The Providence Journal / Connie Grosch

NORTH KINGSTOWN — The Quonset Development Corporation has been squirreling away money for the past eight years, setting aside small operating surpluses and the proceeds from land sales in a reserve account.

The plan was to spend that money upgrading the 3,000-acre Quonset Business Park — improving roadways, railroads and the waterfront to help attract businesses that would create high-wage jobs and buoy the state’s sluggish economy.

It seemed to be working. Although the agency had dipped into the fund for some minor projects, $3.5 million had been built up, prompting plans for an ambitious building agenda and providing a financial cushion in case a potential large tenant demanded immediate upgrades.

That money is now gone, however, another victim of the state’s chronic budget deficits.

The General Assembly has emptied the account to help fund the current-year budget, forcing Quonset officials to dramatically scale down the scheduled upgrades.

“We really needed that money to be able to bring jobs to Rhode Island,” said Barbara M. Jackson, a Quonset board member who served as budget director for former Massachusetts Gov. William Weld. “It was bare bones, what we need to do to make a quality park.”

The corporation is by no means bankrupt.

In 2004, voters approved $48 million in bonds for the park, fueling massive improvements at the former Navy base in North Kingstown.

The corporation has demolished more than 60 buildings, constructed 3,500 feet of internal roadways and spent nearly $6 million upgrading the internal rail system that serves the park’s manufacturing and importing tenants.

Quonset officials say the work has begun to pay off. In June, a Florida developer announced plans to build a $150-million shipbuilding and repair facility for large yachts south of the Quonset piers. Three months later, Boston-based New Boston Fund Inc. won approval to spend $144 million constructing a hotel, office buildings, restaurants and retail shops off Post Road.

But only half of the seven-year Quonset infrastructure improvement plan is complete, and with the state facing a forecasted $450-million budget deficit next year, Quonset officials say they fear that lawmakers will try to tap the corporation’s funds again.

The officials say that could complicate the agency’s ability to market the park, considered key to the state’s economic development agenda.

“No one is going to buy property that doesn’t have a road going to it, or has an old, asbestos-filled Navy building on it,” said Dyana Koelsch, spokeswoman for the QDC.

In all, the corporation had planned to spend $64 million improving park infrastructure, $16 million more than was included in the 2004 bond.

Using revenues from the sale and lease of the state land, the corporation has narrowed that gap. So far, it has spent or committed $27 million in taxpayer funds and $5.3 million from its reserves.

The $21 million remaining from the bonds is expected to cover $1.9 million in unfinished demolition projects, $1.4 million in planned rail upgrades and $1.7 million for a series of public bicycle paths, Quonset officials say. That money cannot be diverted by lawmakers for other priorities.

But there does not appear to be enough for $23 million in unfinished road construction, or for a variety of other upgrades included in the seven-year plan.

Quonset’s acting director, Steven J. King, has already scrapped plans for a $1.8-million, 3,100-foot seaside esplanade, as well as other public amenities and infrastructure improvements included in the plan, Koelsch said.

“We don’t want kids to starve. We don’t want people to be freezing cold,” Jackson said. But, she added, “there is a whole bunch of stuff that needs to happen, because it used to be a Navy base. There was a plan for how to spend it.”

Larry Berman, spokesman for House Speaker William J. Murphy, said lawmakers appropriated the Quonset funds to help repay part of the principal and interest from the $48-million bond from 2004 and $72 million in borrowing for the park approved in 1996.

Taken together, that borrowing costs taxpayers about $1.7 million annually — a substantial sum considering the ballooning budget deficits and recent cuts in social services spending.

“There’s nothing that says the state can’t come forward and say, ‘You have to pay,’ ” said Kevin M. Barry, director of finance for Quonset.

A spokesman for Governor Carcieri, Jeff Neal, did not respond to a request for comment.

Several independent state agencies, such as the Rhode Island Airport Corporation, cover the bulk of the payments on money borrowed by the state to finance their agency’s projects, Berman said. But other similar agencies, including the Rhode Island Convention Center Authority, receive hefty state subsidies.

The QDC calls itself a self-supporting agency, but it has never before been required to contribute to its debt service.

Quonset officials say they hope to regenerate some cash reserves, and to spend the money before it can be snatched up by the legislature, Jackson said. In the current fiscal year, ending June 30, 2008, the QDC plans to bring in $6.7 million. After paying its 40 employees and covering the cost of operating the park’s wastewater treatment plant, water supply system, port and public works department, there will be about $300,000 left over, according to Barry.

But growing the reserves through operating surpluses is slow and unpredictable. As Quonset sells more and more land, meanwhile, its ability to generate large sums of cash diminishes.

“We know it’s going to create a problem for us,” said Saul Kaplan, Carcieri’s top economic advisor and the head of the state Economic Development Corporation. The Quonset corporation is an arm of the EDC, and Kaplan is chairman of its governing board.

“It was a well-constructed idea, but it left a cash balance in a very difficult state budget year,” Kaplan said. “These dollars were taken back to the general budget. That creates a hole.”

bgedan@projo.com