By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Just weeks after the epic collapse of Curt Schilling’s 38 Studios, another high-profile loan guarantee approved by the R.I. Economic Development Corporation during the final year of former Gov. Donald Carcieri’s tenure has gone sour.
Capco Steel LLC received a $6 million loan from Webster Bank through the EDC’s R.I. Industrial Facilities Corporation two years ago to retrofit and expand its facilities in Providence and to buy new equipment. The loan was guaranteed up to $5 million by the EDC’s Industrial Recreational Building Authority (IRBA).
The quasi-public agency had to begin making loan payments to the bank on behalf of Capco this past February “when the company began experiencing financial difficulty,” EDC spokeswoman Judy Chong confirmed Monday in response to an inquiry from WPRI.com.
Chong said $4.6 million of the guaranteed loan was still outstanding as of June 30. She did not say how much money the EDC has paid to Webster so far, but emphasized that taxpayers have never lost money because of IRBA defaults since the program was created in 1958, thanks to reserve funds and asset sales.
“IRBA has been working diligently with Capco and Webster to find solutions to navigate through the downturn in the construction industry, including a plan to keep the company operating at a much smaller level,” Chong said.
Capco CEO Michael Caparco declined to be interviewed, but in an email Tuesday to WPRI.com stated “all workers are back to work.” Reports surfaced last week about extensive layoffs at the company.
Carcieri went to Capco’s Providence headquarters on March 23, 2010, to sign a law increasing the IRBA loan program’s size from $20 million to $60 million and to announce that the steel firm would be the first beneficiary of the expansion. Lawmakers had dropped IRBA’s size from $80 million to $20 million two years earlier due to a lack of demand.
The IRBA loan guarantee was part of a $26 million financing package for Capco Steel from Webster Bank announced that day, which also included a $20 million line of credit. Eight months after the EDC loan guarantee was approved, Capco CEO Mike Caparco Sr. said the company had hired 56 new employees and planned to add 50 more.
“This loan has put in place state-of-the-art equipment to help Capco remain competitive while bringing new jobs to the state of Rhode Island,” Caparco said in a November 2010 statement issued by the EDC. The Industrial Facilities Corporation also approved a $10 million loan for Calise & Sons and a $5 million loan for ATW Companies’ Parmatech-Proform Corp. division during its 2010 fiscal year, according to financial documents.
Carcieri was joined at the Capco bill-signing by House Speaker Gordon Fox, Senate President M. Teresa Paiva Weed, EDC Executive Director Keith Stokes, Treasurer Frank Caprio and then-Mayor David Cicilline. Steven Costantino, who was then chairman of the House Finance Committee and now serves in the Chafee administration, described the guarantees as “a relatively low-risk, low-cost investment for the state.”
For his part, Carcieri described the Capco loan and the expansion of IRBA as symbolic of the state’s new approach.
“We have restructured and re-energized the EDC Board of Directors,” the governor said. “We found a well-seasoned economic development professional in Keith Stokes to lead our renewed efforts. Today marks another important step in our strategy.”
Two months later, Carcieri signed into law a new $125 million Job Creation Guaranty Program to guarantee loans to technology companies; in late July, the EDC board he chaired voted to use the program to guarantee a $75 million loan to 38 Studios. The company filed for bankruptcy last month, which could cost taxpayers $100 million.
The EDC has been rocked by resignations since the problems at 38 Studios exploded into public view this spring. The agency disclosed Monday that Sue Morgan, its chief financial officer since December 2007, will step down at the end of this week to “pursue other opportunities outside government.” Stokes resigned in May.
As of 2010 Capco Steel’s annual revenue totaled more than $100 million and its employees totaled 425, Caparco said at the time. Caparco, who founded the company in 1990, endorsed Costantino for mayor of Providence later that year. Costantino unveiled his jobs plan at the steel plant in July but went on to lose the Democratic primary to Angel Taveras.
Capco has benefited from other government support over the years.
In June 2010, Cicilline visited Capco to launch Jobs Now! Providence, an employment program that benefited 14 Capco workers funded by President Obama’s stimulus law; Caparco praised the program in a Cicilline campaign commercial that summer. In 2008, Cicilline’s administration approved six-month paid apprenticeships at the company for Providence residents, with half their wages paid by the municipal government.
Tim White contributed to this report.