Greater City Providence

Statement from the Mayor’s Office on the City’s ‘fiscal emergency’

Mayor Taveras’ Office this morning released the following statement on the city’s “fiscal emergency.”

March 3, 2011


Mayor takes pay cut, shrinks City workforce, cuts spending

PROVIDENCE – Exactly two months after taking the oath of office, Mayor Angel Taveras held a press conference releasing the findings of the Municipal Finances Review Panel he commissioned immediately upon taking office. Through Executive Order, Taveras tasked the Panel with conducting a comprehensive review of the City’s current fiscal condition.

The findings of the Municipal Finances Review Panel show the true extent of Providence’s financial emergency, revealing that this fiscal year’s structural deficit is $70 million and next fiscal year’s structural deficit is $110 million. Without immediate remediation efforts, the City is expected to end this year with a deficit of as much as $29 million.

Key Findings from the Municipal Finances Review Panel Report:

  • The City has a severe structural deficit due to its reliance on significant one-time fixes to balance budgets.
  • This year’s structural deficit is $70 million.
  • Next year’s structural deficit is $110 million.
  • Without immediate remediation efforts, the City is expected to end this year with a deficit of as much as $29 million.
  • The City’s pension plan is severely underfunded – a result of inadequate funding in prior years, generous benefits and cost of living increases, liberal disability pension provisions and the ability to collect benefits at an early age.
  • The City’s annual required contributions into the pension plan are expected to increase dramatically until 2039, when the annual payment is projected at more than $210 million.
  • A large portion of the City’s property is tax-exempt. There is a critical need for tax-exempt property owners to contribute more towards the cost of City services.
  • Tax collections are projected to fall $4.1 million short of budget.

“When I took the oath of office on January 3, I made a commitment to be honest with the people of Providence about the problems we face. I also promised that I would not shy away from making tough decisions to put our City back on firm financial footing. We are making the tough decisions and taking the immediate actions needed to move Providence forward. Our citizens expect and deserve nothing less,” said Taveras.

Based on the panel’s findings and in conjunction with other ongoing evaluations of City finances, Taveras today announced the actions he would take immediately to begin to address the fiscal challenges facing Providence. These actions include the following:

  • Effective immediately, the Mayor is taking a 10% pay cut.
  • The Mayor will submit a FY12 budget that cuts the Mayor’s office payroll by 10%.
  • Effective immediately, 13 non-union positions, including several school administration positions, have been eliminated – resulting in $1.7 million in savings to the City.
  • Department Directors have been instructed to submit budgets for next year that reflect at least a 10-15% overall reduction.
  • Four to six schools will be closed and a number of teacher positions will be eliminated. On Tuesday, the Mayor published a timeline for the process by which schools will be recommended for closure.
  • There will be an immediate review and freeze on all non-essential spending and hiring across City departments. Numerous unfilled positions will remain vacant and will be eliminated from next year’s budget. Moving forward, all hiring decisions must be approved by Director of Administration Michael D’Amico and Chief of Staff John Pagliarini.
  • There will be an immediate review and renegotiation of contracts with third-party vendors.
  • The City has cancelled its contract with a benefits administration company. This contract cost the City $1.4 million last year. By bringing this service in-house we have created an annual savings of $900,000.
  • The City will seek to renegotiate union contracts to produce cost savings.
  • The City will negotiate with tax-exempt universities and hospitals to increase support for the City.
  • The City will lobby the State to fully implement the Statewide Education Funding Formula.
  • The Taveras administration will accelerate the consolidation of City departments and services. This process is underway and next year’s budget will reflect efforts to cut costs while streamlining City services and making it easier for citizens to access government.
  • The Taveras administration will actively pursue pension reform.
  • Providence will aggressively pursue short- and long-term opportunities to work with neighboring cities and towns to make regionalization of services a reality.
  • The Taveras administration will work in close collaboration with the City Council, the State and the community to pursue new ideas for reducing spending.

Mayor Taveras pledged to move through a fiscal remediation and budgeting process in a way that enables citizens to get involved and stay engaged. His plan includes neighborhood meetings, and an easy-to-use website where residents can find accurate and timely information, and share feedback.

