Providence Business News article

Author Thornton Wilder likened Newport to the nine cities of ancient Troy in his autobiographical novel, “Theophilus North,” set in 1926.

“Newport, Rhode Island, presented nine cities, some superimposed, some having very little relation with the others – variously beautiful, impressive, absurd, commonplace and one very nearly squalid,” he wrote.

Fast forward 90 years and his pre-Depression description could still be used today to describe parts of the coastal community, which in Wilder’s time had not yet seen the population boom fueled by the U.S. Navy’s presence on Aquidneck Island.

While the defense industry maintains a strong presence on the island, Newport and, to lesser degrees, its neighbors, Middletown and Portsmouth, are still feeling the social and economic effects of the Navy’s slow pullout of ships and personnel that began after World War II and accelerated in the 1970s.

Between 1970 and 2010, nearly one-quarter of Aquidneck Island’s population disappeared. Newport was hit hardest, losing 47.6 percent of its population between 1960 and 2010.

“Aquidneck Island is closely tied to the Navy,” said Arthur C. Mead, a University of Rhode Island economist. “But the Navy pulled out their ships and along with it thousands of military personnel.”

Island business and political leaders have spent the decades since the Navy pullout grappling with ways to diversify local industry beyond defense and seasonal tourism – and reverse a population decline projected to continue for decades more.

“No matter what great industry we have, if people can’t afford to live here it’s not going to be effective,” said Erin Donavan-Boyle, executive director of the Newport County Chamber of Commerce.

DEFENSE STILL RULES

During World War II, the Navy’s Torpedo Station in Newport employed more than 13,000 people. The Goat Island facility was only one of the Navy’s many local operations and manufactured 80 percent of the torpedoes used by the United States during the war, according to Naval Station Newport.

By 1971, six new ships had joined the country’s 151-ship cruiser-destroyer force, which was headquartered in Newport. Roughly 4,551 civilian employees and 18,540 military members were in the city.

By 1973, however, the Navy moved its command cruiser-destroyer force to Virginia and took along with it a lot of the Aquidneck Island population.

“It was not a pretty thing at that point in time,” said Mead. “Aquidneck Island got hammered.”

Navy personnel, then and now, have largely lived in Newport and Middletown, and to a lesser degree in Portsmouth. Their strong presence gave birth to new housing, retail stores, schools and businesses. From 1930-1970, Aquidneck Island’s population grew 130.9 percent to 76,373 people.

But by 1980, after the fleets relocated to Virginia, population on the island fell 20.5 percent to 60,732. Newport and Middletown realized significant population decline, while Portsmouth – the most rural community, located farthest from the base – maintained its population and has since grown its population.

“Portsmouth is more of a bedroom community,” explained Mead, adding that it benefits from its proximity to East Bay and Massachusetts communities.

The overall island, however, realized a steady drop in population, which by 2010 had fallen to 58,211. And the number of Aquidneck Island residents over the next three decades is expected to fall another 16.4 percent to 48,671, according to state projections.

Besides the Navy, which is still Newport’s largest employer with 8,340 civilian employees, 10 of the 16 largest defense contractors in Rhode Island and southeastern Massachusetts are located on Aquidneck Island, according to PBN research.

Raytheon IDS of Waltham, Mass., employs about 1,000 people in Portsmouth. In 2013, the company was the No. 3 contractor in the country, securing contract obligations with the federal government for about $12.8 million, according to a 2013 DOD report on contract spending.

But the defense industry has contracted in recent years, especially since the federal sequestration in 2013 triggered automatic funding cuts to defense, and contractors started losing some agreements with the U.S. Defense Department.

The cutbacks have forced many companies to reinvent the way they perform research and development projects. The DOD has increasingly looked for more opportunities to buy already-developed projects, rather than providing the money for research upfront.

“Direct contracts are less frequent,” Donavan-Boyle said. “I wouldn’t say that direct contracting is completely gone, but there has been a shift.”

Such shifts, which began decades ago, have made it clear to island businesses and political leaders that a more-diversified local economy was needed. The first move was to tap into the seaside amenities that led to Newport and its 19th-century mansions becoming identified with the opulence of the Gilded Age.

“When the fleet left, the city of Newport redesigned their whole waterfront and the industry of hospitality and tourism really started to grow,” said Donavan-Boyle.

TOURISM BOOM?

The sea and beaches have long been shining assets drawing people to the island for work and play. Extraordinary mansions dot the coastline and Newport – Aquidneck Island’s top tourist destination – retains the look and feel of a quintessential New England coastal town. The combination offers a unique window into the nation’s history that appeals to many visitors.

“People here can see the impact of what happened in the 1700s,” said Howard Newman, owner of Newport-based art-restoration company Newman Ltd.

Newport, population 24,672, each year attracts more than 3.5 million visitors, who bring outside dollars into the community, benefiting the island at-large.

“Beautiful beaches, natural resources, tourism overflow from Newport, close proximity to Boston and New York, and the ability to provide a variety of retail services to Aquidneck Island provides a fertile environment for the tourism industry,” according to Middletown’s 2014 comprehensive community plan.

Boutique retailers, restaurants and hotels have grown on the island at the same time entertainment-related activities have flourished. In 2014, Newport reported 20.8 percent of its workforce was employed in the tourism industry.

Add health care and social-service facilities such as Newport Hospital and the Maher Center to tourism, and that will account for nearly half of all employment in the city.

