Providence budget stressed by absence of state aid

john simmons, director of administration for the city, says commercial property values are now rising fastest. /
john simmons, director of administration for the city, says commercial property values are now rising fastest. /

Days after the General Assembly approved the state budget and ended its session without approving several measures that would have allowed Providence and other municipalities to develop new revenue sources, Mayor David N. Cicilline announced that he’d have to raise taxes.
He is also cutting jobs, especially in the School Department, and mandating four-day furloughs and increasing health care costs for non-union employees.
With the mayor’s budget still before the City Council’s Finance Committee, Providence Business News spoke with Director of Administration John Simmons about the city’s finances and the general condition of city government.

PBN: The fiscal year began July 1. When do you expect to have a budget in place?
SIMMONS: The expectation is by the end of July we’ll have an operating budget approved by the City Council. … It’s not an uncommon practice for the city to enter into July without a budget approved by the Council. Our process has been that every year we wait for the General Assembly to complete its session … we then take the outcome of the General Assembly’s actions for the year and we adjust our operating budget for the year.

PBN: What share of the city’s revenue comes from the state?
SIMMONS: About 45 percent. That’s similar to other cities in Rhode Island.

PBN: This is the fourth budget you’ve worked on. How is the city doing compared with previous years?
SIMMONS: The city, structurally, it’s much better off than it’s been in many, many years. We have examined the types of operations that we want. We are in a better position to understand our expenditures, the nature of our cost structure. … This year we were coming up to a point where structurally, we would have been in a much better position going into ’08. If what we had received what we thought and what was projected for us in the state’s five-year plan, we would have come out of our structural problem. … Our expenditure growth over the last few years has been around 2.5 to 3 percent. When one looks at the state government growth, federal government growth and [the consumer price index], we are less than all three of them. We are probably one or two percentage points lower than the cost of living. This year, when one takes out one-time items that we put in … our budget is actually declining from ’07 to ’08 … the city-side budget declined about $1 million.

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PBN: What about the schools?
SIMMONS: The schools would be up about $3.5 million. But on a $300 million operating budget … that is reputable.

PBN: You’ve been following a five-year plan with the city’s finances.
SIMMONS: When Mayor Cicilline came in, we created a five-year strategic plan. The first year we had some increases in costs and some tax increases. The second year, we cut that in half, the third year we cut that in half again. Last year we had no tax increase, and our budget was about level-funded. In ’08, we’ll have a tax increase basically to cover the cost of the lack of assistance from the state.

PBN: How much is the tax levy increasing, and how will that affect property owners?
SIMMONS: Our total tax levy increase is about $12 million, of which $2 million is levy growth [from new development]. We’ve had about $75 million to $80 million in new growth from last year to this year, so that’s an increase in the tax levy without affecting anybody’s house. … Then you bring in revaluation, and all that does is readjust for fair market value. I would say in the ’08 year, 30 to 40 percent of property owners will pay the same in taxes or less.

PBN: How has commercial property done versus residential?
SIMMONS: Commercial property has almost faster growth than the residential this time. The previous revaluation there was a lot more of a spike in residential value. This time … there are some 40- to 60-percent spikes in commercial values.

PBN: Do you think the rate of development and property acquisitions in Providence is going to slow down?
SIMMONS: They’ve already begun to slow down … I think part of this is a self-fulfilling prophecy; the more people talk about slowing down, the more it slows down, but there is still some development going on. … I think our next effort – the next wave in the city – will be in office development.

PBN: Why do you think that?
SIMMONS: We don’t have a lot of Class A office space downtown anymore. We need to create the office space, the commercial space in the city to create jobs. We are a ready market for it now that we’ve really gotten on the map.

PBN: Going back to the city’s finances, the city had wanted authorization from the General Assembly to develop some new revenue sources: charging for fire alarm maintenance, imposing a conveyance tax on property transfers and a few other items. How much would all of those items combined have raised?
SIMMONS: With some of the ones, we’d be talking almost $10 million to $11 million.

PBN: What about the condition of the city itself? You’ve been recognized for trimming the work force and reducing costs overall. Are you where you want to be now?
SIMMONS: I guess for some of us, there’s always more. The difficulty is that you get down to a point where you actually begin to drag on your services and you’re not providing the quality of services that you should be.

PBN: How much have you cut the work force?
SIMMONS: About 20 percent, almost 25 percent on management, about 10 percent on the total number of people working for the city when we started. … I think we’re at the point with some departments where you’re going to see service adjustments that are going to be necessary. •

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