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)

I’ts another storm-free day in southern New England, with our biggest concern being how far north low clouds and fog make it onshore through the early afternoon.  It sure has been a nice–nearly 2 week–stretch of quiet, dry weather in New England…. but now the area of high pressure that’s been providing the stable atmosphere is moving out and unsettled weather will be moving in.   And as much as most of us like the sunshine, we could really use some rain.  Here’s a look at the latest information from the US Drought Monitor.  It has RI, CT and and central and western MA under “abnormally dry” conditions.

US Drought Monitor as of Apr 30

And it’s no wonder… since the start of meteorological spring on March 1st we have an almost 5.5″ rainfall deficit.  It’s less severe in eastern MA due to a coastal storm a few weeks ago that brought heavy rain to that area, while in RI we only saw a few light showers.

It looks like a combination of low pressure tomorrow and Thursday, with several fronts over the weekend will help put a dent in that deficit.  We’ll see scattered showers, with some embedded heavier downpours starting by afternoon on Wednesday… and we’ll keep at least a chance of showers in the forecast into Sunday.  Here’s a forecast for how much rainfall we could see through the next 7 days…. with about an 1″-1.25″ expected.

Rainfall Totals Next 7 Days

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)

Good evening ….

The streak of dry sunny weather will come to an end by mid week.  That is actually good news considering how dry it has been.  We have been abnormally dry of late.  Infact, since March 1st rainfall is running 5 inches below average.

After some clouds and morning fog Tuesday, sunshine will warm things up nicely by afternoon. The forecast map below are the high temperatures by 3pm. Inland areas around 70-75 with the coast in the mid to upper 60s due to light sea breeze.

Rain arrives by Wednesday…Thanks for logging on !!    Tony Petrarca

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.

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By Ted Nesi

NARRAGANSETT, R.I. (WPRI) – Roman Catholic Bishop Robert McManus of Worcester was arrested Saturday night in Rhode Island on suspicion of drunken driving after a hit-and-run, WPRI.com has confirmed.

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The Providence Journal’s advertising sales dropped again during the first three months of this year, as Rhode Island’s statewide daily newspaper reported losses in nearly every type of notice.

The Journal’s advertising revenue was down 15% between Jan. 1 and March 31 compared with the same period in 2012, parent company A.H. Belo disclosed in an SEC filing. Quarterly ad sales fell to $9.6 million, or $1.7 million below last year’s level.

Total first-quarter revenue at The Journal from all sources was down 9% from 2013, falling to $20.6 million, thanks to a 10% increase in its contracts to print and distribute other newspapers. Circulation revenue fell 7% to $8 million.

“In Providence we got off to a bumpy start for a variety of reasons,” A.H. Belo CEO Robert Decherd told investors in a conference call last week. He said some of The Journal’s promotional plans for the start of the year were hamstrung by the winter storms that hit Rhode Island.

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Welcome to another edition of my weekend column – as always, send your takes, tips and trial balloons to tnesi@wpri.com. For quick hits all week long, follow me on Twitter: @tednesi.

1. The Superman building wasn’t the only important economic story in Rhode Island this week. You may recall the “Kickstarter for T-shirts” startup Teespring and its 24-year-old founder, Walker Williams, from Williams’ appearance on Executive Suite last fall. Well, a just-published New York Times article reveals Williams and his co-founder have left Rhode Island for Silicon Valley in exchange for a $100,000 investment – and priceless connections – provided by Y Combinator, the famed startup accelerator and the subject of the Times story. (Imagine: at $100,000 a pop, the $75 million borrowed for 38 Studios could have backed 750 Teesprings.) Williams is the star in the article, which reports Teespring just topped $1 million in monthly revenue and has raised $1.3 million from investors; its founders hope to make $1 billion someday. Not that Teespring has bolted Rhode Island: Williams tells me Teespring remains headquartered in Providence and still has 14 people in its local office. Yet the fact that its two founders decamped for the Bay Area shows what an uphill battle Rhode Island faces in retaining its most promising prospects, a challenge that has less to do with high taxes – California ain’t Texas – and more a lack of early-stage capital or a tech sector that can compete with San Francisco and Cambridge. Indeed, even what exists now is imperiled: Providence recently ended its $50,000 equity investments in Betaspring graduates, of which Teespring is one.

