie Almonte’s switch to the treasurer’s race on Thursday, Republican Brendan Doherty’s decision to sit out the race on Friday, and Moderate Party founder Ken Block’s announcement this morning that he’s running again.

Almonte’s exit leaves Treasurer Gina Raimondo and Providence Mayor Angel Taveras as the two potential heavyweights in the Democratic primary, setting up a head-to-head clash between the two. Almonte’s absence could boost Raimondo, since both of them have reputations for pension truth-telling and fiscal responsibility, issues that appeal to moderates and conservatives; Taveras has a more wide-ranging portfolio.

That assumes, of course, both Raimondo and Taveras actually jump into the gubernatorial race. While the two Democrats are taking the steps necessary to mount campaigns, until there’s an official announcement the possibility remains that one of them won’t pull the trigger. Raimondo has $1.7 million already and her fundraising shows no sign of slowing, while Taveras has $560,779 and can tap the deep-pocketed network of former DSCC chief J.B. Poersch; a lengthy primary fight could be expensive and bruising.

On the Republican side, Doherty’s decision to take a pass – along with John Robitaille’s a few months back – is great news for Cranston Mayor Allan Fung, who’s made no secret of his interest in the governor’s office.

Doherty had the support of new party chairman Mark Smiley and could have assembled a campaign team easily; he also demonstrated real fundraising prowess in his congressional bid last year. Without a real primary, Fung can now spend the next 16 months raising money and preparing for a quick two-month general-election campaign once the Democratic candidate is picked. It almost worked for Robitaille in 2010.

Then there’s Ken Block.

The Moderate Party standard-bearer received 22,146 votes in 2010, good for 6.5% of the total. Put another way, Block garnered two-and-a-half times the 8,660 votes that gave Lincoln Chafee his margin of victory over Robitaille in the election. Republicans blame Block for Robitaille’s defeat, which Block contests, but there’s little doubt he makes the math harder for centrist and center-right candidates. A January PPP poll showed Block getting between 8% and 16% of the vote depending on his competition.

As for Chafee, it’s likely nobody was more pleased about Block’s announcement than the incumbent.

If Chafee remains an independent, which still seems probable, his best-case scenario is probably another four-way field: Chafee, Raimondo/Taveras, Fung, Block. But there’s no guarantee he can turn a crowded field into another victory – PPP put him in third place, with only about 20% of the vote, under that scenario, which suggests a Democrat or Fung could be 2014′s Chafee, winning with the support of just a third of the electorate.

The silver lining for Chafee is another finding from the PPP poll. In a hypothetical three-way contest with Chafee running as the Democratic nominee against Doherty and Block, his support reached 35%. Obviously that contest isn’t going to happen – but it suggests about one in three voters are still open to casting a ballot for Chafee depending on their other options. “Landslide Linc” he ain’t, but he has a path.

Of course, the most important fact of all is that it’s only May of 2013, with a year and a half left before voters choose the next governor. But make no mistake: what happens this year will have a big impact on who takes the oath of office in January 2015.

• Related: Minority turnout surged in RI in 2012; white vote slumped (May 9)

But Arnold’s actual story is actually more interesting than that, according to the summer issue of WSJ.Money magazine.

Arnold, 39, closed his hedge fund last year and retired to begin giving away his $2.8-billion fortune, mainly through the Laura and John Arnold Foundation he and his wife founded:

Arnold and his wife, Laura, have a somewhat unique approach to giving. Most billionaires tend to write checks to good causes they’re part of, hospitals where they were treated or universities they attended. … Or there are donors who make sizable gifts to meet an obvious need in a community, such as hunger or education. But at a time when charitable giving in the U.S. is still down from its peak in 2007, the Arnolds want to try something new and somewhat grander. John says the goal is to make “transformational” changes to society.

The Arnolds want to see if they can use their money to solve some of the country’s biggest problems through data analysis and science, with an unsentimental focus on results and an aversion to feel-good projects — the success of which can’t be quantified. No topic is too ambitious: Along with obesity, the Arnolds plan to dig into criminal justice and pension reform, among others.

Among Arnold’s critics is Rhode Island’s own Mike Downey of AFSCME Council 94:

J. Michael Downey, president of Rhode Island’s biggest union of state employees, says he considered it a “wonderful Christmas present” when The Wall Street Journal reported in December that Arnold was helping to fund a pension-reform effort in concert with Gina Raimondo, the state’s Democratic general treasurer. Downey says he’d never heard of Arnold before the article appeared but sees Arnold’s Enron background as evidence that he cares less about workers than pursuing a Darwinian form of capitalism. “That’s how he operates,” Downey says. 
For his part, Arnold says he is “pro-worker” and that solving pension reform will only save jobs in the long run.

EngageRI isn’t the Arnolds’ only involvement in Rhode Island; their foundation is partnering with the Pew Center on the States to help cities and towns, including Pawtucket and Scituate, deal with their underfunded municipal pension plans. They’ve also donated $8,000 to Treasurer Gina Raimondo and her political action committee since last May, according to R.I. Board of Elections filings.

The entire WSJ article is worth a read. It managed to win Arnold praise from Gawker’s Hamilton Nolan, archenemy of plutocrats. “We salute, John Arnold, and your cold-blooded and dead-eyed approach to making this world a better place,” Nolan wrote in a post on Friday. “If every billionaire were like John Arnold, we would be slightly less apoplectic. (Momentarily).”

