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Tech Raiders Tout Divine Providence
Rhode Island Piles On the Incentives to Lure
Businesses From Its New England Neighbors



By Pamela Ferdinand
Special to The Washington Post
Saturday, April 1, 2000


PROVIDENCE, R.I.-Andrew Chi, a thirtysomething dot.com entrepreneur, knew a bargain when he saw one.

For less than half of what Chi and his associates were paying for office space in the seaside town of Marblehead, Mass., they could rent a comparably sized loft with hardwood floors and high ceilings in the historic jewelry district here. Throw in the proximity of Brown University and the arty Rhode Island School of Design, toss in a potpourri of tax incentives and grants, as eager Rhode Island officials did, and the deal became a no-brainer.

Faster than you can say "pahk your cahr," Orbidex.com, an Internet-based service for the art and antiques community, pulled out of Massachusetts and New Jersey in late March and opened shop here. "It didn't compare at all," Chi said. "For a small start-up like us, Massachusetts did not make any effort. The state of Rhode Island came pretty much knocking on our door."

At a time when economists and public policy experts suggest New England states should work as a region to compete with the rest of the country, the littlest state is trying to lure its neighbors' economic refugees over the border with increasingly aggressive tactics. State economic development officials are launching Web sites and rolling out the red carpet for prospective newcomers, wooing them with financial incentives, expansive tours and the personal attention that they say only a small community can afford.

Officials insist they are not aiming to put Massachusetts out of business. But by nipping at its heels, taking a bite out of Fidelity here and a piece of AAA there, the Ocean State has caused some to wonder if it is hurting the home team--not that the players were all that friendly in the first place.

Consider this: A conference in Boston last year on "The Future of New England" featured Mainers attacking Vermont for selling the New York Times in corner stores, Vermonters attacking New Hampshire for tolls and tax-free shopping, and Connecticut representatives chastising Vermont for not understanding the problems of large inner cities.

"Let me conclude by saying to my friend Mr. Douglas," a Connecticut state senator was quoted as saying to Vermont's state treasurer, "that Ben & Jerry's does not count as a street gang."

Orbidex.com is the fourth company to be snagged so far by Rhode Island's campaign to target businesses around Cambridge, Boston and Massachusetts's Route 128 high-tech corridor.

Both the National Governors' Association and the Fraternal Order of Police chose Rhode Island for upcoming annual conventions, and 1999 tourism revenue is expected to surpass the previous record of $2.5 billion. Business incentives range from a 22.5 percent research and development tax credit to low-interest loans for restaurants and artists. Bonuses already have enticed artists from Boston's Fort Point Channel community, which is under siege from that city's massive highway construction project.

"Many people are seeing that they will be pushed out, and they are leaving to get ahead of the game," said artist Stephen Sheffield, who lives in the neighborhood.

Such generous overtures do not come without risk. In 1992, Rhode Island lured a fledgling biotech company from Massachusetts with $30 million in state-backed bonds. The firm, which failed to receive federal approvals, defaulted on most of its loan.

The latest coups, which include relocations or expansions by Citizens Financial Group, CVS Corp. and Fleet Financial Group, appear sturdier. Mirror Image, a T-shirt printing business that won the Cambridge Chamber of Commerce's coveted Small Business of the Year award last year, came south. And AAA Southern New England selected Rhode Island for a regional operations center, even though it has far fewer members here than in Massachusetts. "The states were probably equally as helpful," said AAA spokesman Robert P. Murray, "but Providence was very aggressive."

Central to the recruitment strategy is "mass-exodus.com," a state-sponsored marketing campaign launched last July to lure high-tech and software companies from Boston and Cambridge. Hired hands wore T-shirts, handed out fliers and distributed coasters in trendy neighborhood bars. An enigmatic billboard facing Interstate 95 read simply, "mass-exodus.com, this is your exit."

One of those mass-exodus fliers landed in the hands of Robert Breslin, president of SailFirst.com, which sells boating equipment and services online and was looking to make a move. Now the start-up business pays a fraction of what it paid in Massachusetts--$3.50 per square foot versus $28--for eight times the space near a harbor in Bristol. It also received substantial tax relief and assistance from state officials.

"They were very helpful and frankly, that's what a small business needs," Breslin said. In Cambridge, "[we] were running out of money, and no one seemed to care. It's nice to be in a place where they really want you."

The two-month effort, which cost $110,000, resulted in tens of thousands of hits on a Web site whose images and propaganda can be fully accessed only by cyber sophisticates. The site features hip MTV-style headings such as "Unlike your parents, we actually understand what you do" and provides a laundry list of reasons any up-and-coming firm should move to Rhode Island, including "Home sweet, big, fat, half-the-price home." Another Internet site, to be launched in May, will promote real estate opportunities.

"It's almost a little signature that says we are on the cutting edge, and we know you are, too," said John Martin, spokesman for Rhode Island's Economic Development Corporation. "This was not a typical message by state guys in suits."

Whatever, shrugged Joyce Plotkin, president of the Massachusetts Software Council, an industry trade association. Massachusetts, home of the World Wide Web consortium, has 3,000 software companies with 138,000 employees and counting; Rhode Island has about 688 software companies employing 8,600.

Massachusetts has had 38 tax cuts in the last nine years, and private development in Boston reached $1.4 billion in the last fiscal year. Companies such as Siemens, 3Com, Nokia and Pfizer, among others, have all made significant local investments, and Massachusetts even launched its own technology Web site, advertising incentives.

"If you don't have what we have, you have to do other things, and I think that is what Rhode Island is doing," Plotkin said. "It just doesn't replicate or come close to what we have here."

"We wish Rhode Island well. We're not out to get them," cooed another Massachusetts official, before adding, "We hope that they're not out to get us."

Copyright 2000 The Washington Post Company


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