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.”

(more…)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – The Providence police union is threatening all-out war on Mayor Angel Taveras and the City Council for freezing retired officers’ pensions, labeling the elected officials “underhanded, despicable and heartless” for holding a crucial vote the night of a fallen officer’s wake.

“Their actions that night and the following Monday showed what we mean to them …………ABSOLUTELY NOTHING, JUST A NUMBER!!!!” the executive board of Fraternal Order of Police Lodge #3 wrote members last week in an email obtained by WPRI.com. “The old saying ‘action speaks louder than words’ is so true, and their actions came through loud and clear and it sounded a lot like SCREW YOU!!!”

The City Council voted unanimously to approve the sweeping pension overhaul on April 26, the night before Sgt. Maxwell Dorley’s funeral. ”The audacity of the Mayor and City Council to do such a thing on the night that we waked one of our own, who died in the line of duty for this City is underhanded, despicable and heartless, and a slap in the face to all of us,” the police email said.

In a statement on Friday, Taveras told WPRI.com it had been “a very significant and emotional week for all who work in the city of Providence. Those who serve our city know better than most the history that led Providence into this crisis.” (more…)

By Tim White and Ted Nesi

PROVIDENCE, R.I. (WPRI) – Providence City Councilman John Igliozzi has been ousted as chairman of the City Council Finance Committee, WPRI.com has learned.

Councilman Michael Correia confirmed the news on Friday afternoon after reporter Dan McGowan posted about it on Twitter. He said he thinks the decision was made by either Council President Michael Solomon or Council Majority Leader Seth Yurdin.

The finance committee will meet on Monday at 5 p.m. to elect a new chairman, according to notices filed with the secretary of state’s office. Earlier Friday, that meeting had been canceled and a vote had been scheduled for Tuesday, but amended agendas were filed around 3:30 p.m.

Councilman David Salvatore told WPRI.com he will give “serious thought this weekend” to whether he should seek the chairmanship. “The committee is moving in a new direction,” he said in an email. (more…)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Johnson & Wales University has agreed to advance Providence $5 million by June 30, but Mayor Angel Taveras says he won’t count the full amount toward his 2011-12 budget needs despite protests by other tax-exempt institutions.

Read the rest of this story »

Providence City Council President Pro Tempore Terrence Hassett and his colleague Councilman John Igliozzi caused a major stir this afternoon by abruptly calling for major changes to the far-reaching pension ordinance they helped pass unanimously on Monday.

The two veteran Democrats want to scale back the ordinance’s freeze on cost-of-living adjustments (COLAs), which actuaries estimate could save the city more than $15 million a year as officials scramble to avoid bankruptcy. They said they’re still working on a proposed amendment.

Hassett’s about-face is especially surprising considering he cast three separate votes in favor of the pension bill in recent weeks – one in committee and two as part of the full council – meaning just a few days ago he signed off on the same changes he now opposes.

“Pension reform is necessary, without question, but to severely challenge the financial security of police and fire personnel upon their retirement in such a dramatic manner is not what I am willing to permit,” Hassett said. Igliozzi characterized their actions as a “profile in courage,” GoLo’s Dan McGowan reported.

(more…)

The last time the tart-tongued British weekly The Economist wrote a major story about Rhode Island, in 2009, the headline was “Little Rhody in the red” and the focus was on the state’s “mammoth economic problems.”

Well, The Economist is back – and this time the focus is on the public-sector finance crisis roiling cities and towns across the state. “Improvident,” the headline declares. “Desperate measures for desperate times.”

Here’s an excerpt from the article (no byline, natch):

IT WOULD be something of an overstatement, explains Angel Taveras, the mayor of Providence, Rhode Island’s capital, to call the measures he signed this week a “strategy” for dealing with the city’s financial troubles. He and the city council are simply facing reality, he says. The city was projected to run a deficit of $110m this year. Despite shedding jobs, cutting pay, trimming benefits, curbing services and expanding the tax base (on top of an 11% tax rise last year), Providence still faced a shortfall of $21m or so. There was no way to set its finances to rights without tackling the city’s huge pension costs.

Political observers will undoubtedly also note this is the first national or international article about the state’s finances in quite a while that makes no mention of Treasurer Gina Raimondo. Also, hard as it may be to believe, The Economist actually overstates the health of Providence’s pension system; it’s only 32% funded.