• Related: EngageRI raised $900K in 2011 and 2012, tax returns show (May 13)

(photo: Laura and John Arnold Foundation)

1. Providence’s push for a new Ocean State Regional Water Authority deserves a closer look. The bill, which was supposed to get a hearing Thursday but got yanked from the agenda, would pave the way for the city-owned Providence Water Supply Board to lease its system to the new authority. Notably, any lease or sale agreement entered into by the Ocean State Regional Water Authority wouldn’t be subject to approval by the R.I. Public Utilities Commission; if the capital city got a big upfront payment under the terms of the lease, the new water authority would presumably need to borrow a significant amount to pay the tab – money that would come out of ratepayers’ water bills. The new authority would also still need to come up with a lot of cash over the coming decades to pay for more than $300 million in water-infrastructure projects. Selling a water supply isn’t a new idea – London’s system is privately owned and operated, though not without its critics – but if Providence needs cash and the water system needs capital, it’s unclear if a quasi-public is the best approach. An alternative option would be selling or leasing Providence Water to a private company. For example, Aquarion Water Co., a division of Australia’s Macquarie Group, is in talks to buy yet another Connecticut town’s water system, with the promise of cash and new property-tax revenue once the deal goes through. Perhaps a firm like Aquarion could bring capital from outside Rhode Island to invest in the water system. The privatization option is at least worth considering if Providence Water is keen to change the current regime.

2. This week marks the 65th anniversary of the end of passenger trolley-car service in Providence. The United Electrical Railways’ last streetcar ended its final trip at the Swan Point trolley shelter in the early hours of May 15, 1948. “It was, thus, officially ending a transportation era, which began in Rhode Island in 1864, with horsecars,” a local journalist remarked at the time. “The first line was electrified in 1892 and trolley cars hung on despite introduction of busses [sic] in 1932 and trackless trolleys in 1931.” Has the time come for streetcars to make a grand return to Providence (if not Blackstone Boulevard)? Mayor Angel Taveras included the idea in his big economic-development plan, though funding remains elusive; possible solutions have been offered by Jef Nickerson and Stephen Miller.

3. While taping “Lively Experiment” on Thursday, Director of Administration Richard Licht good-naturedly chastised me for overlooking the “silver lining” of Rhode Island’s falling unemployment rate and instead focusing on the state’s shrinking work force. To the extent that reduced unemployment is a sign of reduced human misery, Licht is right to see good news. The question is how much that’s the case. Since January 2010, when the jobless rate peaked, the number of unemployed Rhode Islanders has fallen by 18,510 – yet the number of employed Rhode Islanders has risen by only 5,624. If those 12,886 unemployed-but-uncounted workers had stayed in the labor force, Rhode Island’s April unemployment rate would have been 11.2%. While that’s still better than the 11.9% unemployment rate of January 2010, it would be far less positive than last month’s actual reported jobless rate of 8.8%. And this isn’t a universal phenomenon: the 6.4% April jobless rate in Massachusetts doesn’t change when you carry out the same exercise, because the Bay State has increased total employment and the size of the labor force since the worst of the recession. That said, DLT statistician Donna Murray told me Friday she thinks a key reason for the recent drop is delayed retirements finally taking place: raw data shows the number of Rhode Islanders ages 55 and older who weren’t in the labor force because they don’t want a job jumped by 15,800 from December to April.

4. We’ve read a lot about various controversies surrounding the Obama administration this week, but some of the most thoughtful critiques of the president didn’t have to do with the daily headlines – they have to do with his entire foreign policy. First there’s Mark Ambinder’s review of “The Dispensable Nation,” which he describes as “the best anti-Obama book I’ve read” thanks to Vali Nasr’s critique of “a president with extreme myopia.” It fits right in with two other new pieces on Obama’s Syria policy: Dexter Filkins’ long New Yorker analysis, and Jeffrey Goldberg’s latest Bloomberg View column.

5. A loyal and good-looking Saturday Morning Post reader informs me Rhode Island’s capital gets a mention from indie band Vampire Weekend on their new album. The lyrics to “Hannah Hunt,” the sixth track on the release, begin: “A gardener told me some plants move / But I could not believe it / Til me and Hannah hunt / Saw crawling vines and weeping willows / As we made our from Providence to Phoenix.” Long trip.

6. The New York Times’ David Carr has a must-read column this week about the disastrous business strategy of Advance Publications in New Orleans, where their Times-Picayune is under assault from The Advocate of Baton Rouge. A recent raid of Times-Pic journalists by The Advocate, Carr writes, “served as a reminder that The Times-Picayune’s former monopoly over talent was a thing of the past. That doesn’t mean that The Advocate will have anywhere near the impact on New Orleans that The Times-Picayune once did, or that it will magically defy the laws of contemporary publishing economics. But it does suggest that Advance’s belief that it had New Orleans to itself and could do as it wished was deeply mistaken.”

7. This week’s dispatch from WPRI.com ace Dan McGowan: “Providence City Council President Michael Solomon this week announced plans to create a 15-member commission tasked with studying the vacant ‘Superman building’ and other potential economic-development projects throughout the city. Both the council and the Taveras administration have expressed concern about offering incentives to help turn the 111 Westminster St. property into apartments – the city has already approved 13 tax stabilization deals since 2011 – but Councilman Terry Hassett said the city must find a way to preserve the iconic structure: ‘We simply cannot allow 111 Westminster to languish,’ he said. No matter what recommendations the new commission makes for the building, the state will still need to subsidize at least some of the project, according to Bill Fischer, a spokesman for High Rock Development, which owns the property. Fischer said his client has continued to meet with Governor Chafee, Mayor Taveras and House and Senate leadership and that he hopes leaders are beginning to understand the magnitude of the project. ‘It’s hard to imagine a refurbished Kennedy Plaza with an empty Superman building sitting next it,’ Fischer told WPRI.com.” Read all of Dan’s reporting here.

