PROVIDENCE, R.I. (WPRI) – Wall Street gave Rhode Island a sharp rebuke Monday as Moody’s Investors Service downgraded its rating on the bonds sold to benefit Curt Schilling’s defunct 38 Studios, citing a growing resistance among lawmakers toward paying back the bondholders.

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PROVIDENCE, R.I. (WPRI) – The former executive director of Rhode Island’s Economic Development Corporation wants to build a biomass to renewable energy plant along Providence waterfront’s on Allens Avenue, but he said the city needs to commit to freezing commercial tax rates to make the project happen.

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PROVIDENCE, R.I. (WPRI) – R.I. Gov. Lincoln Chafee on Thursday sided with former campaign rival and Moderate Party Chairman Ken Block after Block ripped House Speaker Gordon Fox’s plan to restructure the state’s troubled Economic Development Corporation.

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PROVIDENCE, R.I. (WPRI) – House Democrats led by Speaker Gordon Fox on Thursday proposed a complete overhaul of the state economic agencies as they unveiled a sweeping set of bills they say will “improve the coordination and quality” of Rhode Island’s troubled economy.

The Democrats’ other proposals include bringing back the tax credit for historic buildings, this time capped at $5 million per project and potentially $30 million in total; allowing employers to pay workers biweekly; considering curbs on the overuse of jobless benefits by seasonal employers; and creating a new tax credit for local employers who add jobs after making major capital investments.

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Gov. Lincoln Chafee’s nominee to head up the Economic Development Corporation may be a blast from the past, but Marcel Valois has made it pretty clear that the quasi-public agency is in need of major changes.

In an op-ed published last year in the Providence Journal, Valois and former Rhode Island Public Expenditure Council executive director Gary Sasse argued that the state’s economic development strategy “should be changed from a government-dominated, reactionary model to one that operates within a strategic network of committed, innovative, collaborative and agile stakeholders from all sectors.”

Here’s their pitch:

To reboot the Ocean State’s economic development, a new public/private economic-development process should be built on the following organizational framework:

• Create an Office of Strategic Development and Economic Policy within the governor’s office, using existing resources. This office would help set a vision and strategic direction for economic-development activities. It would also work with other state agencies to ensure that economic-development-related functions are effectively coordinated and to reinforce statewide economic strategies and programs. This office would help make sure that all state agencies are rowing in the same direction.

• Establish an independent, university-based professional economic-research collaborative to provide decision makers with real-time economic data and analysis needed in making evidence-based decisions. The collaborative would collect and aggregate critical economic data create dashboard indicators measure specific trends, develop performance metrics, conduct cost/benefit analyses for major state investments and market based reality checks. The mission of the collaborative would be provide invaluable insight and foresight necessary for formulating effective economic-development policies.

• Transform the current EDC in to a public/private Economic Resource and Management Investment Board. This new board would have the responsibility invest state economic-development resources into public/private initiatives in the areas of (1 marketing, reputation management, and customer-relationship management, (2) restructuring public-finance programs to better leverage private capital through public and private collaboration and professional financial management, including underwriting and oversight, (3) investing new business expansion strategies and value-added services and measuring the return on those investments.

Read the whole piece here.

After Curt Schilling’s game company collapsed into bankruptcy last spring, Chafee asked for the resignations of every R.I. Economic Development Corporation board member who voted in 2010 to approve the company’s $75 million taxpayer-guaranteed loan.

Nearly all the members complied in one way or another, with one noteworthy exception: George Nee, president of the Rhode Island AFL-CIO and the leading voice of organized labor in the state. Nee didn’t resign and continued to attend board meetings despite Chafee’s request.

And on Thursday it was Nee – not Chafee – who got the last word: the governor just nominated the union leader for another term on the struggling board, along with four other new members.

Asked by WPRI.com why he’d flip-flopped about Nee, Chafee said in a statement: “I felt strongly that anyone who voted in favor of the 38 Studios deal should resign from the EDC board. Obviously, there was a difference of opinion there between me and George Nee.”