“The Municipal Finances Review Panel’s findings clearly reveal that the City’s existing fiscal foundation is crumbling and is not sustainable. We must work together to build a foundation for a new Providence – one that is based on transparency and fiscal responsibility, and that ensures the future prosperity of our great City,” said Taveras.

Panel members included City Director of Administration Michael D’Amico, former Rhode Island Auditor General Ernest Almonte, Acting Rhode Island Auditor General Dennis Hoyle, former Providence Finance Director Alex Prignano, and Certified Public Accountant Ken Richardson.

Video of Mayor’s press conference:

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  • Can anybody explain is plain language the difference between the $29mm “deficit” and the $70mm “structural deficit”? Also, what’s the total budget? I’m looking but can’t find it.

  • The budget for fiscal year 2011 which ends this June 30th includes $41 million of financing which is rcognized as revenue. If you include financing, the budget deficit is $29 million. Without the financing, the deficit would have been $70 million.

  • Ted Nesi takes a stab at explaining structural vs. operating deficits. Honestly, it just made my eyes glaze over, but someone might understand it.

  • Uhm:

    Providence spends $500,000 annually to dispose of mattresses dumped on city sidewalks.

  • Hokay, it seems like this says the expenses for FY ending 6/30/10 was around $860MM, so the structural deficit is about 8%, assuming generally continuous numbers. Next year is more like 12%.

    Also, let’s call it what it is: “financing” means loans in the form of bonds we sell.

    They’ve played hardball with the schools and, if they follow through, they’ll do likewise with every vendor and department. It’s all a set up for – that’s right and get the hell ready – a tax hike.

    No. Bitching.

  • I know a tax hike is inevitable (aren’t they always?), but hopefully they can keep the tax hike smaller by playing hardball with the other departments (read: unions) like they are with the schools (read: teachers). No, I don’t really want to see schools closed. I actually wish they started with other departments.

    I have faith in the mayor to do the right thing (after all, he did give himself an immediate 10% pay cut and will cut his office payroll by 10% for next year). I’d like to see the city councilors do the same.

    That has more info on what is suggested. My view (perhaps some of this is already being done):

    – Drop the non-owner-occupied property tax exemption (why that even exists is beyond me). If they drop the homestead exemption, the people who actually live in the city (and care about the city) will no longer be able to afford to do so.
    – Taxing college students at all, including for having their car in the city, is a dumb move. It will drive them to other cities (unless this is a common tax).
    – Tax all non-academic buildings owned by the city’s colleges at the normal tax rate for that type of property. This is mainly dorms and dining halls, but also buildings that are owned by the college but not used for college business.
    – Tax the non-profit buildings on the percentage of the building used for other business (example: if an academic building has a cafe on the lower level, tax the percentage of the property taken up by the cafe).
    – Tax surface parking lots downtown at their potential, not actual, value.
    – ENFORCE THE LAWS THAT ARE ALREADY ON THE BOOKS THAT WILL BRING THE CITY REVENUE (snow removal, leaving trash cans on the sidewalk beyond the proper time, parking violations, etc).
    – Charge a fee to restaurants that close off a portion of the curb for valet service. Just about every restaurant on Atwells would have to pay, perhaps making them decide to join forces and pay into a fund to have only a handful of valet areas, making for more street parking and better pedestrian access, oh and more money for the city.
    – Charge a fee for mattress removal.
    – Stop paying out pensions for city employees convicted of a crime.
    – Renegotiate union contracts to get rid of the seniority “bump”. Employment should be based on qualifications and performance, not seniority or years of service (what the unions like to call “experience”).
    – Consolidate school districts (this would actually benefit the state as a whole, not just the city).
    – Expand the permit parking program to the whole city, allowing people with permits to park on the street overnight and ticketing overnight parked cars that don’t have permits (increase the fine to encourage the purchase of permits). Sell permits to people whose car is registered outside of Providence at a higher price than people whose car is registered in Providence (this is a way around that tax on college students’ cars).

