The Saturday Morning Post: Quick hits on politics & more in RI
May 26th, 2012 at 6:00 am by Ted Nesi under Nesi's Notes, On the Main Site, The Saturday Morning Post
Welcome to another edition of my weekend column. Keep sending your takes, tips and trial balloons to tnesi (at) wpri (dot) com and I may include them.
1. The politics of 38 Studios are getting complicated. Last week, Lincoln Chafee looked like the big winner – he was Rhode Island’s Cassandra, the one who tried and failed to warn his state off blowing $90 million on an ex-pitcher’s dreams of gaming glory. Now, though, tough questions are starting to be asked about whether Chafee made a bad situation even worse. The most damaging event was CVS executive Helena Foulkes‘ abrupt resignation from the EDC board on Thursday. Foulkes is one of the most respected business leaders in Rhode Island. She didn’t vote for the 38 Studios deal; Chafee himself put her on the board as his vice chair. (The governor is the chair.) Foulkes didn’t need to save face by fixing a botched deal she supported; the fact that she apparently had such significant disagreements with Chafee that she had to resign will make neutral parties more open to the criticisms of Treasurer Raimondo and others with an anti-Chafee axe to grind.
2. Raimondo, though, is walking a very fine line – claiming she’s above “politics as usual” while simultaneously using her political capital to not-so-subtly shift public blame from Carcieri, Schilling and Keith Stokes to Chafee. If she’s confident in her critique, she should just offer it forthrightly.
3. It’s a bit astonishing how many 38 Studios workers are blaming Chafee, rather than Curt Schilling and their other bosses, for the rapid and sudden demise of 38 Studios. As Josh Barro tweeted: “38 Studios employee tells @white_tim the company could’ve been saved with tax credits. Well, enough free government money can save any company.” Chafee’s indiscreet public comments since May 14 haven’t helped, and we still don’t know what the state considered doing for the firm. But 38 Studios is a private-sector enterprise; it shouldn’t be up to Rhode Island’s government to make its business plan work. And it’s worth recalling that Schilling could never attract private investors.
4. If Chafee doesn’t become a Democrat, at least one of his 2014 campaign ads pretty much writes itself: “When 38 Studios collapsed, Rhode Islanders were left on the hook for $90 million. Who approved the loan program? Democrats in the General Assembly. Who gave the money to Curt Schilling? A Republican governor. It was the independent, the man without a party, who said no.” (No, he wasn’t the only one, but details rarely get in the way of a good campaign spot.)
5. You won’t believe this anecdote, but I swear it’s true. After Nneka Nwosu left me on my own at the State House following Friday’s 6 p.m. newscast, I was the last one in the State Room at the State House. While I was typing away a young state employee came in and started folding up the chairs that had been set out. He asked me what we’d been doing and I said it was a press conference about the problems with 38 Studios. “It really sucks,” he said. “I loved the game.” Yep – turned out this state employee paid $60 (plus, possibly, his future tax dollars) for “Reckoning,” and was a big fan.
6. What about making Ken Block executive director of the R.I. Economic Development Corporation? The Moderate Party founder is a successful businessman full of ideas for the public sector, and he was against 38 Studios from the start. He’s also a rare voice of dissent on the Knowledge District, though, so Senate President Paiva Weed might refuse to confirm him.
7. The 38 Studios bonds will cost nearly $90 million to pay off between now and 2020, but the final bill might be lower. In addition to selling off the company’s assets and putting some of those proceeds towards the loan, Rhode Island could try and restructure the debt below the current 6% to 7.75% interest rates they’re carrying.
8. A loyal Saturday Morning Post reader pointed out that for the same amount of money Rhode Island guaranteed for 38 Studios – $75 million – NASA funded the development of SpaceX’s new astronaut escape system. Another writes in: “What is the state doing with the earnings gained through RI-resident lottery winners? … While $17 million isn’t $75 million, I think it wouldn’t hurt to set it aside for the debt caused by 38 Studios.” Interesting idea, no?