8. Congratulations to The Providence Journal’s Phil Marcelo, who was selected this week as one of the International Center for Journalists’ 14 International Reporting Fellows for 2013. Phil will travel to Liberia in mid-July to report for the Projo on how Rhode Islanders are helping the country rebuild after its civil war. By coincidence, Liberian President Ellen Johnson Sirleaf was in Washington this week, where she met with both U.S. Sen. Jack Reed and Congressman David Cicilline.

9. Rhode Island PBS was kind enough to include me on the panel for this week’s episode of “A Lively Experiment,” along with Richard Licht, Gary Sasse and Maureen Moakley. Topics include the State House fight over economic development, the various scandals in Washington, and whether Richard deserved that raise. Watch tonight at 7 p.m. on WSBE Learn (Ch. 36.2), Sunday at noon on WSBE-TV (Ch. 36.1) or online at the RI PBS blog.

10. Set your DVRs: This week on Newsmakers – former Treasurer Frank Caprio in his first TV interview since the 2010 campaign. Watch Sunday at 10 a.m. on Fox Providence. This week on Executive Suite – ShapeUp CEO Rajiv Kumar. Watch Saturday at 10:30 p.m. or Sunday at 6 p.m. on myRITV (or Sunday at 6 a.m. on Fox). See you back here next Saturday morning.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

An earlier version of this post incorrectly said the Ocean State Regional Water Authority wouldn’t be subject to oversight by the R.I. Public Utilities Commission; the authority’s lease and sale agreements would not be subject to the commission’s oversight, but its other activities would be.

Attorneys on both sides of the case met Friday afternoon with R.I. Superior Court Judge Sarah Taft-Carter, who is handling the suit, court spokesman Craig Berke told WPRI.com. In December, she ordered the state and the unions into a formal mediation process overseen by the Federal Mediation and Conciliation Service.

The lawyers met with Taft-Carter in her chambers for about 20 minutes to update her on the progress of the mediation process, Berke said. The parties have said they aren’t allowed to detail their discussions publicly. Friday’s meeting was the fifth status conference on the pension talks since February.

Taft-Carter has scheduled the next status conference for June 7, Berke said.

• Related: EngageRI: Why the law is OK (March 18) | Prof: Law may be unconstitutional (Dec. 24)

Wired magazine’s Jake Pearson is out with a big feature called “Drugstore Cowboy” that tells the behind-the-scenes story of the federal sting that led to Rhode Island’s Google windfall. Here’s a sample:

On February 25, 2009, a then 34-year-old career con man named David Anthony Whitaker left the Wyatt Detention Facility in Central Falls, Rhode Island, and slid into the backseat of an unmarked government car. … This was merely standard procedure when transporting a government cooperator. …

He had been bringing in obscene amounts of money by selling black-market steroids and human growth hormone online. …

That life ended on March 19, 2008, when a Mexican immigration agent nabbed Whitaker and brought him back to LAX, where the Secret Service promptly arrested him. …

At one point during a meeting with Whitaker and his lawyer, the Feds asked him how he had grown his online enterprise. Whitaker’s answer was immediate: He had used Google AdWords. In fact, he claimed, Google employees had actively helped him advertise his business, even though he had made no attempt to hide its illegal nature. It was reasonable to assume, Whitaker said, that Google was helping other rogue Internet pharmacies too.

Read the rest on Wired.com.

• Related: Let’s put the $165M from Google into the police pension funds (April 3, 2012)

Home prices in the Providence-New Bedford-Fall River metropolitan area are 13% undervalued relative to the economic fundamentals of the region, significantly more than the 7% undervaluation nationwide and 8% undervaluation in Boston, according to an analysis by Trulia, the real-estate data firm.

Jed Kolko, Trulia’s chief economist, explained the methodology in a blog post:

[W]e assess whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes, and rents. Incomes determine how much people can pay for housing, and price increases aren’t sustainable if they push prices too high relative to incomes. Rents reflect how much people value housing even if they won’t benefit from price appreciation (as renters don’t, but owners do); the price-to-rent ratio is like the price-earnings (P/E) ratio for stocks. Using data from multiple sources … we create several measures of fundamental value and combine them in order to calculate how overvalued or undervalued home prices are relative to fundamentals.

Home prices in the Providence area have fallen a long way since the height of the housing bubble: Trulia estimates prices were 51% overvalued during the middle of the 2000s, while they were 39% overvalued nationwide. (The Providence metro area encompasses all of Rhode Island plus Bristol County, Mass.)

Housing prices are below their fundamental value in 91 of the nation’s 100 largest metro areas, including Providence, according to Trulia. The only places where homes are estimated to be overvalued are in California, Texas, Oregon and Hawaii.

There aren’t exactly a flood of new people arriving in the area to snap up those supposedly cheap houses.

Trulia reports Providence was the sixth-slowest-growing major metropolitan area in the U.S. last year, eking out a population uptick of 0.1%, compared with 3% in fastest-growing Austin, Texas. Providence also has some of the oldest housing stock in the country: 6.6% of the homes for sale in March were built before 1900.

