PROVIDENCE, R.I. (WPRI) – Former Hasbro CEO Alan Hassenfeld has a scary message for leaders in Rhode Island’s capital city: “Someday the plug will get pulled in Providence.”
In a candid interview with the Providence Business News, Hassenfeld said he fears Providence is in deeper trouble “than anyone comprehends” and that officials should consider bankruptcy in order to right the ship.
“I’m not sure, and this will shock you, I’m not sure if we shouldn’t pull a Detroit or Central Falls and level the playing field and start all over,” Hassenfeld told PBN in a report published Saturday.
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Hassenfeld, who retired as head of the toy manufacturer in 2005 and now funds the Hassenfeld Institute for Public Leadership at Bryant University, acknowledged he doesn’t like “pulling anything away from people that they were promised,” but said “it’s very hard for a businessman sometimes to comprehend the sick days, the vacation days, the things that people can accrue.”
He also criticized Mayor Jorge Elorza for not having deeper discussions about the city with former Mayor Angel Taveras. While the two Democrats have met at least once since Elorza took office, they have clashed publicly over the city ending the 2014-15 fiscal year with a $5-million deficit. (That budget was approved under Taveras, but managed for six months by the Elorza administration.)
“We in business believe in something we call exit interviews,” Hassenfeld said. “We ask, ‘What did we do right, what did we do wrong, how would you do it differently?’ He’s never sat down with Angel.”
Taveras is widely credited with helping the city nearly eliminate a $110-million structural deficit when he took office in 2011 through a series of payment-in-lieu-of-taxes (PILOT) agreements with Providence’s nonprofit hospitals and colleges as well as a pension reform agreement with public employee unions that reduced the city unfunded pension liability by about $170 million.
While the city posted small surpluses in Taveras’s final two years in office, Providence still faced an $8.7-million cumulative deficit when Elorza was inaugurated last year. That long-term deficit now stands at $13.4 million. In December, Moody’s Investors Service cut the outlook on Providence’s credit rating to negative.
Hassenfeld is among the most prominent Rhode Islanders to publicly suggest Providence should consider bankruptcy. During the 2014 mayor’s race, Republican candidate Dr. Daniel Harrop campaigned on placing the city into receivership. (He earned just 2.6% of the vote and admitted that he didn’t vote for himself.)
In 2011, tiny Central Falls filed for Chapter 9 bankruptcy, slashing pensions and ordering 4% annual tax increases for five straight years in order to improve the city’s finances. Under new Mayor James Diossa, the city has earned high praise for helping the city recover, but Central Falls had the state’s fourth-highest residential property tax rate ($27.63 per $1,000 of assessed value) and second-highest commercial tax rate ($39.67 per $1,000) in 2015, according to the state Division of Municipal Finance.
In 2013, with liabilities approaching $18 billion, Detroit became the largest municipality in history to file for Chapter 9 bankruptcy. Officials have been credited with taking the necessary steps to stabilize the city’s finances – Detroit has also benefited from local billionaires’ willingness to reinvest in the city – but a massive pension liability still exists. Officials in the city’s school department, which was not part of the bankruptcy, have warned the district could run out of money by April.
Locally, state and city leaders have dismissed bankruptcy as an option for Providence.
During a taping of WPRI 12’s Newsmakers in December, Gov. Gina Raimondo said “the city is not close to bankruptcy,” but indicated “if I decide that it’s going in the wrong direction, I wouldn’t hesitate at that point to take a more active role.” Elorza and City Council President Luis Aponte have also said they do not consider bankruptcy an immediate concern.
Aponte has said he does expect the city to raise residential property tax rates for the fiscal year that begins July 1, in part because Providence has held the line on taxes for two consecutive years.