NEW: Providence Facing “Cash Flow Crunch”—Will Likely Need to Borrow to Meet Revenue Shortfalls

Friday, April 10, 2020

GoLocalProv News Team

 

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Providence Mayor Jorge Elorza. Photo: GoLocalProv

The City of Providence is facing the possibility of needing to borrow money to cover operating expenses, due to the coronavirus crisis.

GoLocal obtained an email sent from City of Providence Treasurer Jim Lombardi to City Council members outlining his concerns -- and potential remedies. 

"There is an issue with cash flow moving into June and July. I am awaiting solutions from the administration on potential cuts which have also raised the possibility of a tax anticipation note or a line of credit," said Lombardi, when asked for comment Friday on his communication sent to council members this week. 

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Providence Mayor Jorge Elorza's office did not immediately respond to request for comment. 

City Position

The City of Providence is facing revenue shortfalls due to restaurants and hotel operations being shuttered or having limited operations during the coronavirus crisis, leading to a reduction in dining and hotel taxes. 

In addition, the city allowed for an extension on tax filings past April 15, further hampering the city's ability to collect revenue in the short term. 

Lombardi's email to council members stated the following. 

"There are many unknowns at this point...due to the extension to pay real estate taxes without interest, I am concerned by the timing of payments and the amounts projected by the administration. My rough analysis causes concern about making the first big payroll on June 12, 2020, and escalates from there.

The following are known assumptions made by the administration.

1. There is very little in revenue for miscellaneous departments.
2. There is a reduction in general expenses.
3. There is no payment to the school department of 10 million for June. It cannot be made until we receive PILOT from the state.
4. This cash flow does not include any additional payments to the pension for this year and puts stress on any potential payments made in July.
5. We are close to 100% collection for 100% of real estate, auto, and other property taxes.

Ideas to raise funds.

A. Collect all PILOT payments due and see if we can collect the subsequent year's payment.
B. Move all cash available from departments to the general fund. Based on March 31, 2020, bank balances, we have some cash from other general fund departments.
C. CONFIRM THAT THE SCHOOLS CAN DO WITHOUT THE 10 MILLION DOLLAR PAYMENT BEFORE JULY AND SEE IF WE CAN POSTPONE AN ADDITIONAL PAYMENT.
D. Enroll more vendors, large payment vendors, on epayables. We gain a 30 day grace period on payments made in this manner.
E. Contact state to determine the timing of the Telephone Tax and Pilot for possible June payments (Although it has not worked in the past).
F. Discuss the possibility of a discount on taxes PAID IN FULL for the next FY. Payments will need to be received by June 30 of this year.
G. Postpone payments to vendor's 30 days from the time it gets to Treasury.
H. Have the Council transfer money from reserves to fill the gap of any cash shortfall. Unfortunately, this will hurt us with the credit rating agencies."

 

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