Flanders talks bankruptcy for Warwick

Solomon says city not in crisis, receivership 'not in the glossary'

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As citizens in Warwick continue to mobilize in response to a perceived fiscal storm looming in the city – one rooted primarily in what some claim are irresponsible and unsustainable legacy costs – the Warwick Financial Crisis Committee invited former Rhode Island Supreme Court judge Robert Flanders to speak about potential solutions that could perhaps lead to calmer waters.

He had an answer, which he provided to more than 100 attendees this past Thursday evening at Warwick Public Library. But it was an answer, he said, that elected officials in Warwick likely do not want to hear – advocating for a full “reset” of the city’s financial situation through use of the Fiscal Stability Act.

“The good news is there are remedies to dealing with this. The problem is that it takes a while to convince political authorities that this is the way to go, because they view it as much too radical,” Flanders said. “They see it as admitting failure and, when that happens, their power gets kicked to the curb and some stranger comes in to do what has to be done to get the city and its finances in the right place. So, it’s a very difficult proposition for most mayors and city councils to accept.”

The Fiscal Stability Act, passed in 2010, gives power to the state to appoint receivers to guide municipalities through financial crises rather than the courts. It has three levels of intervention, the least severe of which is a “fiscal overseer” that comes in to work in a supervisory capacity in accordance with city officials. The next level is a budgetary commission, while the most severe measure is receivership, in which an outside individual comes in to restructure obligations and begin the bankruptcy process, if needed.

Flanders – who challenged U.S. Sen. Sheldon Whitehouse in the 2018 election – knows a thing or two about the Fiscal Stability Act, and the pros and cons of a struggling municipality declaring bankruptcy. He is the only person in the state who has ever taken a city through the full process of receivership, which occurred when he was brought in as the state-appointed receiver to bring Central Falls back from insolvency in 2011.

He recalled Central Falls being in a position where it was beginning to default on its fiscal obligations. At that point, the state – specifically the Department of Revenue, which is in charge of declaring an emergency bad enough to warrant a receiver and is therefore also in charge of allowing a municipality declare bankruptcy – had no choice but to intervene, he said.

What occurred over the next 13 months was an example, Flanders contends, of how receivership can provide a necessary catalyst for change that otherwise would never be realized – namely by forcing collective bargaining groups to the table to renegotiate contracts that, while they may contain great deals for the union members, have come at the expense of the city’s financial health.

In order to file for bankruptcy, municipalities must make good faith efforts to resolve their financial problems at the bargaining table, such as through concessions of provisions like automatic cost-of-living adjustments (COLAs) for pension recipients and lucrative healthcare benefits. However, if unions refuse to budge on such terms, the receiver then has the power to file for bankruptcy and begin the process of restructuring deals anyway, usurping all other authorities in order to get the finances back in order.

“The significance of that is immense. Entering bankruptcy, from the day the filing occurs, the receiver can void any and all contracts that have been entered into,” Flanders said. “There are no breach-of-contract arguments that can stand up in that situation, there’s no takings arguments, there’s no legal objections that can be leveled … The only job of a receiver and the bankruptcy court is to come up with a balanced budget that the city can afford.”

By the end of the process, Central Falls had a five-year “recovery plan” in place and was no longer insolvent. Flanders said the process did away with contractual language that had harmful consequences for the city in terms of excessive overtime and healthcare costs.

“They’re doing much better now,” he said, adding that Central Falls has claimed the title “The Comeback City” in the years since the process began.

To Flanders, while no municipality or municipal leader wants to admit to needing the help of a receiver or wants to entertain the bankruptcy process – and filing for bankruptcy would have implications for the city, such as a hit to their bond rating and lasting oversight from the state – refusing to acknowledge an apparent financial problem is much worse.

“My view has always been that the negative implications are greater from doing nothing,” he said. “If you have a problem, is it better to fix the problem and get on a better course for the future, or let it fester and grow worse? To me, all of the adverse impacts, the impact on property values, people leaving the city, these things are happening already. If we have a problem, let’s face it and fix it.”

A matter of political will?

There are certain “triggers” that put any Rhode Island city or town in the potential crosshairs for receivership, including failing to submit financial audits in a timely manner for two consecutive years, projecting a deficit for two consecutive years, being downgraded by a rating agency or being unable to secure credit for borrowing purposes. Achieving any two of those criteria opens up the municipality to the terms of the Fiscal Stability Act.