Iannazzi, right, with Taveras

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – The leader of Providence’s largest union leveled his toughest criticism yet at the city’s police and fire retirees this week, saying their alleged intransigence killed a potential deal with Mayor Angel Taveras to stabilize the troubled pension system and suggesting they do not understand the gravity of the situation.

“Some individuals, acting in a manner that I characterize as irresponsible, have suggested that no changes to the retirement system can occur and that we stand back and let the inevitable (city insolvency) occur,” Donald Iannazzi, Local 1033′s business manager, wrote Tuesday in a letter to his members. “Local 1033 has never acted irresponsibly and will not start today.”

Iannazzi confirmed the letter’s authenticity after WPRI.com obtained a copy. It says Local 1033′s negotiating team “agreed in principal to a tentative agreement” that would have suspended cost-of-living adjustments (COLAs) for retirees receiving less than $40,000 in exchange for no changes to medical benefits. The union’s agreement was contingent on police and fire retirees signing on, he said.

“Response from too many retirees receiving 5% and 6% compounded COLAs was that they would rather fight to the end, even if the end caused a failure in the retirement system and in the city,” Iannazzi said.

Joseph Penza Jr., the attorney representing the Providence Retired Police and Firefighters Association in negotiations with the city, disputed Iannazzi. “I have no idea where he got that information from, absolutely none,” Penza told WPRI.com. “I don’t know who he’s quoting. We’ve been negotiating with the city. … That mantra, if you will, does not come from us.”

(more…)

The Providence Retired Police and Firefighters Association is not happy with the Taveras administration.

City officials have failed to publicize the retiree association’s “counteroffer or alternative suggestions at helping the City of Providence save face and avert bankruptcy after years of fiscal mismanagement and failing to properly fund the retiree’s [sic] pension fund,” according to a letter from the group distributed to reporters on Wednesday by Andrews Law Offices in Providence.

The retiree group says its plan would have suspended all retirees’ cost-of-living adjustments (COLAs) for multiple years and eliminated the compounded 5% and 6% granted in 1989, saving the city almost $5.65 million per year, according to an actuary they hired.

The retirees also say they offered to settle a lawsuit headed to trial this month by allowing the city to move current retirees to Medicare at age 65, “while essentially keeping retiree health benefits intact.” They say the offer would have saved more than $2 million but the city rejected it.

Based on the retirees’ estimates, the two measures combined would save the city almost $8 million a year. Mayor Angel Taveras had said retirees needed to match the level of savings reached under the City Council plan he signed on Monday, which saves an estimated $16 million to $19 million a year.

However, the retiree organization acknowledged that because it is “not a bargaining agent, it cannot bind its members or non-members, though it can negotiate with the city and make recommendations.” The letter also claims the mayor’s chief of staff was considering increasing city taxes by $10 million as of April.

Separately, the deep-pocketed advocacy group Engage Rhode Island that gave crucial support to last November’s state pension overhaul came out in support of the changes in Providence. “We believe that the new ordinance constitutes a comprehensive approach to reform,” EngageRI said in a statement.

Update: A closer look at the numbers shows the retirees are only offering about a third of the savings Taveras said he needed. The letter lumps together pension and Medicare changes for almost $8 million in savings. But the pension changes on their own only save $5.65 million, an the mayor said he needed $16 million to $20 million in pension savings to balance the budget. He also originally wanted as much as $12 million in Medicare savings, while the retirees here say they offered about $2 million.

Update #2: David Ortiz, a spokesman for Taveras, issued this statement responding to the retirees:

We’ve negotiated in good faith with police and fire retirees to reach an agreement that protects the pensions retirees currently receive while achieving the savings needed to prevent Providence from eventual bankruptcy. The representatives that police and fire retirees designated to negotiate on their behalf have not presented an offer that comes close to achieving these savings.

The Taveras administration is moving forward to address Providence’s structural budget imbalance and put Providence on a sustainable fiscal path before it is too late. Providence’s taxpayers, active employees and largest tax-exempt institutions have all reached agreements that have the savings needed to help save the city. We have been unable to reach such an agreement with retirees. If Providence is forced into bankruptcy because of a failure to act, retirees would lose much more than annual raises.

The full text of the retirees’ letter is posted after the jump. If the city responds, I’ll post it here.

(more…)

The Taveras administration is heralding the three big announcements of the last 24 hours – deep cuts in pension benefits and new payments from Lifespan and Brown University – as significant milestones on Providence’s path back from becoming Rhode Island’s second bankrupt city.

