Elorza administration: Providence ended fiscal year with $5M deficit

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PROVIDENCE, R.I. (WPRI) – Two months after informing the state that Providence would end the last fiscal year with a $27,000 deficit, officials from the Elorza administration said Thursday the city’s shortfall is likely to surpass $5 million.

The new disclosure, which members of the City Council have been expecting for several weeks, came during an hour-long council Finance Committee meeting Thursday evening. Finance Director Larry Mancini said the deficit is not final because the city’s annual audit is not complete, but indicated he thinks the city completed the fiscal year that ended June 30 just over $5 million in the red.

The shortfall would be added to the city’s $8.67-million cumulative deficit, a figure that represents what Providence owes from deficits incurred during the 2011 and 2012 fiscal years. State law allows municipalities to pay deficits off over the course of five years.

In a phone interview following Thursday’s meeting, Mancini told WPRI.com that larger-than-expected medical expenditures – Providence is self-insured – and back taxes coming in more slowly than officials anticipated were largely responsible for the shortfall. In July, he told the R.I. Department of Revenue that the city would end the year with a $27,644 deficit.

Thursday’s discussion centered around the $678-million budget for the fiscal year that started July 1, 2014, and ended June 30, 2015. That budget was signed into law by former Mayor Angel Taveras last year. It is separate from the $696.1-million budget that Mayor Jorge Elorza signed into law in June.

In addition to being $3.5 million over budget on medical expenditures, Mancini said the public safety callback and overtime budget came in $4.6 million over budget and the city did not receive about $3 million in state aid it included in the budget that the General Assembly never approved. Taxes came in about $1.4 million under budget.

Providence also didn’t receive about $6.25 million in expected one-time revenues from the sale of the Urban League headquarters and the Flynn School. It also failed to reach an agreement on a lease extension with Triggs Memorial Golf Course and received only half of the $500,000 it expected to earn for the naming rights on the downtown ice rink.

When asked if the $5 million shortfall means Providence is already facing a shortfall for the current fiscal year, Mancini said he believes the city budgeted appropriately in order to avoid similar problems. He pointed to a $5 million increase in the budget for medical expenditures and a larger snow removal budget as moves that give the city more flexibility.

But members of the council weren’t totally convinced.

The city benefited from several one-time revenue sources last year, including $8 million from a bond refinancing and a $2.3-million federal grant for the police department. The city also chose to use most of the $3.2 million it budgeted to pay down its cumulative deficit for general operating expenses.

Adding up all the one-time revenues and the $1.5 million in state aid the city included in its budget but did not receive from the General Assembly, Finance Committee Chairman John Igliozzi said he fears the current year’s shortfall could approach $18 million.

Igliozzi urged Mancini and chief operating officer Brett Smiley to return to the committee in the coming weeks so the city can begin addressing the budget right away. He also expressed concern about approving raises in union contracts if the city is facing a shortfall.

The council is expected to begin vetting the proposed teachers’ union contract next week. Local 1033, which represents municipal employees, and Local 1339, which represents school clerical workers, are both working under expired contracts. The city’s firefighters are also involved in an ongoing legal dispute with the Elorza administration over shift changes, which could come with a price tag of more than $10 million.

“I’m trying to be a problem solver,” Igliozzi said.

Continue the discussion on FacebookDan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan

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