Reports are coming in from a press conference that Mayor Taveras held this morning, things aren’t good. The Mayor is calling for concessions from non-profits and retirees or the city faces receivership and bankruptcy.
See the end of the post for a Press Release from the City.
- City of Providence: Saving Providence
- WPRI: Mayor: Retirees, tax-exempts must sacrifice
- The Providence Journal: Providence mayor: Without retiree COLA reductions, more from tax-exempts, city will be ‘forced into bankruptcy’
- RINPR: Taveras: without sacrifice, Providence will face bankruptcy
- WPRI: Taveras: For Providence, it’s concessions or bust – literally
- GoLocalProv: NEW: Providence Councilman says He’ll “Go to War” Over Tax Hike
City of #Providence is seeking expedited review of Superior Court decision barring city from moving public-safety retirees to Medicare
— Ian Donnis (@IanDon) February 2, 2012
Taveras says retiree benefits will be reduced one way or another. Voluntarily, or… he mentions Central Falls, where receiver cut them.
— Erika Niedowski (@eniedowski) February 2, 2012
This is a Bankruptcy Warning presser. W/o retirees, nonprofits there’ll be supplemental tax increase; that even may not prevent bankruptcy.
— Ted Nesi (@tednesi) February 2, 2012
Retirees getting compounded pensions. Won’t co-pay health
— bill rappleye (@NBC10_Bill) February 2, 2012
Taveras: “We will reduce retiree benefits,” either thru concessions or in bankruptcy ie C Falls. Will hold mtg w retirees next month.
— Ted Nesi (@tednesi) February 2, 2012
Press Release from the Mayor’s Office:
MAYOR TAVERAS URGES ACTION TO SAVE PROVIDENCE
Mayor points to sacrifices made by Providence taxpayers, teachers, firefighters, police. Calls on tax-exempts and retirees to share in City’s sacrifice. Announces plans for town hall meeting with retirees.
PROVIDENCE, R.I. (February 2, 2012) – Providence Mayor Angel Taveras addressed the residents of Providence, lawmakers and members of the press during a media conference in his office earlier today on the difficult fiscal situation Providence faces. During his remarks, Mayor Taveras warned that without additional sacrifice from the City’s large tax-exempt institutions and retirees, Providence will be pushed closer to the brink.
“Our firefighters, police officers, teachers and taxpayers have all sacrificed in the last year and helped Providence avoid catastrophe. However not everyone has sacrificed,” Mayor Taveras said. “The failure of our tax-exempts to sacrifice has left a $7.1 million hole in our budget. There are more than 600 retirees collecting 5 and 6 percent compounded yearly raises. These retirees have refused to sacrifice and are costing Providence taxpayers tens of millions of dollars of year.”
Mayor Taveras urged Providence residents, business leaders and policy makers to call on the City’s tax-exempts and retirees to share in the City’s sacrifice. He directed residents to visit SavingProvidence.com to join the administration’s efforts to weather the current fiscal crisis.
Mayor Taveras pointed to several state legislative measures his administration will support during this year’s session to help save Providence, including legislation that will ensure the City’s tax-exempts pay for the critical services the City provides them and legislation that provides the City with the ability to collect property taxes on buildings used for purposes unrelated to the educational or healthcare mission of those tax exempts.
Providence’s large hospitals, colleges and universities own nearly $3 billion of property across the City which, were it taxable, would be worth nearly $105 million in revenue for Providence. Brown University alone owns more than $1 billion – property that if privately owned by a taxable entity would generate $38 million of revenue for Providence.
“A Providence taxpayer who owns his single residence home in the West End neighborhood and drives a 2002 Toyota Camry saw his taxes increase more than 12 percent last year,” Mayor Taveras said. “Our taxpayers already subsidize the tax exempt institutions in this city. For example, it takes the revenue collected from 19,000 taxpayers like the one I just described to account for the $38 million in property taxes not paid by Brown University.”
Mayor Taveras also called on the City’s retirees who have been the beneficiaries of guaranteed annual raises that compound at 5 and 6 percent each year to share in their neighbors’ sacrifice. The City’s 25 highest paid retirees or their spouses collect at least $109,000. In all, Providence taxpayers are paying $36 million this year in growing pension costs.
