Deal on pension cuts heads off high-stakes challenge

'If a city files for bankruptcy it changes everything.'

In early May, Providence Mayor Angel Taveras said retired city workers just didn’t understand the problems their pensions, some with annual 6 percent compounded increases, were causing the city. More

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Focus: LAW

Deal on pension cuts heads off high-stakes challenge

'If a city files for bankruptcy it changes everything.'

PBN PHOTO/NATALJA KENT
BARGAINING CHIP: Cranston Mayor Allan Fung, right, expects the Providence settlement to generate some momentum at the bargaining table. Above, he is pictured with Carlos E. Lopez, director of constituent affairs.
Posted 6/11/12

In early May, Providence Mayor Angel Taveras said retired city workers just didn’t understand the problems their pensions, some with annual 6 percent compounded increases, were causing the city.

They must have gotten the message.

Less than a month later, Taveras announced a landmark, albeit tentative, agreement with retirees and active public employees, on a package of pension and health care cuts projected to save the city millions of dollars and stave off bankruptcy.

The agreement, should it be ratified by the rank and file, will end a high-stakes Superior Court lawsuit over retiree health insurance and head off a threatened legal challenge to the package of pension cuts passed by the city council in April.

What changed in just a few weeks, from the months and years when retirees fought attempts by the city to take back promised benefits, was the implicit threat in Taveras’ message that this time the threat of a Providence bankruptcy was real.

“Nothing has changed in terms of the [benefit cuts] being any more acceptable, but they could be the lesser of two evils,” said Joseph Penza, the Warwick lawyer representing the Providence Retired Police and Firefighters Association. “If they stay with the litigation, the fear was that the city could go into bankruptcy. So we would win the battle and lose the war.”

Penza said had it not been for the threat of a Central Falls-style bankruptcy, where municipal retirees saw their contracts thrown out and pensions cut in half, he wouldn’t recommend any of the 1,100 retirees he represents approve the city’s offer.

The retirees are expected to vote on the proposed settlement in the next week or two, Penza said. If a majority rejects the deal, the Medicare case will head back to court and provisions barring a future legal challenge to pension changes will be lost.

“People say the Capital City will never go bankrupt, but I was one of the people who predicted Central Falls would not go bankrupt,” Penza said. “I saw people in Central Falls forced to sell their homes because of the bankruptcy. “I think we have an excellent case, but at the end of the day if the city files for bankruptcy it changes everything. I think the retirees should at least see the last, best offer the city has.”

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