“As time has passed, I have been able to work with George on the board and have a number of private discussions with him regarding 38 Studios,” the governor continued.  “I believe that George agrees with me that the process was not performed in the proper way and that 38 Studios was a mistake.”

Chafee’s new nominees for the board are Shannon Brawley, executive director of the Rhode Island Nursery and Landscape Association; Rhode Island College President Nancy Carriuolo; Roland Fiore, president of South County Sand & Gravel Co. Inc.; and Jason Kelly, executive vice president of Moran Shipping Agencies. All the nominations, including Nee’s, are subject to Senate confirmation.

• Related: Chafee picks Parsons despite ties to EDC credit-card scandal (Nov. 30)

PROVIDENCE, R.I. (WPRI) – The troubled R.I. Economic Development Corporation is losing three more board members less than a year after its taxpayer-guaranteed loan to Curt Schilling’s 38 Studios fell apart.

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Parsons was reprimanded and demoted from deputy director to associate director after he approved – perhaps inadvertently – the EDC’s purchase of a plane ticket to Disney World for the son of its legal counsel, who wound up resigning along with other top staff members, according to newspaper accounts.

Parsons was also criticized for taking a $300 cash advance off his EDC credit card, charging $19.77 at a Family Pet Center in North Providence and failing to reimburse the agency for $390 he spent to bring his wife on a trade mission to London.

Christine Hunsinger, a spokeswoman for Governor Chafee, said Friday the governor was aware of the expense irregularities but decided it wasn’t a reason to pass over Parsons, who has worked for the EDC and its forerunner since 1975, a year after former Gov. Philip Noel created it.

“Yes, there was an issue several years back and that was dealt with, and since that time his track record has been impeccable,” Hunsinger told WPRI.com. “The governor is confident that Bill Parsons is the right person because of the institutional knowledge he has in 37 years of public service. EDC will move forward and under the governor’s direction will be a force in driving economic development in the state.”

Hunsinger declined to say how many others Chafee approached about taking the job. She also said the governor called Senate President M. Teresa Paiva Weed to inform her of the choice. Parsons’ appointment must be confirmed by the Senate.

Yet as both Lou Mazzucchelli and Karl Wadensten pointed out on Executive Suite, the study has its merits. And one of the best parts is actually a chart tucked away on page 40.

One of the EDC’s problems as an agency is that it’s never clear exactly how success should be measured. Is it job growth? Total startups? Net business migration? Income growth? State GDP? Something else? The lack of metrics makes it hard to judge whether the EDC is accomplishing anything.

It doesn’t have to be this way. RIPEC reports that Michigan and Utah “outline their performance metrics in their annual economic development organization report.” (EDC doesn’t do one of those.) As the table below indicates, “for each state economic development strategic initiative … Michigan lists measurable outcomes used to track performance on initiatives.” Take a look:

PROVIDENCE, R.I. (WPRI) – Congressman David Cicilline and former House Finance Committee Chairman Steve Costantino are defending their support two years ago for government assistance to politically connected Capco Steel even though the company has defaulted on a taxpayer-guaranteed loan.

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The state’s first error, economic development experts say, was placing so much of its economic development fund in one venture, especially a risky video game company.

“It’s the first time I’ve heard of a government giving away almost the entire store to one company,” says Anthony Figliola, the vice president of Empire Government Strategies and a familiar figure in economic development policy. “The state gave away most of its money to a start-up company. That’s alarming.” …

Since they’re moral obligation bonds, there’d be little standing for bondholders to recoup their losses should the state walk away. The wild card is the market’s reaction, and some say the backlash would be swift. “The market would treat it as tantamount to defaulting,” says Matt Fabian, managing director of Municipal Market Advisors. “They would be ostracized.”

But others say that’s overstated. With more debtors facing accumulated red ink, the market could be more forgiving. “Bondholders knew what they were getting into,” argues Craig Chilton, an adviser with BondView. “If I were a taxpayer in Rhode Island, I’d be hard-pressed to want to make good on the obligation.”

