Riley: What Elorza Needs to Tell Us in 2018
Tuesday, January 09, 2018
Michael G. Riley, GoLocalProv MINDSETTER™
Since his election in 2014, Elorza has commissioned several studies dealing with Providence finances and its structural deficit. Each of the studies highlighted the issue of pension funding with strong suggestions as to the need of bargaining with public union employees for reduced costs to the city, as well as the need for increased contributions.
The PFM 5 year study, delivered in May of 2015, suggested the only solution for reducing the projected 5 year, $85 million structural deficit was immediate and hard negotiations with public employees over pension and health benefits. No such negotiations ever took place.
One year later in April of 2016, National Resource Network (a 2013 HUD incarnation) produced a 10-year study for Providence. It was a whopping 167 pages entitled “A Strategic Fiscal & Management Plan for the City of Providence: A Plan for Sustainability and Investment.”
The stated goal was for “The Network” and Providence, with input from five local stakeholder workgroups to develop a 10-year baseline financial projection for Providence and identify initiatives that the City can pursue to close projected deficits and invest in its future. Our readers can see all the happy talk in the study yet, cutting through the fog, the report properly cited some significant headwinds. The 10-year projected Structural deficit, (assuming Providence pension fund earns 8%, compounded 10 years), is $176 million.
The City’s projected fiscal gap is principally driven by four factors:
- The City’s unfunded pension and OPEB liabilities (between 2 and 2.5 billion)
- Growing health benefits costs (health care and other benefits)
- Revenue growth that cannot balance long-term expenditure growth and the past loss of State Aid
- Maintenance of high carrying costs (e.g. workforce levels, overtime)
The report highlighted needed cuts in expenses and possible increases in revenues that Elorza should consider but any real progress on the expense side appears impossible without a grand bargain with unions. No negotiation is taking place making this and the PFM report interesting but not real.
Elorza, the self-proclaimed accountant/auditor, continues to mislead voters with pipe dream solutions, like the sale of the Water Supply.
What Providence Can Do
For other less meaningful revenues, Providence can: increase its collection rate of levied taxes, fees, fines, and other charges – adopt new sources of revenue (many requiring State authorization) to ensure a fairer burden-to-benefit ratio.
Currently, some groups that benefit from city services are not paying their “fair share” – strike a grand (local) bargain to move toward shared goals and visions with anchor institutions (blight reduction, capital investment, workforce development, etc.) None of this is new but the report has nice tables and is very informative. It informs me that Providence is in deep, deep trouble.
In December of 2016, Elorza again promised to finally address fiscal instability and worsening pension funding. He said his hope is to strike a “grand bargain” with the city’s retirees, but said he still needs to craft a plan to begin those negotiations.
The truth is Elorza does not have a meaningful solution or plan to avoid bankruptcy, without a union negotiated “grand bargain” and the sale of the Water supply. To insist this is his plan and he will save Providence is a sick charade and disgusting. I had hoped by now the Revenue Director would step in at the Governor's request and place Providence into receivership. No such luck. Meanwhile, the Rhode Island Governor is hiding under her desk.
Raimondo Weighs In
Here’s what the Governor said about bankruptcy in October of 2016:
“Providence should not go bankrupt,” Raimondo said. “I’ve looked at the numbers. However, they can’t do anything. And there are some difficult decisions to be made. And the mayor and the City Council need to start making those decisions.”
“If we’re sitting here a few years from now and it looks the way it is now, I might have a different opinion,” Raimondo said. “I think we need some leadership and some action. And make some tough decisions.”
Well, Governor, here we are in 2018 and virtually nothing has been done to reduce the pension crisis. Her secret weapon, the highly capable Robert Hull is no longer there (now in Private Sector) pressuring Elorza to act.
Sensing the relief from Hull’s oversite and departure and Raimondo’s refusal to acknowledge the crisis, Elorza has even gone public laughing at the idea of bankruptcy. He mocks those who think Providence is on the verge. His latest tact is to pin Providence hopes on only one of the dozens of recommendations he commissioned. The sale of the Water Supply which he knows will never happen.
As a politician, the Governor and venture capital veteran has chosen to hide and as an accountant, Elorza has decided to kick the can again and lie to the public while praying no one notices his failure.
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.
