1. Providence’s push for a new Ocean State Regional Water Authority deserves a closer look. The bill, which was supposed to get a hearing Thursday but got yanked from the agenda, would pave the way for the city-owned Providence Water Supply Board to lease its system to the new authority. Unlike the Providence Water board, though, the Ocean State Regional Water Authority wouldn’t be subject to oversight by the R.I. Public Utilities Commission – giving it a monopoly on the sale of water without a check on how much it charges. If the capital city got a big upfront payment under the terms of the lease, the new water authority would presumably need to borrow a significant amount to pay the tab – money that would come out of ratepayers’ water bills. The new authority would also still need to come up with a significant amount of cash over the coming decades to pay for more than $300 million in water-infrastructure projects. Selling a water supply isn’t a new idea – London’s system is privately owned and operated, though not without its critics – but if Providence needs cash and the water system needs capital, it’s unclear if a quasi-public is the best approach. An alternative option would be selling or leasing Providence Water to a private company. For example, Aquarion Water Co., a division of Australia’s Macquarie Group, is in talks to buy yet another Connecticut town’s water system, with the promise of cash and new property-tax revenue once the deal goes through. Perhaps a firm like Aquarion could bring capital from outside Rhode Island to invest in the water system. The privatization option is at least worth considering if Providence Water is keen to change the current regime.
2. This week marks the 65th anniversary of the end of passenger trolley-car service in Providence. The United Electrical Railways’ last streetcar ended its final trip at the Swan Point trolley shelter in the early hours of May 15, 1948. “It was, thus, officially ending a transportation era, which began in Rhode Island in 1864, with horsecars,” a local journalist remarked at the time. “The first line was electrified in 1892 and trolley cars hung on despite introduction of busses [sic] in 1932 and trackless trolleys in 1931.” Has the time come for streetcars to make a grand return to Providence (if not Blackstone Boulevard)? Mayor Angel Taveras included the idea in his big economic-development plan, though funding remains elusive; possible solutions have been offered by Jef Nickerson and Stephen Miller.
There’s still no news about the status of talks happening behind closed doors between lawyers for for the state and public-sector labor unions who are working to resolve the fight over Rhode Island’s landmark 2011 pension law without going to trial.
Attorneys on both sides of the case met Friday afternoon with R.I. Superior Court Judge Sarah Taft-Carter, who is handling the suit, court spokesman Craig Berke told WPRI.com. In December, she ordered the state and the unions into a formal mediation process overseen by the Federal Mediation and Conciliation Service.
The lawyers met with Taft-Carter in her chambers for about 20 minutes to update her on the progress of the mediation process, Berke said. The parties have said they aren’t allowed to detail their discussions publicly. Friday’s meeting was the fifth status conference on the pension talks since February.
Taft-Carter has scheduled the next status conference for June 7, Berke said.
By Dan McGowan
PROVIDENCE, R.I. (WPRI) – Former State Police superintendent and congressional candidate Brendan Doherty on Friday said he has no plans to run for statewide office in 2014, likely clearing a path for Cranston Mayor Allan Fung to run unopposed in a Republican primary for governor next year.
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Rhode Island’s unemployment rate fell to 8.8% in April, reaching the lowest level in four and a half years thanks to a shrinking work force, according to new data released Thursday.
Rhode Island employers added 500 jobs in April, the fifth increase in the last six months. The state would need to add another 29,000 jobs to get back to the peak employment level reached in 2006, which wouldn’t happen until February 2018 if the pace of job growth in April continued.
Back in 2011, a group of law-enforcement officials in Rhode Island announced a huge $500-million settlement with Google to end a probe into the illegal use of its advertising platform to sell prescription drugs. With the help of the Chafee administration and Rhode Island’s two U.S. senators, North Providence and East Providence were allowed to use $70 million from the settlement to shore up their public-safety pension plans.