Almost immediately, however, the mayor got a fresh reminder that his troubles are far from over as S&P downgraded its credit rating yet again, alluding to the legal questions surrounding the pension deal and the city’s weak economy. Investors aren’t too confident, either, Mike Cherney reports for Dow Jones Newswires:

“Our conclusion is that all this is a drop in the bucket compared to the future obligations,” said Robert Waas, principal at RSW Investments, which oversees $1.4 billion in munis and does not hold Providence bonds. “What they’re doing slows the hemorrhaging, but it’s not a tourniquet.” …

Stephen Winterstein, chief municipal strategist at Wilmington Trust Investment Advisors, says Providence is an “extreme example” of an old, northeastern city with a declining tax base, strong union presence and limited financial flexibility. For those reasons, his firm does not hold any Providence debt, either.

“When you talk about cutting your unfunded pension liability and the potential for increasing your revenues, that’s always a good thing,” he said. “But in terms of it being a far-reaching solution to some of the more chronic problems, I’m not sure that’s going to be their panacea.”

A spokesman for Taveras has yet to comment on the S&P downgrade.

(photo: Mike Cohea/Brown University)

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Standard & Poor’s rating agency in New York announced Tuesday it has lowered Providence’s credit rating from BBB+ to BBB, two notches above junk status.

Read the rest of this story »

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Brown University on Tuesday bowed to heavy pressure and agreed to pay the city of Providence $31.5 million over the next 11 years, bringing Mayor Angel Taveras a step closer to his goal of keeping the capital out of bankruptcy.

Read the rest of this story »

Update: All the mayor’s moves haven’t convinced Wall Street, however. Standard & Poor’s cut Providence’s bond rating from BBB+ to BBB on Tuesday, only two steps above junk status. S&P said that while Taveras has taken significant steps to fix the problem, “the city’s budget remains structurally imbalanced,” and Providence’s fiscal outlook is still negative (as opposed to stable).

Update #2: Want to read the Brown U.-Providence agreement for yourself? Download the PDF.

Read all about it - a productive 24 hours for the mayor, with a balanced budget now suddenly within reach.

The Providence City Council voted 12-0 late Monday afternoon to approve a far-reaching overhaul of the city’s pension system, sending the ordinance to Mayor Angel Taveras for his signature.

The only change was an amendment that allows a review of the cost-of-living adjustment (COLA) freeze every five years until the pension system is 70% funded, a city official said. Three members of the council – Michael Correia, Nicholas Narducci and Davian Sanchez – were absent for Monday’s second vote.

The all-Democratic council voted unanimously to approve the changes last Thursday, but its rules required a second affirmative vote to send the ordinance to the mayor’s desk. Taveras is expected to sign it soon.

Update: Taveras signed the pension ordinance Monday evening at Beneficent Church on Weybosset Street, his office said. He was joined at a youth event there by Council President Michael Solomon, Council Majority Leader Seth Yurdin and Councilman David Salvatore, who oversaw the review that led to the changes.

Kathryn Sotnik contributed to this report.

(photo: Angel Taveras)

Is Rhode Island’s pension crisis helping the capital city with economic development?

That’s probably a stretch. But it appears the statewide debate over public-sector retirement benefits did play a role in convincing municipal-finance consultancy PFM Group to open an office in Providence.

“I’ve noticed, particularly in Rhode Island, a bigger recognition of the severity of the problem,” Vijay Kapoor, a senior managing consultant at the Philadelphia-based firm, told Bond Buyer. “The emphasis has gone from ‘How big is the problem?’ to ‘What do we do about it?’ ”

(more…)

Rhode Island politicians are getting some media attention outside the state’s borders this Sunday.

First there’s Congressman David Cicilline, whose recent apology in an interview with Tim White makes Politico’s list of the “top 5 most memorable political apologies”:

The risk of admitting a major mistake is too much for most pols to chance, so when you see a public apology, you know the blunder had to be a whopper. And Washington — and the citizens of Rhode Island — just saw one from freshman Democratic Rep. David Cicilline, who recently swallowed hard and apologized for making a highly misleading statement about the finances of the city of Providence on his way to Congress.

On a lighter note, Gov. Lincoln Chafee recalls his days shoeing Canadian horses in a Boston Globe column by Kevin Paul Dupont:

The job, said Chafee, gave him many skills, the direct ones he sometimes uses when his daughter’s horse needs a change of shoes. He is 59 now, and though not as quick with the rasp and hammer, he still feels he has a good touch with the tools and the clients.

