WARWICK, R.I. (WPRI) — Gov. Dan McKee is pointing the finger at the Federal Reserve as multiple high-profile development projects in Rhode Island run into trouble, arguing that monetary policy is hurting the state.
The governor spent the past week meeting with other governors and union leaders, and said Tuesday he’s now drafting a letter to the central bank asking Fed Chairman Jerome Powell and his colleagues to stop raising interest rates.
“We’re going to be calling on the Federal Reserve and hope that other governors will join in,” McKee, a Democrat, told reporters as he took questions about money problems at the massive Tidewater Landing soccer stadium project in Pawtucket.
“I was on a call with the National Governors Association last week right after I mentioned that I’d questioned what was happening on the Federal Reserve and we’re going to call on them to make it known that they’re done with raising and they’re going to start lowering,” he added.
The Fed has been raising interest rates rapidly in an effort to battle record-high inflation, which has been stubbornly high for more than a year. Consumer prices were up 6% in February compared with a year earlier, still triple the Fed’s annual target of 2% despite the rate hikes.
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McKee’s frustration with the central bank comes as local developers are complaining about the rising cost of borrowing money for construction projects. In Rhode Island, Tidewater developer Fortuitous Partners hasn’t secured enough capital for the soccer stadium project, causing the city to hold off on issuing $27 million in bonds to help pay for construction.
Superman building developer High Rock Development is signaling they could need more taxpayer money to rehabilitate the state’s tallest building in Providence. And the Warwick school district is hitting similar problems while attempting to build new high schools.
“A number of factors have changed since November, such as higher interest rates, banking concerns and continued inflation,” Warwick City Council President Steve McAllister said in a statement Sunday.
The raising rates has spurred backlash from some Democrats, including Massachusetts Sen. Elizabeth Warren, who warned last week the monetary policy could hurt working-class Americans. But President Joe Biden and most congressional Democrats have stood by Powell so far, fearing the long-term impacts of high inflation.
In Rhode Island, McKee’s concerns sound closer to Warren’s, as the Cumberland Democrat argues the Federal Reserve is trying to send people into unemployment.
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McKee echoed Warren, criticizing the central bank for a policy that will cause more unemployment. (By raising interest rates and making it more expensive to borrow money, the Fed hopes to slow the economy, lowering inflation by reducing business activity.)
“They’re concerned that there’s two jobs for every worker,” McKee said Tuesday. “They want to reverse that. They want to have two people looking for one job and send 10 people to the unemployment line, and we just can’t be quiet about that.”
Speaking after an event in Warwick, the governor said he drove by real estate on his way where prices had come down and filling stations where gas was less than $3 per gallon. (AAA reported Monday the average gallon of gas in Rhode Island cost $3.24 per gallon.)
“What are we fighting for, and what is the damage that we could have?” McKee asked. “It’s a serious, serious problem that the Fed is causing now to our whole community.”
The comments evoked pushback from former R.I. Department of Administration director Gary Sasse, a longtime critic of the Tidewater project, who called McKee’s criticism “so misplaced.”
“He has supported federal fiscal and monetary policies that have contributed to the current capital project financing,” Sasse said. “He can’t have it both ways: advocating for more federal spending which contributed to runaway inflation, and complaining when the Fed is trying to control inflation.”
The governor has been a champion of both the Superman redevelopment project and the Tidewater Landing soccer stadium, and touted both developments repeatedly during his successful gubernatorial campaign last year.
Last summer, McKee cast the tie-breaking vote in a controversial move to shift millions in state money away from a future phase of the Tidewater project focused on housing to help pay for the stadium itself. The developer was facing similar financial problems tied to inflation and interest rates at the time.
It’s currently unclear how much more taxpayer money the Superman building developer might seek, or what the timeline will be for the Tidewater developer to secure its financing. McKee expressed confidence that both projects will stay on track, and ultimately be successful.
But he offered a warning to the Federal Reserve.
“I’m here to tell you that pain is coming in many different ways unless they start to signal that they’re going to lower interest rates,” he said.
Eli Sherman (email@example.com) is a Target 12 investigative reporter for 12 News. Connect with him on Twitter and on Facebook.