    One of the comments on the ProJo link I posted above suggests merging cities and towns, making one giant one (bringing Providence, East Providence, North Providence, Pawtucket, Central Falls, Cranston, Johnston, Warwick, and West Warwick into a single city). It’ll never happen, but it would save money.

  • Preliminary discussion on the overnight permits would not allow for cars registered outside the city to get a permit at all. This would keep college students from getting permits unless they transfered their registration, and if they did that, they would then pay the car tax as well.

    Overnight parking was on the agenda of the Transition Committee I was on. We did not have enough time to get to a recommendation that we could all sign off on though. I’m not sure where it all stands at this point, since the Transition Committees have finished our work. I would like to see a volunteer committee formed to address the issues, make recommendations, and get a program rolling. The Mayor did endorse overnight parking during the campaign, which is of course why it was on our agenda.

  • Jen, I am willing to pay taxes and accept a tax hike after all other means of revenue have been exhausted (specifically dropping the exemption that absentee landlords get).

    I don’t even think I mentioned increasing taxes on anyone other than properties that are not owner-occupied and large organizations.

    Sure, I mentioned extra fees, but those fees would not only provide the city revenue, but also likely make life for the residents more pleasant (like the valet fee). Sure, I also start off the first half of my diatribe with the word “tax”, but if you read it, you’ll see I’m trying to save the city’s residents money while also bringing revenue to the city.

    Jef, the permit parking program as you stated would also be fine as it either forces students to register their vehicles here, park in a driveway or lot, or get ticketed overnight (the police department would, of course, have to stop allowing exemptions if you called it in, which I hope they have done in areas where the permit program is in place).

  • I can’t find any regulations on valet parking (there must be something somewhere, anyone want to try to find out). I do know, for an emergency no parking permit, you have to pay $10/day per meter that you block. The Permit for Temporary Parking Privileges requires payment of $10/day regardless of there being a meter or not.

  • As an aside: keep an eye on what becomes of those closed schools. They will all be the city’s older/smaller school houses, and I guarantee that once they’re closed, they’ll be sold off. This is where Grove Street started, so watch out for who’s buying them.

  • Doesn’t everyone know that Cardi’s has same day mattress delivery and they will take your old mattress away for free ?

    I (heart) NIROPE.

  • Corey, certainly once the schools to potentially be closed are announced, we’ll be looking into them and keeping an eye on them. I had the same thought myself.

  • The risk of eliminating the homestead exemption on non-owner occupied buildings with dwelling units is that property owners would pass the added property tax expense to their tenants.

  • Jim – I agree with you about non-owner occupied in theory but when city council removed that exemption last year it had major unintended consequences.
    Recent buyers of foreclosed or bank-owned properties suddenly found themselves paying the full tax rate, even if they lived in their home. The homestead deduction (all types) is tied to the exemption as of 12/31 of the year prior to purchase. So, if you bought in March 2010, but it was bank-owned on 12/31/2009 your bill suddenly went up to the full $30.88 per $1000 when the bill came in Sept 2010. City Council didn’t know that would happen and so owners were stuck with the higher bill.

    The opposite is also true: If a bank bought an owner-occupied unit, they paid the homestead tax rate for the first year they owned the property. Think about how much the city ‘lost’ in tax revenue because of the poorly constructed homestead ordinances that allowed banks to pay as though they live in the unit.

    In tandem with an overhaul of ‘who’ gets homestead has to be how homestead is applied: homestead should be immediately tied to purchase date. I’ve lobbied several council persons, ONS, and the mayor’s office on this topic. Seems as though everyone knows that it happens but many don’t want to take the time to fix it.

  • Seems as though everyone knows that it happens but many don’t want to take the time to fix it.

    Jess, I think that right there is our number one problem. We do so many things in this city and state ass-backwards, why? Because that is how it is done. When Cicilline first took office, sure he had a big mess to clean up, but over 8 years he never properly attended to all the stupid things that are done wrong.

