Riley: Mayor Elorza Lacks Progress

Riley: Mayor Elorza Lacks Progress

We have just passed the two-year anniversary of the Elorza Commissioned 5-year PFM forecast for the City of Providence. We have also just passed the one year anniversary for the even more comprehensive National Resource Network 10-year plan for improving Providence fiscal stability. While both reports are informative, they both rely on an assumption that Mayor Elorza will do much of what is proposed and leave us with the likely outcome described by PFM’s  David Eichenthal:

“If Providence did nothing about its fiscal challenges today, it would face a $37 million budget gap by 2026, and expenditures would outpace revenues by $176 million over the next 10 years. While the city does not face the prospect of bankruptcy anytime soon, failure to act now would be a prescription for insolvency.”

Forming or funding studies and local workgroups is not the same as engaging in the real reform and change that both these reports describe. Mayor Elorza seemed on board with PFM initiatives and seemed to understand the implications of not doing anything. 

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Any “Progress” from our Progressive Mayor?

The PFM report and the NRN report both emphasized the need to act quickly and dramatically. Despite Elora's public proclamations, little progress has been made. Additionally, many of the assumptions like zero wage increases over 5 years appear to be as misleading as his pension accounting. Neither report accounts for what happens to deficits if pension returns are 5% or lower instead of 8%. Also, there is no accounting for the possibility of a recession in either report.

The biggest issues are the pension/OPEB debts and costs of benefits. Both reports describe the need for a grand bargain between Elorza and the Unions. Since the State taxpayer is on the hook when Providence inevitably fails my guess is the Governor and State Officials are watching very closely for any progress from Elorza in addressing Providence Finances. What we have instead seen is a distracted Mayor wanting to engage in political barbs with a nutty President. A Mayor who would rather address protecting illegal immigrants than protect his own taxpayers and his cities overall well-being.

A thorough reading or rereading of the NRN report shows many suggestions. Wouldn’t it be nice if Mr. Elorza tried to implement some of these before he commissions another study?

Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.