State Report: 38 Studios, Legislative Raises & Casino Gaming
Saturday, July 14, 2012
Anyone in need of some inspiring local news may want to stop reading right about now. This week’s State House Roundup is rather depressing. One of the main stories of the week is that Rhode Island managed to crack the national headlines twice. Unfortunately, it was in regard to the 38 Studios bankruptcy hearings and the state earning the dishonor of being named the worst state in the country to do business in. On the bright side, Central Falls may be one step closer to clawing its way out of the red. Also, Sen. Sheehan announced that he is declining the annual cost of living adjustment given to the General Assembly. Too bad he is the only Democratic Senator to do so thus far.
Rhode Island ranked the worst state to do business
For the second year in a row, Rhode Island has won the dubious distinction of being the worst state in the nation to do business in, according to CNBC. Not only did the state finish last, it was near the bottom of most of CNBC’s 43 measurements used for the study. The study’s 43 criteria were broken down into 10 broad categories: cost of doing business, workforce, quality of life, economy, transportation and infrastructure, technology and innovation, education, business friendliness, access to capital, and cost of living.
Each state was awarded points based on how well it performed in each category and the state earned a putrid 844. “Rhode Island just didn’t finish last in our rankings. With just 844 out of 2,500 possible points, the Ocean State was pretty much dead in the water,” said CNBC correspondent Scott Cohn. For sake of comparison, Texas finished first on the CNBC list, earning 1,604 points.
Rhode Island finished near the bottom in 6 out 10 categories including cost of business, workforce, economy, infrastructure and transportation, business friendliness, and cost of living. Out of the six, the state was dead last in one category: infrastructure and transportation.
The one positive aspect of CNBC’s data is that the Ocean State was ranked 10th best in nation in terms of access to capital. Last year the state ranked 35th in access to capital, but experienced a surge in the rankings due to large amounts of venture capital flowing into the state, according to Cohn.
Twin River Casino Campaign Ad Spot
On Wednesday, the Twin River slot parlor released a commercial encouraging the passage of its November ballot question. The ad asks Rhode Islander voters to vote “yes” when it comes to adding table games to Twin River. The ad maintains that adding table games to Twin River will not only help revitalize the Rhode Island economy, but also add about 650 new jobs. Voting “yes” will also protect 900 current jobs, generate $16.2 million in new revenue, and stimulate a projected $60 million in economic activity, according to Twin River.
The issue of table gaming in Rhode Island became paramount in late 2011 when Massachusetts approved three full casinos and one slot parlor. Not surprisingly, Twin River and Newport Grand slot parlor would have a hard time competing with neighboring casinos that offer table games.
A study commissioned by Gov. Chafee concluded that Rhode Island’s annual revenue would decrease by roughly $100 million when Massachusetts’s approved casinos open in 2017.
Twin River’s ad will run for two weeks on YouTube and can be viewed HERE.
Sen. Sheehan declines legislator pay hike
Earlier this week, Sen. James C. Sheehan (D-North Kingstown, Narragansett), announced that he would be declining the 3.2 percent salary increase being given to the General Assembly. Sen. Sheehan’s decision makes him just the first Democratic Senator to turn down the raise.
“Given the state of the economy and the fact that there have been budget cuts, I will not accept the constitutionally guaranteed pay raise,” said Sen. Sheehan. “I do not think it is appropriate in principle to accept a pay raise when sacrifices are being made all across state government and in most of the households in our state.”
Sen. Sheehan joins six Republican Senators and two House members in his decision. Senators Denis Algiere (R-Westerly), Dawson Hodgson (R-North Kingstown), Nicholas Kettle (R-Coventry), Frank Maher (R-Exeter), Christopher Ottiano (R-Portsmouth), and Glen Shibley (R-Coventry), all declined the raise. Additionally, Rep. Doreen Costa (R-North Kingstown) and James McLaughlin (D-Cumberland) also declined the increase.
38 Studios bankruptcy hearing
On Tuesday, the Chief Financial Officer for 38 Studios helped to shed some light on what caused the undoing of the now defunct video game company. Richard Wester, CFO for 38 Studios, told a bankruptcy court in Delaware that the company’s first game sold much less than projected.
Wester told the court that the company had projected to sell 2 million copies of “Kingdoms of Amular: Reckoning,” but ending up selling only 1.4 million units. According to Wester, 38 Studios would have been able to pay its bills and complete its second game Copernicus, if Kingdoms of Amular had fulfilled its potential. Wester also maintains that the company would have paid back its $75 million state backed loan with the revenue generated from Copernicus.
Aside from Kingdoms of Amular underselling, 38 Studios’ bankruptcy can also be linked to its partnership with Electric Arts (EA). In fact, 38 Studios had to split the revenue on the game with EA the publisher, 70/30. Thus, EA received 70 percent of the revenue generated from the game. Furthermore, 38 Studios had to pay back a $30 million loan to EA. In the end, the amount of money left over was not enough for 38 Studios to remain above water.
Central Falls bankruptcy update
On Wednesday, it was announced that Central Falls might make their way out of bankruptcy by September 2012. If the September date holds true, it will be one year and one month after the cash-strapped city first filed for bankruptcy. Conversely, it took Vallejo, Calif. three years to recover from filing for Chapter 9 in 2008.
Wednesday’s news specified that once governmental control is handed back over to the city, it must abide by the receiver’s five-year balanced budget plan. The state appointed receiver took over in July 2010 when the mayor, Charles Moreau, and William Benson Jr., City Council President, were demoted to advisers.
Under the plan, the city’s retirees, unions or the state reserve the right to go to court if city officials do not follow the arrangement. Bankruptcy Jude Frank J. Bailey will retain jurisdiction for the life of the plan. The judge has set Sept. 5 and 6 for hearings on the restructuring.
Since filing for bankruptcy in August 2011, city employees and retirees have agreed to pay more for their health care and retirees have experienced pension cuts up to 55 percent. The only individuals to make it through the bankruptcy unscathed are the investors holding city bonds.