    Take the teacher layoffs. Why do we need to tell teachers that they are being fired before the budget is due? Because that is the way it is done. Why are municipal budgets due before the state budget, meaning the cities and towns can’t know what they are getting from the state before writing their budgets? That’s just the way it is done. Things can be changed, but someone needs to grab the initiative. We have an Assembly that dicks around the whole session then passes a hundred bills in the last 10 minutes before 2am the last day of the session. And the City Council has been pretty quiet today.

  • @ Jim – Providence, East Providence, North Providence, Pawtucket, Central Falls, Cranston, Johnston, Warwick, and West Warwick – the nine boroughs!

    Depending on how desperate the cities and towns and the state become, it could happen or in other configurations. If the concept is put on the table, at least it can be discussed and analyzed for potential benefits. Besides urban and suburban class issues and fears of a unified school system, there would be 375 years of history to overcome in creating a greater Providence City.

  • Pawtucket has floated the idea of doing fleet maintenance for other cities, specifically Central Falls, but Lincoln, Cumberland, others could take advantage.

  • Peter, are you suggesting that the schools and civil services could be consolidated, or are you suggesting the possibility of going even further?

    I the problem with consolidating cities (and so-called cities) is exemplified by Toronto and it goes beyond class; urban interests get pitted against suburban interests. The most recent mayor of Toronto was elected solely by the outer ring of more suburban districts. He did not win a single district in the more dense central urban area. He knows where his votes are from and he acts accordingly.

    If you’ve never heard of the man, let this be your introduction to Rob Ford:

    I could see Pawtucket, CF, Providence and maaaybe one or two more, but I’m a little wary of the others. call me a snob.

  • This is exactly the discussion that needs to take place. Many people are aware of the recent dynamic in Toronto. This urban suburban divide may negatively affect their mass transit system. At this late date Toronto may actually lose its streetcars in favor or buses for within inner urban neighborhoods because of a Mayor who favors suburbanites.

    The point of consolidation or at least sharing of services between neighboring communities has been kicking around for a while and as Jim pointed out made its most recent appearance in a Projo comment. There are extensive duplicative financial efforts on the part of relatively small municipal jurisdictions in Rhode Island and especially in the Providence area. Many services if not administrative functions of these jurisdictions could be shared or merged.

    Tom perhaps you’re right that such a merger should be limited to Providence, Pawtucket and Central Falls or alternately Cranston and Warwick. However, it’s virtually impossible to identify the distinctions between the North End and Marieville or between Mt. Pleasant and Elmhurst or Centerdale and Fruit Hill, at least south of Mineral Spring Avenue. With all of its 12 to 24 unit 1960s apartment buildings plus three-deckers, Mariville in suburban North Providence may actually have a higher population density than the North End of Providence. On the southern boundary of Providence it’s similarly difficult to distinguish between parts of Washington Park and Edgewood and the Reservoir Triangle and the Pontiac area between Providence and Cranston.

    What is the appropriate number of school superintendents, police chiefs, fire chiefs, public works heads, planning directors, mayors, or city councils plus their deputies and all the support staff that goes with all of them? When cumulative deficit numbers being bantered around is in the hundreds of millions of dollars, it’s time to put everything on the table including consolidation, not just shared services.

  • That’s the thing about merging towns and cities, the urban-suburban divide and how to properly meet everyone’s needs. I’m not saying it’s a good idea. In fact, to merge entire cities here would probably be a bad idea, especially with the hatred (perhaps it’s more like fear) many people have of Providence.

    If this were to happen, I think we’d have to change city boundaries. Take the southern parts of North Providence and merge them with Providence, Pawtucket, and Central Falls. Add in the western parts of East Providence, the eastern parts of Cranston and Johnston, and the northern portion of Warwick (Pawtuxet Village). That would make the more urban areas without the suburban areas dividing the city or sitting on the outskirts.

    It’ll never happen. What should happen is merging Central Falls and Pawtucket, though that’s out of the scope of this post.

  • Changing city boundaries seem a bit of a stretch. Reasonably the most possible city consolidations, if they were to happen at all, would Central Falls and Pawtucket and possibly with Providence. Aquidneck Island would make sense, but Portsmouth would never combine its school system with Newport and Middletown.

    Without something like city consolidation, taxes generally will continue to increase and services will be drastically cut. 38 or 39 individual school systems, police departments, fire departments, and government administrations is no longer affordable.