2. Food for thought: Lincoln Chafee defeated John Robitaille in 2010 by only 8,600 votes. That means the choices of fewer than 1% of Rhode Islanders – or half the population of Central Falls – determined that the governor would be a socially liberal independent rather than a socially conservative Republican. It’s no understatement, then, to say the 8,600 voters who put Chafee over the top are the reason same-sex marriage will become legal in Rhode Island on Aug. 1, 2013; Robitaille opposed gay marriage and presumably would have vetoed the bill, which might never have reached the governor’s desk in the first place without clear gubernatorial support. Elections matter.

Read the rest of this entry »

By Dan McGowan

Providence Mayor Angel Taveras would be midway through his second term as governor before Rhode Island’s capital city could raise commercial property taxes if future city leaders follow through on his pledge to freeze those rates for seven years.

So what do the laundry list of candidates lining up to succeed Taveras think of his proposal? WPRI.com asked every candidate who has expressed interest in running for the city’s top job to weigh in on the Taveras budget proposal.

After the jump, find out what City Council President Michael Solomon, Councilwoman Sabina Matos, state Rep. John Lombardi, Victor Capellan, Lorne Adrain and Maryellen Butke had to say. Read the rest of this entry »

By Walt Buteau

SOUTH KINGSTOWN, R.I. (WPRI) – Accused of embezzling state grant money, Institute for International Sport Executive Director Dan Doyle was arraigned on more than a dozen charges Friday morning.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Same-sex marriage will be legal in Rhode Island starting Aug. 1 after the R.I. House of Representatives gave final approval to the legislation Thursday, thrilling supporters who’ve been pushing the issue at the State House for 16 years.

Read the rest of this story »

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Angela Romans, the top education advisor to Providence Mayor Angel Taveras, is leaving City Hall for a job with Brown University’s Annenberg Institute for School Reform, WPRI.com has learned.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Bishop of Providence Thomas Tobin says he’s “profoundly disappointed” that Rhode Island is likely to legalize same-sex marriage on Thursday, and he’s warning Catholics to think hard before going to the weddings of local gays and lesbians.

Read the rest of this story »

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – Rhode Island’s capital city is on pace to end the 2012-13 fiscal year with a $10.8 million deficit, but it can balance its budget with additional help from the state, according to Internal Auditor Mathew Clarkin.

Read the rest of this story »

• Related: Study: RI has 3rd-most baptisms, remains most Catholic state (March 12)

Reuters’ Felix Salmon, one of the most influential finance bloggers in the nation, jumped into the discussion Josh Barro and yours truly were having about Rhode Island officials’ justification for refusing to default on the 38 Studios bonds. While Salmon agrees the state’s pensioners would seem more deserving of repayment than the bondholders, he gently chides Josh and me for a bit of “faux naïveté” regarding what’s going on:

The answer is that yes, moral obligation bonds are effectively general obligations bonds in all but name. The state has found a way of issuing bonds without having to get the approval of the legislature, but they’re still obligations of the state, and the state doesn’t distinguish the two types of obligation. And yes, Rhode Island should be paying the lower interest rate rather than the higher interest rate. But that doesn’t mean that voters should have to approve moral obligation bonds: it could equally mean that voters should stop having to approve general obligation bonds.

That is what all governors really want: to have the legislature and voters stop interfering in their borrowing strategy. And that is the real reason why Chafee is staying current on his moral obligation bonds. He wants the world to see voter approval as an anachronism, and in an ideal world he would love it if moral obligation bonds had the same legal backing — and therefore the same lower yield — as general obligation bonds. That way he’d never need to issue a general obligation bond, or get voter approval for such a thing, ever again. It’s a very attractive vision — and it’s not one he’s going to give up just because Rhode Island is suffering a fiscal nightmare these days.

As someone who spends a lot of time listening to Lincoln Chafee, I’m skeptical that the governor has truly thought through the reasons for drawing a distinction between moral-obligation and general-obligation bonds (or not drawing one). But as Salmon makes clear, this debate has demonstrated that there’s no real difference between the two types of debt when it comes to whether taxpayers will have to cover the liability.

• Related: Chafee reveals RI’s confusion about the 38 Studios bonds (May 1)

Gov. Lincoln Chafee is using some of the choicest real estate in all of American journalism – the New York Times op-ed page – to make his case about why he’ll be making the right move Thursday when he signs into law a bill allowing same-sex marriage (presuming it passes the House).

