By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s unemployment rate fell to 8.8% in April, reaching the lowest level in four and a half years thanks to a shrinking work force, according to new data released Thursday.

Rhode Island employers added 500 jobs in April, the fifth increase in the last six months. The state would need to add another 29,000 jobs to get back to the peak employment level reached in 2006, which wouldn’t happen until February 2018 if the pace of job growth in April continued.

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A leading real-estate firm says houses are cheap – relatively speaking – in the Providence region.

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)

Providence has topped a set of national rankings, and Mayor Angel Taveras probably isn’t happy about it.

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.

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – House Democrats led by Speaker Gordon Fox on Thursday proposed a complete overhaul of the state economic agencies as they unveiled a sweeping set of bills they say will “improve the coordination and quality” of Rhode Island’s troubled economy.

The Democrats’ other proposals include bringing back the tax credit for historic buildings, this time capped at $5 million per project and potentially $30 million in total; allowing employers to pay workers biweekly; considering curbs on the overuse of jobless benefits by seasonal employers; and creating a new tax credit for local employers who add jobs after making major capital investments.

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It’s a tale of two states.

Massachusetts achieved a happy milestone in January, as employment in the Bay State reached 3.31 million jobs – passing the pre-recession peak of 3.3 million reached in April 2008, and meaning Massachusetts has regained all the jobs the state lost during the Great Recession.

“The numbers are really pretty remarkable,” one private-sector researcher marveled to The Boston Globe.

They also offer a grim contrast with the numbers in Rhode Island, which has only regained 8,700 of the 39,600 jobs it lost during the downturn. Put another way, Massachusetts has recovered 110% of the jobs it lost during the recession; Rhode Island has recovered just 22%.

Here’s a chart – Rhode Island is blue, Massachusetts is red, and 100 equals previous peak employment:

(more…)

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – A Providence developer plans to transform a vacant factory along I-95 into upscale office space suitable for law firms, engineers or corporate offices, Mayor Angel Taveras announced Thursday.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Brown University has received $44 million as a down payment on construction of a new home for its three-year-old School of Engineering, the school announced Wednesday.

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• Related: Watch Newsmakers with Brown U. President Christina Paxson (Nov. 21)

When Twitter and Square co-founder Jack Dorsey appeared on Executive Suite recently, he said the best thing Rhode Island leaders could do to attract more entrepreneurs is to be hospitable to them.

“I think the biggest thing is stating that you want that, stating that you want small businesses, that you want more of them – and not just stating it but showing it,” the billionaire entrepreneur said.

Dorsey argued that “easy paths of starting something” are key. “It’s just taking on that attitude and really showing, not telling, more than anything else,” he said.

Unfortunately, by that standard it seems Rhode Island could hardly be doing worse.

Rhode Island receives a grade of F - the worst in the country – for its overall friendless toward small businesses in a new survey conducted by Thumbtack and the Kauffman Foundation. Only two other states – Hawaii and Maine – got a failing grade. By comparison, New Hampshire got an A+, Massachusetts got a C- and Connecticut got a D+. (Vermont’s sample size was too small to grade.)

(more…)

Gary Sasse, the longtime local policymaker who most recently served in the Carcieri administration, is among those who aren’t sure about the idea of providing $40 million or more in state tax credits to convert the Superman building into apartments. Sasse explained his concerns in an email:

The most economically efficient tax policy is one that imposes the lowest possible rates applied on the broadest possible tax base. However, there may be instances were the use of tax policy in the form of credits or tax expenditures can be used to incentivize investment decisions in a way that is not inconsistent with the principles of economic efficiency or capitalism.

For example, if business is provided an R&D or Investment Tax Credit and these credits are available to all qualified taxpayers, one can make the argument that such use of tax policy is not inconsistent with capitalism, recognizing that there is no pure form of any economic system and the value of these tax expenditures should be aggressively monitored.

The type of tax credit that is being proposed for the Superman building does not meet the test outlined above. It is crony capitalism, where preferential tax is being afforded to the politically well connected. This is nothing more then socialism for the well-connected. Any plan to change the use of the Superman building, or any similar project, must be viable to the market or it is bound to fail, regardless of public subsidies.

The resolution of the historic tax-credit plan for the Superman building will tell us a lot – if Rhode Island decision makers are interested in rooting out crony capitalism, a traditional approach to economic development in Rhode Island, a practice of rewarding specific business interest with taxpayer-funded subsidies or largess. Just think of the opportunity costs of our policy of economic development driven by preferential tax treatment.

• Related: Q&A: Dean Baker calls tax deal for Superman building ‘crazy’ (March 28)

The iconoclastic liberal economist Dean Baker is famous for discovering the housing bubble years before better-known economists did so. Baker is the co-director of the Center for Economic and Policy Research in Washington. He visited Rhode Island last week to speak at the Economic Progress Institute’s annual budget conference.