(photo: Ted Nesi/WPRI)

PROVIDENCE, R.I. (WPRI) – House Speaker Gordon Fox on Friday denied that he pushed lawmakers to create a new $125 million loan program in 2010 knowing the R.I. Economic Development Corporation planned to pledge $75 million of the money to Curt Schilling’s 38 Studios.

In his first extended broadcast interview since 38 Studios’ demise, Fox told WPRI 12 about an April meeting where Schilling and Tom Zaccagnino, a 38 Studios board member, asked Gov. Lincoln Chafee to sign two consent agreements, one allowing the company to get tax credits and another to provide bridge financing.

Fox didn’t rule out the possibility that Rhode Island will opt to default on the $75 million moral-obligation bonds the EDC issued for 38 Studios, which are not legal obligations of the state and could require lawmakers to appropriate more than $12 million a year for bondholders through 2020.

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PROVIDENCE, R.I. (WPRI) - The R.I. Economic Development Corporation has hired a special counsel, Max Wistow, to examine whether taxpayers have legal avenues to claw back some of the tens of millions of dollars they’re poised to lose after the collapse of Curt Schilling’s video game company, 38 Studios.

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PROVIDENCE, R.I. (WPRI) – Citizens Bank is suing former Red Sox ace Curt Schilling personally for more than $2.3 million, alleging he promised to repay money his now-bankrupt video game company 38 Studios borrowed from the bank.

The court documents obtained by WPRI.com in the Citizens suit shed new light on how 38 Studios capitalized on its $75 million taxpayer-guaranteed loan from the R.I. Economic Development Corporation and what happened behind the scenes as the company fell apart last month.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) - Senate President M. Teresa Paiva Weed says her chamber may not take up Governor Chafee’s nominees to the troubled R.I. Economic Development Corporation board before lawmakers leave Smith Hill this week.

“I think we may have to come back,” Paiva Weed told WPRI.com. “That’s the way it’s looking.” She said the governor has been sending a significant number of appointments to the Senate in the waning days of the session.

Lawmakers are hoping to adjourn as soon as Tuesday, but confirmation hearings haven’t been scheduled for any of the six EDC nominees Chafee has put forward in the wake of the 38 Studios debacle: Marcia Blount, Pablo Rodriguez, Roland Fiore, Stephen Hardy, William Holmes and Peter Crowley.

The EDC board has 12 members in addition to the governor, who serves as chairman but only votes to break ties. The board has a number of major issues to take up in the coming months, including the runway expansion at T.F. Green Airport and dredging the port at Quonset Point.

Failure to confirm Chafee’s nominees would not necessarily cripple the EDC board, however. State law says “a majority of directors holding office shall constitute a quorum,” and that a vacancy “shall not impair the right of a quorum to exercise all of the rights and perform all of the duties of the corporation.”

As The Providence Journal first reported, Paiva Weed opted to move the EDC nominations through the Senate Judiciary Committee instead of the Senate Corporations Committee, which considered and approved his previous slate of candidates last year.

PROVIDENCE, R.I. (WPRI) – Governor Chafee on Thursday nominated three new board members to the R.I. Economic Development Corporation and ordered an independent outside review of the agency after a $75 million loan guarantee to 38 Studios blew up in its face.

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Secretary of State A. Ralph Mollis, however, takes a different view. His office says the company is under no legal obligation to register as an organization with business before the government.

“State law defines lobbying as influencing action on legislation by the General Assembly or the governor or on policy-making by the executive branch,” Mollis spokesman Chris Barnett told WPRI.com. “We have received no evidence or allegations of any such activities by 38 Studios that would trigger the requirement to register.”

38 Studios apparently agrees. The company has never registered anyone to lobby at the Rhode Island State House, even though Carcieri and Chafee administration officials, as well as House Speaker Gordon Fox, have all acknowledged meeting with Curt Schilling and other company representatives to discuss its plans.

In 2010, R.I. Economic Development Corporation Executive Director Keith Stokes told WPRI.com Schilling’s company convinced lawmakers to expand the proposed Job Creation Guaranty Program, saying: “Because of 38 Studios, it has given us the ability to have not a $50 million program but a $125 million program.”

