GOVERNMENT

Moody’s calls shared services task force a ‘credit positive’

COURTESY MOODY'S INVESTOR SERVICE
ACCORDING TO MOODY'S INVESTOR SERVICE, the shared services task force created between Pawtucket, Central Falls and East Providence by Gov. Lincoln D. Chafee is a ‘credit positive.’ For a larger version of this graphic, click HERE.
Posted 7/16/12

(Updated, 2:15 p.m.)

NEW YORK – Moody’s Investors Service – a globally recognized rating company – called the shared services task force created between Pawtucket, Central Falls and East Providence by Gov. Lincoln D. Chafee a ‘credit positive.’

According to the Moody’s report, the task force was named a credit positive because it is expected to improve the credit of the three fiscally troubled cities “because it will likely lead to operating efficiencies and save operating costs.”

Currently, Moody’s has rated Central Falls as Caa1 with review for upgrade, Pawtucket as Baa2 negative and East Providence as Ba1 stable.

The task force, which was created through executive order on Thursday, June 28, was designed to help facilitate shared municipal services among the three cities.

“I am pleased that Moody’s has noted our ongoing efforts to find new and innovative solutions to the significant challenges facing Rhode Island’s cities and towns,” Chafee said in prepared remarks.

“The state of Rhode Island and our economy as a whole cannot be successful if our municipalities are not fiscally healthy, and in these difficult economic times, we must seriously explore shared services as a viable option for savings and efficiency,” added Chafee

The five-member panel will be led by John C. Simmons, executive director of the R.I. Public Expenditure Council. The task force also will include Rhode Island’s director of revenue, Rosemary Booth Gallogly, as well as the mayor of Pawtucket, the city manager of East Providence and the Central Falls receiver, or their designees.

The task force “will advise on strategies to share public services among the cities in order to exploit economies of scale and reduce costs to combat revenue pressures,” said the Moody’s report, adding that sharing of services by local governments is a common practice in many states, including New York and New Jersey.

“While the task force is charged with researching shared service opportunities and ultimately making recommendations to the three cities, it lacks the power to compel the cities to go along with the suggestions,” said the report.

According to Moody’s, a 2010 report by the state’s Senate Commission on Shared Municipal Services warned of potential barriers to a shared services plan, including stakeholder resistance to change, union negotiations, employee benefit differences, state charter agreements, and fear of losing control or access to services, among others.

“However, the acute financial strain experienced by all three cities is likely to motivate them to embrace shared services plans proposed by the task force,” said the Moody’s report. “These three cities are among the most stressed in the state, beleaguered by a lackluster economy, stagnant property tax revenues, cuts in state aid, severely underfunded pensions and negative operating fund balances.”

The report insists that there is ample room to share services and reduce costs within Pawtucket, East Providence and Central Falls. Moody’s attributes more than one-third of all general fund expenditures within these cities to public works and public safety.

“Even a modest 5 percent reduction in public works expenditures would result in annual budgetary savings of $65,000 for Central Falls, $537,000 for Pawtucket, and $321,000 for East Providence,” said the report.

Moody’s cited a report from the Rhode Island Senate Commission, which stated that sharing services between the three municipalities would benefit the small state while “improving service delivery, pooling resources, and reducing expenses.”

The Senate Commission’s study recommended a four-year plan to complete a shared service consolidation. The Commission’s process includes compiling data, identifying barriers and solutions, implementation and conducting an evaluation of the consolidation.

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