The Mayor also pointed to the $38 million taxpayers contribute each year to cover retiree health benefits and announced that the City Solicitor’s office will file an appeal today to Rhode Island Supreme Court asking for an expedited review and a reversal of her ruling. The recent decision that blocked the City from moving Medicare-eligible retirees from the City health plan to Medicare created an additional $8 million gap in the City’s budget.
“As a city, we no longer have the ability to sustain these benefits. It must stop now,” Mayor Taveras said. “Our retirees must be a part of the sacrifice to save Providence. Either retirees will join their neighbors and make a sacrifice to save Providence or they will follow the path of Central Falls retirees who have had their full pensions slashed drastically in the courts.”
Mayor Taveras announced that he will host a town hall meeting with Providence retirees on Saturday, March 3.
Since last year, the Taveras administration has taken proactive measures to combat the City’s fiscal crisis. Mayor Taveras cut his own pay by 10 percent and voluntarily refused a City pension. The Mayor’s office budget has been cut by 13 percent. The administration has revised contracts with the City’s firefighters, police officers and teachers. The City raised residential and commercial property taxes and reduced the allowable deduction on the vehicle excise tax. Mayor Taveras thanked the City’s residents for their sacrifice and asked for their help to encourage those who have not sacrificed to come to the table.
For accompanying charts and illustrations, please visit: http://providenceri.com/efile/2054
Honestly, with the national economy stuck in neutral, I cannot see the city avoiding bankruptcy. Just not enough revenue, too many liabilities, business activity sluggish. It’s sad. I try to support all local businesses but it doesn’t seem like enough. It’s sad. I feel like the future of 2 whole generations has been wasted.
Agreeing with one of our Facebook commenters, I think it is also well past time for us to be talking about regionalism. Schools, Fire, entire cities… we need to be finding how we can maximize services at reduced costs.
I feel like it’s too late to be talking about regionalism. The city of going to run out of money in 5 months. My feeling is that the non-profits will not come through, the retirees will not agree to concessions, and any attempt made to reduce employee benefit costs will just get overturned by the courts. What tools are available for Providence to avoid bankruptcy at this point? Does anyone have any ideas? Because where I’m sitting, I just don’t have any hope.
Central Falls / Bankruptcy
Providence / -$7.1 million ?
Woonsocket / -$2.7 million ?
East Providence / -$6.1 million ?
Pawtucket / -$1.2 million ?
What others? Actual figures won’t really be know until it gets closer to the end of the fiscal year. Consolidation services or merging cities might not be the answer, as long as the pension problem still looms.
Just to clarify, the $7.1 million is only the shortfall related to the payments from non-profits. The total budget deficit is $22.5 million.
Also, GoLocalProv.com is reporting that, according to Council President Michael Solomon, tax increases are “off the table”.
The codified 5-6% COLA boggles my mind.
I know there was a whole series of discussion about this on various forums, but it still absolutely boggles my mind. Working people don’t get 5% raises unless they are excellent at their jobs.
I don’t think anyone is going to volunteer to help. Nice job my the Mayor to bring these issues up, though. I think it is going to take the heavy hand and use of the courts to get any changes.
On the non-profit side, I’m really disappointed in Brown. I kind of expect JWU to be cheap and RISD really struggled for a bit with the recession and kids leaving school. Brown has a good endowment and gets a free pass. Yale does as much or more economic development in New Haven as Brown does here, and they still make a large payment in lieu. Part of this is that Brown has many more undergraduates and does not receive as much grant money but still. It’s kind of ironic that Brown is the leftist of the Ivies in terms of politics, but donates the least to local government.
Regionalism won’t save us by June, mostly because it wouldn’t be able to be negotiated and in place by June, but perhaps it could help us by next June. Because I have no doubt, even if the Mayor gets everything he wants, we’re gonna be facing another shortfall next year. Unless housing prices make some dramatic turn-around, our property tax revenue will continue to dwindle.
And on regionalism, we really need to stop drawing such a solid line between City and State. For example, Providence (and to a lesser extent Cranston), host a lot of state property, plus non-profits, plus Providence is the economic engine for the state. What if the state funded our Police to make up for that, as an example? There’s no reason it has to just be the municipalities pooling our resources, without the cities and towns, there is no state.
Latest News Reports:
Central Falls receiver Flanders set to meet with Mayor Taveras [Nesi’s Notes]
Chafee-as-peacemaker meets with Taveras, Brown U. brass [Nesi’s Notes]
Here’s a few thoughts:
1) Tax the university properties, particularly any building that contains dormitories.