Wired magazine’s Jake Pearson is out with a big feature called “Drugstore Cowboy” that tells the behind-the-scenes story of the federal sting that led to Rhode Island’s Google windfall. Here’s a sample:
On February 25, 2009, a then 34-year-old career con man named David Anthony Whitaker left the Wyatt Detention Facility in Central Falls, Rhode Island, and slid into the backseat of an unmarked government car. … This was merely standard procedure when transporting a government cooperator. …
He had been bringing in obscene amounts of money by selling black-market steroids and human growth hormone online. …
That life ended on March 19, 2008, when a Mexican immigration agent nabbed Whitaker and brought him back to LAX, where the Secret Service promptly arrested him. …
At one point during a meeting with Whitaker and his lawyer, the Feds asked him how he had grown his online enterprise. Whitaker’s answer was immediate: He had used Google AdWords. In fact, he claimed, Google employees had actively helped him advertise his business, even though he had made no attempt to hide its illegal nature. It was reasonable to assume, Whitaker said, that Google was helping other rogue Internet pharmacies too.
• Related: Let’s put the $165M from Google into the police pension funds (April 3, 2012)
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Former Auditor General Ernie Almonte announced Thursday that he’ll run for general treasurer in 2014, abandoning his long-shot bid for governor against Gina Raimondo and Angel Taveras.
• Related: Caprio calls ‘shove it’ remark ‘stupid,’ prepares comeback (May 14)
A leading real-estate firm says houses are cheap – relatively speaking – in the Providence region.
Home prices in the Providence-New Bedford-Fall River metropolitan area are 13% undervalued relative to the economic fundamentals of the region, significantly more than the 7% undervaluation nationwide and 8% undervaluation in Boston, according to an analysis by Trulia, the real-estate data firm.
Jed Kolko, Trulia’s chief economist, explained the methodology in a blog post:
[W]e assess whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes, and rents. Incomes determine how much people can pay for housing, and price increases aren’t sustainable if they push prices too high relative to incomes. Rents reflect how much people value housing even if they won’t benefit from price appreciation (as renters don’t, but owners do); the price-to-rent ratio is like the price-earnings (P/E) ratio for stocks. Using data from multiple sources … we create several measures of fundamental value and combine them in order to calculate how overvalued or undervalued home prices are relative to fundamentals.
Home prices in the Providence area have fallen a long way since the height of the housing bubble: Trulia estimates prices were 51% overvalued during the middle of the 2000s, while they were 39% overvalued nationwide. (The Providence metro area encompasses all of Rhode Island plus Bristol County, Mass.)
Housing prices are below their fundamental value in 91 of the nation’s 100 largest metro areas, including Providence, according to Trulia. The only places where homes are estimated to be overvalued are in California, Texas, Oregon and Hawaii.
There aren’t exactly a flood of new people arriving in the area to snap up those supposedly cheap houses.
Trulia reports Providence was the sixth-slowest-growing major metropolitan area in the U.S. last year, eking out a population uptick of 0.1%, compared with 3% in fastest-growing Austin, Texas. Providence also has some of the oldest housing stock in the country: 6.6% of the homes for sale in March were built before 1900.
• Related: Study: Cost-of-living in Providence 23% above national average (Feb. 20)
By Dan McGowan
PROVIDENCE, R.I. (WPRI) – A Providence councilman has proposed a five-point plan to help reduce or prevent a property tax hike, but the Council’s top fiscal advisor said a residential rate increase is “unavoidable” for Rhode Island’s capital city.
By Dan McGowan
PROVIDENCE, R.I. (WPRI) – Legislation to create a regional water supply board in Rhode Island would pave the way for Providence – and several other communities – to lease their water supplies for a profit, Providence Water Supply Board Chairman Brett Smiley said Tuesday.
By Ted Nesi and Tim White
PROVIDENCE, R.I. (WPRI) - In his first TV interview since losing the 2010 governor’s race, former General Treasurer Frank Caprio told WPRI 12 he regrets his infamous comment that President Obama could take his endorsement and “shove it,” attributing the outburst to the frustrations of a losing campaign in its final weeks.
• Video: Watch the full Newsmakers with Frank Caprio (May 14)
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Rhode Island’s congressional delegation slammed the Internal Revenue Service on Monday for giving special scrutiny to conservative groups, but U.S. Sen. Sheldon Whitehouse suggested the scandal reflects a broken national campaign-finance system.
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – Engage Rhode Island’s fundraising slowed significantly in 2012 compared with the prior year, when the advocacy group provided crucial support for the pension law pushed through by Treasurer Gina Raimondo, WPRI.com has confirmed. Its union opponents said they spent $80,000 in 2011.