But the problem with relying on tourism in New England is that it is seasonal. And it doesn’t typically require high-skilled or highly compensated labor. This dynamic, especially in Newport, prices out a large segment of the labor force, making it difficult to own a home there. Newport’s median family income totals $61,320, according to census data, while the annual income needed to affordably purchase a median priced home is $104,750, according to the 2016 Housing Fact Book compiled by HousingWorksRI at Roger Williams University. While not as large, the same kind of gap exists in Middletown and Portsmouth.

Affordability, however, was one of the things that led Mead to move his family to Newport in the 1970s. He chose the city because of its beauty, but more importantly because it was something he could afford on his then-salary as a professor.

“You’d be hard-pressed to come in and live in Newport” today, he said.

Businesses that largely rely on wealthier residents and tourists, such as Newman Ltd., have helped reshape the character of the community in recent decades.

“Walk out onto Farewell Street and chances are there’s someone who runs a small business here in the neighborhood,” Newman said. “The Navy pulling out gave birth to a whole different kind of community.”

But the changes have not translated to job growth.

Newport lost 627 jobs between 2010 and 2014. And the cost-of-living realities are challenging for young, working professionals and families, which are increasingly taking over the workforce.

“By 2020, half of the workforce will be millennials, and … we’re slowly becoming a popular retirement area,” Donovan-Boyle said.

The median age on the island in 1980 was 28.7 years old, compared with 36.4 years old in 2010. Because of this, officials see an imminent need to diversify employment opportunities to once again attract young adults and families.

“The goal here is to reverse that trend,” said Paul Carroll, director of civic engagement for Newport. “As people age, you’re going to need that next generation and support system – a strong and healthy replacement – so you need to create an opportunity for people to come back and say, ‘Hey, I can make it here.’ ”

HOW TO DIVERSIFY?

Carroll sees opportunity in what he called “integrated resilience.” Take the challenges that exist right now, learn from best practices and try to capitalize on solutions, he explains.

“We have a chance to be a test case for innovation,” he said. “And anything we’re doing here not only benefits Newport and Aquidneck Island, but we see this as an opportunity for the entire state.”

The city has identified several shifting trends related to climate change, technology, economic opportunities and population. Newport, which is already about 90 percent built-out, doesn’t have much room for new development. But the city, dating back to at least 1997, has created master plans to redevelop its North End, identifying about 60 acres of land near the Pell Bridge, which it believes could become a so-called “resilience innovation hub.”

The swath of land would be transformed, Carroll says, to – among other things – focus on bolstering innovation related to climate change, ocean technologies, defense, cybersecurity, green infrastructure and digital industries.

“We’re setting the parameters around economic development, community development and job creation,” Carroll said.

The goal is to connect defense-related industries with the private sector to create new products, commerce and new jobs. The innovation hub would exist in concert with the city’s Innovate Newport project, a much-anticipated repurposing of the former Sheffield School to become a technology accelerator and flex space.

Innovate Newport – similar to the hub at-large – would focus on resilience-related technologies, products and design related to ocean engineering, defense and cybersecurity. The project has been underway for a few years now, and the city has been awarded tax credits through the state’s Rebuild RI incentive program to make a final push toward completion. The project is eligible for a maximum of $2.13 million issued over five years, according to the state.

For the hub, the city has allocated $500,000 and hired a consortium of companies, including InfraLinx Capital, the Louis Berger Group and Gilbane Building Co., which together formed the Newport Project Development Co. The goal, Carroll says, is to use Newport as a national test case for innovation around resilience and to work with the Naval Undersea Warfare Center to commercialize some of the work coming out of the center.

“Since NUWC has traditionally lacked an immediate ‘outside-the-fence’ physical platform for its commercialization efforts, [NUWC] has been a great supporter and advocate over the last three and a half years for both Newport’s technology accelerator … as well as the much-larger, 60-plus-acre resilience innovation hub we are working on in our North End,” Carroll said.

Donovan-Boyle sees a lot of economic and commercial opportunities that could materialize in the future. She also sees an opportunity for companies to grow in Middletown, where there’s industrial space available.

“Some companies, which find success here, start small and grow out,” she said. “But there’s certainly room for more.”

With an aging population, she adds, there’s also plenty of opportunity for growth in the health care sector, as Newport Hospital is expanding its services and there will be growing demand for end-of-life care.

Dr. Anthony Napoli, medical director and emergency medicine chair at Newport Hospital, says patient volume in the summer increases about 40 percent compared with winter months because of the influx of tourism. The dynamic creates what he called an “interesting scenario,” when it comes to staffing measures, as the hospital when necessary will extend workers’ hours during the summer and shorten them during the winter.

“We have to get a little more creative,” he said.

If, for whatever reason, the hospital can’t meet demand, Napoli added, it will hire so-called “traveling workers,” which are typically temporary non-physician staff.

“As the [tourism] season ends, the volume goes down, but the acuity stays about the same because the people who remain in the community are getting older,” he said. “The volume goes down at times, but it can be just as busy.”

He doesn’t see an immediate challenge in finding qualified staff for year-round employment, but does believe staffing levels will need to increase, especially if emergency-department utilization and acuity levels continue to rise.

Donovan-Boyle says she’s realistic about those and other challenges facing the island.

“Housing prices is an area that needs to be addressed to ensure that people making an affordable wage can live in affordable homes – and I’m not necessarily talking low- to moderate-income – I’m just talking affordable,” she said. “When a business is looking at an area that’s attractive, they want to see that it’s affordable and has a good quality of life for its employees.” •