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Senate Passes Overhaul of Economic Development Agencies

April 8, 2010

BOSTON – The Senate on Thursday passed a major overhaul of the state’s network of agencies charged with developing business interests and activity in Massachusetts. The legislation creates a streamlined, cohesive model with built-in oversight and transparency measures to reduce redundancy and waste, and promote a more business-friendly environment that will ultimately help stimulate job growth in the Commonwealth.

“It’s time to tighten up this model and get a real sense of direction in terms of business development here in Massachusetts,” Senate President Therese Murray (D-Plymouth) said. “Most of our agencies do a great job, but the current model isn’t working. We need to get lean, improve communication, and start growing businesses, creating jobs and building a stronger Commonwealth. That’s what this legislation does. We’re proud of it.”

“This bill brings bold and innovative change to the way that we do business in Massachusetts to ensure that we can compete nationally and globally as well as keep and grow jobs here in the state,” said Senator Karen Spilka (D-Ashland), co-author of the bill. “This legislation offers tangible assistance to businesses now so they can get people back to work. In the long term, by streamlining and clearly focusing our economic development activities, we will increase taxpayers’ return on investment.”

The legislation creates a ‘one-stop shop’ for businesses seeking to expand or locate in Massachusetts by requiring the existing Massachusetts Office of Business Development (MOBD) to contract with regionally-based economic development organizations.

These private organizations would act as the primary contact for businesses seeking assistance from the state and perform business prospect management services on behalf of the Commonwealth. MOBD would oversee the efforts of these organizations, provide leads, and share information about state programs and services.

The goal is to increase competition among regions for new business to ensure businesses find the best fit in Massachusetts. With MOBD and the regional organizations providing clear direction for accessing economic development services, there will be less confusion about how to access technical assistance, grant and loan programs, and expansion support.

The legislation also increases accountability, communication and oversight of state agencies, quasi-publics and state contracts with private organizations engaged in economic development activities. It requires every Governor to publish a written economic development policy by December 31 of the year he or she is elected to help the Commonwealth strategically assess economic development goals over the long-term.

The bill further requires the Secretary of Housing and Economic Development to act as chair of the boards of all state authorities engaged in economic development and business assistance activities. Those authorities will also be subject to performance management reviews that take into account both output measures, such as the average length of time to return a call, and outcome measures, such as the number of jobs retained. 

All organizations involved in economic development activities, including quasi-public authorities, will be required to submit annual reports to the Secretary of Housing and Economic Development and publish audited financial statements.

“We applaud the Senate for the creation of this legislation, in particular, for the new Mass Growth Capital Corporation – an initiative that both the Patrick Administration and the Senate drafted as a part of their bills and one that is key to supporting small businesses with capital and advice in a streamlined, efficient manner,” Secretary of Housing and Economic Development Greg Bialecki said. “This critical legislation will also allow economic development, tourism, trade and marketing efforts to be coordinated throughout the Commonwealth.”

The legislation merges organizations tasked with marketing the state nationally and internationally, including the Massachusetts Office of Travel & Tourism, into the newly-created Massachusetts Marketing Partnership.

The Partnership will serve as a central marketing organization for the entire state and will be charged with increasing the Commonwealth’s efforts in the areas of tourism and international trade. The Massachusetts Film Office and the Massachusetts Sports Partnership will also be included.

Through the creation of the Massachusetts Growth Capital Corporation, a larger number of small businesses will gain access to working capital so that they can continue to grow even in times of tight credit. The legislation also consolidates the Economic Stabilization Trust, which provides financial assistance and consulting to struggling businesses, with the existing Community Development Finance Corporation, further streamlining state assistance to small businesses.

To assist new small business in getting off the ground, the bill establishes a program of direct expertise for small businesses through the Growth Capital Corporation. For those small companies that receive financial assistance from the state, finance and management consulting will be mandatory to help keep companies afloat and prevent job losses.

The legislation also requires an economic impact statement to be filed by administrative agencies planning to adopt new regulations that details the cost of the proposed regulations to small businesses before public hearings on those regulations.

Additionally, it requires a rolling review of regulations to identify and modify those which prove too costly. Low-cost access to small claims court is also improved by raising the limit on filings from $2,000, where it has been for many years, to $7,000.

The bill expands the state pension fund’s investment authority by creating a $25-50 million credit program to support lending to fast-growing small businesses in Massachusetts. It also promotes beneficial competition for the issuance of tax-exempt bonds by non-profit institutions by providing parallel authorization to both MassDevelopment and the Massachusetts Health Educational Facilities Authority.

Further streamlining the state’s approach to economic development, the Department of Business Development is eliminated within the Executive Office of Housing and Economic Development, allowing MOBD a direct reporting line to the Secretary.

Several other agencies, including the independent Massachusetts Sports and Entertainment Commission and the Massachusetts Industrial Development Authority, are eliminated, with an estimated savings to taxpayers of $1 million a year.

Finally, to ensure that all state agencies and authorities in the Commonwealth stay true to their stated mission and goals, and to avoid waste and ineffectiveness in the future, the bill establishes a Sunset Commission to conduct regular reviews and analysis – a measure supported by the Associated Industries of Massachusetts.

The commission would consider the continuing need for agencies and authorities in state government, based on their performance, and assign “sunset” dates, or elimination, for any that are found to be unnecessary.

Other provisions of the bill include:

  • Prohibiting the use of state funds to pay for registered lobbyists;
  • Providing a three-year permit extension for development projects struggling with tight credit conditions; and,
  • Calling for a study of business energy costs, as well as a study to determine the feasibility of a state-owned bank.

The bill now goes to the House of Representatives.

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