RI gov candidates have mixed views on Providence’s finances

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PROVIDENCE, R.I. (WPRI) –  There’s at least one thing the three leading candidates for Rhode Island governor can agree on: Providence officials have more work to do to get the city’s financial house in order.

But with the city’s unfunded pension liability hovering around $1 billion and Mayor Jorge Elorza projecting massive school budget shortfalls in the coming years, Democratic Gov. Gina Raimondo, Republican challenger Allan Fung and independent Joe Trillo have different views on whether the state will need to intervene in the coming years.

“The governor will support the mayor and council next year as they work toward solutions to their pension challenges,” Mike Raia, a spokesperson for the Raimondo campaign, told Eyewitness News. “Actions that originate at the local level with local buy-in will be most effective. She’s encouraging them to get to work as soon as possible after they are sworn in.”

Fung, who as mayor of Cranston has built a large rainy day fund while attempting to tackle to the city’s long-term financial challenges, said the city “needs sound leadership that is willing to tackle financial problems head on.” As governor, he said he would take a “methodical approach” to reviewing Providence books before deciding if state oversight is needed.

Trillo, a former Republican state lawmaker who left the party to run for governor, sounded a louder alarm, warning that Providence may require a state takeover similar to the one in Central Falls several years ago. Central Falls ended up filing for Chapter 11 bankruptcy in 2011.

“That result is not desirable, but with the mayor’s incompetence, that may actually be the only solution to the problem,” Trillo said, referring to Providence going into bankruptcy. Raimondo and Fung said they don’t believe the city is nearing bankruptcy.

Elorza, a Democrat who is facing an independent challenge from Dianne “Dee Dee” Witman has offered a more optimistic view of the city’s finances this year.

The mayor announced last week that Providence is projecting a $9.1-million surplus for the fiscal year that ended June 30, the third consecutive year the city spent less than it took in. The leftover funds will be used to replenish the city’s rainy day fund, a decision that has earned praise from ratings agencies.

But Elorza has also warned that Providence needs to address its pension system, which had just $348 million in assets available to cover $1.35 billion in promised retirement benefits – a funding ratio of 25.28% – as of June 30, 2017. He has said the city’s growing annual contribution to the retirement fund – which is expected to increase from $83 million in the current year to $175 million by 2040 – will threaten funding for other necessary services in the coming years.

The mayor is already locked in a labor dispute with the city’s 2,000 teachers, who have been working without a new contract since Aug. 31, 2017. He has said the school department is facing a shortfall of $37 million over the next five years, which could force cuts to programing. Although teachers are not members of the city pension system, Providence’s $128.5 million annual payment to the school department this year is less than in 2009, when the district received $133.8 million from the city.

Elorza has suggested the city should be allowed to monetize its water supply system, a solution that would require General Assembly approval. The mayor has predicted the city could generate between $300 million and $400 million if it enters into a lease deal for the water system with the quasi-public Narragansett Bay Commission.

Although the mayor has repeatedly said he is not seeking to privatize the city’s water, the gubernatorial candidates all said they would oppose any attempt at privatization.

Raimondo believes Providence has a right to explore its options, “but any proposal would need to be fully vetted by the legislature, since it would impact many communities across the state,” according to Raia.

Trillo called a deal involving Providence Water “the easy way out for somebody who can’t figure his way out.” He also suggested the city may not have the legal right to monetize the water supply.

Fung, who wrote an op-ed criticizing the ideal for The Providence Journal last year, said he does not support a “bailout” for the pension fund. And while Elorza is not the first Providence mayor to propose monetizing the water system, Fung acknowledges his relationship with the current mayor is different from the rapport he built with former Mayors Angel Taveras and David Cicilline.

“In nine years as mayor, he’s been the only mayor I’ve had to publicly criticize over issues,” Fung said. “I’ll leave it at that.”

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Dan 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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