Michael Corso, the prominent local tax-credit broker who’s advised 38 Studios and met with Fox on the company’s behalf, isn’t a registered lobbyist either, according to the secretary of state’s office.

Common Cause Rhode Island’s John Marion expressed exasperation that Mollis and, apparently, 38 Studios don’t think the company is lobbying. ”It strains credulity to say that Curt Schilling hasn’t been, and isn’t currently, lobbying our government,” Marion told WPRI.com.

Marion suggested Mollis may be legally incorrect. ”My reading of Rhode Island’s lobbying laws suggest [Schilling] should be registered and regularly reporting,” he said. “If by some tortured interpretation of the lobbying law he is not considered to be a lobbyist, then it’s our belief the law needs to be promptly fixed.”

Marion speculated that one possible explanation for why 38 Studios isn’t considered to be technically lobbying is an exemption in the rules and regulations that covers “representation of one’s own, wholly owned business entity,” though it’s unclear whether all of 38 Studios’ activities would be covered by that.

38 Studios has never responded to requests for comment.

• Related: Schilling praises ‘pure motives’ of RI pols to Fox News’ Hannity (March 21)

PROVIDENCE, R.I. (WPRI) – Governor Chafee sparred with Curt Schilling over his handling of the 38 Studios crisis on Tuesday as another one of the R.I. Economic Development Corporation’s board members resigned.

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Out of the spotlight, though, Aug. 16, 2011, marked a big day in the 38 Studios-Rhode Island relationship.

That day the EDC delivered 38 Studios $4.1 million in cash from the $75 million bond transaction the previous November. The EDC says the money was provided because 38 Studios had entered “into a satisfactory distribution agreement for its Project Copernicus.”

Strangely, however, no other evidence corroborates that 38 Studios nailed down a distribution deal for Copernicus, even though the EDC gave the company $4.1 million based on the existence of one.

In a March 15 bond disclosure notice obtained by WPRI.com, 38 Studios described itself as still being “in discussions with top publishers regarding a publishing and distribution agreement for the MMO Copernicus, under which the Company anticipates that it would receive advance-funding for development of the game.”

On top of that, The Providence Journal reports today that 38 Studios thinks “Chafee’s public comments derailed discussions that 38 Studios says it was having with another publisher for a $55-million deal on Project Copernicus, as well as a venture capitalist about additional financing. 38 Studios declined to identify the would be-investors.”

Add the Copernicus distribution deal to the list of unanswered questions about 38 Studios.

Also on Aug. 16, R.I. Economic Development Corporation executive director Keith Stokes signed a modification of his agency’s 10-month-old third-party monitoring agreement with 38 Studios, apparently without informing the agency’s board or Governor Chafee, according to the governor.

The revised agreement said IBM would no longer deliver paper documents to the EDC as part of its “ongoing project monitoring for Project Copernicus.” Instead, 38 Studios “agree[d] to hold quarterly review meetings” where the information required from IBM (the “IBM Work Product”) would be given to EDC officials.

38 Studios “agrees that EDC will be entitled to delivery of such written IBM Work Product as EDC determines it is necessary to receive,” the revised agreement adds. The EDC would still be able to request an opportunity to view IBM’s documentation on 38 Studios, but only after the agency gave “reasonable advance notice.”

Update: A reader writes in to suggest one explanation – there’s a significant difference between a publishing deal (which could provide money up front to fund the game’s development) and a distribution deal (which wouldn’t provide money until the game starts selling). It’s possible 38 Studios had a distribution deal in place but not a publishing one, which would help explain why an infusion of cash didn’t come in after last August.

• Nov. 2, 2010 … $10.9 million. “Upon delivery and the Date of Issuance of the Bonds AND after the date when [38 Studios], or a letter of credit bank selected by [38 Studios], presents reasonable documentary evidence to the [EDC] that the letter of credit required in connection with [38 Studios'] execution of that Lease dated Sept. 20, 2010 is to be issued subject only to the funding of a deposit account at such letter of credit.”

• Nov. 2, 2010 … $2.1 million. ”Collateralization for letter of credit that serves as the security deposit on Empire Street lease.”

