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Governor: New day at EDC

June 5, 2012

PROVIDENCE — Gov. Lincoln Chafee declared Monday that “this is a new day at EDC,” because the RI Economic Development Corp. will start being more cautious about the way it doles out taxpayers’ money.
“We’ve been scorched; we’ve been burned, as it stands now,” Chafee acknowledged. “Rhode Islanders should know I am conservative by nature with every dollar and I always have been, as a mayor, as a (U.S.) senator, as a governor. There is going to be a full analysis before any investment is made.”
Describing his thoughts on economic development, Chafee said “I like investing in education and infrastructure. That’s what I like to grow the economy with. It is part of my conservative approach. Loans are traditionally done by banks, and we are going to have a banker on the board. Equity is acquired by going out to equity firms, what government does well is roads, bridges, schools, water works, so companies can come in and know they have good access to electricity, to power, to energy, wastewater. That’s what companies like…that’s what I want government to focus on.”
Nonetheless, Chafee said, “I don’t feel like there’s an urgency to pull any plugs at this stage” on 38 Studios and force it into bankruptcy. He said his administration has been working with the company to attract outside investors and will continue to for as long as long as there is still hope that it can be resuscitated, although he repeated that he is not optimistic that will happen.
“There are still conversations being had” with “potential investors.” The company has laid off all of its employees and now is the subject of a forensic audit demanded by the state to determine how the company ran out of money before it could pay back $75 million of loans that were guaranteed by EDC as part of a $125 million loan program or before it even came close to finishing its massively multi-player online video game, Project Copernicus.
Chafee announced the appointment of three more new EDC board members on Monday, bringing to six the number of new faces he has nominated for the panel since last Thursday.
The latest appointments include: Roland Fiore, President of South County Sand & Gravel of South Kingstown, replacing Timothy Babineau; Steven Hardy of Warwick, senior vice president of Bristol County Savings Bank, who replaces Daniel Sullivan Jr., and William Holmes, business manager for the Rhode Island Carpenters Local 94, named to the seat designated for labor and replacing George Nee. Last week, Chafee announced the appointments of Marcia Blount (replacing J.L. Singleton), Alison Vereika (replacing Stephen Lane) and Dr. Pablo Rodriguez (replacing Helena Foulkes).
The appointments complete Chafee’s purge of all EDC members who voted in favor of the 38 Studios deal back in 2010. He cited the need for a “fresh start” at the troubled agency. All six nominations must still be confirmed by the Senate.
The governor also told reporters he is moving Paul McGreevy, director of the Department of Business Regulation (DBR) over to EDC as a special assistant to the governor.
As Special Advisor, McGreevy will work to stabilize the EDC, ensure that it performs its current functions properly, and examine its overall management and mission.
He will also work closely with the Rhode Island Public Expenditure Council (RIPEC), which has been commissioned by Chafee to conduct an analysis of the structure, programs, and role of the EDC, similar to the 2009 Verrecchia Report that recommended a revamp of an agency it called “fragmented, disjointed and without focus.”
The RIPEC study, which Chafee announced last week, is expected to be completed by Sept. 1, at which point McGreevy, a Newport resident, will return to DBR.
"Drawing from his Navy background and management consulting experience, Paul will help the Board look broadly at the EDC and its relationship with economic development in Rhode Island. He will conduct a thorough and disciplined review of the organization as a whole and help us address complex questions and decisions about its future," Chafee said in a written statement.
The governor hinted at a press conference that the RIPEC report may result in “a new model” for the EDC, adding that McGreevy “has a good background to address this transition, if there is a transition.
Answering reporters’ questions, Chafee, who chairs the EDC by virtue of his office, felt compelled to say “I don’t think the EDC has irrevocably lost credibility because of 38 Studios.” He added that the agency, “has too much of a solid foundation that has been going on a long time.
Chafee said he had “a brief conversation” that “went away quickly” last November or December with his then-chief of staff Patrick Rogers about 38 Studios wanting to apply for TV and Motion Picture Tax Credits. The governor said he remembers saying “we’re already in for all this amount of money, and I don’t see film credits being part of what I want to pursue.” He added that, to his recollection, the subject was not brought up again until 38 Studios financial difficulties started to become known in April of this year.


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