By Dan McGowan
PROVIDENCE, R.I. (WPRI) – Rhode Island’s capital city paid out nearly $12,000 per month in claims for pothole damages and other accidents between Jan. 2009 and March 2013, WPRI.com has learned.
1. Now that we know both Gina Raimondo and Angel Taveras have hedge funds managing big chunks of Rhode Island’s biggest and second-biggest public pensions, it’s likely citizens and other policymakers will want to take a closer look at their investing strategies. (Taveras aides emphasize that, unlike Raimondo, the mayor didn’t actively move money into hedge funds – he just left it there after taking office.) The treasurer has defended her use of hedge funds as a way to, well, hedge – to invest in assets that won’t move in lockstep with the stock market à la 2008. Yet while publicly traded stocks have rebounded smartly since the recession, The Economist reports that hedge funds are “going nowhere fast.” An index fund with 60% equities and 40% bonds would have returned more than 90% over the past decade; hedge funds returned only 17% after fees. Raimondo doesn’t dispute this, saying that she and the State Investment Commission have made a strategic choice to accept lower returns in order to minimize losses. Still, government pension funds are the ultimate long-term investors: should they have piled into public equities when they were cheap in 2008-09 rather than run away from them – particularly for systems whose funding levels are only 59% (Rhode Island) and 36% (Providence)? Without big investment gains, taxpayers and retirees will be left to fill those sizable shortfalls. Josh Barro, though, says Raimondo has this right: “Higher equity rates of return are purely compensation for risk, and downside risk would be born by RI taxpayers. … Hedge funds might be bad for other reasons, e.g., they charge too many fees. But she’s right not to chase returns by adding risk.”
2. With private-sector labor in a seemingly unstoppable decline, there’s been some interesting discussion on the left lately about alternative ways of organizing workers outside of traditional unions. Josh Eidelson tackled the question in The American Prospect earlier this year, and this week The Washington Post’s Harold Meyerson weighed in. Some of the ideas sound reminiscent of Fuerza Laboral, the Central Falls-based group that helps low-paid workers fight employer exploitation. Josie Shagwert, Fuerza’s former executive director, explained its work on Executive Suite last Labor Day.
Providence has topped a set of national rankings, and Mayor Angel Taveras probably isn’t happy about it.
Taxpayers in Rhode Island’s capital city paid the highest commercial property taxes charged in any of the nation’s 53 biggest cities in 2011, according to the latest edition of a widely cited comparative study by the Lincoln Institute of Land Policy and the Minnesota Taxpayers Association.
The previous edition of the study listed Providence as having the second-highest commercial property taxes among big cities, behind only Detroit – a statistic that’s been widely referenced locally ever since Governor Chafee cited it on Newsmakers and then had his research confirmed by PolitiFact.
But the tax burden on commercial property in Providence grew even heavier in 2011, when Rhode Island’s cash-strapped capital slapped a tax bill of $4,975 on commercial property worth $100,000 – $69 more than second-ranked Des Moines and $75 more than third-ranked Detroit. Here’s a chart:
Taveras has proposed freezing the commercial tax rate for seven years – apparently at what has been the highest level in any major U.S. city, according to this study. Even that may not happen: City Council members have expressed skepticism about the proposal, suggesting they may raise commercial taxes even more.
The study said Providence also charged the fifth-most on apartment buildings among the 53 big cities in 2011, with a tax of $21,765 on a $600,000 property, behind Des Moines, Detroit, New York City and Buffalo. In addition, Providence ranked 11th-highest for homestead property taxes on the median-value home and 9th- and 10th-highest for industrial property taxes on machinery, equipment, inventories and fixtures.
The latest edition of the study was cited Friday on Twitter by Gary Sasse. “Rhode Island’s economic health is linked to more competitive business taxes in the Capital City,” he commented (in abbreviated tweet form). Not coincidentally, the owner of the now-vacant Superman building wants a tax break to redevelop it.
By Dan McGowan
PROVIDENCE, R.I. (WPRI) – R.I. Gov. Lincoln Chafee on Thursday sided with former campaign rival and Moderate Party Chairman Ken Block after Block ripped House Speaker Gordon Fox’s plan to restructure the state’s troubled Economic Development Corporation.