• Related: Study: Cost-of-living in Providence 23% above national average (Feb. 20)

1. Now that we know both Gina Raimondo and Angel Taveras have hedge funds managing big chunks of Rhode Island’s biggest and second-biggest public pensions, it’s likely citizens and other policymakers will want to take a closer look at their investing strategies. (Taveras aides emphasize that, unlike Raimondo, the mayor didn’t actively move money into hedge funds – he just left it there after taking office.) The treasurer has defended her use of hedge funds as a way to, well, hedge – to invest in assets that won’t move in lockstep with the stock market à la 2008. Yet while publicly traded stocks have rebounded smartly since the recession, The Economist reports that hedge funds are “going nowhere fast.” An index fund with 60% equities and 40% bonds would have returned more than 90% over the past decade; hedge funds returned only 17% after fees. Raimondo doesn’t dispute this, saying that she and the State Investment Commission have made a strategic choice to accept lower returns in order to minimize losses. Still, government pension funds are the ultimate long-term investors: should they have piled into public equities when they were cheap in 2008-09 rather than run away from them – particularly for systems whose funding levels are only 59% (Rhode Island) and 36% (Providence)? Without big investment gains, taxpayers and retirees will be left to fill those sizable shortfalls. Josh Barro, though, says Raimondo has this right: “Higher equity rates of return are purely compensation for risk, and downside risk would be born by RI taxpayers. … Hedge funds might be bad for other reasons, e.g., they charge too many fees. But she’s right not to chase returns by adding risk.”

2. With private-sector labor in a seemingly unstoppable decline, there’s been some interesting discussion on the left lately about alternative ways of organizing workers outside of traditional unions. Josh Eidelson tackled the question in The American Prospect earlier this year, and this week The Washington Post’s Harold Meyerson weighed in. Some of the ideas sound reminiscent of Fuerza Laboral, the Central Falls-based group that helps low-paid workers fight employer exploitation. Josie Shagwert, Fuerza’s former executive director, explained its work on Executive Suite last Labor Day.

3. U.S. Sen. Sheldon Whitehouse had a notable victory on the Senate floor this week, winning 67 votes for his proposal to create a National Endowment for the Oceans, Coasts and Great Lakes, which would fund aquatic research, restoration and conservation. Notably, 13 Republicans voted in favor of Whitehouse’s proposal, among them John McCain, Lindsay Graham, Jeff Sessions, Saxby Chambliss and Thad Cochran – a sign the senator has stronger relationships across the aisle than some back home might expect in light of his liberal image. (Not that Whitehouse’s lefty bona fides should be in doubt: the other night MSNBC’s Chris Hayes devoted a TV segment to the senator’s most recent speech on climate change.) That said, the oceans endowment is still a long way from handing out grants. It’s unclear if and when the House will take up the Water Resources Development Act reauthorization that it’s attached to, it doesn’t have any designated funding yet, and last year the measure was stripped out of a BP cleanup bill by House-Senate conferees. Legislating is a long game.

4. Speaking of the Senate, sometimes it seems like Massachusetts freshman Elizabeth Warren is an honorary member of the Rhode Island delegation. She was in Rhode Island last month to headline a fundraiser of Jack Reed, who helped get her onto the Banking Committee and has worked with her to defend her baby, the new Consumer Financial Protection Bureau. Just this week Warren announced her support for Sen. Whitehouse’s sequester alternative, which would replace the across-the-board spending cuts with revenue from the Buffett Rule and higher corporate taxes. It’s not surprising Warren would make common cause with Reed and Whitehouse – they’re kindred spirits as wonky liberal Democrats from Southern New England. Warren is also in the somewhat odd position of being her state’s senior senator just months after taking office, thanks to John Kerry’s appointment as secretary of state – perhaps she’s looking a bit to her colleagues from the south.

5. A must-read for politicians and bureaucrats - Cass Sunstein on why government forms should be simple.

6. So former Senate President Joe Montalbano will get a Superior Court judgeship from Governor Chafee – no surprise perhaps, considering that in 2011 when I pressed the governor on whether it was appropriate to make Montalbano a magistrate, he gave me a look and replied: “I’m not going to fight with the General Assembly.” Chafee’s decision to give judgeships to Montalbano and another magistrate, Patricia Asquith, is a double-win for the Senate because it will let the chamber dole out two more plum appointments once their magistrate slots are vacant. But is it even constitutional for Rhode Island to have magistrates, who are appointed by judges, and can send people to jail and grant divorces? Former Rep. Keven McKenna thinks not. He argued forcefully before the Senate Judiciary Committee last year that magistrates’ actions are “constitutionally void” and a violation of the will of Rhode Island voters, who approved merit selection 19 years ago, because magistrates exercise the powers of a judge but aren’t picked by the governor and the Judicial Nominating Commission. “Chief judges and chief justices have no authority to appoint anyone to exercise judicial powers. Only the governor can do that,” McKenna said. “Separation of powers is really simple: The governor can only administer, the General Assembly can only legislate, and judges can only adjudicate – they can’t appoint. Appointments are not adjudicating functions.” Those comments fell on deaf ears with the senators in attendance that afternoon – among them Senate President M. Teresa Paiva Weed, who’ll likely be fitted for the black robes herself someday – though Charlestown Rep. Donna Walsh keeps pressing the issue.

7. Could this be the African Century?

8. This week’s dispatch from WPRI.com ace Dan McGowan: “When the Taveras administration announced plans this week to transfer ownership of the decrepit George C. Arnold building on Washington Street to the Providence Redevelopment Agency, it marked the first time in 15 years the city has moved to exercise its use of eminent domain. In 1998, former Mayor Buddy Cianci used that power to take over another crumbling downtown building that housed the Fox Lady, the city’s most famous strip club. In its place now is Bravo Brasserie, a French restaurant that has become one of the jewels of downtown. The Arnold building may not be the only building the city seizes: Taveras has signaled he is willing to keep using those powers to redevelop unkempt properties in the coming months.”