Baker sat down with WPRI.com after the event for a wide-ranging interview about the economic issues facing Rhode Island. (Previous selections discussed the Superman building’s fate and the pension fund’s outlook.) In this section, Baker discusses how he thinks Rhode Island should balance its budget.

The transcript has been lightly edited for length and clarity.

You mentioned in your talk how Rhode Island is like Greece, though you were quick to couch it. I was thinking when I heard you were coming here that one thing I wanted to ask you was, we don’t have a central bank in Rhode Island, we have to balance the budget, we can’t get a looser federal fiscal policy – therefore I’m wondering how to apply what liberals suggest to do for the economy when you get down to a state-level economy. It seems like there aren’t a lot of tools. So when you said Rhode Island is like Greece, what did you mean by that?

Essentially, exactly that. Greece can’t just say, “OK, we’re going to run a big deficit to boost our economy,” because they have to borrow the money from someone, and basically they’re in a situation where the European Central Bank and the IMF are saying, “Here’s the deficits you have to run.” They’re constrained in what they can spend. They don’t have the central bank – the ECB’s deciding what they can do in terms of interest rates, money creation – they don’t have much leeway that way. So the question is, what can you do given those two really big constraints? You can try to do what you can with the resources you have, but you’re basically going in a fight with your hands behind your back because you can’t do the obvious things.

(more…)

The iconoclastic liberal economist Dean Baker is famous for discovering the housing bubble years before better-known economists did so. Baker is the co-director of the Center for Economic and Policy Research in Washington. He visited Rhode Island on Thursday to speak at the Economic Progress Institute’s annual budget conference.

Baker sat down with WPRI.com after the event for a wide-ranging interview about the economic issues facing Rhode Island. The Q&A will run on Nesi’s Notes in multiple posts. In this section, Baker offers his take on Providence’s vacant “Superman” building and how to deal with properties like it.

The transcript has been lightly edited for length and clarity.

One of the proposals you presented today was for the creation of a “vacant property tax.” Empty properties are a big problem here, particularly in Providence – what’s the idea with that?

The idea is that to get properties occupied, we want to bring prices down. You have all these people running around and talking like high home prices are a virtue – no, that doesn’t make any sense. I like to joke about the “unaffordable housing policy.” I understand it: I’m a homeowner, I want my house to be worth $1 million.

(more…)

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Several members of the Providence City Council on Wednesday expressed initial support for Mayor Angel Taveras’s plan to freeze the commercial real estate tax for seven years, but said they would seek more details before fully endorsing the proposal.

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By Dan McGowan

PROVIDENCE, R.I. (WPRI) – House Speaker Gordon Fox on Wednesday said state lawmakers have not seen a specific proposal detailing the amount of historic tax credits that will be needed to convert Providence’s “Superman building” into apartments.

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• Related: Tens of millions in tax credits sought for ‘Superman’ building (March 5)

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Rhode Island’s capital city would freeze its commercial real estate tax for seven years, offer incentives for developers to build on surface parking lots and redevelop the Kennedy Plaza bus hub under an economic development action plan unveiled Wednesday by Mayor Angel Taveras.

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• PDF: Read Mayor Taveras’s economic-development plan for Providence

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – A coalition of political progressives and labor leaders renewed their uphill battle to raise affluent Rhode Islanders’ taxes on Tuesday – but they ran into immediate opposition from Senate President M. Teresa Paiva Weed.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Senate leaders led by Senate President M. Teresa Paiva Weed unveiled a wide-ranging package of 25 legislative proposals on Tuesday that the Newport Democrat and her colleagues argue will improve Rhode Island’s anemic economy.

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• Related: Paiva Weed offers her take on turning around the RI economy (Jan. 15)

As you may have heard, Governor Chafee opposed the 38 Studios deal.

After Curt Schilling’s game company collapsed into bankruptcy last spring, Chafee asked for the resignations of every R.I. Economic Development Corporation board member who voted in 2010 to approve the company’s $75 million taxpayer-guaranteed loan.

Nearly all the members complied in one way or another, with one noteworthy exception: George Nee, president of the Rhode Island AFL-CIO and the leading voice of organized labor in the state. Nee didn’t resign and continued to attend board meetings despite Chafee’s request.

And on Thursday it was Nee – not Chafee – who got the last word: the governor just nominated the union leader for another term on the struggling board, along with four other new members.

(more…)

​By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s unemployment rate inched down in January to the lowest level in four years as the state’s work force continued to shrink, new data released Thursday shows, but employers in the state added jobs for the third straight month.

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• Related: RI has lost 10% of its prime working-age population since 2006 (March 4)

Rhode Island’s unemployment rate was the highest in the United States in December, and it would have been even higher if tens of thousands of residents in the prime of their working lives hadn’t decided to leave the state during and after the Great Recession.

One of the alternative ways economists check the health of the job market is by looking at the employment status of “prime-age” adults – defined as those between the ages of 25 and 54. Those are the years when most people are focusing on their careers, raising families and saving for retirement. Looking specifically at 25- to 54-year-olds also allows analysts to look past changes caused by demographic shifts as the baby boomers age.

