Taxpayers are and should be outraged not only at the final “findings”, or rather lack of findings, resulting from the conclusion of the multi-year investigation of the 38 Studios fiasco, but also at the lack of transparency surrounding the investigation. Based upon what professional bond investment managers have told me, I have stated repeatedly since long before the first bond payment was ever made that the only way to have a thoroughly independent, full-blown professional investigation would be to default on the bond payments, thereby forcing the bond insurance companies, who would wind up paying these bonds, to perform their own deep investigation.
Of course, The Powers That Be did not want that, for fear of the real truth coming out, so they used the fear mongering excuse that the state’s bond rating would be adversely affected if we defaulted on the bonds. While, as I’ve been advised, it may be true that the rating of moral obligation bonds like the 38 Studios bonds, which are not backed by the full faith and credit of the State and, therefore, do not carry a low tax-exempt interest rate but rather a much higher and fully taxable interest rate, may be adversely affected, we should not be issuing anymore of these moral obligation bonds anyway. Such bonds are approved by the legislature so the debt can be issued without requiring voter approval. Needless to say, after the result of the 38 Studio investment, the practice of issuing bonds without voter approval should be curtailed permanently.
As I have been also advised, the ratings of the state’s general obligation bonds may also be affected by a default on the 38 Studios moral obligation bonds, even though general obligations require voter approval and are backed by the full faith and credit of the state. Even so, the possible potential increase in the amount of interest the state may have to pay on potential future bonds not even yet issued would be far less than the $90 million we are currently paying on the 38 Studios bonds, and the state would have avoided what now appears to be a cover up.
If the governor and state treasurer had stepped up and done the smart thing by defaulting on the bond payments initially, the taxpayers could have saved tens of millions of dollars and would have had the results of a professional insurance investigation made public years ago.
It is still not too late to default on the remaining 38 Studios bond payments and, thereby, force the bond insurers to give us the full investigation the taxpayers deserve and reduce the cost of this fiasco to the taxpayers.
Ray Matheiu is an independent candidate for RI state representative in district 1.