9. Not all the business news in Rhode Island is bad. Providence Equity Partners has raised more than $4 billion for its latest investment fund, more than two-thirds of the way to its $6 billion. ProvEq’s Jonathan Nelson, the richest man in Rhode Island, is among those who advised Chafee about 38 Studios’ prospects in recent weeks. (Too bad the company doesn’t employ many people here.) More than one tech executive also pointed out to me the fact that there are so many job openings locally and nationally for 38 Studios’ workers, a sign that employees with certain skills are in demand even in an age of high unemployment.
10. Kudos to Anchor Rising’s Monique Chartier and Andrew Morse, who are doing yeoman’s work tracking all the financial machinations in Woonsocket; Revenue Director Rosemary Booth Gallogly told reporters Thursday she’s strongly considering putting Woonsocket’s finances under formal state oversight, just like bankrupt Central Falls and East Providence. And over at Rhode Island’s Future, Bob Plain was the first to report the city’s delegation wants a receiver. It’s all a good reason for you to make donations to both Anchor Rising and Rhode Island’s Future – the state benefits from a robust blogosphere.
11. There’s plenty of speculation about who’ll succeed Gordon Fox as speaker of the House, centering primarily on J. Patrick O’Neill and Helio Melo. You hear much less talk about who’ll take over for Teresa Paiva Weed as Senate president, even though she’s been in her job since 2009 and is widely believed to covet a judgeship. Is Dominick Ruggerio damaged goods after his DUI? Could it be Maryellen Goodwin, Dan DaPonte or Josh Miller?
12. This week on “Newsmakers” – Democratic congressional candidate Anthony Gemma. Watch Sunday at 10 a.m. on Fox Providence. See you back here next Saturday morning, and have a wonderful Memorial Day weekend.
Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi
Tags: saturday quick hits
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
Rhode Island is dead in the water economically. When all is said and done all the municipal workers for city and towns will accept the elmination of COLA’s, after what they see is going to happen to the retirees. The retirees have been given advances on what their pensions should have been worth if they not inflated by the Democratic controlled goverments of Rhode Island. What Rhode Island needs is a turnover in the General ASSembly and the State Senate. I also know this will not happen, the people of Rhode Island are addicted to government money. As more and more of these reports come out Rhode Island is being not only being perceived as the third world, but is as corrupt as a third world nation. It is apparant to the world and they are watching Rhode Island is a third world state. They are seeing Rhode Island worse off than Greece and Portugal. I don’t know if the majority of Rhode Islanders know that this fiasco, is known all over the world in the business community. The people of Rhode Island appear to be buffoons and simpletons. No ethical business people will even consider setting any type of business operations in Rhode Island. Who would hire such inept people, or with so little insight and lack of ethics who are simpletons and are corrupt?
Rhode Islanders better grasp the concept, when taxes and regulations are antibusiness, high quality businesses don’t want to set up operations in your jurisdiction. What elected officals need to do in the upcoming fiscal year is cut spending, that means when all these over generous public sector employee contracts expire, make these contract realistic no more giving away the store, that also includes the education budget. These public sector employees cannot leave their jobs if the pay is cut who in their right mind will hire them? Start by allocating a set dollar amount of the education to every child and allow parents to choose what schools their kids go to, then start reducing the amount of public school teachers. The public schools are costing a fortune and not educating the kids of Rhode Island they are workfare programs for idiots who can do well in school but can work with adults. Reduce the abuse and fraud in social services, fire social workers, stop being the parasite magnet for every welfare case in the country. Elminate all stupid filing fees for business, for example every business in Rhode Island are extorted $500 just to operate a business in Rhode Island just like third world nations. Elminate the car tax another which is another extortion, just like in third world nations. There are so many other regulations that have to be removed. Zoning boards and zoning laws are another form of extortion.
How many of the 784 RI (2011)companies with +100 employees are incorporated out of state? How many are receiving RI state tax credits? Hmmm.
How many interviewees, concerning 38 Studios, did I hear that stated RI, particularly, Providence and surrounding area did not have the qualifications to become a software designing “mecca”, and 38 Studios would have been the founding company to begin a new industry here. How many did I hear were hired from out of state.
