Mayor: Freeze COLAs, push tax-exempts

PROVIDENCE, R.I. (WPRI) - Providence Mayor Angel Taveras said Monday he will move to suspend city pensioners' 5% and 6% cost-of-living adjustments and keep pushing major tax-exempt institutions to make larger payments in an effort to avoid municipal bankruptcy.

"Providence is in peril, and we must work together to save our great capital city," Taveras said in his State of the City speech at City Hall, where he was flanked by Gov. Lincoln Chafee and City Council President Michael Solomon. "We are on the edge and staring into a black hole."

Taveras, a first-term Democrat who took office 13 months ago, has spent his first year in office struggling to close a $110 million structural budget deficit he inherited from his predecessors, David Cicilline and Buddy Cianci. The city's total budget is about $614 million this year.

Steps taken by the mayor over the past year have narrowed that shortfall to $22.5 million, but Providence is now down to few options before the fiscal year ends in June. The city is projected to be out of cash and unable to make payroll at that point.

Less than two weeks after warning Providence is on "the brink of bankruptcy," Taveras on Monday painted a grim picture of a future city permeated with the stench of uncollected garbage and suffering from higher crime rates and failing schools if the capital doesn't increase revenue and address its legacy costs.

"We will be living in a city that is barely recognizable," Taveras said. He used the phrase "black hole" five times to describe the situation facing Providence and raised the specter of nearby Central Falls, which filed for bankruptcy last August.

"Rhode Island is dependent on Providence for its economic success," Taveras said. "Rhode Island cannot afford for Providence to follow the path of Central Falls."

Taveras singled out retiree benefits as major cost drivers, highlighting mandatory annual COLAs of up to 6% for about 600 pensioners - at a cost of $16.5 million a year - and free lifetime health care guaranteed to many employees. "This must stop now," the mayor said.

Providence's highest-paid pensioner, former Fire Chief Gilbert McLaughlin, retired with an annual salary of $63,510 and now receives an annual pension of $196,813 a year, according to the city. At the current rate of growth, McLaughlin's pension will total nearly $800,000 a year if he lives to the age of 100.

Chafee said he wants state lawmakers to pass legislation that gives their blessing to a suspension of COLAs at the local level, a step the state took last year. "It's all about the structural problems - the mayor's absolutely right," the governor said. "We don't want to do anything for the short term."

Paul Doughty, president of the Providence firefighters union, said after the speech Taveras should ask retirees for voluntary reductions in their pension payments rather than making changes unilaterally. The city has not presented them with a formal proposal for concessions, he said. A meeting with them is scheduled for March.

The mayor said a supplemental tax increase on Providence residents and businesses may be required to close the deficit, but Solomon said the City Council is staunchly opposed to that. "Right now that's off the table," he said. The mayor warned as well that more layoffs are "possible" despite a reduction in payroll of 200 already.

Taveras said he may announce a deal this week with Johnson & Wales University, one of four tax-exempt private colleges in Providence, to increase its voluntary payments to the city. He did not say whether a deal is near with Brown University or the city's hospitals, but warned "we will hold them accountable by other means" if necessary.

Providence's largest tax-exempt institutions own nearly $3 billion in property and would pay $105 million a year in property taxes if taxed at normal rates, according to the Taveras administration. The mayor wants an additional $7.1 million a year from them on top of contributions already made by the four colleges under a 2003 deal.

Taveras will meet separately with city hospitals' CEOs and Brown President Ruth Simmons later this week to continue talks, spokesman David Ortiz said. Simmons on Saturday described "now productive and positive discussions with the city and state leadership to determine the exact nature of the university’s contributions."

Taveras thanked Providence's municipal employees, police officers, firefighters and teachers for agreeing to new, reduced contracts. He also thanked Chafee and the General Assembly for passing legislation to assist the city in dealing with its budget problems.

The mayor also ticked off a number of positive occurrences in Providence over the past year, including the arrival of video game company 38 Studios and the coming expansion of Hasbro; the announcement of events including Netroots Nation and the American Hockey League All-Star Game; and a number of national honors.

"I am willing to do whatever it takes to tackle our budget deficit and shepherd Providence successfully through June, into the next fiscal year and toward a brighter, more sustainable future," Taveras said. "But I am not willing to take a short-term, short-sighted approach to the real problems that plague our capital city."

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi's Notes blog. Follow him on Twitter: @tednesi

Steve Nielsen contributed to this report.