Providence Going Broke: What Next for the Capital City?
Dan McGowan, GoLocalProv News Editor
Providence Going Broke: What Next for the Capital City?
The city of Providence nearly ran out of cash in December and is staring down an approximate $30 million deficit in the current fiscal year, city officials confirmed at a City Council finance committee meeting Thursday evening.
The news came just hours after Mayor Angel Taveras warned that a supplemental tax hike or bankruptcy could be on the horizon if the city can’t reach an agreement to slash retiree benefits and receive more payments in lieu of taxes from tax-exempt institutions.
“It was bad [in December],” said James Lombardi, the city’s treasurer. “We held up a lot of vendor checks from going out.”
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Lombardi said he doesn’t think the city can make it through June without having cash-flow problems, nearly two months before the next tax collection period. Initial estimates suggest the city will be more than $16 million in the hole by the end of June. In July, that amount will nearly triple to $46 million.
“Obviously July is a big problem,” Lombardi said.
Borrowing an Option
During the meeting, internal auditor Matt Clarkin said the city is currently facing a $30 million shortfall. To address the possibility of running out of money by June, Clarkin suggested the city could: defer vendor payments, freeze hiring, limit purchasing to only vital needs and eliminate all but emergency overtime.
For July, when the cash-flow problems balloon to nearly $50 million, Clarkin said the borrowing of tax anticipation notes (TANs) or accelerating the state PILOT payments would be an option
Last week, the General Assembly signed off on Pawtucket borrowing $12.6 million in TANs. It was the second straight year the city needed a cash advance.
But if Providence takes that route, Clarkin said the city needs to begin discussing it right away because the process could take 30-60 days for the city to actually get its cash injection. If the city were to put off making the decision, it could be too late.
Taveras Calls for Sacrifice
No matter what action the city decides to take, Taveras made it clear that systemic change is essential to solving the city’s fiscal crisis. He said that it’s time for retirees and the nonprofits to make the same sacrifices other city employees and residents have made.
“Our firefighters, police officers, teachers and taxpayers have all sacrificed in the last year and helped Providence avoid catastrophe. However not everyone has sacrificed,” 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.”
Taveras said he plans to hold a forum for retiree next month to discuss the city’s options. But he made it clear that one way or another, their benefits will be cut.
“As a city, we no longer have the ability to sustain these benefits. It must stop now,” 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.”
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