Carney to eliminate DEDO under new economic development plan

The state agency tasked with attracting new companies to Delaware is going out of business.

Gov. John Carney says he plans to dissolve the 35-year-old Delaware Economic Development Office after shifting most of its functions to a new public-private partnership run by some of the state's largest companies – a move that will require approval from the General Assembly.

"The times are different, and the economy is different," Carney said Tuesday in an exclusive interview with The News Journal. "We need to do things different, be more aggressive and cultivate small entrepreneurial businesses because that's where the future is."

Carney's proposal to eliminate the Cabinet-level office is a new wrinkle in a broader plan to reform the state's economic development efforts – a "reset" recommended by both the Delaware Business Roundtable and a 15-member working group the governor created on his first day in office.

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In a report released in April, the working group called on Carney to hand many of DEDO's functions over to the Delaware Prosperity Partnership, a new nonprofit that would be jointly funded by the state and private enterprise.

The partnership would provide a range of economic development services, including the recruitment of new employers, support for the state's nascent startup community, investment in workforce development programs and other initiatives that target high growth sectors.

Perhaps most importantly, the new entity also would be tasked with vetting and endorsing companies seeking funding from the state's Strategic Fund, which provides state taxpayer grants and loans to businesses as incentives for businesses to move or stay in Delaware.

Carney on Wednesday will formally announce his plan to turn the working group's recommendations into reality.

"We're very pleased the governor took our report seriously," said Rod Ward, chief executive officer of Corporation Services Co. and co-chair of the working group. "We feel very strongly that a collaborative, active partnership between the private and public sector can more effectively build Delaware's economy than either side could alone."

The road to creating that public-private partnership will begin with job cuts, however.

Carney's proposal calls for the state to pony up $2 million a year to the partnership's operating budget with another $1 million supplied by the business community – largely in the form of membership fees paid by companies that want a seat on the nonprofit's board.

Under the governor's plan, the financially strapped state would generate its annual contribution by eliminating 19 of the 42 positions at DEDO, which this year is funded to the tune of $2.9 million. In the first year, that money would come directly from the Strategic Fund.

The remaining employees would be folded into a new agency under the Delaware Department of State to be named the Division of Small Business Development and Tourism.

DEDO employees reportedly were informed of the governor's plans on Tuesday. But exactly which positions would be eliminated – and when – have not been announced.

"These are conversations we'll be having with the General Assembly in the coming weeks," Carney spokesman Jon Starkey said.

Impacted DEDO employees will be able to apply for a job at the new partnership, given opportunities for other positions in state government or offered assistance to find work in the private sector, he added.

But before any of that can happen, Carney will need state legislators to authorize funding for the DPP and approve the proposed elimination of DEDO. The governor said he expects legislation to do just that will be introduced in the coming weeks.

Carney unveiled his plans to several key legislators during a brief conversation on Tuesday. The effort, he admitted, will take careful coordination to establish and fund one organization while defunding and dissolving another.

State Rep. Bryon Short, D-Highland Woods, who chairs the House Economic Development Committee and served on the governor's working group, said he is encouraged by the proposal.

"I think the governor is trying to ensure our approach to economic development is forward looking," he said. "To do that, you have to be open-minded. That includes asking whether an agency should be Cabinet level or whether it would be more effective to restructure the government and try something new."

State Sen. David Lawson, R-Marydel, called Carney's plan "a good start."

"I think getting rid of government regulation is what would really allow jobs to flourish," said Lawson, who serves on the Senate Finance Committee.

"But I was never in favor of DEDO most of the time," he said. "Fisker and Bloom have been boondoggles and a huge loss to taxpayers."

Lawson was referring the two of the most frequently cited examples that DEDO critics use to point out the agency's missteps under then-Gov. Jack Markell.

The most notable failure under Carney's predecessor came when Fisker Automotive pocketed $21.5 million in taxpayer funds before filing for bankruptcy protection in late 2013 without creating any of the 2,500 jobs promised at the former General Motors plant near Newport.

Newark fuel cell maker Bloom Energy also has consistently missed hiring targets set when it was approved for a $16.5 million taxpayer-funded grant in 2012.

Others have resulted in wins for the state, such as the $42 million in grants and loans DEDO gave to PBF Energy for the restart of the Delaware City refinery, which today employs about 550 workers. Nearly $11 million in incentives for JPMorgan Chase & Co. also helped convince the bank to bring 1,800 new jobs and $200 million in new construction projects here by 2019.

Another $9.6 million awarded to DuPont Co. last year helped to convince company leaders to locate two of the three spinoff companies that will emerge from its pending merger with the Dow Chemical Co. And $7.9 million in taxpayer grants were used to keep the headquarters of DuPont spinout Chemours Co. in Wilmington.

The state's practice of dishing out those economic development incentives would continue under the proposed public-private partnership. 

The difference would be that companies seeking those allocations would be funneled to the state by the private-public partnership, rather than DEDO.

Governed by an executive director and a 15-member board mostly made up of business professionals, the new partnership is expected to have a better understanding than its predecessor of emerging markets, promising technology and the needs of startup business owners. 

"The criticism [of DEDO] has always been that small business has been overlooked," Carney said. "This was a good way, I thought, of having your cake and eating it, too."

He said the public-private partnership would be able to leverage more funds for economic development activity than the state could alone, while the new Division of Small Business Development and Tourism would be better able to focus on supporting women- and minority-owned businesses and attracting visitors to the First State.

State Sen Brian Pettyjohn, R-Georgetown, said he believes the model proposed by Carney also could help spread the benefits of economic development more evenly across the state.

"We can't have a solution that works for just New Castle County," he said. "I see this as a great opportunity for every area of the state from Greenville to Gumboro." 

Contact business reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.