Mayor Elorza: City will run out of cash if budget isn’t passed

Providence

PROVIDENCE, R.I. (WPRI) — The mayor of Providence issued a dire warning at a hastily called news conference Friday morning, saying the cash-strapped city will run out of money in mid-July if a budget is not passed and approved soon.

The City Council is currently vetting the mayor’s proposed fiscal year 2019-20 budget, which he released on April 30, for the fiscal year that starts July 1. The council leadership is proposing a significant and controversial change to the city’s tax structure, which Mayor Jorge Elorza calls an “11th-hour” proposal that he doesn’t support.

“What the council has proposed as an option is in reality not an option,” Elorza told reporters.

The council leadership gained a significant win in their quest to change the tax structure at the State House Thursday night, when a Senate committee passed enabling legislation for the proposal.

The plan, supported by Council Finance Chairman John Igliozzi and Council President Sabina Matos, would create a single tax rate and bring back the city’s homestead exemption in a graduated fashion, with a 40% exemption for owner-occupied home values up to $350,000 and 28% exemption for values above that.

Asked if he would veto that plan as is, Elorza said he doesn’t envision it landing on his desk.

“It’s not going to pass, it’s just not an option,” he said. “They can’t do that … this is something that’s at the 11th hour, it’s something tremendously complicated, and it’s also unprecedented.”

Instead, he called on the council to continue negotiations with his office to come up with a budget plan prior to the start of the fiscal year, and said he would propose starting a commission to discuss changing the tax structure next year.

“I think a progressive tax structure also makes sense,” Elorza said. “It should be done so that we have authority, so that it’s legal.”

The city law department has said the council’s plan is not currently legal, which is why councilors asked Providence senators and representatives to introduce legislation at the State House to enable the new tax structure. There’s only a week left in the General Assembly session, and it’s unclear if the legislation will clear both chambers before adjournment.

At the hearing Thursday night, Igliozzi told senators the graduated exemption plan would make tax bills more equitable for lower-income residents of Providence who saw their home values skyrocket during a recent property revaluation.

“My mission statement, like yours, is to represent and advocate for people who don’t have a voice,” Igliozzi told the committee. “Protect the taxpayer, provide quality of life for our constituents.”

Igliozzi has also been asking councilors for their ideas to cut the mayor’s proposal at recent public meetings. Councilors have proposed denying the increase to the Arts, Culture and Tourism budget, funding it at the same level as last year; moving employees from the Office of Economic Opportunity, whose director recently resigned, to the Planning Department; and removing a $50,000 proposal to add washing machines to city schools.

Elorza said the budget dispute is “embarrassing for the city,” and could result in issues for a $20 million school bond set to close next week. He said the city will soon have to disclose the situation to the bond purchasers, which could change the “generous bond premiums” the city has received.

He also said the city is looking into utilizing a state law from 2001 that allows the city to give property tax relief to people who make less than $25,000 per year. It was not immediately clear how many homeowners that would effect.

In a statement late Thursday night, Council President Matos said the poorest residents of the city would “foot the bill” under the mayor’s plan.

“Presented with a budget from a self-proclaimed ‘progressive’ mayor that raises taxes on the city’s poorest while giving the city’s wealthiest homeowners a tax break, the City Council felt obligated to find a way to help soften the blow to our working-class families,” Matos said.

“The mayor’s budget, representing a $15 million increase over last year’s, reads like a Christmas wish list to be funded by the expected windfall from our recent property revaluation process,” she continued.

Elorza said many of the budget increases are “automatic,” including an increase to the city’s pension payment and millions in increased medical costs.

The next council finance committee meeting has not yet been scheduled.

Steph Machado (smachado@wpri.com) covers Providence, politics and more for WPRI 12. Follow her on Twitter and on Facebook

Copyright 2019 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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