Raleigh business incubator falls short of goals, can’t document jobs

ccampbell@newsobserver.comAugust 10, 2013 

— Thirteen years after its opening was hailed as something that “all of Raleigh” would benefit from, the Raleigh Business and Technology Center has fallen short on many of its stated goals and failed to document progress on others.

The center’s contract with the city, which had been renewed annually until it was revoked in June, offered a series of annual goals: 100 small businesses served through various programs, 50 people placed in jobs, 20 new jobs created, 30 business plans developed and $2 million in service contracts obtained.

City auditors, however, had trouble finding records to show how the center performed on those measurements. The center, they wrote, “does not collect sufficient information ... to show the effect of their programs. The success or failure of any one line of service or program cannot be identified.”

A quarterly report written by center director Bob Robinson last year listed many of the annual goals completed in a three-month period – using the exact target number listed in the contract. No supporting documentation was provided.

Here’s how some of the center’s key services measured up:

Cheap office space

The incubator building includes about 30 small office suites, rented out at below market rates. Tenants paid $1.50 per month per square foot; the downtown Raleigh average, by contrast, is $23.76 per square foot.

The idea is that minority-owned startup businesses can get cheap office space for their first several years before moving on to a traditional office complex. But records show the current roster of tenants doesn’t always follow that model.

As of March, the center had 18 tenants. Two of them had been there for nearly a decade. Four had contracts to provide services to the incubator programs. One was a religious organization, the International Alliance of Bishops. And Johns Hopkins University, one of the country’s leading research universities, rented two offices for a public health study.

Another tenant, Marcus Properties, is a local branch of a Las Vegas-based construction and residential management firm. Tim Washington is the local manager; his wife, Pamela, has her own business headquartered down the hall. She says her IT firm, FYI Technologies, has benefited from numerous incubator programs.

“We’ve worked with their business plan (assistance); we’ve taken some blueprint reading courses,” Pamela Washington said. “The biggest thing is the location and the costs. It’s hard to get a good quality central location for the price.”

Other current tenants, however, were hesitant to credit their success to the center. “I think that was just self-marketing,” said John Johnston, who employs 12 people at his IT firm, J2 & Associates.

Center leaders refused to provide auditors with a list of former tenants. N.C. Secretary of State business records show two entities registered to Robinson had space at the building in years past: Fan Fashions LLC and Texas-based Healthy Resources Enterprise.

Small-business loans

The center offers a revolving loan pool of $500,000 to small businesses that don’t qualify for traditional bank lending. Center employee Dan Calloway, who oversees the program, said nine borrowers are currently in the program. But he declined to name them, citing the program’s confidentiality rules.

The loan pool was funded by the U.S. Department of Agriculture’s Rural Development division. The agency awarded the center an additional $400,000 in 2007, but it couldn’t meet the matching funds requirement. Calloway says that’s because Robinson pulled money out of the original loan pool, and he’s not sure where it went.

Weekly business classes

The center often touts its Pacesetters program, a 10-month series of free weekly classes for business owners and others looking to start a firm. Much of Raleigh’s contribution goes toward funding the program, which is operated by a business trainer based in South Carolina. A center tenant interviews and selects about 25 participants each year. The program cost $106,000 last year, though only $22,995 of that went to the instructor – much of the rest went to accounting, a share of Robinson’s salary and an awards banquet.

Pacesetters aren’t required to provide the center information about their revenues, number of employees and other data that could help track the success of the program.

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