Chafee’s 1,200-word opinion piece – “Why I Am Signing Marriage Equality Into Law” – lays out clearly and succinctly the case the governor has been making since his inaugural speech in 2011: that allowing gays and lesbians to wed in Rhode Island will fit with the state’s history of tolerance and benefit its economy to boot. He also goes out of his way to praise the Rhode Island Senate’s GOP caucus for backing the bill, and makes a point of highlighting some of the brighter spots in the state’s economy.

This isn’t Chafee’s first foray onto the Times’ opinion page. In February 2010, just after he launched his successful campaign for governor, he published a piece called “Goodbye to All That” that suggested, following Evan Bayh’s disillusioned departure from the U.S. Senate, the need for a third political party.

One bit of political trivia that’s still unresolved: when exactly did Chafee actually start expressing support for same-sex marriage? Chafee notes in his op-ed that he opposed President Bush’s proposed constitutional ban on gay marriage in 2004, but at that point he only supported civil unions; during Chafee’s 2006 re-election campaign, however, he was on record supporting full marriage rights for gays and lesbians.

Whatever the case, Chafee supported same-sex nuptials long before most Democrats, let alone Republicans.

My friend Josh Barro of Bloomberg View, who spends a happily inordinate amount of time writing about Rhode Island, interviewed Governor Chafee this week during the governor’s media roadshow in Connecticut and New York City. Josh pressed the governor on why he’s flatly ruled out defaulting on the 38 Studios bonds yet signed a law that reneged on promises made to state retirees – and Chafee’s reply was not convincing:

That raises a question that many state residents – especially retired employees – would like to see answered: If Rhode Island can’t afford to keep its promises to retirees, how can it afford to keep its promise to the 38 Studios bondholders? Chafee isn’t prepared to answer. …

And when it came to 38 Studios, Chafee couldn’t even answer a simple question: Is it ever appropriate for the state to issue moral obligation bonds?

“I’m not an expert on that issue,” he responded. After a year of dealing with the fallout from 38 Studios’ collapse, you would think he would be.

As the interview ended, Chafee remarked, “I’ll have to think a little more about Josh’s question” — the one about why you can freeze COLAs but can’t default on 38 Studios.

Local officials are fearful that the bond market won’t differentiate between a default on the moral-obligation bonds issued for 38 Studios and the general-obligation bonds backed by the state’s full faith and credit, particularly since Rhode Island is a municipal minnow compared with, say, California. A top policymaker once asked me to imagine a Wall Street Journal headline the day after: “Rhode Island defaults on bonds.”

While that’s certainly possible, it’s worth scrutinizing.

First of all, if any state officials in the country should be able to go to Wall Street and soothingly explain why the 38 Studios case is a unique one and the default won’t set a precedent, wouldn’t they be Gina Raimondo – a former venture capitalist beloved by financiers who crafted a landmark law slashing pension liabilities – and Rosemary Booth Gallogly – a veteran policymaker who’s overseen the successful restructuring of municipal budgets in Central Falls and elsewhere, all while explicitly protecting bondholders?

Maybe, maybe not. (And maybe Raimondo and Gallogly aren’t interested in trying.) But if that’s the case, a moral-obligation bond is effectively a general-obligation bond in all but name, with full repayment by Rhode Island taxpayers promised no matter what. If so, shouldn’t voters have to approve moral-obligation bonds at the ballot box as they already do with general-obligation bonds – and shouldn’t Rhode Island be paying the lower interest rate investors get on a lower-risk general-obligation bond?

By Ted Nesi and Tim White

PROVIDENCE, R.I. (WPRI) – Treasurer Gina Raimondo continued to raise campaign cash at a rip-roaring pace during the first three months of 2013, far outpacing the other leading candidates for the state’s top job.

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We’re welcoming in the month of May with a continuation of the dry, sunny and seasonable conditions that we had at the end of April.  Our weather is still under the control of an area of high pressure that is anchored across New England, bringing a delightful stretch of storm-free days.  We’re in what we call an “omega Block”.  I’ve highlighted it in red on the 500mb map from the 06z NAM computer guidance this morning:

Omega Block

Notice the resemblance to the greek letter omega:

Greek Letter Omega

“Blocking” means that there’s a stagnation in the weather pattern where there’s  the same type of weather for days or even weeks.  For New England, which is under the omega block, it means dry weather and light wind for an extended period of time while rain and clouds are common on either side of the omega block. This kind of pattern makes forecasting easier since you can pinpoint areas that will be dominated by dry or rainy weather for several days.

So when will the pattern break?  Some of our computer models see some signs of change by late next week… though even then, it doesn’t look like a complete break down of the ridging in New England.  At this point, we’re looking at likely warmer than average and drier than average conditions in our area through possibly May 10.