“I could always get along with the horse, that’s key,” he said. “I could get under there and not have them go nuts on me.”

As for the fast and potted track of politics, his work long ago with hammer and hoof often helps there, too. Since putting his tools in storage, Chafee has been mayor of Warwick, R.I., a US Senator and, since January 2011, the governor.

“What’s similar is that it’s hard work,” he said. “If a trainer wanted me on Saturday or Sunday to shoe a horse because of a race, you had to do it, to keep your business. If you want to stay in politics, and they say there is a wake you should go to – and maybe you have other plans – you should really go to the wake. It’s what you do.”

The Providence City Council is wasting no time in pushing through its plan to fix the pension system.

The council will hold a special meeting Monday at 5 p.m. at City Hall to take a second vote on the far-reaching overhaul, according to a notice filed with the secretary of state’s office. The proposal would freeze retirees’ pensions for about 24 years and shave at least $236 million off the city’s unfunded pension liability.

The council’s 15 Democrats already voted unanimously on Thursday to enact the pension changes, but the chamber’s rules require a second vote on all ordinances. If it passes again, the measure will go to the desk of Mayor Angel Taveras, who has said he will sign it.

Officials emphasized Thursday that negotiations with retirees to craft an alternative compromise deal on pension cuts can continue even if the ordinance is enacted, but firefighters union president Paul Doughty dismissed that idea, warning that approving the changes unilaterally would poison the city’s relations with his members for “a generation.”

Monday’s meeting agenda says the council will also vote on a resolution authorizing the city “to take all necessary actions to challenge consent decree on cost-of-living [adjustment] (COLA) allowances” and on changes to zoning regulations for downtown and the former Interstate 195 land.

• Related: Council votes 15-0 to OK pension cuts; Local 1033 backs move (April 26)

A far-reaching city pension overhaul that’s backed by Providence Mayor Angel Taveras and could be approved Thursday night has won the support of the Greater Providence Chamber of Commerce.

The Chamber sent an email to its members Wednesday urging them to lobby their councilors in favor of the plan. The changes, which would suspend cost-of-living adjustments for an estimated 24 years, “are vital to ensuring the Capital City’s solvency and the vibrancy of its business community,” the Chamber said.

The seven recommendations made by the council’s pension subcommittee have been moving forward rapidly since they were unveiled last Thursday. (The subcommittee’s report is available as a PDF.) Taveras embraced them in his budget address on Monday and two council committees approved them Tuesday night.

“The Chamber is urging support for these reforms because the savings plan … provides sustainable and long term reform solutions that will put Providence in a position to make fiscally responsible choices and create a strong foundation for job growth and enhanced economic development,” the email said.

Rosemary Booth Gallogly, the state director of revenue who has worked closely with city officials throughout its financial crisis, said Wednesday she’s reviewed the plan. ”They’ve certainly done their diligence,” Gallogly told WPRI.com. “They’ve obviously spent a lot of time with the actuary, with the numbers.”

The pension changes will take effect July 1 if the council approves them and Taveras signs them into law. It’s likely public-sector unions or retirees would challenge the move in court. Actuaries say the changes would reduce the city’s $901 million pension shortfall by at least $236 million.

• Related: Raimondo, RISC weigh in on Providence’s pension proposals (April 23)

That didn’t take long.

The Providence City Council’s special pension subcommittee will meet at 5 p.m. at City Hall to vote on an ordinance implementing its recommendations for changing the pension system, including a multi-decade freeze on cost-of-living adjustments (COLAs), according to an agenda filed with the secretary of state’s office.

The Committee on Ordinances will meet immediately after the subcommittee is done to cast its own votes on the pension proposal, its agenda shows. That would put the measure on the fast track for approval by the full council and getting signed into law by Mayor Angel Taveras, who supports the changes.

City Council President Michael Solomon said Monday he expects the council to back the pension proposal.

Update: Both committees passed all the ordinances unanimously, according to a news release. The full City Council is now scheduled to vote on them at a special meeting this Thursday at 7:30 p.m. Should be a big night.

• Related: Providence pension panel says suspend COLAs, cap benefits (April 19)

Providence Mayor Angel Taveras warned Monday night that “the threat of eventual, inevitable bankruptcy will continue to plague our city” without changes to shrink its $901 million unfunded pension liability. The mayor’s seven-point pension proposal would cut that figure by about a quarter.

