RI GOP says state should not pay 38 Studios loans
Dee DeQuattro
The Rhode Island Republican Party is asking the state not to pay back millions of dollars in moral obligation bonds used to fund the failed 38 Studios deal.
“I am calling upon the General Assembly to not pay the 38 Studios bond. The bond holders purchased an insurance policy as part of this bond and stand to be made whole if the state chooses not to pay it off. Additionally, the bonds rate of return was much higher because it was more likely to default than general obligation bonds. This is not a guaranteed bond and carries with it a higher risk,” said Mark Smiley, GOP Chairman.
Smiley threw his support behind proposed legislation that would block the state from paying back over $100 million in loans.
“I don't really see the taxpayers taking the hit, because this isn't a general obligation bond, it is a moral obligation bond. It shouldn't be looked at by bond rating institutions as the same thing. Whatever the ramifications would be to our credit rating, they should be stacked up against the actual cost of paying off this bond and not to preserve the ability to issue this type of bond in the future. The taxpayers of Rhode Island should not be forced to pay for this. They never made this commitment,” said Smiley.
Former Red Sox Pitcher Curt Schilling received a $75 million loan guarantee from the state of Rhode Island in 2010. In 2012 the company went bankrupt after failing to pay the loans.
The state is now on the hook for over $100 million in “moral obligation” bonds. Governor Lincoln Chafee and General Treasurer Gina Raimondo have supported paying back the loans.
(c) WLNE-TV 2013