• Dec. 10, 2010 … $9.4 million. ”Upon public announcement by [38 Studios] of a relocation date to RI.”

• April 18, 2011 … $17.2 million. ”Upon relocation of [38 Studios'] headquarters and the current object, Coperncius studio to RI AND the creation of at least 80 full-time jobs in RI with an average annual wage not less than $67,500 per year.”

• April 18, 2011 … $4.2 million. “Upon the creation by [38 Studios] of an additional 45 full-time jobs in RI with an average annual wage not less than $67,500 per year.”

• Aug. 16, 2011 … $4.1 million. ”Upon the entry by [38 Studios] into a satisfactory distribution agreement for its Project Copernicus.”

• Nov. 2, 2011 … $1.6 million. ”Upon the creation by [38 Studios] of at least an additional 125 full-time jobs in RI with an average annual wage of not less than $67,500 per year.”

Total … $49.5 million between Nov. 2, 2010, and Nov. 2, 2011.

When the $75 million worth of bonds were sold on Nov. 1, 2010, the EDC spent $1.9 million of the proceeds on fees, then put the rest into three accounts: $49.5 million went into the Project Fund, $12.8 million went into a Capital Reserve Fund and $10.6 million went into a Capitalized Interest Account.

As of Nov. 2, 2011, a year after the bonds got sold, the Project Fund was empty – that was the source for all the above transfers from EDC to 38 Studios. The company told the state all $49.5 million is gone, but no details have been provided about how the company spent the money.

As of now, the Capitalized Interest Account is down to about $2.7 million – enough for one more interest-only payment, which is due on Nov. 1.

Starting next May 1, 38 Studios itself is supposed to start making the principal and interest payments to bondholders from its own revenue; if it can’t do so, the EDC will tap the Capital Reserve Fund. If that happens, the governor is required to ask state lawmakers to appropriate money in the budget to replenish the fund. However, lawmakers aren’t legally obligated to actually appropriate the money.

As this September 2010 story noted, it’s important to realize that these milestones are different from the job milestones that got most of the attention when the deal was done (i.e., that 38 Studios would create 450 full-time jobs here by 2013). Collecting the bond proceeds only required 250 jobs in Rhode Island; the company will pay minor penalties separartely if it doesn’t reach the 450 mark by November 2013.

• Related: RI taxpayers actually on the hook for $112.6M with 38 Studios (May 15)

In November 2009, Curt Schilling’s embattled video game company apparently incorporated two limited liability companies under Delaware law, records show: Mercury Project LLC and Precision Jobs LLC. Neither company was registered in Rhode Island.

WPRI 12 reported Wednesday evening that 38 Studios’ failure to incorporate in Rhode Island could make it ineligible for more than $8 million in state tax credits it’s seeking to avoid insolvency. The governor’s office says officials are looking into the question of 38 Studios’ corporate residency.

Precision Jobs holds the trademarks to logos for 38 Studios’ game “Kingdoms of Amalur: Reckoning” and listed its address as a building on Market Street in Philadelphia. 38 Studios put up Mercury Project’s assets to the R.I. Economic Development Corporation as security for the agency’s $75 million loan guarantee.

The Mercury Project and Precision Jobs LLCs are in addition to the company’s other two LLCs, also incorporated in Delaware: 38 Studios LLC, the parent company, and 38 Studios Baltimore LLC, the former Big Huge Games studio in Maryland that 38 Studios bought in 2009.

Governor Chafee will hold a press conference at 5:30 to offer an update on 38 Studios’ situation. Asked by another Twitter user whether he will “pay back” the government for his “bail out money,” Schilling replied: “Haven’t received a penny of it, and have not asked for any.”

“Don’t believe what you read, especially when what you read is a lie,” Schilling wrote Friday.