9. My colleague Tim White offers some belated praise for the Chafee administration. Target 12 recently exposed a state worker charged with inspecting needy Rhode Islanders’ home-heating systems rather strangely parking his state car behind his house during work hours. (Watch the video.) Key to the report was a series of documents – time-cards and itineraries – that confirmed the employee not only was on the clock but wasn’t where he told his supervisors he was. In the course of his reporting, Tim tells me he ran into a roadblock with lawyers from the Department of Human Services, who were reluctant to provide the records. “Then Chafee’s office stepped in.” The governor’s spokeswoman, Christine Hunsinger, worked to get all the documentation released to WPRI, telling Tim: “It’s better to be transparent.” (Amen!) Tim also notes that this is different from what happened with an eerily similar 2009 report in which Target 12 found that the entire Department of Labor and Training fraud unit was failing to do its job. The Carcieri administration refused to release the relevant documents, which were eventually leaked. Last summer, however, Chafee signed a beefed-up public records law that called for greater transparency. “Coincidence?” Tim wonders.

10. Set your DVRs: This week on Newsmakers – Congressman David Cicilline. Watch Sunday at 10 a.m. on Fox Providence. This week on Executive Suite – Siena Restaurant Group’s Anthony and Chris Tarro, plus Laurie White and Jon Duffy from the Greater Providence Chamber of Commerce discuss “The Garage.” Watch Saturday at 10:30 p.m. or Sunday at 6 p.m. on myRITV (or Sunday at 6 a.m. on Fox). Happy Mother’s Day to all the moms reading this. See you back here next Saturday morning.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

This post has been updated.

Taxpayers in Rhode Island’s capital city paid the highest commercial property taxes charged in any of the nation’s 53 biggest cities in 2011, according to the latest edition of a widely cited comparative study by the Lincoln Institute of Land Policy and the Minnesota Taxpayers Association.

The previous edition of the study listed Providence as having the second-highest commercial property taxes among big cities, behind only Detroit – a statistic that’s been widely referenced locally ever since Governor Chafee cited it on Newsmakers and then had his research confirmed by PolitiFact.

But the tax burden on commercial property in Providence grew even heavier in 2011, when Rhode Island’s cash-strapped capital slapped a tax bill of $4,975 on commercial property worth $100,000 – $69 more than second-ranked Des Moines and $75 more than third-ranked Detroit. Here’s a chart:

Taveras has proposed freezing the commercial tax rate for seven years – apparently at what has been the highest level in any major U.S. city, according to this study. Even that may not happen: City Council members have expressed skepticism about the proposal, suggesting they may raise commercial taxes even more.

The study said Providence also charged the fifth-most on apartment buildings among the 53 big cities in 2011, with a tax of $21,765 on a $600,000 property, behind Des Moines, Detroit, New York City and Buffalo. In addition, Providence ranked 11th-highest for homestead property taxes on the median-value home and 9th- and 10th-highest for industrial property taxes on machinery, equipment, inventories and fixtures.

The latest edition of the study was cited Friday on Twitter by Gary Sasse. “Rhode Island’s economic health is linked to more competitive business taxes in the Capital City,” he commented (in abbreviated tweet form). Not coincidentally, the owner of the now-vacant Superman building wants a tax break to redevelop it.

[A] collection of Democratic lawmakers on Thursday renewed their push to keep rates low but also backed interest rates that were based on the markets. Their plan would base rates on a 91-day Treasury bill and allow the Education Department to add to that to pay for the administration of loan programs.

“The student loan interest rate offered by the government shouldn’t be needlessly high, it should be based on actual costs,” Sen. Jack Reed, D-R.I., said in introducing the plan.

The versions from both parties include a proposal that was central to Obama’s budget: interest rates would shift based on financial markets. …

Basing student loans on 10-year Treasury notes’ rates would, at least for now, offer a deal to some students. … That’s not to say, however, the rates would be a good deal forever. If Treasury increases its rates, students’ loan rates would rise, too.

For context, under the current system Congress sets the actual numerical interest rate on student loans – that’s why the rate is currently set by law at 3.8% and is (again) scheduled to rise to 6.8% on July 1. (Hence the growing focus on the issue at the moment.)

Reed’s bill would have Congress stop setting the rate by statute and start basing it on market movements instead, as outlined above. However – unlike similar proposals from President Obama and House Republicans – Reed’s bill would set a maximum cap on rates: 6.8% for subsidized loans and 8.25% for unsubsidized loans. It would also allow students to refinance their loans at a lower rate.

Why the cap? According to Reed, it’s necessary because someday interest rates will return to a higher level.

Reed’s staff says college graduates in the Class of 2007 would have paid almost 8% and the Class of 1981 would have paid almost 17% if the House GOP proposal had been law at the time. Using CBO economic forecasts, they project rates will be back above 8% by 2018 under the Obama/GOP proposals.

The White House and Republicans argue Reed’s proposal could raise costs for borrowers or force other taxpayers to subsidize student loans. “In order to have a cap, we would have to charge students more in order to hedge against the possibility that rates would go up to unmanageable levels in the future,” an administration official told reporters April 10.

While a capped market rate is Reed’s vision for a permanent fix on student loans, in the meantime he’s introduced a bill to freeze current rates for two more years while Congress comes up with a long-term resolution. “Some who claim it is important to avoid burdening our children and grandchildren with national debt are all too willing to bury these young people in student debt,” Reed said in a statement Thursday.

Reed isn’t the only local senator arguing for a fresh approach to student loans. Massachusetts’ Elizabeth Warren on Wednesday introduced a bill to let students borrow at the same rate that big banks get from the Federal Reserve’s discount window.

(photo: Manuel Balce Caneta/AP)

Providence has invested 19.75% of its total pension assets in hedge funds, the Taveras administration disclosed Tuesday after WPRI.com requested a breakdown of its investment portfolio.

