Magaziner: Public debt tops $10B

PROVIDENCE – More than $10.5 billion in debt has been accumulated by Rhode Island public issuers of debt, according to a Debt Affordability Study released Thursday by R.I. General Treasurer Seth Magaziner.

Magaziner, in a news release, said the 130-page report is the “most exhaustive” in the state’s history, and sets new debt affordability targets for the first time since 1999.

The study, presented to the Public Finance Management Board, will be conducted every two years, according to a spokesman for Magaziner.

While Magaziner said it is “imperative” that the state maintains its commitment to making job-creating investments in infrastructure, school facilities and other capital projects, he said it’s important to ensure that “we never borrow beyond our means.”

- Advertisement -

To that end, he said the study sheds new light on the affordability of public borrowing across the Rhode Island.

Public issuers of debt include the state, municipalities, and school, water and fire districts, as well as quasi-public entities such as the Narragansett Bay Commission, R.I. Commerce Corp., Rhode Island Student Loan Authority and R.I. Airport Corp.

As of June 30, the state had a total of $1.9 billion of tax-supported debt outstanding, and approximately $2.83 billion of unfunded actuarial accrued liability for its pensions. Quasi-public agencies had nearly $5 billion of debt outstanding, excluding debt held by nonprofit and private conduit borrowers. And municipalities and special districts, as of June 30, 2015, had a total of $2 billion of debt and $3.69 billion of pension liabilities outstanding. With the pensions, the total swells to $17 billion.

While the study does not recommend a single overall limit for public debt across all issuers, it recommends separate affordability limits for the state, quasi-public agencies and municipalities.

The state’s debt burden is “manageable,” but above many national peers. As a result, the study recommends a slight reduction to the state’s prior debt affordability targets.

The study states overall debt and pension liabilities should be less than 6.3 percent of a community’s total assessed property value. Exceeding that threshold are Woonsocket at 20.3 percent, Central Falls at 19.2 percent, Providence at 17.8 percent, Pawtucket at 14.9 percent, Johnston, 13 percent, West Warwick, 9.7 percent, and Cranston, 6.8 percent. On the other end of the spectrum, Exeter was the lowest at 0.1 percent, and Charlestown and Scituate followed at 0.6 percent.

The study singled out the R.I. Resource Recovery Corp., with the Public Finance Management Board recommending that the resource recovery corporation “refrain from any issuance of long-term debt until the future of the facility is more certain.” Regarding the airport corporation, it said the debt per passenger is too high.

The report also said that if the 7 percent state-level debt target “is to be strictly enforced right away, the state would not have the capacity to add new debt in the 2018 referendum.” In addition, it recommended that the debt service to general revenue target be set at 7.5 percent for the next five to six years before reverting to a long-term 7 percent target level.

The study is part of the Public Finance Management Board’s ongoing work to provide information that can help Rhode Island communities manage their debt, according to Magaziner.

Lori Stabile is the PBN Web Editor.