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New Providence Budget: A Cheat Sheet

Tuesday, February 01, 2011

 

More than six months into the fiscal year, the City of Providence may finally get a budget—solving the short-term problem of operating in fiscal limbo, but not the deep-seated financial problems that loom over the not-too-distant future.

The $638 million budget is a slightly scaled down version of an 11th-hour proposal Mayor David Cicilline submitted in December, just weeks before leaving office. The new proposal was hashed out between the council and Mayor Angel Taveras.

Last night, the council Finance Committee heard the 2011 budget for the first time and—despite the misgivings of some council members who said they hadn’t had time to study it in detail—recommended it to the full council.

The budget cuts what Cicilline had proposed, but still increases spending by approximately $20 million over 2010. It also includes $3.6 million in spending that is expected to be paid for through savings elsewhere in the budget—although city officials declined last night to disclose any details about where they might find those savings.

Increases spending by 3.3 percent The $638.4 million budget proposal represents a 3.3 percent increase over the $617.9 million budget for the fiscal year that ended in June 2010. Council President Michael Solomon said much of the increase is due to contracts and collective bargaining agreements that could not be altered. Rising health costs and pension obligations also contributed to the increase, according to Director of Administration Michael D’Amico. “Those are things that we don’t have control over looking back retrospectively, now that we’re six months into the year,” said Taveras spokeswoman Melissa Withers.

Eliminates one raise, keeps another The budget does away with a proposed one percent raise for non-union city workers and managers that Cicilline had proposed. The raise would have been for the first six months of 2011. But it does keep a 2 percent raise for the same group of people for the last six months of 2010. That money will be paid out retroactively. Withers said the Taveras administration did not want to retroactively rescind a raise that city employees had been counting on. But, by the same token, she said going forward it would have been “imprudent and inappropriate” to have yet another raise given the “fiscal realities” the city is facing.

Cuts Cicilline proposal by $5.3 million The proposed budget is $5.3 million less than what Cicilline had suggested. The budget was trimmed down by eliminating roughly eight positions he had proposed and reducing the spending on medical insurance for retirees by $2.2 million.

Reduces police chief’s pension benefit The budget also cuts $9,000 from what the city would have paid into Police Chief Dean Esserman’s retirement account for the first half of 2011 (in the next fiscal year, the reduction will total $18,000). Otherwise, for now, his salary will remain within the range approved by the council. In 2010, Esserman’s salary was $168,000, according to city pay records.

$35 million from Providence Public Building Authority The budget includes $35 million in bonds and notes issued by the Providence Public Building Authority to finance repairs, replacements, and upgrades to city and school buildings.

$36.1 million reduction in state aid The budget also absorbs a hit of $36.1 million in lost state aid.

$10.2 million to help property owners The spending plan sets aside $10.2 million to pay for a 15 percent tax abatement to non-owner occupied property owners in the city.

A slight $3.6 million 'deficit'? City officials wouldn’t call it a deficit, but the budget did include $3.6 million in spending that is unaccounted for—described as “deferred expenditures” in the proposal. When pressed by Councilman Sam Zurier to say where those savings were coming from, acting Finance Director Rich Kerbel said he’d “rather not” until they had been finalized. D’Amico told GoLocalProv that it is not uncommon for businesses and governments to have “cost saving targets” in their budgets. He did not have an exact amount for how much of the $3.6 million has been identified so far, but said he “fully expects” to achieve that goal.

At this late stage, is a new budget even necessary? Kerbel said he’d never seen a budget passed so late in the year in his career in government. “I think this is a highly unusual situation,” he told council members. But said passing a budget would help the city’s standing with bond holders and give relief to property owners. It also would eliminate a cloud of uncertainty that has been hanging over the city’s financial staff. However, technically, the city has been operating on a default budget this year, according to Finance Committee Chairman John Igliozzi. The council did pass a tax levy last summer, which he said is more important to bond rating agencies than having an approved spending plan in place for the year.

City leaders praise budget deal… Taveras and Solomon both issued statements praising the new budget. “Our collaborative approach to solving the city’s fiscal woes sends a strong message that Providence is serious about giving taxpayers relief and getting our fiscal house in order,” Taveras said. Solomon added: “Despite the national recession and cuts in state aid, the Council worked together with the Mayor and produced a budget that does not harm important city services or unfairly target one constituency.”

… But long term problems still loom “This proposed budget doesn’t solve any particular financial problems the city has and the city has serious financial problems facing it,” Igliozzi said. “The city’s revenues—they’re not equal to the payouts. ... It’s getting wider, greater, and unsustainable.” He also noted that not all of the city’s problems were related to the world’s financial collapse, saying that some of its issues are “self-inflicted.”

 

 

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