Rhode Island’s state pension system has invested somewhat less in hedge funds – 14.6% of assets as of April – under a new investment strategy implemented by Treasurer Gina Raimondo soon after she took office in 2011.

Providence’s Board of Investment Commissioners, which is chaired by the mayor and oversees the city’s pension portfolio, started investing in hedge funds on the advice of its longtime financial consultant, Boston-based Wainwright Investment Counsel, Taveras spokesman David Ortiz told WPRI.com. The investment board meets roughly once a month.

Ortiz said the city was already investing nearly 20% of its money in hedge funds when Taveras succeeded now-Congressman David Cicilline in January 2011. Raimondo, by contrast, moved to add hedge funds to the state’s portfolio a few months after she took over from Frank Caprio that same year.

“The asset mix in Providence’s pension portfolio has remained essentially static since we took office,” Ortiz said. “We relied on the advice of Wainwright. They’ve managed the city’s portfolio for many years, and the fund has performed well relative to peers.”

Providence’s pension investments earned an 11.2% return during 2012, less than the 12.5% that the state’s investments earned, according to Ortiz and the State Investment Commission. Providence expects to earn an average return of 8.25% on its investments over the long term, while the state expects to earn 7.5%.

Ortiz said the Taveras administration didn’t have information available about the amount of fees it pays to hedge funds, although city officials “asked a while ago” for Wainwright to provide details.

“We’re awaiting reply,” he said.

Raimondo’s investment strategy has come under withering criticism over the last month from Forbes.com contributor Edward Siedle, president of Benchmark Financial Services, who argued in one post that “the smart pension money would steer clear of hedge funds, not pile into them.”

Robert Walsh, executive director of the National Education Association Rhode Island teachers union and a frequent Raimondo critic, quipped recently that the treasurer’s defense of her hedge-fund strategy might as well rely on “magic beans,” tweeting: “Top corporate pension funds have 2% in hedge, not 20%+.”

Taveras is now planning to review Providence’s heavy investment in hedge funds, according to Ortiz.

“Recently, compelling questions have been raised about hedge funds and other nontraditional investments by public retirement systems,” he said. “We’ve asked Wainwright for more information about those kinds of investments in Providence’s pension fund, including the fees paid to investment managers.”

Coincidentally, Raimondo said during her 2010 campaign that Providence’s pension fund invested $1 million in Point Judith Capital, the venture capital firm she co-founded, after Wainwright approached Point Judith and then recommended the investment to the Board of Investment Commissioners.

Providence’s pension fund is significantly smaller than the state of Rhode Island’s. Their assets totaled $326.5 million and $7.2 billion, respectively, as of June 30. Following the adoption of separate overhauls pushed through by Taveras and Raimondo, the city’s pension plan is 36% funded and the state’s plan is 59% funded.

• Related: Raimondo puts 14% in hedge funds, 10 times US median (April 29)

(photo: Ted Nesi/WPRI)

U.S. Sen. Jack Reed, U.S. Sen. Sheldon Whitehouse and Congressman David Cicilline are among the eight members of Congress co-hosting a summit on Capitol Hill to criticize a proposal in Obama’s latest budget that would trim Social Security benefits by switching to a measure of inflation known as “chained CPI.”

Rhode Island’s entire delegation slammed the policy when it emerged, and Cicilline has garnered national attention for introducing a resolution that would have Congress express formal disapproval of chained CPI. U.S. Sens. Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont are also among the summit’s hosts, giving it a decidedly New England flavor.

There were 207,122 Rhode Island residents receiving Social Security benefits in December 2011, the most recent month for which figures are available – meaning nearly 20% of state residents are on Social Security. Two-thirds of Rhode Island’s beneficiaries were 65 or older, while 35,905 were disabled and 15,704 were children. The Rhode Islanders’ combined Social Security benefits totaled $236 million that month.

The congressional event at 12:30 p.m. will be streamed live online by Strengthen Social Security, a coalition of unions and progressive groups that supports increasing benefits.

• Related: RI congressional delegation slams Obama over Social Security (April 10)

Rhode Island’s $7.7 billion pension fund earned 9.81% during the 12 months ended March 31, according to Bank of New York Mellon Corp., its custodial bank. By comparison, the median public-sector plan with assets of at least $5 billion earned 10.5% over the same period, Wilshire Associates Inc. reported Tuesday.

Raimondo has acknowledged her new investment strategy, approved unanimously by the investment commission in 2011, could reduce the state’s investment return somewhat, but argues it will benefit the state in the long run by reducing risk and volatility.

“The improvements made by the State Investment Commission to the investment portfolio were designed to deliver strong, long-term returns, while reducing risk to provide a secure retirement for public employees and retirees,” Raimondo spokeswoman Joy Fox told WPRI.com. “The SIC’s strategies should be evaluated against long-term returns, not against any particular immediate snapshot.”

Rhode Island’s pension investments also grew more slowly over the three years and five years ended March 31 compared with the median plan of at least $5 billion, according to Wilshire and BNY Mellon. However, Rhode Island’s return over the 10-year period ended March 31 was 8.78%, better than the median plan’s 8.59%. Rhode Island’s plan also beat the internal benchmark it uses for comparison purposes:

The median plan’s performance published by Santa Monica-based Wilshire comes from its Wilshire Trust Universe Comparison Service, which tracks more than 1,700 public and private investment plans that control more than $3.4 trillion in assets. A Wilshire spokeswoman declined to disclose how many of those are public plans with at least $5 billion worth of assets.