Rhode Island General Election Voters Margin of Error: +/- 4.9% at 95% Confidence Level
Interviewing Period: October 9-11, 2017
Mode: Landline (61%) and Mobile (39%)
Telephone Directed by: John Della Volpe, SocialSphere, Inc.
Are you registered to vote at this address?
When it comes to voting, do you consider yourself to be affiliated with the Democratic Party, the Republican Party, Moderate, or Unaffiliated with a major party?
Next year, in November of 2018, there will be a statewide general election for Governor and many other state offices. How likely is it that you will vote in this election?
Will you definitely be voting, will you probably be voting, are you 50-50...
Definitely be voting: 78%
Probably be voting: 13%
In general, would you say things in Rhode Island are headed in the right direction or are they off on the wrong track?
Right track: 39%
Wrong track: 45%
Don't know/Refused: .6%
What would you say is the number one problem facing Rhode Island that you would like the Governor to address?
Jobs and economy: 21%
State budget: 9%
Corruption/Public integrity: .8%
Don’t know: .9%
Over the past three years or so, would you say the economy in Rhode Island has improved, gotten worse, or not changed at all?
Changed for the better: 35%
Changed for the worse: 16%
Not changed at all: 43%
Don't know/Refused: 5%
Over the same time, has your family's financial situation improved, gotten worse, or not changed at all?
Changed for the better: 26%
Changed for the worse: 19%
Not changed at all: 54%
Don't know/Refused: 1%
Recently, a proposal has been made to permit the issuance of $81 million in bonds by the State to build a new stadium for the Pawtucket Red Sox. If there was an election today on this issue, would you vote to approve or reject issuing $81 million in financing supported moral obligation bonds to build the stadium?
Net: Approve: 28%
Definitely approve: 15%
Probably approve: 14%
Net: Reject: 67%
Probably reject: 19%
Definitely reject: 48%
Don't know: 4%
Could you please tell me your age?
Don't know/refused: 1%
What was the last grade you completed in school?
High school grad: 16%
Technical/Vocational school: 1%
Some college: 23%
College grad: 34%
Graduate degree: 24%
Don't know/refused: 1%
The next question is about the total income of YOUR HOUSEHOLD for the PAST 12 MONTHS. Please include your income PLUS the income of all members living in your household (including cohabiting partners and armed forces members living at home).
$50,000 or less: 27%
More $50,000 but less than $75,000: 13%
More $75,000 but less than $100,000: 13%
More $100,000 but less than $150,000: 17%
$150,000 or more: 13%
Don't know/refused: 17%
What particular ethnic group or nationality - such as English, French, Italian, Irish, Latino, Jewish, African American, and so forth - do you consider yourself a part of or feel closest to?
Black or African American: 6%
Would you say that Donald Trump has done an excellent good, fair or poor job as President?
Never heard of: 0%
Cannot rate: 3%
Would you say that Jack Reed has done an excellent good, fair or poor job as a United States Senator?
Never heard of: 6%
Cannot rate: 6%
Would you say that Sheldon Whitehouse has done an excellent good, fair or poor job as a United States Senator?
Never heard of: 6%
Cannot rate: 7%
Would you say that David Cicilline has done an excellent good, fair or poor job as a Member of Congress?
Never heard of: 6%
Cannot rate: 8%
Would you say that James Langevin has done an excellent good, fair or poor job as a Member of Congress?
Never heard of: 13%
Cannot rate: 11%
Would you say that Gina Raimondo has done an excellent good, fair or poor job as Governor?
Never heard of: 1%
Cannot rate: 3%
Would you say that Daniel McKee has done an excellent good, fair or poor job as Lieutenant Governor?
Never heard of: 26%
Cannot rate: 25%
Would you say that Peter Kilmartin has done an excellent good, fair or poor job as Attorney General?
Never heard of: 13%
Cannot rate: 19%
Would you say that Seth Magaziner has done an excellent good, fair or poor job as General Treasurer?
Never heard of: 21%
Cannot rate: 21%
Would you say that Nellie Gorbea has done an excellent good, fair or poor job as Secretary of State?
Never heard of: 20%
Cannot rate: 23%
Would you say that Jorge Elorza has done an excellent good, fair or poor job as Mayor of Providence?
Never heard of: 9%
Cannot rate: 15%