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Donna Perry: Communities in Crisis and the Flanders Roadmap

Thursday, March 08, 2012


If there were any lingering doubts that a municipal fiscal crisis has taken hold and is spreading in the state, events of the past week should silence the skeptics once and for all.The spectacle of one mayor pleading with hundreds of public sector retirees about unsustainable retirement benefits or another one giving sobering briefings to statewide officials about depleted city accountshave sadly become almost commonplace occurrences in Rhode Island this year.

The stormy encounter between Providence retirees and Mayor Angel Taveras over the city’s intention to rein in overextended retirement benefits took place just days before Woonsocket Mayor Leo Fontaine and other city officials pored over the bleak numbers facing his city.

The deficit and pension debt details may vary between the two cities but the broader theme remains the same: the escalating fiscal problems of Providence and Woonsocket come on the heels of the recent state takeover of East Providence, and all are manifesting certain conditions that were present when the receivership of Central Falls was triggered.

Untamed deficits, particularly in school departments, mounting local pension plan debt, and plummeting revenues are converging on municipal balance sheets and the consequences could be devastating. In Woonsocket, Mayor Fontaine has correctly characterized his city’s unfolding crisis as a case of “dire circumstances” and has stated that “bankruptcy is certainly on the table”since learning the city school department’s true deficit is now approaching $10 million, far higher than the $2.7 million of earlier projections.

RISC Municipal Fiscal Forum

Woonsocket’s dilemma is serious indeed yet the numbers pale in comparison to Providence, where the debt runs far deeper. The problems facing both cities and other communities will be on the discussion agenda when the state’s independent advocate for thetaxpayer; the RI Statewide Coalition (RISC); stages its annual Winter Meeting this weekend.

RISC has asked Central Falls Receiver Robert Flanders to give the keynote address and lead a panel discussion on the municipal fiscal crisis now facing several communities—and most importantly— what it will take to get them out of it. Flanders’experience with Central Falls, his proven agility to tame a municipal finance inferno and build a new financial foundation from the ashes, make him the state’s leading voice on the growing municipal fiscal crisis. It’s critical not only to understand the considerable achievements his receivership office has attained for the state’s tiniest city, but also to note that Central Falls today stands in far better financial condition than Providence, East Providence, Woonsocket, and beyond because of the turnaround job that Flanders has led.

Benefits of Flanders’ Receivership

Contrary to rising recent criticisms of the Receiver’s operations,being lodged by either disgruntled former elected officials or the city’s state SenatorElizabeth Crowley, the financial tab for the office of the Receiver is a miniscule cost when set against the significant savings and vastly improved efficiencies of local city government the receivership process has attained.

In fact, a key point Flanders’ harshest critics seem to conveniently overlook, is the reality that nearly $ 1 million ($782,580) of the estimated $1.8 million cost of the process has had to go for legal fees for the receiver’s own separate legal defense that was needed because of the multiple union court filings to challenge the authority of the Receiver in the first place! If the union’s persistent court battles had abated sooner, the legal tab for the Receiver’s office would have been that much less.

Flanders’ receivership has been about a whole lot more just the widely chronicled negotiations to trim retirees’ pension benefits. He and his team have instituted wholesale improvements to the day to day management of the city through strategic consolidations of jobs, functions, and departments that have translated into real savings that are expected to be at least $ 6 million this year and a whopping $30 million over the next five years. Their current attemptto consolidate the business office functions of the school department within the city’s own finance office is especially timely.

The present fiscal emergency that has now gripped Woonsocket is directly related to what is clearly becoming a pattern in local communities: overwhelmed school finance offices and superintendents that seem unable to keep pace with the complexities of present day school budgets. (State intervention in East Providence was similarly triggered by a school department deficit) The fact that Woonsocket officials have cited extremely poor record keeping by the departed Schools Superintendent that produced a $ 7.3 million dollar surprise is another vivid reminder that a Flanders-styled reform of merging school and city business operations could become an increasingly important option for other troubled communities.

Uncertain Road Ahead for Communities

In recent weeks, it’s understandable that both Mayor Taveras and Governor Chafee have vowed they will not allow Providence to go into bankruptcy, yet the path out of harm’s way for Providence seems far from clear. In contrast, Woonsocket’s Mayor has franklystated that bankruptcy is certainly an option that has to be on the table for his city at this point. Only the days to come will reveal whether the moment may be arriving when other elected officials will have to face up to a similar sobering reality.

It breaks down this way: if a city is operating with persistent deficits they can’t tame; annual required contributions (ARC) payments to pension funds they can’t make; is facing defiant, and court bound public sector retirees not interested in retirement concessions; and have maxed out taxpayers and plummeting revenues; then how can it be viewed as anything other than bankrupt, whether it’s been officially declared or not?

It’s going to come down to which roadmap will the states’ communities choose to follow: the road to recovery or the road to ruin?

RISC encourages all taxpayers to join in this important debate on Saturday, March 10th. Details at http://www.statewidecoalition.com.

Donna Perry is a Communications Consultant to RISC

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