Moore: Elorza’s Budget is a Bridge To Nowhere
Monday, May 04, 2015
Give Mayor Jorge Elorza credit, he made good on his promise to not raise taxes this year. The property taxpayers of the city cannot afford any tax hikes.
But the question remains: does a no tax increase budget, though a relief for home and business owners in the short term, really mean a lot in the long run? Further, what does this budget proposal do for Providence's larger financial picture going forward 5-10 years? Unfortunately, not much.
Providence is a city with financial problems in the short term as it's increasingly looking as if the only way it will only end the year in the black by relying on one-time revenue sources, mainly by refinancing a large portion of the city's debt, which will bring an extra $5 million into the city coffers.
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The more significant financial issues, however, lie in the long term. The city is facing some, to put it bluntly, crippling liabilities, which threaten to crowd out the funding for all the important things a city does--public safety, road paving and plowing, and educating children. The city has an unfunded pension liability of $894 million, according to the most recent accounting (first reported at wpri.com), meaning if everyone who was owned a pension right now were to collect it, that's the sum the city would need to come up with. While that's an unlikely event, the city's unfunded liability is at a dangerous level.
But wait, there's more. The city has an unfunded healthcare liability that's even larger, at a whopping $1 billion. The budget allocates $2.5 million more this year for health care costs and $3.5 million for pension costs, as a result of these liabilities. Expect even bigger allocations to continue into the future.
Those factors, combined with the shape of the condition of the city streets, and the aging infrastructure in the school department, suggest that Providence is in need of some major reforms--not just tinkering around the edges.
Even more frustrating is the fact that the Elorza budget relies on several lofty assumptions to fall into balance. First, the budget is relying on a repeal of an ordinance passed last year that gave a tax break to non-owner occupied rental properties. It allowed the owners of rental properties to pay 160 percent of the city’s $19.25 per $1,000 instead of the 170 percent they currently pay.
Lofty Assumptions
That ordinance was badly needed since those properties pay significantly more than owner-occupied properties. It's basically a tax on renters as those costs are passed on to the end users. To repeal that ordinance would bring in an extra $6 million in revenue, but would be a slap to the face of the people who rent property in Providence. Hopefully, the Providence City Council will reject this proposal and find the revenues elsewhere.
The budget also relies on the state legislature to reject a proposal from the Governor's office that would cut the Payment in Lieu of Taxes Program (PILOT), which gives the city state money for hosting certain state buildings. The Governor's budget proposes to cut the program, but the Elorza budget assumes that the funding will be reinstated by the legislature.
And don't think that the budget doesn't contain any revenue enhancements. The budget calls for more parking meters (particularly on Federal Hill), and increases the fees for city licenses--again, making it harder to do business in Providence.
Elorza also didn’t budget any money for wage increases for any of the unionized employees. This is suspect, considering many of the city unions have contracts that either have expired or will shortly. For instance, the Providence Teachers Union's contract expired earlier last year, whereas the school clerical workers union is slated to expire at the end of August. The municipal workers union, represented by The Laborers' International Union of North America, has a contract that will expire in June. Meanwhile, the Police Department has a wage reopener clause in their contract that allows them to negotiate a raise for next year.
Coming Up Short
Elorza's budget contains no money for any of those workers. Perhaps this means Elorza plans to take a hard-line with the workforce and refuse to give them any raises in an effort to protect taxpayers. But it remains to be seen if Elorza has the spine to stand up to the unions, who are known for their political strength in Rhode Island.
But if the capital city is going to return to glory, it's going to take stout reforms, not merely a status quo budget that increases spending and punts off the significant reforms Providence needs somewhere into the future.
Russell Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and on political campaigns. Send him email at [email protected]. Follow him on twitter @russmoore713.
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