I never did like Lincoln Chafee….UNTIL this recent debacle. I now like him…sorta. lol
The EDC has shown itself to be a group of self-serving individuals. What substantive solutions have been delivered by them. We should have a RI Chamber Of Commerce, merged with the Dept. of DLT.
Gina Raimondo, is just another politician. Bears careful watching.
Raimondo has been manipulating public opinion from the beginning. Just consider her wedding announcement in the NYT. It said her farther was a chemist for Bulova. Here in Rhode Island she was spinning the story that he was a factory worker. Who spins their father’s work identity for their own selfish ends? She’s above the political fray? I think not, she’s very skillful politically and out for herself.
I hope Helio Melo does not get the speakership, he really is no brighter than Fox.
The one consistent thing about Chafee is that he contradicts himself in every interview.
http://news.providencejournal.com/breaking-news/2012/05/chafee-38-studi-2.html
The saddest part for RI is that politics and personal stubbornness are going to cost the state dearly. Chafee’s comments over the past two weeks, when aggregated and viewed as a whole reveal how much of a self-interested imbecile the man is, regardless of his political platform.
The 38 Studios MMO was not a bad investment, and most likely would have been wildly profitable. YES, it was expensive to develop, but when over 80% of the work is already done, and you just need a little extra push to get over the finish line, the state’s denial of assistance and withholding of the additional loan money (38 only received around $50m of the $75).
If they had gotten that push, one year from now, millions of dollars in profit could be flowing into the state of RI from Copernicus sales. As it stands, the game assets will most likely be sold off to another developer for pennies on the dollar and cannibalized.
Its unbelievable to me that the state opted for the outcome in which nobody wins.
Rhode Island has the government officals they elected, you people have the government you elected, now deal with the consequences of their actions. With that being said, don’t blame others for not setting up shop in Rhode Island. You may tolerate these taxes others will not, too bad too many of you can’t grasp this concept. Pass this message on too your relatives who are public sector employees maybe they will not they are the problem.
Andrew sounds like a gambler with a problem. If if just place another bet, play another hand or make one more toss of the dice my luck will turn. Who said the game is 80% done? 38 Studios? They also said it was going to be released this year and just pushed it off to 2013 and pulled their preview from a big video game conference. Doesn’t sound like a company even close to completion. If all this rosy success was just a year away where was all the private venture captal? Answer no where. If experts in the video gaming industry didn’t have any confidence in Schilling and 38 Studios why should the people of RI foot the bill.
And by the way. 38 Studios is an LLC based out of Delaware! There were no corporate profits coming to RI.
Dear Shitheads,
99% of any LLC’s are born out of a Delaware. Reason being is you are to ignorant or stupid to understand. All of RI will be paying dearly for their governor fuckhead’s decisions. The amount of unemployment that will have to be paid out with the amount of people leaving the state. The shithead Governor didn’t think of that one apparently. Guess what! 95% of the people laid off are leaving the state. Guess where that money is going to go!? GO GO GO CHAFEE….YOUR SOOO GOOOD AT WHAT YOU DOOOOOOOOOOOOOOOOOOO
It is all starting to become crystal clear as this plays out. Ask who the first politician was advocating for 38 studios and this deal?? Then ask why??
Many of the employees hired at 38 were from California according to Schilling in a recet televised interview with Gene Valicenti. The interview is on Channel 10 website. How did RI benefit from this debacle?
Would have if they didnt fuck the deal up.
Hmm, so where is most of the video game industry located? RI or CA? If you want to build a video game company with experienced workers, where do you look, RI or CA? The answer to both those questions is the same and it doesn’t have the word “Island” in it. Most of the employees might have originally come from somewhere else, but they’d lived in MA for one or more years and most had moved to RI and were willing to settle here. But now they’ll all be going away, thanks to the Guv. Enjoy those Chafee-induced extra taxes!
