Last Thursday, a small group of protestors gathered outside the Rhode Island State House to express opposition to the repayment of the state's $75 million bond given now-defunct 38 Studios, reports The Providence Journal.
The group included several local political figures — including second-time Democratic governor candidate Todd Giroux and CEO of the Republican Party's Center for Freedom and Prosperity Mike Stenhous — as well as a handful of members of the R.I. Tea Party, Green Party and Occupy Providence.
“This former Red Sox player doesn’t think that we, the taxpayers, should be on the hook for the dealings of another former Red Sox player,” Stenhouse said.
“By not paying this bond we will send a statement that these insider, special deals will not be tolerated any more in our state," he added.
Randall Rose of Occupy Providence said during the protest that “it doesn’t matter” if the state's bond rating is cut because “smart investors know the [bond rating] agencies can’t be trusted at all.” However, House Speaker Nicholas Mattiello argued that the state can't take this risk, noting that the state needs to pay investors to avoid further serious financial issues — such as the downgrade to "junk bond status" for R.I.'s current and future bonds.
“The 38 Studio bonds were not approved by R.I. voters," said former state General Treasurer Frank Caprio, who does not think the bonds should be repaid. "The sophisticated investors who made the loan are multi-billion-dollar companies who understood the risks and have bought insurance to protect their investment.”
Caprio has recommended the state “begin discussions with the rating agencies and the others who hold and insure the bonds." But Department of Administration director Richard Licht recenlty told the House Finance Committee that negotiations for a settlement with bond holders have gotten nowhere. According to Licht, he and R.I's budget and management office director Peter Marino met with the bond insurer both last and this year; the insurer "had no interest in negotiating anything prior to a default.” Licht also said that USAA, the largest bondholder, has no interest in discussing a settlement.
Last year's bond payment — which was paid for with state funds — was $2.4 million, while this year's is substantially higher, $12.3 million. Ernest Almonte, the legislature's former auditor general, said that there is no guarantee lawmakers will approve this next payment to the bond holders, which could move the state to push harder for a settlement between now and the end of the state's budget discussions 30 days from now.
Last month, the Rhode Island Libertarian Party urged the state to not repay the 38 Studios loan, with party chairman Mike Rollins stating the "so-called 'moral obligation' bonds are neither moral, nor a legitimate financial obligation." Just last week, the Greater Providence Chamber of Commerce wrote an open letter urging citizens to push lawmakers to repay the loan.
Follow the full story of 38 Studios' collapse in our dedicated StoryStream.