NEW: Sasse Says ‘Zero Evidence’ 38 Studios Default Would Have Long-Term Harm
Thursday, April 18, 2013
A former top state official tells GoLocalProv today that there is no evidence that defaulting on the 38 Studios bonds would be harmful in the long run.
“There is zero empirical evidence that default on MOB’s [moral obligation bonds] will have a long term adverse financial impact on RI taxpayers,” said Gary Sasse, the former director of administration under Gov. Carcieri and also the former long-time head of the Rhode Island Public Expenditure Council.
Sasse, who was responding to today’s GoLocalProv report on the 38 Studios bonds, said the claim that a default would be a “black eye” for the state hasn’t been proven. He said he is concerned that the state is rushing off into doing something without exploring all of its options.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAnd responsibility for that falls on state Treasurer Gina Raimondo, the state’s chief financial officer who has led the way on state debt policy, most notably pension reform, Sasse said. “I believe that the General Treasurer should make public an objective analysis of the costs and benefits of the various [options] available to deal with the 38 Studios’ MOB,” Sasse added, saying taxpayers deserve such analysis before sending more than $100 million-plus to the bold-holders for the 38 Studios debt.
One option that he is surprised has not been discussed is renegotiating the terms of the debt with the bond-holders. He says state officials should reach out to the insurer for the bonds and seek a settlement.
Another unasked question, according to Sasse: what is the ‘opportunity cost’ of spending more than $100 million on the 38 Studios bonds? In other words, what other opportunities is the state passing up in allocating that money to 38 Studios—such as opportunities to spend the money on education, tax relief, or economic development, Sasse said.
“Right now I don’t have a lot of confidence an informed decision is being made,” Sasse concluded.
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