Providence Mayor Angel Taveras last winter warned that the city was on the brink of bankruptcy and faced another large tax increase or state takeover without givebacks from employees and larger payments from nonprofit institutions. Three months later, the city passed new pension rules expected to save $16 million annually. In addition, Brown and Johnson & Wales universities agreed to increase their yearly contributions and Lifespan signed a deal to start making payments to the city. But Taveras says his warnings about bankruptcy were not idle threats, and Providence is still one successful legal challenge away from the precipice. Hours after the Brown and Lifespan announcements last week, Standard & Poor’s downgraded Providence’s credit rating from BBB to BBB-, the lowest investment-grade rating.
Taveras and city Director of Administration Michael D’Amico discuss Providence’s financial footing and the high-stakes fight over employee pensions.
PBN: With Brown, Johnson & Wales and Lifespan contributing more to the city, plus the pension changes passed this spring, has Providence avoided bankruptcy at least for this year?
TAVERAS: We may have moved it further away from the edge, but until there is a final resolution of our Medicare legislation, and what I anticipate will be pension litigation, [bankruptcy] just simply can’t come off the table. If we can’t come to a resolution with our pensions, there just are no other options. I believe bankruptcy is very bad for the city. It will cause property values to plummet and prevent people from investing in the city. Some people look at it as a panacea, but I look at it as a Pandora’s box. By the end of this fiscal year, I anticipate we will have a ruling from the Supreme Court on the Medicare legislation. How they decide that case will be indicative of how they will decide a COLA case. If we are not successful with the Medicare case, it is unlikely that we would be successful in some of the other things we are trying to do.
PBN: In February you warned of a potential mid-2012 or fiscal 2013 tax increase. With the city still in financial crisis, why didn’t you propose one?