RI tackles red tape in the name of job creation

If Rhode Island's 39 cities and towns are anything, they are fiercely independent — right down to the point where each and every one has its own rules for setting up party tents.

That can make life — and business — difficult for William Corcoran, who owns a tent company. Half of the 2,000 events he does a year are in Rhode Island, where he might be sent from a building department to a police department to a fire department and back again to get the proper permit.

Not long ago, he was told it was necessary to appear before the planning board in Warwick to get the green light to erect a tent — for three days — for a dog show.

"A lot of my time is spent not putting up tents but dealing with the regulatory process," said Corcoran, whose firm, Newport Tent Co., has been in business for 40 years. "It's bad enough we have to fight the wind and the rain. We don't have to fight City Hall."

For small business owners, the backbone of the economy in Rhode Island and in states across the country, red tape means more than just frustration. Figuring out complex rules, much less complying with them, costs time, and time costs money. The Small Business Administration estimates that federal regulations cost the economy $1.75 trillion a year — which says nothing of those that states impose themselves.

Last year, the General Assembly approved a package of bills aimed at making it easier for firms to do business here. And former Gov. Donald Carcieri signed an executive order establishing an office whose aim is to improve regulatory procedures — and help businesses navigate them.

"We were hearing a consistent outcry that we need to do a better job of streamlining our system," said Keith Stokes, executive director of the Rhode Island Economic Development Corporation. "Small businesses were just lost out there."

Rhode Island, which has the third-highest unemployment rate in the country at 10.9 percent and is adding new jobs at a glacial pace, has something of a reputation when it comes to business climate. And it's not good.

The cable business news network CNBC last month ranked Rhode Island No. 50 — dead last — in its annual state-by-state survey of the best places to do business. Virginia came out on top; Alaska was just ahead of Rhode Island in 49th place.

Rhode Island performed poorly in half of the 10 categories, including the cost of doing business, overall economy, business friendliness, cost of living and infrastructure and transportation.

That can keep companies from moving here in the first place, or hinder their growth once they're here. An effort this year by Gov. Lincoln Chafee to gradually reduce the corporate tax rate from 9 percent to 7.5 percent was dropped. The change would have put Rhode Island on par with Connecticut and ahead of Massachusetts, which has a rate of 8.25 percent.

Leonard Lardaro, a professor of economics at the University of Rhode Island, said that calling the state's regulations draconian would be an understatement. They're not consistent, he said, and they're not necessarily up to date.

"In total, they're onerous," he said.

As the smallest state in the U.S., he and others point out, Rhode Island should be nimble — a model of efficiency.

The state legislation passed last year provided, among other things, for concurrent review of permit applications by multiple agencies so the process doesn't drag on for months; took steps to smooth implementation and enforcement of a fire code that business owners describe as a nightmare; and set aside funding to develop a statewide master business application.

Rhode Island also created an office of regulatory reform, including a position now filled by Sherri Lynn Carrera. As the state's small business ombudsman, it is her full-time job to deal with other people's headaches and complaints. In short, she wrestles with red tape.

One firm she worked with was Stat-SouthCoast EMS, of Dartmouth, Mass., an ambulance company seeking to expand into Rhode Island. The company applied in May 2010 to the Department of Health for an ambulance license and was told it wouldn't be reviewed until August, said Mark Haskell, director of corporate development. Carrera cited a staff shortage.

Later, when the company tried to register its vehicles at the Department of Motor Vehicles, it couldn't because its leasing company did not have a license to do business in the state. So Stat-SouthCoast ended up purchasing two other vehicles, at an unexpected cost of about $130,000, Haskell said.

Later still, the company learned that ambulances in Rhode Island are required to have a special safety modification on the rear — a requirement no other state has. Technically, modifying the vehicles in this way voids the warranty, Haskell said, but he made the adjustment anyway. (Carrera said the requirement is being phased out.)

All told, the delays cost the company a lease on an office space, pushed back their hiring of 12 workers and meant several months of lost income.

Carrera met at least eight times with company officials — who nearly decided to walk away from Rhode Island — and helped resolve the issues over five months. The company has been now up and running in Newport.

"Our heads were spinning," said Haskell.

Karl Wadensten, who sits on the Economic Development Corporation board of directors, is heading the board's effort on regulatory reform. Wadensten, who owns a business in Richmond, R.I., that sells industrial vibrators and is a devotee of the "lean business" philosophy, says there's no more pressing issue in a state that desperately needs to create jobs.

But he says it's going to require a cultural shift — perhaps the hardest type of change. State agencies and municipalities aren't used to seeing small businesses as customers.

"This is so complex and so convoluted, this process, they don't realize that without speeding it up people are delayed in getting employed."

Corcoran, of the tent company, said he doesn't so much object to the cost of permits and licenses. It's the inefficiency that bogs him down: keeping straight, for instance, which jurisdiction wants fire extinguishers posted on the center of the tent poles, and which wants them at the exits.

"It's time that you can't be doing other things, like marketing or servicing your customers," he said. "So it's diminishing your ability to grow your business."