By Timothy C. Barmann
Journal Staff Writer

When the General Assembly considered repealing a tax credit that reimbursed a small-business owner for certain loan fees, no one from the business community came to testify against the proposal. 

The tax credit was eliminated in 2005, and that change led to in a sharp decline in loans made to small businesses, according to the U.S. Small Business Administration.   That example was raised yesterday at the 2007 Rhode Island Economic Summit to illustrate how better communication was needed between the small-business community and elected officials.

Yesterday's summit, sponsored by Johnson & Wales University's Small Business Development Center, and the SBA, was the official first step in improving the lines of communication.   "This is the first time we've ever done this," said Mark S. Hayward, district director for the SBA. The purpose was to develop a dialogue where issues are brought to the table, he said.   The event was held at Johnson & Wales' Harborside Campus, in Providence.
The 147 small businesses represented had the ear of the state's top elected officials. The summit was attended by Governor Carcieri, Senate President Joseph A. Montalbano, Senate Majority Leader M. Teresa Paiva Weed, House Finance Chairman Steven M. Costantino and House Corporations Committee Chairman Brian P. Kennedy.

The purpose of the summit was to form a package of proposed bills to be submitted to the General Assembly that would address areas of concern for the small-business community. The goal, the SBA said, was to have participants design and approve a legislative package by Feb. 1.   Yesterday's discussions focused on four core issues: health-care costs; taxes; regulations; and education and workforce development.

The cost to provide health-care benefits to employees is going up at a rate of about 12 percent a year, said Anthony Gemma, owner of Gem Plumbing and Heating, of Lincoln. At that rate, costs will double in four to five years, he said.
Eliminating health-care benefits to cut costs is not an option for Mercury Print and Mail, said Stephen Cronin, the company owner.

"We have to offer benefits like this" in order to attract and keep talented employees, he said. But with the continuing run-up in costs, "it's more difficult to find the funds to offer that kind of benefit for our staff."   Cronin said he was establishing a "wellness" program for his employees, designed to help them stay in shape and eat nutritious foods. He said he was working with Blue Cross & Blue Shield of Rhode Island to find a nutritionist and personal trainer to help design the program. It only makes sense, Cronin said, that healthier people spend less on health care, and that should lead to lower costs, he said.

There were discussions about using some of the cigarette-tax money the state collects to provide incentives to companies that offer such wellness programs, Hayward said.   A panel group that discussed regulation issues highlighted some of the costs of the recently tightened fire-safety codes, and how those costs are burdensome for some small companies, particularly those in the hospitality industry, Hayward said. Some participants proposed taking another look at those regulations to see if they can be made less onerous without compromising safety, he said.

Another breakout session discussed the importance of work-force education and training. One issue that arose was the need to protect the funds set aside for the Job Development Fund. That money, Hayward said, has been shifted by the General Assembly to other uses.  As far as tax credits, some summit attendees said it was important to reinstate the credit, established in 1994, that benefited small-business owners who needed to borrow money for working capital. Borrowing through the SBA required the companies to pay a guarantee fee of 2 percent, or more, of the loan amount, Hayward said. The tax credit allowed the businesses to recoup that fee.

When the credit was eliminated at the start of 2005, the number of loans dropped noticeably, he said. Last year, there were only 819 loans made, for a total of $100 million. That was down from 1,123 loans for a total of $106 million, in 2004, when the tax credit was still in effect.   Gemma said he was optimistic about meetings, such as yesterday's summit, and how they could eventually help small businesses.