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Elorza: Everything on the table for solving Providence’s fiscal woes

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Providence Mayor Jorge Elorza_257899

PROVIDENCE, R.I. (WPRI) – Providence Mayor Jorge Elorza said Friday he’s considering raising taxes, seeking more money from the city’s nonprofit colleges and hospitals and reexamining retirement benefits as part of his plan to address a structural deficit that could balloon to $37 million over the next decade.

The first-term Democrat offered no concrete plans for how his budget proposal later this month will address the growing shortfall, but he said the city could face “some dire consequences” if it doesn’t take steps to resolves its financial challenges.

“Everything has to be looked at and everything has to be on the table,” Elorza said during a taping of WPRI 12’s Newsmakers. “So the full suite of different options, that will be published in two weeks or so.”

The city is currently in the process of crafting a 10-year plan that factors in anticipated expenses like retiree benefits, road repairs and school construction to give Elorza a better idea of how to build a budget for the fiscal year that begins July 1 as well as future years.

The challenges sound familiar: Massive cuts in state aid – the city currently receives $29.6 million less than it did in the 2007 fiscal year – coupled with rising employee and retiree benefit costs and larger-than-average public safety budgets have put the city in a position of having its expenses far exceed its revenues.

The problem is exacerbated by the city’s nonexistent reserves, a safeguard commonly known as a rainy day fund. The city had $22 million in reserves in 2008, but those funds were rapidly drawn down after massive cuts in state aid and the economic downturn. Because Providence faces a $13.4 million cumulative deficit, the city must run an operating surplus for several years to offset the earlier red ink.

In a recent application for a federal grant to hire more firefighters, an official in the public safety department said the city “cannot afford to operate in a structural deficit mode because receivership or bankruptcy will be in its future.”

“Well the idea is if we don’t take these steps, we face some dire consequences,” Elorza said. “But that is why we’ve been going through this entire process, to make sure we’re thinking for the long term as we prepare each year’s budget.”

In the interview, Elorza acknowledged that property taxes will likely increase on those whose properties increased in value in the city’s recent revaluation. He also said he’s willing to consider possible changes to retiree health benefits, but declined to offer a plan.

Elorza also said he would like to see the city’s private colleges and hospitals make more payments-in-lieu-of-taxes (PILOT) because Providence receives less financial support from the nonprofit institutions than other comparable communities around New England do from their nonprofts. Elorza said he supports legislation that would require “non-mission essential nonprofit properties” to pay property taxes.

Elorza specifically mentioned 121 South Main Street, a Brown University-owned building that also houses Hemenway’s Restaurant, as an example of a property that doesn’t pay taxes to the city. (Brown is actually scheduled to pay the city $720,000 in the current fiscal year through a plan that requires the university to pay taxes on 15% of the property.)

The mayor said he plans to introduce his budget for the fiscal year that begins July 1 later this month. He said the city can’t fix its problems overnight.

“This isn’t the result of one administration, one individual,” Elorza said. “It’s decades and decades of neglect.”

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 Tim White( twhite@wpri.com ) is the Target 12 investigative reporter for WPRI 12 and Fox Providence. Follow him on Twitter: @TimWhiteRI

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