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Roach: 38 Studios Loan Debate at Heart of RI Gubernatorial Race

Wednesday, May 14, 2014


Ken Block, Angel Taveras, Todd Giroux, Allan Fung, Clay Pell, and Gina Raimondo don’t agree on many things and if Rhode Island should repay the 38 Studios loan is just another item they can’t seem to find common ground. On one side, we have Block, Fung, and Giroux saying that the state should not pay back the loan. On the other side, there’s Taveras, Pell, and Raimondo who believe that we should repay the 38 Studios loan.

It’s no secret that the 38 Studios deal was a bad deal. We all know the story of how Governor Carcieri and members of the General Assembly decided to put all of our economic eggs into Curt Shilling’s basket only to have said basked go belly-up faster than you could say Knights of Amular: Reckoning. However, the issue now is whether we – the taxpayers – continue to pay for the mistakes of our past leaders.

On principle, I say no. Block, Fung, and Giroux would each agree. Block recently was quoted as saying:

Wall Street insiders want to protect bondholders and force states like Rhode Island to stand behind ‘moral obligation bonds’ under any circumstances. The ongoing legal challenges and scandals continuing to swirl around the 38 Studios deal necessitate a halt in paying off those bonds.

Again, I agree with this sentiment. Why should we – the taxpayers – have to pay for the our government’s mistakes? For most of us, when we make a mistake the government isn’t there to bail us out so why should we be there for the government?

Well, Governor Chafee has argued that if we default on the 38 Studios repayment Rhode Island’s credit rating will…go in the tank. The S&P Ratings Services looks like they would agree as they recently stated, “if Rhode Island were to fail to support any of its debt, we would likely take negative rating action.” If the state’s credit rating goes down, it increases the cost our state incurs to borrow and in some cases if our credit rating dips below a certain criteria, it could trigger accelerated payments.

So which position should we support?

This is a difficult decision, quite honestly. Do we take the risk of our credit rating tanking in order to make a point? Do we repay the bonds in the hopes that the lawsuit provides the state with some ability to recoup what it has lost?

The maverick in me says we should take the position of not repaying the bonds. The bonds were a result of a few people making a very bad decision and we – the taxpayers – are left picking up the pieces.

That’s what the maverick in me would do. The guy really concerned about our credit rating, would reluctantly make the repayments again and again until the lawsuit was settled or the bonds repayments we completed.


Related Slideshow: 10 Questions Block Has to Answer When Running for Gov of RI

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10. Can Block convince voters he is more than a third party player?


To win in the GOP primary, Block is going to need to convince GOP primary voters that his ideals align with the fundamental beliefs of the Republican Party. 


He did get a political gift.  As GoLocalProv reported - Blocks opponent in the GOP primary, Cranston Mayor Allan Fung has been a consistent donor for a decade to many of the top Democrats in the Party.


Both Block and Fung will be challenged to explain their GOP credentials.

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9. Is Block too much of a techno-candidate?


Block, the founder of a software company, love to talk about technology solutions to public policy problems. He is going to have to define his solutions to problems in a tangible way.  Often, voters connect to simple themes, "Hope and Change" or from "Head Start to Harvard." 


Block is going to need to be able to show he can connect to all Rhode Islanders - we are a retail political state.

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8. Can Block raise money?


Block has demonstrated he is serious about running - he has already invested $500,000 of his own money to win the GOP primary, but he will need an estimated $3 million to win the primary and General Election next November.


To date, his fundraising base has been small and while Fung is no Gina Raimondo in fundraising, he does have a modest Republican fundraising base.

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7. Will Block defend the behavior of National Republicans?


If 15 months from now Ted Cruz works tirelessly to close the federal government over the implementation of Obamacare, will GOP Governor Ken Block speak out on the issue? 


Will Block praise or criticize Cruz? In the primary, conservative voters may want him to praise Cruz and in the General election, the majority of voters may want him to condemn Cruz.

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6. Can Block attract RI GOP leaders?


A few weeks ago Fung announced an advisory group of prominent Republicans.  The announcement gave Fung's efforts some momentum. Block would pick up a lot of credibility if he were to peel some Fung supporters over to his team.


In addition, a number of leading Republicans have yet to make an announcement - if they break to Block it may create momentum.

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5. Can Block connect with voters in the General Election?


Assuming Block beat Fung in a GOP primary and went on to face a progressive Democrat like Providence Mayor Angel Taveras or rising star Clay Pell, can Block work the Greek Festival in Cranston or the Scituate Art Festival as well as these Democrats?


Will undecided voters connect to Block?

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4. Will Block's lack of previous elected office help or hinder?


It can be argued that never having been elected before could be perceived as a negative.


Sure, Governor Don Carcieri was never previously elected to office and Governor Bruce Sundlun had only been elected to the state's Constitutional Congress, but voters may want to be sure that Block will know a federal emergency declaration from a new software version - or will each new storm be deemed Sandy 2.0 and so on.

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3. Is Block the smartest guy in the room?


Make no mistake about it, Block is smart. Business smart, policy smart, but could he be too smart and then not be able to connect to voters.


Bill Clinton was a Rhodes Scholar (so was Gina Raimondo), but one thing about Bill Clinton was that he could play the role of a good ol' boy as good as anyone. He could make any voter feel right at home.


Block will need to channel his intelligence into a language and approach that connects to the CEO he is asking to support his effort as equally as asking a unemployed mom in Pawtucket.

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2. How will he handle the plethora of special interests?


This time Block will have to answer the questionnaire from the FOP, the Right-to-Life groups, the Environment Council, MADD, the Teamsters, The Northern RI Chamber of Commerce, NEA-RI, arts advocacy groups, the NAACP, and you get the picture.


Consistency will matter. One group's endorsement will spark another groups condemnation. Mr. Block, welcome to the 2014 governor's race.

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1. Can he handle the hot lights?


The one thing about being the third or fourth candidate in a race is people remember the smart things you said, but don't pay much attention to the dumb things you said. Heck, you really didn't have a real chance to win so the assessment is not very stringent.


This time will be different. He needs to run not one but two nearly flawless races to be the next Governor of Rhode Island. His effort in 2010 will help him, but this time he has a real chance to win and the stakes are much higher


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