Rhode Island's $75 million deal to lure 38 Studios to the state is coming under fire from several candidates in the upcoming gubernatorial election and even the State Treasurer, who is calling for major changes to the agreement.
38 Studios, best known as the brainchild of former Boston Red Sox ace Curt Schilling, struck a lucrative sweetheart deal with Rhode Island last month. In exchange for a $75 million loan guarantee, the studio agreed to bail out on Boston and take the road to Rhode Island instead. Rhode Island Governor Don Carcieri described the deal as a "statement," saying, "This gives us the ability to be a real player in the digital-media area." But many of the politicians vying for Carcieri's job in the November 2010 gubernatorial election don't seem to share his enthusiasm.
Independent candidate and former Senator Lincoln Chafee wants the Rhode Island Economic Development Corporation to put a halt to the deal and solicit proposals from other companies instead, saying the EDC sunk the money into 38 Studios without any sort of appropriate process. The $75 million guarantee represents 60 percent of the $125 million allocated by the state to support high-tech and knowledge-based business and Chafee said in a letter to EDC Director Keith Stokes that he wants a "full, fair and far reaching RFP (request for proposal) process to ensure that Rhode Island gets the best possible use of its new loan guarantee fund."
Frank T. Caprio, the State Treasurer and Democratic candidate for Governor, also got in on the action, calling for changes to the deal that would reflect the risk being assumed by taxpayers. He wants Rhode Island to take equity in 38 Studios and have the right to attend board meetings, as well as a guarantee that "indirect jobs" created by the agreement be located in Rhode Island. He's also calling for the imposition of penalties against 38 Studios if it eliminates jobs "too quickly" after making the move.
Moderate Party candidate Ken Block was blunter in his assessment, calling the deal a "mistake" as soon as it was announced. "You can't fix the economy with silver-bullet solutions," he said. "Seventy-five million dollars could go a long way to help many small businesses here in Rhode Island, and we can't afford to set aside such a large sum of money for specific inducements to special companies."
Gina M. Raimondo, the Democratic candidate for General Treasurer who is also the co-founder of Rhode Island's only venture capital firm, pointed out that there are more than 100 venture capital firms in the Boston area, none of which were willing to back the studio. "I cannot support this particular deal," she said. "This company is highly, highly risky - they have no revenue and have never released a game."
Even the two Republicans running for office who said they support the arrangement expressed reservations. John Robitaille, a candidate for Governor, said he would rather have offered smaller loan guarantees to existing Rhode Island businesses, while Kernan King said it's the job of banks, not governments, to loan money to businesses. But both expressed trust in the EDC's judgment and hope that 38 Studios would flourish in the state.
It's not clear whether Rhode Island's deal with 38 Studios could be scuttled at this point, although Chafee said EDC Director Stokes indicated that it's not yet a "done deal," suggesting that higher hurdles could await. According to the Providence Journal, 12 percent of Rhode Islanders currently cannot find work; 38 Studios promises to employ 450 of them by the end of 2012. It also noted that 90 percent of videogame companies ultimately fail.