The prime-age numbers for Rhode Island are striking and worrying: excluding soldiers and institutionalized individuals, the state’s civilian population ages 25-54 plunged by 46,000 between 2006 and 2012, a drop of 10% in just six years, according to the Bureau of Labor Statistics. Among those who remained, the share with a job dropped by 16% and the number of unemployed more than doubled.

Here’s a chart:

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By Ted Nesi and Carl Sisson

PROVIDENCE, R.I. (WPRI) – The troubled R.I. Economic Development Corporation is losing three more board members less than a year after its taxpayer-guaranteed loan to Curt Schilling’s 38 Studios fell apart.

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​By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s economy is being held back by problems that include relatively high taxes, a maze of regulations, too many dropouts and a lack of funding for startups, according to a new study commissioned by the Chafee administration.

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• Related: Read the full Fourth Economy Consulting study of Rhode Island (PDF)

Rhode Islanders pay a significant premium to live here.

The cost of living in the Providence metropolitan area was 23% higher than the national average last year, according to the latest index from the Center for Regional Economic Competitiveness. That made Providence the 25th-most expensive U.S. jurisdiction out of about 300 examined by the Virginia-based research group, data provided to WPRI.com shows.

The country’s most expensive places were Manhattan (125% above average), Brooklyn (79%), Honolulu (67%), San Francisco (63%) and San Jose (57%); the cheapest were Harlingen, Texas, and Norman, Okla. The costliest metropolitan area in New England was Bridgeport (46% above average), followed by Boston (40%), New Haven (28%), Hartford (24%) and Providence.

Here’s how the Center’s Dean Frutiger describes its methodology:

The composite index numbers is composed of the six individual component categories, groceries, housing, utilities, transportation, medical care, and miscellaneous. Each of the categories has a weight attached to it, respectively, 13.56, 27.02, 10.30, 12.35, 4.60, and 32.17. These numbers represent the percent of average annual income spent in those categories by a professional/managerial household. The composite index number therefore, is composed of 13.56% of the grocery index, 27.02% of the housing index, etc.

Housing is the category where Providence-area residents pay the biggest premium, 32% more than the national average. They also pay 29% more for miscellaneous goods, 27% more for utilities and 17% more for health care, but only 5% more for transportation.

Metro Providence’s high costs were a big topic recently on Executive Suite with urban expert Aaron Renn. (more…)

​By Ted Nesi

SMITHFIELD, R.I. (WPRI) – Drug manufacturer Alexion Pharmaceuticals is criticizing Governor Chafee’s proposal to sharply reduce the generosity of a tax credit he offered them just three months ago in exchange for agreeing to keep jobs in the state.

• Related: CVS reviewing Chafee push to cut tax credit worth $15 million (Jan. 17)

CVS Caremark is holding its fire on Governor Chafee’s budget – for now.

The governor on Wednesday proposed reducing Rhode Island’s corporate tax rate from 9% to 7% over three years, and paying for it partly by cutting in half the value of Jobs Development Act tax credits – the vast majority of which benefit Woonsocket-based CVS, to the tune of more than $15 million in fiscal 2011-12 alone.

“We will be reviewing all of the elements of the governor’s budget proposal and look forward to continue making significant contributions to Rhode Island’s economy,” CVS spokesman Mike DeAngelis told WPRI.com on Thursday.

“CVS Caremark shares Governor Chafee’s commitment to improving and growing Rhode Island’s economy and we applaud his focus on job creation and a competitive corporate tax rate,” he said.

(more…)

Never led it be said that House Speaker Gordon Fox isn’t open to suggestions.

After Fox read a WPRI.com post suggesting that the House of Representatives’ economic summit on Thursday should have included someone who understands startup companies, the speaker agreed – and invited Owen Johnson, co-founder of startup accelerator Betaspring, to join the list of speakers.

House spokesman Larry Berman said the lack of startup representation was “inadvertent.”

“When it was pointed out to us that there was no startup, Speaker Fox said immediately that was an oversight – we really need to hear the perspective of a startup company, to see the hurdles that are necessary to start businesses – because we want to attract more businesses – so it’s important to get that perspective from startups,” Berman said.

Johnson will speak on the first panel. The economic summit is Thursday at Rhode Island College.

• Related: Few from private sector invited to RI House economic summit (Jan. 11)

​By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Rhode Island’s 11 higher-education institutions are combining forces to launch a new College and University Research Collaborative that will help state leaders understand what ails the local economy and what could help fix it.

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• Related: Two must-read articles about economic development and RI​ (Jan. 15)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Senate President M. Teresa Paiva Weed on Tuesday pledged to spend the next few months pushing policies to improve Rhode Island’s economy as state leaders continue to grapple with its disappointing failure to recover from the recession.

“It’s not easy to come before you today and say we have not done as good a job as we should have in some of these areas,” Paiva Weed, D-Newport, told reporters during a State House news conference.

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• Related: Read the Senate president’s ‘Moving the Needle’ report (PDF)