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Riley: Will Mayor Elorza Stiff The Pension Plan Again?

Tuesday, March 20, 2018

 

Jorge Elorza

Since 2014 I have pointed out to Mayor Elorza and Rhode Island's Auditor general Dennis Hoyle that Providence had not been paying its pension on time for at least 15 years.

Providence generally paid in October after the fiscal year. I challenged the State Auditor General to show me any other city in America that accounted for its pensions the same way. In 2015 New Actuary Segal agreed with my assertion that Providence was overstating pension assets by roughly $63 million dollars. This was denied by the City and the auditor general. 

Reaction to my allegations was swift:  1) Segal agreed with me and hit Providence with an increased liability of $63 million. 2) Hoyle defended the city’s accounting though he wished they didn’t handle it the way they did. He assured me that Elorza had a plan for paying the contribution on time. 3) Elorza finally publicly acknowledges the failure to contribute to the pension plan on day one instead averaging contributions 450 days late. In 2015 Elorza made a pledge to contribute on or before June 30, 2015, which is actually 365 days late.

“But for at least the 11th consecutive year, the city is planning to make the majority of its annual required contribution, known as the ARC, sometime after first-quarter tax revenues begin flowing in on July 24. In other words, the city will use the money it receives during the 2015-16 fiscal year to cover a leftover tab from the 2014-15 fiscal year," wrote WPRI in 2015. 

Elorza Misleading the Municipal Bond Market

As most people know the term “fraudulent” or the act of fraud requires an element of intent.

Brazenly ignoring the Auditor General's wish, Elorza and prior mayors each year said they would pay “on time," Every City other than Providence does this. Yet Providence never does, it’s obvious that this fact pattern is misleading and likely fraudulent.

I believe Jorge Elorza has been misleading everyone about the true financial condition of Providence since he was elected and he has knowingly approved false accounting of pensions each year as well as approved improperly diverted pension contribution payments made to the plan, deducted from each employees paycheck. He uses the employee funds to cover operating cash flow problems, that he claims do not exist. Well, it is now four years later and Elorza still has not paid on time. This “undesirable behavior” goes unremarked upon by our Auditor General.

So now the Mayor has hit upon a sudden revenue source with his speed cams. Three full years after his pledge to contribute in full to the pension plans “on time." Can we, therefore, expect him to actually contribute to worker pension plans by June 30, 2018? Or is that too much to ask? Does he just prevaricate about finances or have there been other promises Mr. Elorza made to citizens and state officials in the full knowledge he will never be held accountable.

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. 

 

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