2) Tax parking lots at quadruple the rate of lots with property. That will stop the tearing down of structures.
3) Tax the church properties. If they want to play in the political field, they have to pay the price of admittance.
Perhaps Brown could contribute more, but I think that the mayor’s speech is a bit misleading and gives the impression that they’re just freeloading.
From Ruth simmons: “I explained that Brown is committed to working with the city in mutually beneficial ways, but that we could not simply provide unrestricted funds to address a structural deficit that had accrued for many years, and, according to the Mayor’s Municipal Finance Review Panel, was the result of reductions in state aid, high employee and retiree costs and a reliance on one-time budget fixes.”
I’m inclined to agree that even if Brown could afford to pay a bit more, the deficit is neither the University’s fault nor it’s responsibility.
In 2003, Brown and the City reached an agreement that was supposed to stand for 20 years, amounting to $4 million in annual payments, plus taxes on commercial property. They recently offered $10 million over 5 years on top of that, which Taveras rejected. If the city agreed to a deal in 2003, I don’t think it’s unreasonable for Brown to want the city to honor it.
Plus, if it wasn’t for the value that the city derives from the non-profits, do you really think the city could get $38 billion in revenue out of that land? I think it may have actually been in the Projo comments that I saw someone say that without the non-profits, Providence would be another Fall River… just about.
Ruth’s whole letter is on GLPVD: http://www.golocalprov.com/news/breaking-brown-pres.-issues-letter-calling-taveras-decision-surprising/
I am completely shocked that retirees get 6% cost of living increases each year. They’re making more money per year sitting on their asses than the people who are doing those same jobs. It’s absolutely ridiculous. It’s a shame Taveras had to come into this at the fault of the previous administrations who gave the unions everything they wanted.
Tony P has the right ideas. Tax any non-educational building/space. If a building is only 50% educational and the rest is making profit, that property should be taxed at 50% of its value. Tax surface lots at their potential value, not at the actual value. And start taxing the Catholic Church in RI since Bishop Tobin seems to have no problem being involved in the political process (something he’s not allowed to do by law and maintain his tax-exempt status).
In addition to those, I agree that we need to start thinking regionally. Consolidating our police, fire, and education departments would be a great start. Of course, the unions will never go for it, but someone has to stand up to them (though the threat of bankruptcy should be enough to scare them since that could totally throw out everything they get right now).
Bankruptcy might be the answer. The state’s credit rating would take a beating in the near term with multiple municipal bankruptcies, but it would provide a clean or at least cleaner slate. The Mayor and City Council might not have to resign. New York was able to reinvent itself after its bankruptcy in the 70s.
New York City did not actually declare bankruptcy, although it did come dangerously close. Also, is New York City the most reasonable comparison in terms of financially distressed municipalities recovering from a fiscal crisis? My fear is that by declaring bankruptcy, we experience a situation closer to Vallejo, CA, or other cities like Harrisburg, PA or Bridgeport, CT (both declared bankruptcy but petition was rejected in court).
I have long wondered why it has taken this long to get to this point…Didn’t Cranston declare bankruptcy years ago in order to get out from under some onerous past deals?
I wish there was a better solution, especially when i see all the awesome in Providence that has been able to thrive not only in spite of the economy, but in spite of the politics of the city itself–all the food trucks, farmers markets, city farms and community gardens, small restaurants opening, little shops, many parts of the city’s housing market is still holding steady (for example, i could never afford to buy back my house in Fed Hill) and all of those are good things, and I hope that, again, in spite of whatever happens with the city, that these small and creative social and economic engines are able to continue to thrive, and thus the longest run-on sentence you’ll see today.
The longer the city waits to take action, the more dire circumstances will become. I hate to see people lose their jobs, but I think they need to start furloughing non-essential staff immediately, although it’s not going to completely close the gap.
I mean, what other options are there. Borrowing money? How many times has the city borrowed money to solve one crisis, only to have to deal with another crisis later? Retirees? See Central Falls. Non-profits? You might have a chance there, but nothing we can count on. Tax Increase? City Council says it’s off the table.
I hate to say it, but I don’t see many options or ideas available. It would be nice if someone or some organization other than
the city stepped forth and offered some assistance or solutions.
And Rhode Island makes the The New York Times again.
I usually defend the unions, but not this time. In addition to unsustainble retiree COLAs they want the city to pay for medical insurance rather than going on Medicare. If bankruptcy voids contracts, it will be hard to feel sorry for folks who rejected Medicare that most retirees are happy to get, indeed are worried about GOP led efforts in Congress to totally undermine that program.