Most of the employees may have been from elsewhere, that doesn’t mean that a good number of Rhode Islanders weren’t employed there too. All of them paid income taxes to the state, the vast majority lived in the state and spent most of their income here on living expenses. 38 was brought here to create jobs- did they or didn’t they? It’s now being reported that businesses in the neighborhood of 38 Studios are seeing a huge drop in income and will also be suffering layoffs. Sounds to me like the plan was working until it got scuttled.
How bad of a gamble is it to risk what, 8(?) million in tax CREDITS vs 112 million in taxpayer DOLLARS? Is a chance at success better than a guaranteed failure? Tell me you haven’t noticed that Chafee starts a sentence with “we’re doing everything we can to help them” and finishes with “but we are doing all we can to cut off avenues of aid”? The man (using the term loosely) is using 38 Studios, the workers who just got laid off, and every taxpayer in RI to try to prove he was smarter than Carcieri.
The government does not belong in the business of venture capital. Rhode Islands tax code is social engineering, it is not a level playing field. Rhode Island needs to lower corporate taxes drastically. After this situtation, no business will even look at Rhode Island. It is on every business media outlet. Rhode Islanders better get used to be considered buffoons.
Forget “millions of dollars in profit” 38 Studios could have made in a hypothetical future.
Instead, consider that they would have broke even at the very least, as in the debts would be paid, and the taxpayers of Rhode Island wouldn’t be on the hook for the remainder of the bill (after whatever happens with assets being sold), plus interest.
Meanwhile, 38 Studios would continue to operate as normal after breaking even, because more publishers and investors will be interested, and other future releases would surely happen.
Know which game developers break even with a relatively new IP, but continue to stay in business and develop more games? Nearly all of them.
This would’ve been the worst-case-scenario in a world where Chafee and his cabal didn’t amputate and cauterize the potential for 38 Studios just so he could dress up in his dad’s clothes and say “I was right when I said they would fail.”
I still don’t understand why RI taxpayers aren’t realizing that Chafee is STILL doing everything in his power to torpedo 38 studios.
He claims to be concerned as the “biggest investor” but WHY would the biggest investor continue to spew damaging speculation and vague (non-educated) opinion on the situation?
He keeps asking about the private investors from one side of his mouth, and in the same breath continues to use words like “failed” and “flop” and “terrible” and “troubling”.
What private investor would not be driven off when the other “largest investor” keeps damaging the situation from his political pulpit?
Also, if you don’t think this is 100% political from his end then you must not be a Rhode Islander.
He has also now warned or admonished Raimondo that she better be “factually accurate”, yet he himself keeps touting sales numbers (410,000) from a source that has no clue what the true product sales numbers are. Sources of those numbers are 3rd-party, non-insider venues that do ESTIMATES based on many variables – they’re NOT accurate, but Chafee keeps using that from his stump along with “flop” and “failed” as his metrics.
He also broke confidentially when releasing what is arguably one of the biggest strategic advantages any game studio has – release date. Why is the “biggest investor” giving away that and other inside corporate information in a way that is designed to damage the studio?
He has also alluded to their corporate finances in a public venue – mentioning how many millions 38 studios spends per month. Again, this is corporate inside information that Chafee has no business releasing publicly, unless of course his plan is to sink the entire company. Hmm.
Chafee has decided the fate of the company, the employees, the product, and the investors already. He’s continued to stall, cloud the issue, and repeatedly spout information that has done nothing but drive off other investors.
I suspect that with the other RI problems (nationally high unemployment, RI pension debacle, bankrupt towns) that the investors – the ones who actually bought the bonds – will be left with nothing.
The state is MORALLY obligated to pay back the investors. You know – investors – the ones who have actually paid money – the taxpayers have STILL paid ZERO DOLLARS for this bond deal (read about how bonds work, please). While MORALLY obligated, they are not LEGALLY BOUND to pay the bonds back at all.
So again, in a state where the political problems reach far and wide, it would be political suicide to pay the bond back to the investors, so it’s my opinion that it is the INVESTORS who will get paid nothing.
If I were an investor right now I would be asking Chafee some very tough questions as to why he continues to drive off possible avenues to rescue the company and their 300+ employees.