38 Studios successfully pays $1.125 million to Rhode Island
38 Studios's $1.125 million check to the state of Rhode Island has cleared, governor Lincoln Chafee announced during a press conference this afternoon, thus fulfilling the first required payment on the studio's loan from the Rhode Island Economic Development Corporation.
Rhode Island is changing its legislation on tax breaks, closing loopholes pertaining to state funds being used for motion-picture endeavors, Chafee said. The state's interest lies in protecting the taxpayers, balanced with keeping 38 Studios solvent, since "taxpayers have had a very generous deal for 38 studios," Chafee said.
"It's time for them to go out and get private capital funding," Chafee said. "That's the deal. It's a generous deal, but stick to it."
Rhode Island officials believe that the total of the $49 million loaned to 38 has been spent. Chafee said that until late April, meetings with 38 suggested that they would make their May payment. "I want to make sure we're doing everything possible to make sure 38 doesn't fail," Chafee said. "We're in deep." Everything possible except giving them more money."There's not going to be any money from the state. They're not coming here for easy money."
According to Chafee, "Basically, the access to private capital hasn't materialized."
38 Studios' next payment is a debt service payment due November 1 of $2.6 million, and Rhode Island officials believe the studio will have the capital to cover it.
38 Studios will then owe $12.6 million in full annual debt service in 2013, and "that's on their dime," officials said.
Chafee said he recognized the risk involved in starting a new gaming studio, but the state would have benefited greatly from the studio's "huge success" had it done well.
"I said from the beginning that it was a risky enterprise," Chafee said. Regarding how 38 Studios will function if it doesn't have the funds to pay its employees, Chafee reiterated, "Again, these are the ramifications of being in a risky business."
Chafee doesn't plan on taking a gamble of this nature again: "Never, never ever. Not under my watch," he said.