By Dan McGowan and Tim White
PROVIDENCE, R.I. (WPRI) - Several Rhode Island school administrators spent thousands of taxpayer dollars on a trip to China, dining at high-end steakhouses and an in-state overnight staff retreat in 2012, according to a Target 12 review of school district travel data.
Philip Elliott reports for the AP:
[A] collection of Democratic lawmakers on Thursday renewed their push to keep rates low but also backed interest rates that were based on the markets. Their plan would base rates on a 91-day Treasury bill and allow the Education Department to add to that to pay for the administration of loan programs.
“The student loan interest rate offered by the government shouldn’t be needlessly high, it should be based on actual costs,” Sen. Jack Reed, D-R.I., said in introducing the plan.
The versions from both parties include a proposal that was central to Obama’s budget: interest rates would shift based on financial markets. …
Basing student loans on 10-year Treasury notes’ rates would, at least for now, offer a deal to some students. … That’s not to say, however, the rates would be a good deal forever. If Treasury increases its rates, students’ loan rates would rise, too.
For context, under the current system Congress sets the actual numerical interest rate on student loans – that’s why the rate is currently set by law at 3.8% and is (again) scheduled to rise to 6.8% on July 1. (Hence the growing focus on the issue at the moment.)
Reed’s bill would have Congress stop setting the rate by statute and start basing it on market movements instead, as outlined above. However – unlike similar proposals from President Obama and House Republicans – Reed’s bill would set a maximum cap on rates: 6.8% for subsidized loans and 8.25% for unsubsidized loans. It would also allow students to refinance their loans at a lower rate.
Why the cap? According to Reed, it’s necessary because someday interest rates will return to a higher level.
Reed’s staff says college graduates in the Class of 2007 would have paid almost 8% and the Class of 1981 would have paid almost 17% if the House GOP proposal had been law at the time. Using CBO economic forecasts, they project rates will be back above 8% by 2018 under the Obama/GOP proposals.
The White House and Republicans argue Reed’s proposal could raise costs for borrowers or force other taxpayers to subsidize student loans. “In order to have a cap, we would have to charge students more in order to hedge against the possibility that rates would go up to unmanageable levels in the future,” an administration official told reporters April 10.
While a capped market rate is Reed’s vision for a permanent fix on student loans, in the meantime he’s introduced a bill to freeze current rates for two more years while Congress comes up with a long-term resolution. “Some who claim it is important to avoid burdening our children and grandchildren with national debt are all too willing to bury these young people in student debt,” Reed said in a statement Thursday.
Reed isn’t the only local senator arguing for a fresh approach to student loans. Massachusetts’ Elizabeth Warren on Wednesday introduced a bill to let students borrow at the same rate that big banks get from the Federal Reserve’s discount window.
(photo: Manuel Balce Caneta/AP)
By Dan McGowan and Tim White
PROVIDENCE, R.I. (WPRI) – Nearly two years after Providence closed several public schools, the city is still paying hundreds of thousands of dollars to keep the lights and heat running in the empty buildings, WPRI.com has learned.
By Ted Nesi
PROVIDENCE, R.I. (WPRI) – President Obama, Congressman David Cicilline and other Democrats were propelled to victory last November by a surge in voting by Hispanic and black Rhode Islanders as well as a sharp drop in participation among white citizens, a WPRI.com analysis of new Census data shows.
Providence has invested 19.75% of its total pension assets in hedge funds, the Taveras administration disclosed Tuesday after WPRI.com requested a breakdown of its investment portfolio.
Rhode Island’s state pension system has invested somewhat less in hedge funds – 14.6% of assets as of April – under a new investment strategy implemented by Treasurer Gina Raimondo soon after she took office in 2011.
Providence’s Board of Investment Commissioners, which is chaired by the mayor and oversees the city’s pension portfolio, started investing in hedge funds on the advice of its longtime financial consultant, Boston-based Wainwright Investment Counsel, Taveras spokesman David Ortiz told WPRI.com. The investment board meets roughly once a month.