More coverage of the 38 Studios crisis:

• Schilling links to leaked ‘Copernicus’ art – ’38 isn’t dead yet’ (May 24)
• Schilling holds onto job as ESPN analyst amid 38 Studios woes (May 24)
• As Delaware firm, 38 Studios may be ineligible for RI tax credits (May 23)
• The Globe’s Kirsner lays out the likely endgames for 38 Studios (May 23)
• 38 Studios loses CEO and high-profile VP, LinkedIn suggests (May 23)
• Seven of EDC’s current directors voted to OK 38 Studios deal (May 23)

“Nobody is buying MMOs after Star Wars fizzled. I think value is low, probably $20 million or so,” Pachter said. “There is just no demand for game assets right now, as THQ proved when it tried to sell the Warhammer MMO. I think [Electronic Arts] could step in, since they are the publisher, so you might see some alternative way to get 38 some bridge financing.”

An Electronic Arts spokesman offered no indication to Joystiq that the company which distributed “Reckoning” is planning to step in as 38 Studios’ savior. On the other hand, Pachter’s comments are a reminder that Rhode Island won’t be stuck with nothing if 38 Studios collapses.

Principal and interest payments due on the 38 Studios bonds total $112.6 million through 2020. Subtract the $23.4 million set aside from the initial proceeds to pay the bonds, add another $20 million in proceeds from selling 38 Studios’ assets, and Rhode Island taxpayers’ total tab could be reduced to roughly $69.2 million.

Internet speeds in the United States have long trailed those in other countries like South Korea. Downloading videos, games and other big files often takes far longer for Americans than their counterparts across the globe.

In the latest global rankings, the United States remained a slow-poke, placing No. 26 in terms of speediest Internet connections, according to Pando Networks, a company that delivers games and other large online files online for other companies. …

A separate study by Pando Networks earlier this month showed the average speeds in all 50 states. Rhode Island led the list with 894 [kilobytes per second] while Idaho finished last at 318 KBps.

Back when I was at PBN, I did a story on why Rhode Island’s Internet connections are so speedy. Experts gave a lot of the credit to Cox Communications, which invested early and heavily in Rhode Island’s broadband infrastructure; Verizon has done the same more recently.

38 Studios' R.A. Salvatore, Todd McFarlane and Schilling

Curt Schilling moved 38 Studios to Rhode Island in return for a $75 million taxpayer-guaranteed loan. But that doesn’t mean he’s given up on convincing private investors to put money into his gaming startup.

The investment banking arm of Swiss financial giant UBS has started circulating a “brief teaser” to drum up interest in a “pre-IPO fund raise” for 38 Studios, The Boston Globe’s Scott Kirsner reports.

The document includes some ambitious forecasts, according to Kirsner. UBS says 38 Studios will generate more than $100 million in revenue next year and be “extremely profitable” by 2013.

Kirsner describes the “pre-IPO” language as “quite a stretch for a company that has yet to release its first game.” 38 Studios’ first title, “Kingdoms of Amalur: Reckoning,” is due out in the first quarter of next year; its second, the massively multiplayer title “Project Copernicus,” is due in the fourth quarter. The latter’s development is being funded with the Rhode Island loan.

The Wall Street Journal’s Venture Capital Dispatch blog followed up on Kirsner’s item with its own take:

Privately, many venture capitalists that we talked to over the years about Schilling’s ambitious endeavor have rolled their eyes, saying they’d never invest in a hit-driven business. That’s especially true in this era of social gaming, in which companies like Zynga can build games cheaply and quickly. … Further, these VC said Schilling wasn’t willing to give up much control of the company. The case study said Schilling owned 82.5% of the company’s stock.

We’re unsure which, if any, venture firms would lend a hand, but if much of the development risk is out, Schilling might have a strong case. And hedge funds and mutual funds are swarming to Web companies right now, especially if this company really is pre-IPO (though also pre-revenue).

“Reckoning” has been winning quite a bit of advance praise since 38 Studios and distributor Electronic Arts began previewing it this spring, which is surely music to the ears of officials in Rhode Island (as is the fact that the company has dozens of job openings here).

The Globe and WSJ also imply that the state-backed loan is a key reason the company now feels so bullish about its prospects. 38 Studios received $21.4 million from the loan in two installments on April 18, which were its most recent payments, EDC spokeswoman Judy Chong said. That brings the total disbursed to about $43.8 million.