By Dan McGowan

Add Nellie Gorbea to the growing list of potential candidates for secretary of state.

Gorbea, who currently serves as executive director of HousingWorks RI, told WPRI.com she is giving “serious thought” to joining outgoing Democratic Party Chairman Ed Pacheco and Newport businessman Guillaume de Ramel in the race to replace the term-limited Ralph Mollis next year.

“A lot of people have been asking if I’m considering it,” Gorbea told WPRI.com. “I’m looking into it. I’m having thoughtful conversations.”

Gorbea, a Democrat, is a veteran in local politics, having served as a top aide to former Secretary of State Matt Brown and as president of the Rhode Island Latino Political Action Committee (RILPAC). As head of Housing Works RI, she helped craft last year’s successful bond referendum campaign that generated $25 million for affordable housing in the state.

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Gov. Lincoln Chafee announced plans to sign a bill legalizing same-sex marriage during a ceremony on Thursday evening, immediately after the final version legislation is expected to win passage in the House of Representatives.

Read the rest of this story »

• Related: How the Rhode Island shifted on same-sex marriage (April 24)

High Rock Development isn’t the only organization putting out studies about the “Superman building” today.

The administration of Providence Mayor Angel Taveras quietly released a 95-page study [pdf] Tuesday afternoon that suggests state taxpayers should consider providing $60 million in historic tax credits to subsidize the conversion of the former Bank of America building into apartments. That’s significantly more than the $39 million requested by High Rock in its own proposal for the redevelopment.

However, Taveras all but disowned the study’s conclusion in a statement his office released along with it, saying: “I am concerned this proposal would not be the wisest public investment – especially if there is a less costly alternative to maintaining the Superman Building as a contributor to our state’s economy. More work needs to be done to explore the option of maintaining the building as office space.”

Read the rest of this entry »

By Dan McGowan

PROVIDENCE, R.I. (WPRI) – The overwhelming majority of Rhode Island’s public school teachers do not want Gov. Lincoln Chafee to extend Education Commissioner Deborah Gist’s contract, according to a poll released Tuesday by the state’s leading teachers unions.

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By Dan McGowan

PROVIDENCE, R.I. (WPRI) – The owner of Providence’s iconic “Superman building” is asking House and Senate leadership to approve nearly $40 million in state money and the city to grant a tax stabilization for a project that would transform the city’s tallest structure into apartments, WPRI.com has learned.

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• Superman building proposal: The summary | The market study | The economic impacts (PDFs)

The Providence Journal’s Sunday print circulation fell 10% during the six months ended March 31, figures released Tuesday showed, as the newspaper’s parent company reported a first-quarter loss of $8 million.

The Journal’s print circulation on Sundays – the most lucrative edition of the week for most papers – totaled 109,516 copies, down by 12,763 since March 2012, the Alliance for Audited Media (formerly the Audit Bureau of Circulations) reported Tuesday morning.

The Projo sold an average of 79,244 traditional print editions on weekdays between Oct. 1 and March 31, a decrease of 6,252 from a year earlier and 45% fewer than in September 2007.

Saturday circulation dipped below 100,000 for the first time, falling by 10,484 to 98,651. Weekday circulation fell below 100,000 for the first time in 2010. The overall pace of circulation loss has slowed since 2009-10, when the annual rate of decline on Sundays peaked at 17%.

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The federal government is poised to shower billions of dollars on Rhode Island’s health providers over the next decade due to the looming expansion of Medicaid under President Obama’s Affordable Care Act.

The health law expands Medicaid, the joint federal-state health insurance program for the poor, to cover childless adults who make up to 138% of the federal poverty level, currently $15,856. A new study by the Rhode Island Public Expenditure Council projects that roughly 40,000 more Rhode Islanders will sign up for the program between the start of the expansion on Jan. 1, 2014, and the end of 2023.

Yet Rhode Island taxpayers will need to spend just $450 million in local matching funds to get $3.15 billion in federal money (seven times as much) to cover the newly enrolled 40,000, according to RIPEC. That’s thanks to the extremely generous terms of the Medicaid expansion: the federal government will pay at least 90% of the cost for patients added under Obamacare, compared with only 51% for the current members.

Rhode Island’s Medicaid program spent $1.8 billion in federal and state dollars to cover 224,000 people during the 2010-11 fiscal year. Medicaid accounts for roughly a quarter of Rhode Island’s entire state budget.

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