Providence Mayor Jorge O. Elorza last month said residents and business leaders will finally see "cranes in the sky" this year. He sees a city about to turn a fiscal corner after years of stagnation.
But if the city really is set for a rebound, why is there so much angst outside of City Hall about its finances? The reason, as this week's cover story reports, is that for every rosy financial projection put forward by city leaders, there is a negative sign that could tip the scale toward a financial crisis – and yes, even bankruptcy.
City leaders expect increases in property tax, business tax and license revenue, a steadily expanding tax base and savings from a host of belt-tightening measures are on the horizon. Yet the city's operating deficit grew last fiscal year. More than 40 percent of its tax base is held by nonprofits – and thus untaxable – and its unfunded pension liability for city employees exceeds $900 million.
Elorza's dismissive response to discussion of bankruptcy as "barroom talk" fails to recognize the breadth of concern for the city's finances among business and community leaders and even bond-rating services.
There are many good reasons to avoid bankruptcy, including a drying up of private investment that may finally be returning. But the budget Elorza submits this spring must begin to show a sustainable path through the debt and deficit spending that has kept the question of bankruptcy looming in the shadows of City Hall for years. •