Moody’s praises Providence for paring back pension benefits
May 8th, 2012 at 2:54 pm by Ted Nesi under General Talk, Nesi's Notes, On the Main Site
The Providence City Council may be uncertain about the pension changes it just passed, but Moody’s isn’t.
“The ordinance is a credit positive because it provides current and future year budgetary relief to the financially strained city, although labor unions are likely to challenge the new law since it conflicts with existing collective bargaining agreements,” Moody’s analysts Susan Kendall and Geordie Thompson wrote Tuesday in a note to investors obtained by WPRI.com.
The pair described the pension overhaul as another sign that Mayor Angel Taveras and the City Council are taking difficult steps to avoid bankruptcy, saying it “demonstrates city management’s strong willingness to cut its long-term obligations despite resistance from employee groups and the threat of litigation.”
They also noted that last week Taveras reached deals with tax-exempts Brown University and Lifespan for an additional $33.9 million worth of payments over the coming years, which the administration “projects … will bring its 2012 and 2013 budgets into balance, although its reserve position and liquidity will remain weak.”
Local judges are a major concern for Moody’s. The analysts singled out R.I. Superior Court Judge Sarah Taft-Carter’s February decision barring Providence from moving retirees to Medicare as a key cause of its renewed fiscal distress in recent months, and said the outcome of any pension litigation will be significant.
“Providence’s ordinance marks the first time that a Rhode Island local government has altered existing contractual agreements with retirees outside of Chapter 9 bankruptcy,” which Central Falls used to make changes, Kendall and Thompson wrote. “If the ordinance survives a legal challenge, many other Rhode Island local governments may pass similar actions that reduce benefits to manage their own significant fiscal stress.”
“A large proportion of Rhode Island local governments are facing fiscal stress related to growing pension benefits,” they added. “The ability to alter pension benefits outside of bankruptcy would be a significant tool for municipalities to balance financial operations. This could also reduce the growing need for state intervention.”
The General Assembly is currently considering a package of bills proposed by Governor Chafee and backed by most local leaders that would allow troubled city and town governments to reduce their expenses, notably by freezing cost-of-living adjustments (COLAs) if their pension plans are underfunded.
Woonsocket, Providence and Central Falls face by far the largest combined pension and debt liabilities as a share of their property tax bases, according to this accompanying chart from Moody’s.
• Related: Moody’s joins Fitch, cuts Providence’s bond rating over budget (March 27)
(chart: Moody’s)
Tags: angel taveras, chapter 9, moody's, municipal, pensions, providence, providence city council, providence financial crisis
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
Thats BS from a corporate group that only sees cutting workers to the bone as a means to stabilize investment.
Nelson, these people you call workers are the dregs of society. They have been overcompensated for too long at the expense of people who work in the private sector. There has not been 5 or 6% inflation in this country in over 30 years. A cola is to keep the buying power the same not for an increase in value. You must be a workfare reciepent.
The talking horse shows his intelligence again! Nice going Ed.
ok mayor if you want to do this lets do it right-sign a contract that you or any other mayor that follows you for the next 24 years cannot get a raise; what you make right now they make for the next 24 years. next all your people have to cancel all your gas and credit cards that the tax payers pay for and cancel all those cell phones too. if channel 12 did not find that slacker he would still be doing it-how many more are out there. all these people complaining about the pensions-do what they do-next time you are being hurt or your house is on fire dont call the police or fire-call the mayor he will help you or call a school teacher they have a pretty good pension-that the tax payers pay for too
There is level at which these Wall St secrewballs will go to secure more money for the banks on higher interests for us by downgrading our bonding.
They wonder about the judges? Hello! Now they want to control the law. Wall St already has screwed up the economy.
I wonder if Moody worries about no interest from banks, high insurance costs without documentation, higher utility bills for bogus reasons, a 135% increase in health care costs–greed over need.
A contract is meant to be enforced. Just ask any bank or credit card company.
Employees never defaulted on the contracts, but the cities have by not funding what they signed. Where was Moody’s then?
Here come all the whiners who can’t sererate from mommy and don’t know how to do math, or realize if the city goes bankrupt, CONTRACTS CAN BE BROKEN. Employees will get paid for their services, retirees DON’T HAVE TO BE COMPENSATED. Now for you MORONS GET THAT THROUGH BUTTOCKS TO YOUR BRAINS. That is where they are located on you anyway.
I believe that most of your rate will be decided in court, not by someone who lives in Houston where illegal’s run the city. The talking horse shows his intelligence again!
Take a look around Mr/Ms. public sector employee. There are stories in the news everyday about cities,towns,states, not to mention our country, that are bankrupt or on the verge of bankruptcy.Many pension funds also are either unfunded or bankrupt. It sucks for you that reality is just starting to shine its light on this mess. But reality it is. Basic math tells us these contracts should never have been agreed to. They are, simply put, unsustainable. They were signed by politicians, and this is not a startling revelation, that were in the back pockets of the public unions. That is why these contracts should be voted on by the taxpayers/voting public. But, I guess we, the taxpayer, are supposed to sit back and enjoy the ride over the cliff! No, it is our duty to stand up and preserve our country….for our children.
The persons You elected did this.