Elorza announces working group to consider long-term Providence pension solutions

MAYOR JORGE O. ELORZA on Monday announced a new working group of community organizations, lawmakers and financial experts to consider solutions to the city pension crisis. / PBN FILE PHOTO/STEPHANIE ALVAREZ EWENS

PROVIDENCE – After his pitch to borrow more than $700 million to shore up the city pension fund stalled in the General Assembly, Mayor Jorge O. Elorza is turning to community leaders and financial experts to come up with a solution.

Elorza in a virtual press conference on Monday announced a 12-member working group to make recommendations on how to tackle the city’s longstanding and quickly growing pension woes. The pension obligation bond, which Elorza floated to the legislature earlier this year, is still on the table, but by no means the only option. 

Instead, Elorza framed the mission of the working group as one of comprehensive reform for paying down the $1.2 billion unfunded pension liability and its escalating annual payments, which the city projects will hit $227 million by 2040. 

Exactly what the other options are that might be considered is unclear, as is the viability of the pension obligation bond. The 25-year, fixed interest-rate pension obligation bond requires legislation to bypass state laws that limit the amount of debt municipalities can take on relative to their assessed property value.

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A bill was introduced in both chambers of the legislature this year, but failed to make it out of committee. A single hearing on the bill by the House Committee on Finance was met with concerns by a number of state financial experts, including Michael DiBiase, president and CEO of the Rhode Island Public Expenditure Council.

While DiBiase on Monday did not comment specifically on the pension obligation bond idea – which he in a prior letter called a “bet on capital markets” that would “remove any incentive to address these structural issues for the foreseeable future” – he stressed the importance of the city’s financial strength for the state as a whole.

“There is no greater fiscal challenge for our state than Providence’s finances,” DiBiase said.

Unfunded retiree payments – both the $1.2 billion pension liability and about $1 billion in other post-employment benefits – are the most pressing problem, but DiBiase also named high commercial tax rates and debt and “limited capacity” to make necessary investments in city schools as other financial weaknesses he hoped the working group would address.

“Providence is the seat of government, it’s the seat of industry, it’s the seat of culture and of academia,” said Laurie White, president of the Greater Providence Chamber of Commerce. “This is not just an issue that impacts the residents and taxpayers of the city. It truly has a statewide economic impact.”

Asked by a reporter about the absence of union representation on the working group, Elorza said the chief focus was on inclusion of lawmakers, financial experts and community stakeholders. Union representatives and their leaders, as well as other members of the public, will still be able to weigh in during biweekly public meetings, he said.

The group is expected to first consider the pension obligation bond proposal ahead of the legislature’s return for a fall session, before moving on to a more comprehensive proposal to address the city’s financial challenges. The first meeting will be held Tuesday at 12:15 p.m. on Zoom.

The 12-person group includes Elorza, DiBiase, White, Providence Foundation Executive Director Cliff Wood, Gov. Daniel J. McKee or his designee; House Speaker K. Joseph Shekarchi or his designee; Senate President Dominick J. Ruggerio or his designee, three financial advisers and two members of the Providence City Council.


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