• Related: Raimondo puts 14% in hedge funds, 10 times US median (April 29)

I think we really have to carefully look at the situation. The Israeli attacks [in Syria last weekend] were prompted more in terms of disrupting the flow of military equipment to Hezbollah, and not so much involvement in the political and military activities within Syria of the opposition.

I think, one, we want to with the regional partners look at what we can do to aid the opposition to be effective, inclusive, and to as quickly as possible try to force the Assad government out. They have been attacking their own people and they’ve been destroying their country, literally, so we want that. But the precise military steps, I think, have to be carefully calibrated.

Senator Whitehouse actually sounded more hawkish about Syria than Reed after a trip there in January, when he told me: “This is a chance for us to be the great power that comes to the relief of Syria so that 100 years from now we’re still remembered as the country that helped them get their freedom.”

• Related: Levin retirement sets up Jack Reed for powerful Armed Services chairmanship (March 7)

The Journal’s advertising revenue was down 15% between Jan. 1 and March 31 compared with the same period in 2012, parent company A.H. Belo disclosed in an SEC filing. Quarterly ad sales fell to $9.6 million, or $1.7 million below last year’s level.

Total first-quarter revenue at The Journal from all sources was down 9% from 2013, falling to $20.6 million, thanks to a 10% increase in its contracts to print and distribute other newspapers. Circulation revenue fell 7% to $8 million.

“In Providence we got off to a bumpy start for a variety of reasons,” A.H. Belo CEO Robert Decherd told investors in a conference call last week. He said some of The Journal’s promotional plans for the start of the year were hamstrung by the winter storms that hit Rhode Island.

“Things have firmed up there and we have some very promising developments with respect to printing and distribution in Providence that should help us out,” Decherd said. “Local advertising again is doing OK there, national is unpredictable and printing and distribution is looking promising.”

“We think they’ll make up a substantial part of the shortfall to [their budget] plan from the first quarter through the remainder of the year,” the CEO added.

The Journal said retail advertising for entertainment, department stores and home furnishings all fell in the first quarter, as did classified ads in every category except obituaries. Digital advertising dropped 16% due to fewer sales of online banner and classified ads.

The Providence paper’s advertising revenue has declined every quarter for at least the last six years, according to A.H. Belo’s regulatory filings. Advertisers accounted for just 46% of total Journal revenue during the first quarter of 2013; it was 83% as recently as 2007.

The Journal’s average weekday circulation fell from 85,496 to 79,244 during the six-month period ended March 31, according to a report by the Alliance for Audited Media released last week. The paper reported almost 2,000 subscribers to its electronic edition.

Decherd said The Journal is continuing to explore the sale of its 75 Fountain St. headquarters.

“We continue to have discussions with potential partners, purchasers, tenants, etc., of our headquarters facility on Fountain Street,” he said. “We are optimistic that we’ll have a clear strategy for that building within six to 12 months.” He also said a large piece of undeveloped property owned by The Journal isn’t like to sell “until the real-estate market improves generally in Providence.”

At The Journal’s two sister papers, first-quarter advertising and marketing revenue rose by 1% at the Dallas Morning News and fell by 12% at The Press-Enterprise of Riverside, Calif. Total revenue was down 2% at the Dallas daily but 16% at the California paper.

Jim Moroney, the Morning News’ publisher, announced on the investor call that the Dallas paper will move to a metered paywall – similar to The New York Times’ successful one – in late summer or early fall.

“Overall, the strategy is working,” Decherd told investors. “Having a balance sheet with no debt continues to be a tremendous advantage, and we’re very encouraged by the initiatives Jim has undertaken in Dallas, as well as some lesser but similar initiatives in Riverside and Providence.”

More coverage of The Providence Journal on Nesi’s Notes:

• Projo’s Sunday circulation slumps 10%; owner loses $8M (April 30)
• Projo parent company’s top four execs share $1.7M in bonuses (April 2)
• Projo revenue nearly steady in 2012, but ad sales are down 66% (March 12)
• Projo lays off 23 as ad sales drop 13%; CEO remains gloomy (Nov. 8)
• Projo trying to sell Providence HQ for $10M, move to top floors (Oct. 9)

1. The Superman building wasn’t the only important economic story in Rhode Island this week. You may recall the “Kickstarter for T-shirts” startup Teespring and its 24-year-old founder, Walker Williams, from Williams’ appearance on Executive Suite last fall. Well, a just-published New York Times article reveals Williams and his co-founder have left Rhode Island for Silicon Valley in exchange for a $100,000 investment – and priceless connections – provided by Y Combinator, the famed startup accelerator and the subject of the Times story. (Imagine: at $100,000 a pop, the $75 million borrowed for 38 Studios could have backed 750 Teesprings.) Williams is the star in the article, which reports Teespring just topped $1 million in monthly revenue and has raised $1.3 million from investors; its founders hope to make $1 billion someday. Not that Teespring has bolted Rhode Island: Williams tells me Teespring remains headquartered in Providence and still has 14 people in its local office. Yet the fact that its two founders decamped for the Bay Area shows what an uphill battle Rhode Island faces in retaining its most promising prospects, a challenge that has less to do with high taxes – California ain’t Texas – and more a lack of early-stage capital or a tech sector that can compete with San Francisco and Cambridge. Indeed, even what exists now is imperiled: Providence recently ended its $50,000 equity investments in Betaspring graduates, of which Teespring is one.

2. Food for thought: Lincoln Chafee defeated John Robitaille in 2010 by only 8,600 votes. That means the choices of fewer than 1% of Rhode Islanders – or half the population of Central Falls – determined that the governor would be a socially liberal independent rather than a socially conservative Republican. It’s no understatement, then, to say the 8,600 voters who put Chafee over the top are the reason same-sex marriage will become legal in Rhode Island on Aug. 1, 2013; Robitaille opposed gay marriage and presumably would have vetoed the bill, which might never have reached the governor’s desk in the first place without clear gubernatorial support. Elections matter.

