Providence Barely Makes Payroll
Wednesday, July 20, 2011
Providence’s fiscal situation remains so critical that the city will barely be able to make payroll over the next few weeks, officials confirmed yesterday.
Earlier this week, the city council granted final approval to the $613.8 million budget for the new fiscal year, which closed an estimated $110 million deficit. Mayor Angel Taveras signed the document with remarkable speed, inking it within minutes of the vote. But it will be weeks before the city sees any new revenue from the tax bills it is sending out.
The challenge in the short term is to keep up with payroll.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBeyond payroll looms a far larger bill—a nearly $60 million pension payment that is due to the city’s own retirement system for fire, police, and municipal workers in October.
“We are presently monitoring cash closely to make sure we have sufficient funds for employees to be paid,” said City Treasurer James Lombardi. “Cash flow issues will subside when we obtain state funds and begin collecting tax revenues early next month. The next big challenge is to make the pension payment.”
Auditor predicted ‘negative cash position’
The situation was not unforeseen. Last fall, when he was still the Internal Auditor, Lombardi himself issued a report declaring that there “was no question” the city would run out of money in about a year. More recently, his successor, Matt Clarkin, warned that the city could find itself in a “negative cash position” in late August or early September.
The city has to stick it out for a couple of weeks before there is any major influx of cash. Then, by August 1, it is due to receive $20 million total from state payments in lieu of taxes and other forms of state aid.
The current cash crunch suggests that, even though officials have the budget deal behind them, the city still has a ways to go before it has navigated its way completely out of what Mayor Angel Taveras has called a “Category 5” fiscal storm.
But Taveras’ office yesterday sought to squash any question that the city might have trouble paying its bills.
“The Taveras administration has worked since taking office to pull Providence back from the brink of financial collapse,” said spokesman David Ortiz. “The city’s finances will be tight for many months to come, but we will continue to make payroll and manage bills without need for short-term borrowing or other measures.”
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