(photo: 38 Studios)

The average download speed in No. 1 Delaware was 11.36 Mbps, compared with No. 2 Rhode Island’s 9.74 Mbps. We’re a heckuva lot faster than last-place Montana, which came in at 2.57 Mbps, but still in the slow lane compared with South Korea, where the government is promising universal 1 gigabit per second broadband by next year – that’s 1,000 Mbps.

Here’s a map of the Northeast posted by BI – the closer to red, the faster:

This doesn’t really surprise me. Back when I was a tech reporter at PBN, I reported on how Delaware’s broadband pushed Rhode Island’s from the top spot in the 2009 Speed Matters survey.

Experts I spoke with back then gave a big part of the credit for Rhode Island’s speedy connections to Cox Communications, which invested early and heavily in Rhode Island’s broadband infrastructure; Verizon has done the same more recently. The EDC is now making its own push through its Broadband Rhode Island initiative.

(map: Google, via Business Insider)

The EDC borrowed a combined $35 million on Fidelity’s behalf to help the company pay for upgrades and then an expansion in Smithfield – $25 million in 1996 and another $10 million in 2002. Rhode Island taxpayers are also shouldering part of the payments so long as Fidelity keeps meeting certain targets for employment here.

EDC Executive Director Keith Stokes specifically cited the Fidelity agreement in defending the 38 Studios deal to the press last year. A third-party consultant monitors Fidelity on behalf of the EDC to keep tabs on whether it’s in compliance, he said.

Rhode Island spent $2.6 million in 2008-09 to cover its share of Fidelity’s repayments, Revenue Department documents show. The outstanding balance on the original $35 million debt was $27.7 million as of June 30, 2009, the documents say.

A separate report shows Fidelity received tax credits from Rhode Island worth $5 million in 2008-09 and $3.5 million in 2009-10. I’m not sure how those two payment streams interact, if at all; EDC spokeswoman Judy Chong said she is putting together materials explaining Fidelity’s state support now.

But even as Rhode Island officials crow about spawning a new gaming hub here, at least some Bay State leaders are preparing to fight back. A new Massachusetts Video Game Institute was announced last month, and legislation to boost the industry is now being drafted, The Associated Press reports:

Massachusetts video game companies could receive tax credits and other incentives under legislation that seeks to strengthen the state’s foothold in an industry that’s sustained strong growth in a weak economy. …

Details of the legislation aren’t finished, but a draft offers a menu of possible tax credits tied to job creation or production goals for companies that design or produce video games.

Incentives would be offered to startups or existing companies who expand or relocate in Massachusetts. A so-called ‘clawback’ provision would help the state recoup investments in firms that leave or fail to produce promised jobs.

State Rep. Vincent Pedone said it’s too early to say what the effort would cost, but the goal is expand the state’s $2 billion video game industry to $20 billion in five years. …

Seventeen other states offer financial incentives to video game companies and the Province of Quebec has aggressively lured firms with tax credits. …

The effort comes after former Boston Red Sox star Curt Schilling decided to move his video game company, 38 Studios, to Rhode Island after that state offered a $75 million loan guarantee. Pedone said he believes Rhode Island took the wrong approach by focusing on one company and not the entire industry.

Rep. Bradley Jones, the House Republican leader, said he’s not against cutting taxes but doesn’t believe the state should pick “winners and losers” in the private sector. …

Massachusetts has already carved out a respectable niche in the industry, with 1,295 people directly employed by video game developers or publishers, according to a recent report by the Entertainment Software Association. That places the state fifth behind California, Texas, Washington and New York.

Those five states account for 71% of total employment in the video game industry, according to the same organization. Rhode Island doesn’t even merit an individual state report on its website. The state has a long way to go if it’s going to become a major hub for game developers.

EA will host a 20- to 30-minute demonstration of the game, “Kingdoms of Amalur: Reckoning,” at a press event during the annual Game Developers Conference, spokeswoman Amanda Taggart said in an e-mail. 38 Studios has a deal with EA to distribute and market the game.