3. It’s interesting to compare this year’s two House votes on same-sex marriage, which secured five additional “yea” votes over the last three months and passed 56-15 this week, up from 51-19 in January. Only two lawmakers actually switched sides, both changing from opponents to supporters – Pawtucket Democrat Raymond Johnston and West Warwick Republican Patricia Morgan. (One other Republican, Brian Newberry, also voted yes.) Four Democrats who missed the roll call in January voted yes this time, as well: South Kingstown’s Spencer Dickinson, Johnston’s Deb Fellela, Hopkinton’s Brian Patrick Kennedy and Charlestown’s Donna Walsh. Three others cast votes in January but failed to on Thursday: Gregg Amore (yes), Mike Chippendale (no) and Ray Hull (no). Last and apparently least there’s Cranston Democrat Peter Palumbo, the sole representative out of 75 who didn’t cast a vote in January or in May – making him the only one of the 113 General Assembly members who never cast a vote on gay marriage this year.

4. WPRI.com ace Dan McGowan reports: “If Providence Mayor Angel Taveras doesn’t act fast, he may not be able to lock down a campaign website by the time he officially announces his plans to run for governor. That’s because the Providence firefighters union has been busy scooping up nearly every Web domain associated with Taveras. WPRI.com discovered at least ten URLs – including AngelTaveras.com, Taveras2014.com and TaverasForGovernor.com – that are registered to the group. Union President Paul Doughty declined to name every domain the firefighters have purchased, but said it’s a strategy they’ve used for the last decade: ‘Sometimes it comes in handy.’ Doughty’s union has been far chummier with Taveras during his first term than they were with former mayor and now congressman David Cicilline; back then, the firefighters owned CicillineLies.com.”

5. Congratulations to my alma mater, Attleboro High School, on getting chosen by The Washington Post as one of America’s most challenging high schools. I know I received a great – indeed, challenging! – education at AHS from teachers like Paula Sollitto, Sheila Rosa, David Sawyer, Peter Glass, Pete Tarsi and Mark Ferruccio.

6. The Providence Journal put up its paywall in February 2012. This week’s circulation report showed the e-edition has added almost 2,000 readers in the year since then, but the print edition has lost far more: nearly 13,000 on Sundays and more than 6,000 on weekdays. With new leadership in the newsroom, one of the big questions for Journal executives going forward is whether a digital replica is the best online strategy going forward. The New York Times and other papers are funding success with metered models – and the Projo’s sister paper, the Dallas Morning News, has announced it will implement one later this week. Could The Journal follow suit?

7. This short on the history of movie opening titles is really fun. Check it out.

8. One of the more interesting politicians to watch next year will be someone who’s not expected to face a tough campaign: David Cicilline. The former Providence mayor was showered with praise at Thursday’s same-sex marriage signing ceremony orchestrated by Lincoln Chafee’s office, and the independent governor would probably like to secure the congressman’s endorsement in 2014. It’s certainly easy to see why Cicilline might be cool to endorsing Angel Taveras considering the political peril Providence’s finances put him in – and Gina Raimondo’s support for the congressman in his hour of need was rather tepid. If Taveras runs for governor, Cicilline could also play an influential role in the race to succeed him as mayor – particularly on his home base of the East Side. What will the congressman do – and how much does it matter?

9. Time and People magazines threw a cocktail party before the White House Correspondents’ Dinner last week, and Rhode Island’s own Alex + Ani got one of its products into the 20.6-pound swag bag.

10. Set your DVRs: This week on Newsmakers – a one-on-one interview with Roman Catholic Bishop of Providence Thomas Tobin. Watch Sunday at 10 a.m. on Fox Providence. This week on Executive Suite – Verizon’s Massachusetts/Rhode Island President Donna Cupelo and Dave’s Coffee CEO David Lanning. Watch Saturday at 10:30 p.m. or Sunday at 6 p.m. on myRITV (or Sunday at 6 a.m. on Fox). See you back here next Saturday morning.

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

• Related: Study: RI has 3rd-most baptisms, remains most Catholic state (March 12)

The answer is that yes, moral obligation bonds are effectively general obligations bonds in all but name. The state has found a way of issuing bonds without having to get the approval of the legislature, but they’re still obligations of the state, and the state doesn’t distinguish the two types of obligation. And yes, Rhode Island should be paying the lower interest rate rather than the higher interest rate. But that doesn’t mean that voters should have to approve moral obligation bonds: it could equally mean that voters should stop having to approve general obligation bonds.

That is what all governors really want: to have the legislature and voters stop interfering in their borrowing strategy. And that is the real reason why Chafee is staying current on his moral obligation bonds. He wants the world to see voter approval as an anachronism, and in an ideal world he would love it if moral obligation bonds had the same legal backing — and therefore the same lower yield — as general obligation bonds. That way he’d never need to issue a general obligation bond, or get voter approval for such a thing, ever again. It’s a very attractive vision — and it’s not one he’s going to give up just because Rhode Island is suffering a fiscal nightmare these days.

As someone who spends a lot of time listening to Lincoln Chafee, I’m skeptical that the governor has truly thought through the reasons for drawing a distinction between moral-obligation and general-obligation bonds (or not drawing one). But as Salmon makes clear, this debate has demonstrated that there’s no real difference between the two types of debt when it comes to whether taxpayers will have to cover the liability.

• Related: Chafee reveals RI’s confusion about the 38 Studios bonds (May 1)