Riley: The State Should Intervene in Providence - Hartford Style
Tuesday, May 29, 2018
Hartford Mayor Luke Bronin publicly warned for years about Hartford’s financial distress and that something had to be done. About a year ago, Bronin asked for the State of Connecticut to intervene. They did, and as a result, there is now an oversight board monitoring Hartford.
The State agreed to make a cash infusion of $270 million as well as the annual interest costs on outstanding debt totaling roughly $40 million a year for the next two decades in return for oversight of all budgets, approval of all labor agreements and approval of any new bonding.
Hartford vs Providence
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe same deal is available for Mayor Jorge Elorza but Elorza does not want to give up his fantasy of turning around Providence through a “grand bargain." Not so coincidentally, Elorza is likely to be reelected and he does not want his power diminished.
In many ways, Providence is far worse off than Hartford who was considering bankruptcy for the last few years. Finally, Bronin opted for saving the city of Hartford instead of his own job. He deserves congratulations for the selfless act.
On the other hand, in Providence, where our pension is funded at a puny 26% as opposed to Hartford’s 72% Mayor Elorza seems fine with Providence ‘s $1.2 billion in pension debt and $1 billion in OPEB debt versus Hartford’s $400 million in pension and OPEB. Elorza scoffs at bankruptcy.
There is no thought at all being given to asking the State to intervene for the benefit of its citizens. Mr. Elorza selfishly defies the odds by pushing a temporary and partial solution of selling the Providence Water Supply. This solution has almost no chance of occurring before the election as Elorza tries to run out the clock. The entire city is in a smoldering stalemate as no opponent has yet exhibited the skill or desire to save Providence. Even an incompetent Elorza is a huge favorite despite his poor track record and lack of intestinal fortitude.
Importantly, the State does not require that Mayor Elorza invite them in. There is already ample reason under existing receivership law to intervene. Ms. Raimondo after being of the opinion that Providence was in desperate shape in 2014 when she pointed squarely at Taveras in the primary now witnesses a disaster no longer in slow motion yet does nothing. Since Taveras left office Providence finances and funding have deteriorated dramatically.
The pension funded ratio has plummeted from near 40% to 26% and is still overstated dramatically by Elorza.
State Should Intervene
Providence is a critical part of the State’s economy and culture. No Mayor or Governor should gamble the state's future for personal political gain.
It is time for the Governor to stand up and intervene through the revenue director before deterioration and bankruptcy soon follow their inevitable course.
Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC News, Yahoo TV, and CNBC.
Related Slideshow: GoLocal: Benchmark Poll, October 2017
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