News Release from Rep. Donna Walsh (D-District 36)
Like most
Rhode Islanders, I am shocked at the recent news about potential financial
problems at Curt Schilling’s 38 Studios and the terrible costs that will be put
on Rhode Island
Last year,
I worked hard for the inclusion of the key elements of my corporate subsidy
accountability legislation into the State Budget which then passed the General
Assembly and was signed into law by the Governor.
Clearly, those
new transparency and accountability rules were not enough for state regulators
to foresee 38 Studios’ current problems, and I will continue to work to fix
this clearly broken system.
When the
2010 session of the General Assembly enacted former Governor Carcieri’s $125
million small business loan program, we had no idea that a deal had already
been struck to take $75 million to use as a lure to get Curt Schilling to move
his company from Massachusetts to Rhode Island
I believe
there are lessons to be learned from that one single act. One is that the small
business loan program should never have been used in that fashion. We could
have helped dozens of Rhode Island-based companies to survive and thrive for
the cost of enticing the one single untested business from another state.
Governor Carcieri took an enormous gamble with the 38 Studios deal and we may
all be the losers for it.
As Co-chair
of the Joint Legislative Committee on Economic Development, I will call for
hearings to examine what went wrong with the 38 Studios deal, and more
importantly, to act on the lessons we learn from this matter to improve our
state’s policy toward boosting jobs and the economy through small business
development.
I sincerely
hope there is a positive solution to the 38 Studios crisis that does not
involve further risk of taxpayers’ money. No one benefits if 38 Studios fails.
But we must resolve to make more prudent decisions in the future, stressing the
fundamentals and avoiding risky ventures, however glamorous. I pledge my own
efforts to see that we come out of this crisis smarter and stronger.
The state legislature holds as much responsible for the financial crisis facing 38 Studios as former Governor Carcieri and the state's EDC. Rep. Walsh say's she didn't know about a deal being struck between 38 Studios and the state before the House of Representatives approved the $125 million dollar Small Business Loan program. That's interesting. I believe that she may not have known about it but I also beleive that the leadership of both the House and Senate knew about it. Over the last several months rank and file union members have been pounded with accusations that they are bankrupting the state because of pension costs and colas. Now comes a potential loss of $100 million dollars. This loss was preceded by the $500,000.00 fiasco at the Atheletic Hall of Fame at URI. Rep. Walsh should know by now that the road to hell is paved with good intentions and nothing is going to change at the state house because she intends to hold hearings on the 38 Studio deal. The legislative leadership knew from the get go that it did not pass the smell test.
ReplyDeleteBeth Richardson comments
ReplyDeleteThe kind of money that a start-up company like 38 Studios requires should be provided via venture capital. Venture capital is private money. Someone or a group of people have a chunk of (their own) money which they would like to invest and hopefully get a good return. People who dabble in venture capital know that it is a risky business and, because it is their own money that they are risking, they assume all the risk themselves and do so carefully. When the Economic Development Corporation gets into the business of supplying venture capital, you can bet that there is lots of politics involved. Furthermore the members of the EDC are not gambling with their own money. It is the taxpayers who will have to pay. More often than not in such a situation the government employees, or elected officials, don't even lose their jobs. Donna Walsh, I am sure, means well, but "governmental oversight" is an oxymoron.
Beth - Treasurer Gina Raimondo said that same thing last night - 38 Studios was a deal that should have been done with venture capital. But as I reported last year, the VCs WEREN'T INTERESTED, even AFTER Schilling got the state deal - that inability to get VC financing was among the first clear signs 38 Studios wasn't going to make it.
ReplyDeleteWe ran a piece today by Tom Sgouros questioning whether we should even have an EDC.
As for what you and Jim Mageau note about Donna's intent to hold hearings, well, there are limits to what one state legislator can do. Because she chairs that Joint Committee, she's in a position to push for answers.
Beth Richardson comments
ReplyDeleteIf the VC's weren't interested, then 38 studios was indeed on shaky ground. I agree with Tom Sgouros, EDC should go. To succeed businesses must make good economic sense. Having political connections is usually not enough to make a business succeed, though I suppose there are some businesses for which political connections alone would be enough to make a business succeed! These aren't the kind of businesses I, as a taxpayer, want to foster however.
It doesn't seem possible to me that the state could be involved in funding small businesses and "...avoiding risky ventures..." (to use Donna's phrase). Business start-ups are risky. There is no getting around this.
I find it almost humorous that all these General Assembly officials have negative knowledge about the 38 studio affair. Do they live in an underground cave with no external contact? Please. Gordon Fox touted the virtues of this deal just as much as Carcieri. Another example of why this State is rapidly becoming a national joke...and a bankrupt one at that. $75M for 200 jobs....that is value for the money.
ReplyDeleteGW
GW - You either didn't read about this 2010 deal or you have selective memory. This was Carcieri's deal. Sure, the leadership bought into it later - after the $125 million package was passed and signed - but it was Carcieri's deal.
ReplyDeleteGW is in fact correct. According to this November 7, 2010 ProJo story, it was Fox who first approached Stokes about the 38 Studios deal, not Carcieri.
DeleteThanks Linda. Will is always so quick to condemn everyone who disagrees with him. To try to lay the blame on just the ex-Governor is absurd. Sure, he is at fault but so are lots of others. I cannot wait for a full investigation.
DeleteGW