“Reckoning” is being developed by Big Huge Games, a Maryland-based subsidiary that 38 Studios acquired in May 2009. The game is scheduled to be released this fall, Taggart said. It will cost $59.95 and be available on Playstation 3, Xbox 360 and PCs, according to Amazon.com.

38 Studios’ other project – Project Copernicus, a massively multiplayer online game – is the one that will be funded by the $75 million taxpayer-guaranteed loan the company got from the R.I. Economic Development Corporation last year. That game is supposed to be released in September 2012, according to bond documents.

38 Studios has received $22.4 million of the loan money so far, according to the EDC. The company will move into its new headquarters at One Empire Street in Providence by May 1.

That was the scathing outside review of the R.I. Economic Development Corporation commissioned by Governor Carcieri in late 2008, following the abrupt departure of its then-executive director, Saul Kaplan. The report’s recommendations inspired lawmakers to make a number of changes to the EDC the following year, and Lincoln Chafee cited it all the time as a way to back up his own criticisms of the agency during the campaign.

It’s worth noting, then, that Governor Chafee’s decision to only commit to one more year for Keith Stokes at the EDC’s helm, and Carcieri’s original decision to only give him a one-year contract, both go directly against a key point made by former Hasbro CEO Al Verrecchia and his co-authors.

“There has been far too much turnover at the [EDC] director level, and that, unquestionably, has affected the performance of the organization,” they said in their final report. Carcieri echoed that after the report was released, saying the EDC needed to be guided by someone whom business leaders and agency officials were confident would be around for the long haul.

More from the report:

Given the end of the Governor’s term in 2010, it may be difficult to attract the best candidate possible if the director position is perceived to have a short term. Accordingly, the State should be prepared to offer a 3-5 year employment contract at market-based compensation levels, if required. Naturally, the next Governor would have the flexibility to replace the director, but the guaranteed term of employment (as outlined in an agreement) should afford sufficient protection to candidates so that they consider the position an attractive one.

The General Assembly followed that advice by allowing the executive director to serve a three-year term, regardless of whether someone else takes office in the interim. Carcieri then offered the job to Ioanna Morfessis, who accepted before quickly backing out.

By that time, the EDC had been without a permanent leader for a year, and the state’s unemployment rate had long since hit double-digits. So Carcieri brought in Stokes – but only for a year. Now Chafee is keeping Stokes – but only for a year.

Chafee doesn’t have to get rid of Stokes next January, of course. But if Verrecchia & co. are to be believed, the failure to put someone at the helm of the EDC for the duration is hurting the state’s economic development efforts. Since Verrecchia is now chairman of the EDC board, maybe he’ll make that point to Chafee himself.

Update: Chafee spokesman Christian Vareika argues that focusing on how long Stokes serves in the job misses the report’s larger point, which is that the EDC needs to be given a clear direction.

“Nothing in what Governor Chafee has said about retaining Keith Stokes precludes him from completing his appointed term,” which goes until February 2013, Vareika said in an e-mail. “Further, the policy, strategy, and programmatic focus of the RIEDC is the purview of the governor and the [EDC] Board of Directors, and regardless of whether Stokes serves one year or more, there will be consistency in those areas.”

When Governor Carcieri appointed Stokes to lead the R.I. Economic Development Corporation last winter, Carcieri said he was appointing him to a one-year term so the next governor could decide what to do about the EDC once he took office.

But it turns out the Senate’s vote to confirm Stokes gave him a three-year term, so he can stay in the job until February 2013 without another confirmation vote, spokesman Christian Vareika told me a few minutes ago.

However – and here’s where it gets confusing – Carcieri’s agreement with Stokes only covered one year. So Stokes will now need to negotiate a new contract with the Chafee administration to figure out, among other things, how much he makes. Carcieri paid him $185,000, nearly double what Stokes’ predecessor made but less than the $250,000 offered to Ioanna Morfessis, who backed out after taking the job.

For now Chafee is only committing to keeping Stokes for another year, through next January. “During that time, the governor wants to develop a working relationship [with Stokes], and they’ll revisit the issue in a year’s time,” Vareika said.

Update: Only giving Stokes a one-year commitment also goes against the Verrecchia report that Chafee has praised in the past.