PROVIDENCE, R.I. (WPRI) – Turns out Providence Mayor Jorge Elorza was wrong about the city’s surplus for the 2015-16 fiscal year. It was actually larger.
An independent audit of Providence’s finances released Wednesday shows Rhode Island’s capital city finished the fiscal year that ran from July 1, 2015, to June 30, 2016, with a $10.3-million operating surplus, approximately $800,000 more than administration officials anticipated.
The annual audit, prepared by BlumShapiro, shows the city has eliminated the majority of its $13.4-million cumulative deficit, which accounted for annual shortfalls incurred during the 2011, 2012 and 2015 fiscal years and can only be reduced through future operating surpluses.tca
The multi-year shortfall has drawn scorn from ratings agencies and state revenue officials in recent years, but the city now finds itself on pace to end the current fiscal year with reserves in its general fund – commonly known as a rainy day fund – for the first time since 2011.
- Read: Providence’s annual audit
- More: What the surplus actually means
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When it comes to the $696-million budget audited by BlumShapiro, the city collected $257 million in real estate taxes, $49 million in tangible taxes and $33 million in car taxes during the fiscal year for a total of $338.9 million. (Providence’s total tax collection was up 32% compared to 2007, according to the audit.)
On the spending side, the city’s law department ($1.9 million), municipal court ($1 million) and fire department ($1.2 million) all overspent their budgets by at least $1 million, according to the audit. The police department ($784,000) and the mayor’s office ($311,000) slightly underspent their respective budgets.
The audit shows Providence still faces massive long-term liabilities, which largely consist of retiree benefits – pensions and health care – and debt service.
Providence’s pension system is now just 25.28% funded, with an unfunded liability of $985 million, according to the audit. The fund paid out $108.1 million to retirees during the year, about $17.8 million more than it took in from employee contributions and investment income.
The unfunded pension liability grew by $85 million between 2015 and 2016, due in large part to the city’s decision to lower the fund’s assumed annual rate of return on investments from 8.25% to 8%. If the city were to reduce the rate of return to 7%, the unfunded liability would be $1.13 billion. A 9% rate of return would cut the liability to $860 million.
After posting a 17.5% rate of return during the 2014 fiscal year, the city posted returns of 3.3% and 2.6% in 2015 and 2016, respectively.
As for other post-employment benefits (OPEB) – such as retiree health care – Providence’s unfunded liability was $980.6 million as of 2014, according to the audit. The city spent about $30 million on retiree healthcare in 2016.
When it comes to Providence’s vital statistics, the city’s population grew slightly to 179,207 in 2016. The average age of city residents was 28.8 and per capita income was $21,512. The unemployment rate fell to 5.5%, the lowest rate in at least 10 years. Public school enrollment grew slightly to 23,867.
The total number of city employees – counting the school department – was 5,011. Fire and rescue calls grew to 46,000, the most in at least 10 years. There were 124,000 service calls to the police department, the most since 2011.
Elorza is expected to release his proposed budget for the 2017-18 fiscal year in April.