Three of the four members of Rhode Island’s all-Democratic congressional delegation will take aim Wednesday at someone who’s an unusual target for them: President Obama.
U.S. Sen. Jack Reed, U.S. Sen. Sheldon Whitehouse and Congressman David Cicilline are among the eight members of Congress co-hosting a summit on Capitol Hill to criticize a proposal in Obama’s latest budget that would trim Social Security benefits by switching to a measure of inflation known as “chained CPI.”
Rhode Island’s entire delegation slammed the policy when it emerged, and Cicilline has garnered national attention for introducing a resolution that would have Congress express formal disapproval of chained CPI. U.S. Sens. Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont are also among the summit’s hosts, giving it a decidedly New England flavor.
There were 207,122 Rhode Island residents receiving Social Security benefits in December 2011, the most recent month for which figures are available – meaning nearly 20% of state residents are on Social Security. Two-thirds of Rhode Island’s beneficiaries were 65 or older, while 35,905 were disabled and 15,704 were children. The Rhode Islanders’ combined Social Security benefits totaled $236 million that month.
The congressional event at 12:30 p.m. will be streamed live online by Strengthen Social Security, a coalition of unions and progressive groups that supports increasing benefits.
• Related: RI congressional delegation slams Obama over Social Security (April 10)
The investment performance of Rhode Island’s pension fund is lagging behind its peers under the new mix of assets adopted by Treasurer Gina Raimondo and the State Investment Commission that relies more heavily on hedge funds, data released Tuesday suggests.
Rhode Island’s $7.7 billion pension fund earned 9.81% during the 12 months ended March 31, according to Bank of New York Mellon Corp., its custodial bank. By comparison, the median public-sector plan with assets of at least $5 billion earned 10.5% over the same period, Wilshire Associates Inc. reported Tuesday.
Raimondo has acknowledged her new investment strategy, approved unanimously by the investment commission in 2011, could reduce the state’s investment return somewhat, but argues it will benefit the state in the long run by reducing risk and volatility.
“The improvements made by the State Investment Commission to the investment portfolio were designed to deliver strong, long-term returns, while reducing risk to provide a secure retirement for public employees and retirees,” Raimondo spokeswoman Joy Fox told WPRI.com. “The SIC’s strategies should be evaluated against long-term returns, not against any particular immediate snapshot.”
Rhode Island’s pension investments also grew more slowly over the three years and five years ended March 31 compared with the median plan of at least $5 billion, according to Wilshire and BNY Mellon. However, Rhode Island’s return over the 10-year period ended March 31 was 8.78%, better than the median plan’s 8.59%. Rhode Island’s plan also beat the internal benchmark it uses for comparison purposes:
The median plan’s performance published by Santa Monica-based Wilshire comes from its Wilshire Trust Universe Comparison Service, which tracks more than 1,700 public and private investment plans that control more than $3.4 trillion in assets. A Wilshire spokeswoman declined to disclose how many of those are public plans with at least $5 billion worth of assets.
• Related: Raimondo puts 14% in hedge funds, 10 times US median (April 29)
The NYT taped an interview with Senator Reed to gauge his thoughts on the conflict in Syria. He’s cautious:
I think we really have to carefully look at the situation. The Israeli attacks [in Syria last weekend] were prompted more in terms of disrupting the flow of military equipment to Hezbollah, and not so much involvement in the political and military activities within Syria of the opposition.
I think, one, we want to with the regional partners look at what we can do to aid the opposition to be effective, inclusive, and to as quickly as possible try to force the Assad government out. They have been attacking their own people and they’ve been destroying their country, literally, so we want that. But the precise military steps, I think, have to be carefully calibrated.
Senator Whitehouse actually sounded more hawkish about Syria than Reed after a trip there in January, when he told me: “This is a chance for us to be the great power that comes to the relief of Syria so that 100 years from now we’re still remembered as the country that helped them get their freedom.”
• Related: Levin retirement sets up Jack Reed for powerful Armed Services chairmanship (March 7)
By Dan McGowan
PROVIDENCE, R.I. (WPRI) – Rhode Island’s capital city will repay the U.S. Department of Housing and Urban Development more than $600,000 that was improperly spent by a troubled taxpayer-backed loan program, WPRI.com has learned.