Btw, I thought the city was going to run out of money last september…How did PVD avoid that?
Raising taxes will drive people out of the city. Short-sighted solution in my opinion. Why would people live here, if they could move 5-10 minutes away and pay significantly less taxes (besides the benefit of living in a cool city, of course)? I do like seeing Taveras confronting the issue head-on and not avoiding it though.
I live in Providence and pay the taxes because I like the city and I like being close to everything I need and do. However, if taxes go up any more, I will have to start seriously considering a move out of the city. I know people on this particular forum don’t really feel for those who complain about the expense of owning a car, but with the tax increase, my car taxes are literally half of what I pay on my house, and my car is worth 1/10th the value of my property and house.
I am pretty sure, though, the City Council will not consider a tax increase as a means to deal with these economic issues. They know a tax increase will only hurt them in the end.
WPRI – Mayor hopeful Prov can avoid bankruptcy
Just a couple of observations and questions: It is my understanding that non-profits in RI (and possibly in Providence) are the largest segmet of corporate entities (I think by count). For example , what taxes does AS220 pay?Brown makes a goood argument regarding the innovation and jobs that the instituton brings to Providence. However, isn’t that true for many of the private companies especially start-ups too? I believe the corporate taxes (of various types –inventory, etc.!) for private industry in Providence are among the highest in the countryand I think this significantly detracts from business growth and job creation in private industry (which would alleviate much of the financial pressure in Providence (house buying, etc.). No wonder Providence has a high ratio of non-profits vs private industry: the cost structure is significantly different.
What if there was one tax rate for all non-residential property (possibly with a 1% net incerease in aggregate). Would that spread fairness and provide needed incentives for private business development?
With no concrete evidence to show here, I think that there may be “grandfathered” private commercial rates that may have disparity too.
Of course NY has a city income tax. That would certainly drive away people with such a stagnant private industry in Providence. Maybe if 111 Westmister St. was filled with lawyers and union executives:)
I haven’t crunched the numbers for the above but believe there is much legacy unfairness and, unfortunately (or possibly fortunately) a clean slate could provide increased confidence and long term predictability in the tax structure.
How about all those long term City Council members who approved these outrages deals without the benefit of actuarial/financial knowledge, wisdom or perhaps integegrity (based on campaign contributions).
I applaud and wish Mayor Tavares success. Wasn’t there a pension reform bill that Cicillini and Igliozzi had in-hand about 6 years ago?
While I agree that the colleges should pay more to the city, smaller nonprofits like AS220 should not be subject to increased taxes. AS220 does not have a billion dollars; nor are their employees or administrators making bank. There’s no comparison… How about taxing the Catholic Church for the Bishop McVinney Auditorium? I don’t even think they use it, and it cuts the city up into two.
I think they should just tax the Diocese of Providence as a whole entity. Bishop Tobin can’t seem to keep him mouth shut when it comes to political issues, which is what he’s supposed to do to keep a religious organization tax-exempt. They aren’t supposed to take part in the political process, including discussing legislation (the jerks even include a pamphlet about how marriage equality is bad in the pre-Cana classes Catholics are required to take before getting married).
The Bishop McVinney Auditorium makes me wonder; how many nonprofit owned parcels of land are there in Providence that are either (A) undeveloped–and have been so for years–or (B) have vacant or underutilized buildings? Are theses parcels taxed?
Some have rightfully questioned Brown for running for-profit ventures, such as the Brown Book Store, while not paying taxes on these properties. It makes me wonder about all the land that is bought up by big nonprofit colleges, churches, hospitals, etc, only to be left unused for years… I think that they should not only pay taxes on property that is used for profit, but also any land that they own but don’t use or develop.
Numbers coming through on Twitter from the Mayor’s announcement on a tax agreement with Johnson & Wales seem to put Brown on the hot seat. No one has a full story up yet, but it looks like just under $1 million per year from J&W with the potential for up to (reported as high as, not sure the factors) $14.5 million over 10 years.
I’m sure I’ll receive a press release from the City shortly.
RINPR: Let Providence tap the water supply system:
Press release from the Mayor’s Office regarding last weekend’s retiree meeting:
Mayor Taveras Calls on Retirees to Share in Sacrifice Needed to Save Providence and Protect Pensions