    Providence and the state will become even less competitive than they are now. Without a major shift in the approach to government, taxation, and economic development, the unfortunate brain drain of the last 50 years will continue.

    In a way it’s irrelevant that Rhode Island is a nice place to live and has high quality of life. If good job opportunities don’t come here, the population won’t either and more likely people already here will leave.

    The Governor, the mayors, and the people of the state need to be flexible and think beyond the familiar to survive and flourish.

  • Perhaps it is time to talk about what seems impossible. Because what seems impossible right now is finding a way through this fiscal crisis for both the cities and towns and the state. We’re in a unique position here in the city-state.

    In my limited understanding of it, the Constitution seems to only require us to have a Republican form of government. It says nothing about the states being divided into cities and towns. Perhaps it is time for us to redefine what a municipality is, giving more control over the things like snow removal and road maintenance and police and fire and such to the state, while having local control over issues like planning and zoning and direct day to day issues. I don’t know what that new form of governance looks like, because it hasn’t been done yet. We’d have to invent it.

  • Jef, there are precedents for consolidation: Indianapolis IN
    … and I think similar legislation in Lexington KY, Kansas City KS, Nashville TN, and Athens GA and maybe others ….

    Indianapolis city/county metropolitan population is comparable to the State of RI. Rhode Island has a greater land area by maybe 150%. The same urban/suburban issues mentioned in the thread played out in Indy too. After Unigov in Indianapolis, economic and cultural expansion both ensued (unfortunately so did sprawl).

  • oh, … and, of course, New York City’s borough system is a hybridized city / county governance with powerful localized borough committees and “presidents.” Think of Newport County as Manhattan, Washington County as Staten Island, Kent County as Brooklyn, Providence County as Queens, and Bristol County as, well …, the Bronx ? haha (the county / borough associations can change) …

    Population is not comparable at all but land area (and water area) are comparable.

    Rhode Island could pioneer the return of the city/state (you know, like 16C Florence … )

  • The land area of Rhode Island is a little more than triple that of NYC with an eighth of the population, not really comparable, but if divided up differently than what we have for counties, it could work with those divisions.

  • Developing a new form of government or city-state may be challenging. If I counted correctly, according to the City of Providence website there are 39 departments. Other cities and towns might have fewer or different departments. Which departments would the city(s) keep and what would go to the state? Would the state be saddled with only the departments that are expensive to operate? How would tax revenue be distributed?

    As Jim pointed out the perception of Providence by residents of other cities and towns is that of hatred and fear. I would venture to say the same perception is true of the state and in particular with the General Assembly.

    Besides the pending pension avalanche, I would assume that the most expensive service that cities and towns offer is education. It would also be the most divisive for a state take-over or hand-over with the urban-suburban divide.

    A statewide education system could be a great opportunity, if the minimum standard set for all students was that of the privileged more affluent towns that have the best systems today. Having high minimum staff and curriculum standards and the resources to support them would likely be the only way for the affluent towns to buy into a statewide system.

  • And even better, only ONE school board and ONE superintendent.

    “The Board of Education hires a Superintendent of Education as the chief executive officer of the public school system, and the State Librarian.

    The Superintendent appoints four Assistant Superintendents to run state-level offices responsible for curriculum, instruction, and student support; human resources; business services; and information technology services.

    The Superintendent also appoints fifteen Complex Area Superintendents who each oversees and supports 2-4 school complexes. Each complex consists of a high school and the elementary and intermediate/middle schools that feed into it. The Complex Area Superintendents are based in administrative offices located in seven geographical districts: Honolulu, Central, Leeward, and Windward on Oahu; and Hawaii, Maui (including Molokai and Lanai) and Kauai (including Niihau) on the Neighbor Islands.”

    They give their superintendent a lot of hiring power. Somehow I can’t see that happening here. To many “players” will want to have a say. RI would probably also end up with 39 Complex Area Superintendents. But its nice to know that it can be done somewhere. I am sure the GA would probably jump at a chance to send a few members to check it out.

Providence, RI
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