As Justin Katz points out, what Taveras didn’t say is that the $901 million estimated unfunded liability is actually on the optimistic side, because it assumes the Providence pension fund’s investments will earn an average of 8.25% every year in perpetuity – a relatively optimistic assumption.

If Providence lowered that forecast to 7.5%, as the state did last year, its unfunded liability would balloon to slightly more than $1 billion, according to estimates the city’s actuarial firm, Buck Consultants, gave to the law department on Feb. 23.

Here’s how Providence’s pension balance sheet looks using four different rate of return forecasts:

Rates of return are the subject of heated debate, however – read Iris Lav and Josh Barro for two perspectives. Also, keep in mind that pensions aren’t Providence’s biggest retirement problem – the city’s unfunded liability for retiree health benefits totals $1.2 billion, putting the combined shortfall at well over $2 billion.

Update: After reading this, you may wonder why Providence is sticking with a 8.25% return forecast. Here’s how Buck Consultants, which made the call, explained its decision in the city’s latest experience study:

The 1,000 forecasted returns produced by the [GEMS Economic Scenario Generator] model averaged 8.45% over the next 30 years, which compares favorably to the current assumed rate of 8.25%. The current asset allocation has an equity exposure of approximately 85%, considerably higher than the target range. At this level the future investment returns can be quite volatile year to year, possibly leading to returns well above or well under the 8.45% average projected rate of return, which can result in great swings in annual contribution requirements. Over the same 30-year period, the geometric average of forecasted inflation rates is 3.12%. The difference between the overall 8.45% rate of return and the 3.12% inflation rates is 5.33%, which is the forecasted real rate of return.

• Related: Providence’s rosy return rate may mask $1.46B pension gap (June 30)

From this morning’s 8:30 newscast, here’s the CliffsNotes version of my Providence story posted last night:

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Providence Mayor Angel Taveras said Monday he plans to balance the 2012-13 city budget by keeping tax rates the same, scaling back retirees’ benefits and funneling increased state aid into the school system.

Read the rest of this story »

Update: The story is now updated with more details, plus reaction from Michael Solomon and Paul Doughty.

By Ted Nesi

PROVIDENCE, R.I. (WPRI) – A City Council panel’s seven big recommendations for scaling back the capital’s retirement system are drawing a largely positive response from Treasurer Gina Raimondo and the Rhode Island Statewide Coalition.

Raimondo – who’s had a frosty relationship with city officials since their pension plan was excluded from last year’s state overhaul – said she couldn’t comment on the substance of the proposal, but credited the approach.

“While I have not been briefed on the specifics, I commend the Providence City Council for rolling up their sleeves and taking a comprehensive look at the city’s pension challenges,” Raimondo told WPRI.com in a statement Friday.

“Ensuring retirement security for the city’s public employees and balancing taxpayer contributions is not easy, but must be done,” she said. “I look forward to learning more about the proposal.” The pension subcommittee was chaired by David Salvatore, who was fired by Raimondo from his Treasury job earlier this year.

On Sunday, the Rhode Island Statewide Coalition weighed in to praise Salvatore’s work. “The Providence City Council should be commended for stating the grim facts about the financial condition of the city in a report that should be a red flag for all of Rhode Island,” Harriet Lloyd, RISC’s executive director, said in a statement.

(more…)

This is the ballgame, folks.

After six months of work, the Providence City Council’s Subcommittee on Pension Sustainability released an inch-thick report Thursday night on the capital’s cash-strapped employee retirement system. The key section is this table on page 35 laying out the panel’s seven recommendations on how to stabilize the system:

Councilman David Salvatore, who has chaired the subcommittee since it was established in October, told WPRI.com he is hopeful the panel and then the full council will pass all seven recommendations. ”This isn’t about changing the rules; this is about preserving the retirement system,” he said. “If we do not make these substantive changes, there will not be a pension system for [retirees] one day.”

If the City Council approves the recommendations, it would almost certainly kick off a legal fight over whether the city government has the authority to do so, a question that probably will be answered by the Rhode Island Supreme Court in the end. If the courts eventually rule against the city and say retirement benefits cannot be changed, Providence will likely be forced to file for bankruptcy.

“We’re confident that it will be upheld in the courts,” Salvatore said. “There is a compelling public purpose argument that we are sticking to. It’s very different from 10 years ago, when this was [last] brought to court – the state of the city’s finances. We’re in dire straits. We’re confident that it will be upheld.”

