Last summer lawmakers passed a measure to make an initial $2.5-million payment to the investors who purchased the state-backed bonds that financed Schilling’s now-bankrupt video-game company, 38 Studios.
At the time the state also earmarked $50,000 to study what the effect would be if the state decided to default on the loan – mostly to satisfy disgruntled fellow lawmakers and angry taxpayers. The state put out a proposal to companies to bid on conducting that research. The deadline for financial-industry experts to bid for the contract was on Oct. 25, with the winning bid completing a study on the issue by Dec.
But no one bid on the proposal – and even those who the state contacted directly were not interested in bidding on the project. Instead of telling the general public, lawmakers quietly canceled the proposal.
Asked why that happened, Governor Chafee’s administration director, Richard A. Licht, said: "No one bid on it."
"We did advertise it in several places," he said, name checking the Bond Buyer and the Wall Street Journal, "and we sent it out to about 30 different prospective firms. Eight or nine made inquiry about it … no one bid. That’s why we canceled it.… So we are considering what our other options might be. And we will ultimately, hopefully, get someone who will do this study for us."
Rhode Island taxpayers will be forced to pay as much $89.2 million on Schilling’s state-backed loan, including the initial $2.5-million taxpayer payment to the bondholders on May 1, 2014, and $12.5 million in each of the next seven years.
If the state does not pay back the loan, it could be one of the first states since the Great Depression to not pay back a loan. It could also face a credit downgrade from financial ratings firms, making it more difficult to borrow money in the future.
Source: Providence Journal