SHEFFIELD INCUBATOR A BIG RISK TO TAXPAYERS

It was truly an embarrassing week for Newport. Our sole event center was ripped from the heart of the downtown leaving a huge dent in the economy. The Newport City Council was in damage control mode changing the topic from the loss of jobs and world class events held at the now defunct Newport Yachting Center to the hopes and dreams seen in the Sheffield Incubator. Accompanying the announcement of rehabbing the old elementary school was thunderous back-patting and chest pounding from all Council Members.

What is the Sheffield Incubator?

The Sheffield Incubator is a plan to use $1.6 mil of federal money plus $1.6 mil of City of Newport money, to transform Sheffield into small office spaces, a café and conference room. The Sheffield Incubator will be a success if it is able to fill some of the office space with new small businesses that are either created or that move to the area, paying for the cost of the operation of the building by paying rent and expanding Newport’s tax base.

What benefits will the Sheffield Incubator Offer?

A start-up business (think one to two people) can lease a small office space or a cubicle which includes all the benefits of a large office: think shared conference room, printer, copier, internet, etc. Sharing the costs with other tenants lowers the overhead for everyone. The concept appears to be focused towards defense contractors and technology companies.

Challenging the Sheffield Incubator:

Co-working office spaces are not new. Co-working spaces have cropped-up around the country to varying degrees of success. The primary factor of whether a co-working space is successful depends on the cost of office space where it is located. In high cost markets like San Francisco, Boston and New York, co-working seems to break even. In areas where commercial office space is relatively inexpensive, co-working seems less successful. Last year Birmingham Alabama had three co-working buildings go out of business due the high percentage of start-ups that fail and a lot of tenants who kick the tire but never take the bait (APM Marketplace). Despite having an expensive residential real estate market, Newport has a very inexpensive commercial office space market. A tenant in Newport can find an office downtown for as little as $350.00 per month.

Another issue is the idea that the Sheffield Incubator will cater to defense contractors. The problem is that all defense contractors must meet strict security guidelines for both physical access and communication. To cater to defense contractors the Sheffield Incubator would have to offer expensive security measures, unlikely to be affordable on its current budget.

Co-working spaces compete with free public libraries, homes, and coffee shops which Newport has an abundance of.

The Sheffield Incubator will not negate the negative economic and business climate of Newport and Rhode Island.

What good is a cheap office when it costs half a million dollars to buy a small 3 bedroom house in need of work on Kay Boulevard? Why would an entrepreneurial family move to Newport when the only viable school is private and costs upwards of $30k per year? How does Newport compete with expensive utilities, complicated regulations, high income taxes and a $500.00 a year tax on limited liability companies?

The City Council would be wise to listen to the voices of Alex and Kristen Lanio, who relocated their small business from Newport to McKinney, Texas. Raytheon just moved 3,600 jobs to the same Texas city. McKinney Texas was cited by Money magazine as the best small city to live in the United States. Underlying McKinney’s growth and success is a strong public school system that focuses on AP courses and preparing students for college. According to US News, 50.5% of McKinney HS students are ready for college whereas only 17% of Rogers students are ready. McKinney is ranked the 413th best high school in the US. Rogers is not ranked. McKinney spends $8k per student, Newport spends $19k. McKinney like Rogers has a high percentage of economically disadvantaged students.

My Opinion: Instead of pretending to be real estate investors, the City Council should roll-up their sleeves and start making difficult decisions to make Newport more competitive with the rest of the country.