• Related: Chart: The decline and fall of the Providence pension system (Jan. 25)

Rhode Island got more of the sort of national publicity it doesn’t need this week, with Providence again characterized as another Detroit – a city that is now perilously close to bankruptcy.

Here’s Michael Connor, reporting for Reuters on Tuesday:

[T]he next series of major cities and counties in danger of defaulting on their debt can hardly point to one single decision for their malaise. Whether it be Detroit, Miami or Providence, Rhode Island, their problems have a lot more to do with financial policies that put them on course to live well beyond their means. …

“This is a lagging process,” said Richard Ciccarone, managing director at McDonnell Investment Management. “Capitulation may not come for years. In the crash of 1929, the defaults did not come until 1934 or 1935. The marginals hang on as they can.” …

“Over the next year or two, there is a big risk of more Chapter 9 filings in certain parts of the country: California, Rhode Island and the Midwest,” said municipal bankruptcy lawyer David Dubrow of Arent Fox. …

In Rhode Island, where the governor backs legislation to reduce operating costs for distressed local governments, cities such as Providence and Pawtucket are seen as possible candidates for bankruptcy. Afflicted by underfunded pensions, the state’s Central Falls is bankrupt.

In Providence, Mayor Taveras used the word “bankruptcy” for the first time in a Feb. 2 news conference, but since then he’s stressed his optimism that it won’t come to that. The city wants retirees to agree to pension concessions by May 1 – less than two weeks from now – and still hasn’t announced a deal with six of its seven biggest nonprofits. Taveras will unveil his proposed 2012-13 budget on Monday night.

At the General Assembly, meanwhile, the House Finance Committee will hold a hearing to consider Governor Chafee’s municipal relief legislation next Thursday at 1 p.m. Senate Finance held its own hearing on April 12, but the panel took no action that day and has yet to schedule a vote on any of the bills.

• Related: WSJ editorial lumps Providence financial crisis in with Detroit’s (March 15)

Providence Mayor Angel Taveras sent a letter March 28 asking the city’s retirees to voluntarily suspend their cost-of-living adjustments, and about two dozen have agreed so far. (Alisha Pina has more details.) The missive went out as the city continues negotiations with Local 1033, police and fire retirees.

If you want to read the documents Taveras sent, you can download them as PDFs from WPRI.com: the three-page letter, the legal release form, and the frequently asked questions. In the letter, Taveras says the city “runs the risk of running out of cash by the end of June and faces a $50 million shortfall in July.”

Another section of Taveras’s letter might be interesting to taxpayers as well as retirees:

We have a $613 million annual budget. Of that, $308.6 million is allocated to our public schools and by state law we are prohibited from cutting education funding. That leaves $305 million. We also need to make $69 million in debt payments. That leaves $235 million. Our annual required payment (ARC) to the pension system is $58.9 million. That leaves $176.6 million. Retiree medical costs amount to $38 million.

In all, we have $138.6 million to run the city. That includes payroll, public safety, road repairs, parks and recreation, contributions and support for our community centers and libraries and trash pickup, among other things. To date, we have spent approximately $92.4 million, leaving us with $46.2 million in the bank to get us to the next fiscal year. Our budget deficit is 48 percent of our remaining cash. We cannot rely solely on cutting spending to balance our budget. …

To use the language of the federal budget, only $138.6 million of the city’s $613 million budget is discretionary spending; the rest – 77% of the budget – is mandatory spending. The city will actually spend more this year on debt and retirees ($165.9 million) than it will on all non-school city services ($138.6 million).

Politically, Taveras’s challenge is made even greater because the discretionary spending category includes most of the services residents actually notice (police, parks, libraries, potholes, snow plowing). So the spending he has direct control over is also the spending people are most likely to complain about seeing cut.

Brown University President Ruth Simmons says it’s Providence’s own fault that it doesn’t have enough money to balance its budget, and Mayor Angel Taveras shouldn’t make Brown pay for problems the city caused.

“I don’t think it’s reasonable for the city, having made mistakes and having become insolvent because of those mistakes, to turn to institutions that are successful and to demand that they pay for those mistakes,” Simmons told the Undergraduate Council of Students on Wednesday night, according to The Brown Daily Herald.

Spokesmen for Brown and Taveras continue to say the two sides are still discussing a final resolution to their differences over how much more the university should contribute to the city – Taveras wants it to increase by $4 million, while Simmons wants to keep the increase at $2 million.

