PROVIDENCE, R.I. (AP) — Rhode Island's House speaker said Thursday the state should repay bonds that financed the failed 38 Studios deal, despite calls from some lawmakers — including in his own party — to default.
Speaker Nicholas Mattiello told reporters he had concluded, following meetings with two Wall Street rating agencies, that it's in the best interests of the state to make the payments.
"We need to pay to protect the credit rating of Rhode Island," he said after a caucus with fellow Democrats. "I am not going to put Rhode Island on the default list. The reputation of the state will not be harmed any further."
On Wednesday, Mattiello and Majority Leader John DeSimone met in New York City with representatives of Moody's and Standard & Poor's, both of which have warned of downgrades, possibly by multiple notches, if the state defaulted. That would lead to increased borrowing costs.
While there is no legal requirement to repay so-called moral obligation bonds — the type used in the deal that gave 38 Studios a $75 million state-guaranteed loan — Mattiello said "a moral obligation is your commitment to pay."
The speaker claimed overwhelming support from Democrats, who make up 69 of the chamber's 75 members. Asked if he has enough votes for appropriating the next $12 million bond payment, he said: "Yes, easily."
Rep. Spencer Dickinson, who has been among the most vocal critics of repayment, called the speaker's arguments in the caucus persuasive, but said he remains a "big skeptic" and suggested others still are too.
"I'm not ready to do a bailout," said Dickinson, D-South Kingstown. "I think it still might be an undecided issue."
Lawmakers last year approved $2.5 million for the initial payment, but only after heated debate and a request for an outside study on the possible repercussions of a default. That analysis by SJ Advisors, released this month, predicted the state's bond rating would fall to junk status.
Some legislators and others criticized the report's conclusions as alarmist and unlikely.
Rhode Island remains responsible for some $87 million after 38 Studios, the video game company founded by ex-Red Sox pitcher Curt Schilling, went bankrupt in 2012. The state economic development agency is suing over its collapse.
Mattiello said he hopes some of the defendants may now be encouraged to settle, given the leadership's support for making the payment. Senate President Teresa Paiva Weed and Gov. Lincoln Chafee, both Democrats, also say the state should pay.
House Minority Whip Joseph Trillo, R-Warwick, isn't convinced.
"My problem with most of these arguments is they're coming from people who have an interest in the payments being made," he said. "I haven't been swayed at this point."