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Fri May 9, 2014
RI Assembly Caught in Curt Schilling Rundown Pickle
So here’s another report that shows just how badly the General Assembly has fumbled the 38 Studios ball. Gov. Lincoln Chafee has released a financial consultant’s report that shows that it would cost less for the state to pay off the 38 Studios bonds than to default.
The finding, by the firm SJ Advisors, states that Rhode Island’s credit rating would take a significant hit if the state walked away from the $75 million in bond obligations to those who invested retired Red Sox pitcher Curt Schilling’s folly, 38 Studios.
This analysis comes just a day after the Rhode Island Public Expenditure Council warned lawmakers at a Statehouse hearing that defaulting on the debt would over the long term cost the state more than it would save, would bash the state’s credit rating and drive up the cost of borrowing for Rhode Island state and municipal governments.
Chafee has included a $12.5 million bond payment in his proposed budget that is currently being considered by the Assembly. ``We must protect the state’s credit rating, its positive reputation and our access to the capital markets,’’ Chafee said in a statement.
``While this cost to taxpayers is distasteful, we are doing everything we can to reduce the size of the burden on our citizens through litigation,’’ stated Chafee. ``Repayment of these bonds is in the best interest to the state’s financial status and its reputation in the marketplace.’’
While some in the legislature want to stiff the bondholders, a look at history shows just how badly your representatives and senators have handled all this. 38 Studios went bankrupt in 2011, but now three years later lawmakers are still groping for a solution.
Now with just weeks remaining in the 2014 Assembly session, watch for yet another midnight deal to cobble together a budget article that will pass muster and win approval.
Chafee was a very vocal opponent of the 38 Studios deal. It was a mess he inherited from former Gov. Donald (Thanks Don) Carcieri. But about all Chafee has done is file suit against the law firms and financial advisors that rode the gravy train all the way to bankruptcy. It is very sad that neither the Assembly nor Chafee had earlier put together a special commission to probe this deal and recommend a way forward.
And for the Assembly to have waited until now to figure out how to proceed is evidence of just how poorly both Republican Carcieri and the Democratic legislative leadership handled this matter. Watch for a last-minute solution. As is the case in life, few good things happen after midnight on Smith Hill.