• Related: Brown U. student: ‘It’s not our families’ job to fund Providence’ (March 7)

By Tim White

PROVIDENCE, R.I. (WPRI) – Calling it “too little too late,” David Cicilline’s Republican challenger is lashing out at the freshman congressman’s apology for comments he made on Providence’s finances, labeling the remarks “political opportunism.”

In a statement less than 24 hours after WPRI 12’s exclusive interview with Congressman Cicilline – in which he expressed regret for calling Providence’s finances “excellent” in 2010 – Brendan Doherty said the mea culpa was long overdue.

“David Cicilline’s responsibility for the fiscal crisis in Providence and his active concealment of the crisis reach far beyond a single statement,” Doherty said in the statement. “He must stand up and take full responsibility, rather than attempting to hide behind a half-hearted, campaign inspired apology.”

Read the rest of this story »

Editor’s note: Politico and Anthony Gemma are also reacting to Cicilline’s apology.

By Tim White

PROVIDENCE, R.I. (WPRI) – Congressman David Cicilline offered a public apology and expressed regret Tuesday for saying during his 2010 campaign that Providence was in “excellent financial condition.”

“I should not have used that word,” Cicilline said in a wide-ranging interview with WPRI 12. “It obviously doesn’t describe the condition the city is in [and] it was never my intention to mislead people intentionally.”

“I should have been much clearer the challenge the city faces,” Cicilline said. “I should have been much louder in the consequences of the state cuts and to the extent anything I did contributed to the challenge the city faces, I’m sorry for that and I accept full responsibility for it.”

“I understand now why people feel I misled them and I understand why people feel betrayed and it’s important for me to address that,” Cicilline added.

Read the rest of this story »

Republican Brendan Doherty’s campaign isn’t acting too concerned about Gov. Lincoln Chafee’s endorsement of Democratic Congressman David Cicilline for reelection, particularly since the governor’s comments echoed one of their own campaign talking points.

Giovanni Cicione, Doherty’s campaign manager, told WPRI.com he was “not surprised” Chafee opted to endorse Cicilline, “but it is noteworthy that in the same breath he felt he had to qualify that support by saying that Cicilline was not ‘forthright’ in discussing the financial troubles he left in Providence.”

During a taping of “Newsmakers” on Friday, Chafee labeled as “unfounded” much of the criticism of Cicilline’s work as mayor, but said of the congressman’s comments on the campaign trail in 2010, “maybe there’s some legitimate criticism there – he should have been more forthright in the depth, the devastation of these cuts.”

“We consider that qualification telling,” Cicione said, “and we will give the governor’s endorsement of the architect of Providence’s demise the weight it is due.” Doherty retired as superintendent of the state police just weeks after the newly elected Chafee asked him to stay on.

Chafee, Providence Mayor Angel Taveras and Treasurer Gina Raimondo are all supporting Cicilline over Doherty. Chafee attended a Cicilline fundraiser in Providence on Thursday night whose host committee included the mayor and the treasurer. Chafee and Taveras have emphasized their preference for a Democratic majority in Congress.

“We wish the governor and Mayor Taveras well in cleaning up the problems David Cicilline left behind, and we can only hope that they find a way to prevent the damage done in his eight years of neglect from being foisted upon the taxpayers of the state and the 11% of our citizens who remain unemployed,” Cicione said.

• Related: Chafee endorses Cicilline, defends him as mayor (with caveat) (March 30)

The Rhode Island political establishment continues to close ranks around Congressman David Cicilline.

Gov. Lincoln Chafee said Friday he’s endorsing the freshman Democrat for reelection. On Thursday evening, Chafee attended a Cicilline fundraiser in Providence whose host committee included Providence Mayor Angel Taveras and Treasurer Gina Raimondo.

“A lot of the criticism leveled against Congressman Cicilline’s time as mayor I think is unfounded, because he suffered $30 million in [state aid] cuts, and that’s what we’re talking about,” Chafee, an independent who left the Republican Party in 2007, said during a taping of WPRI 12′s “Newsmakers” this morning.

“No mayor can take $30 million in cuts just like that. No organization – ‘Newsmakers’ or Channel 12 couldn’t take these kind of cuts without ramifications,” he said. “So I think some of the criticism has been unfair.”

However, the governor said Cicilline may have erred in the way he described Providence’s financial situation to voters while campaigning for Congress in 2010.

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