Ken Block, a Warwick businessman, former gubernatorial candidate and founder of Watchdog RI, also spoke at the meeting on Thursday and said that he felt Warwick had already hit at least two of those criteria.

The city has failed to submit its required annual fiscal audit by the Dec. 31 deadline (following the close of each fiscal year on July 1) for 11 consecutive years – and the most recent audit for FY18 still hasn’t been submitted, as the city recently got its fourth extension to submit the report by July 23. Solomon reiterated on Monday that the city has submitted all necessary documents to its auditing firm, BlumShapiro, but due to vacations, they haven’t been able to finalize the numbers yet.

But Block also contends the city has projected a structural deficit last year and in years going forward, and that the city likely faces a downgrade in its bond rating due to a provision that states a municipality must have more than 10 percent of its total budget in reserves otherwise it could face a downgrade.

It is not known exactly how much Warwick has in its cash reserves at this time, although Solomon said during his State of the City address in February that the number was around $13 million to $14 million, and the city recently allocated $2.4 million of that to balance the FY20 budget that passed in late May. He said on Monday that “squeezing the stone to draw water will show a more fruitful result, and I’ll let the numbers come in on their own.”

Regardless of all this information, Flanders made sure to emphasize that even if those conditions for eligibility under the Act are met, it is ultimately up to the Department of Revenue – whose director is a gubernatorial appointment – to begin the process.

“In the end, it’s a political decision on the part of the state to jump into these situations,” he said.

Flanders also contends that political decisions are often responsible for cities and towns getting into financial trouble in the first place.

“This isn’t Mayor Solomon’s fault,” he said. “It’s probably been going on for years with prior administrations. That’s what we were facing in Central Falls. They gave away benefits, they got contributions from the unions to run for office and everything was fine until the chickens started coming home to roost and everybody realized this was unsustainable and can’t go on.”

What should be looked at?

A reassessment of these types of agreements is exactly what attendees of the meeting on Thursday night are calling for. They specifically mention automatic COLAs within pensions and lucrative healthcare benefits – which include provisions like lifetime healthcare for city retirees with no co-pays and no requirement to switch to Medicare once hitting age 65, as well as comprehensive prescription medicine coverage – as some of the most glaring examples of things that must be re-examined.

“We cannot cover the expenses with a maximum tax increase every year, so something has to be done,” citizen advocate Rob Cote said. “When you look at this objectively, there really is no mathematical formula to come out of this. They cannot raise taxes enough, fund the schools, pave your roads and pick up your garbage and support our retirees. It’s impossible.”

Cote and Block brought up the five-year report commissioned by City Council President Steve Merolla last summer that showed Warwick was facing between $50 million and $130 million in deficits, depending on whether or not the city funded its other post-employment benefits (OPEB) liabilities. The report was never released, with city officials including Merolla and Solomon contending that the report was unreliable and not finalized, until the Boston Globe got hold of it.

Solomon said that “you can blow your nose” with the report, but Block contended on Thursday that these numbers are the only snapshot of the city’s financial health available to the public, since the city has failed to file its FY18 audit.

“The city has not published its financial position for more than a year,” Block said. “They are [the city] utterly flying blind. They don’t know how much money you all have. They can’t tell you, and that’s horrifying. Because while they cannot tell you how much money they have, they are approving next year’s budget, they are ratifying contracts … Every one of you sitting here tonight should be furious about that, because it is utterly reckless. It’s worse. I believe it’s fiscal malfeasance.”

Block, Cote and Flanders all said that the only way city officials would admit to there being a possible need for state intervention into finances is to establish a clear presence at city meetings and at budget hearings going forward. Even then, Flanders said it will require bravery on the part of city leadership to admit to a problem in the first place.

“The politicians are very good at hiding these numbers, and they’re very good at kicking the can down the road because they don’t want to face this for all the reasons I talked about,” he said. “They want to be out of office when all of this explodes.”

Solomon: City not in crisis

Responding to the tenor of the meeting, which featured attendance from those almost exclusively of the view that the city is hurtling toward a financial cliff, Solomon categorically denied that Warwick was in such peril during a phone interview on Monday.

“Warwick is not in that situation. There is no financial crisis blooming,” he said. “There have been difficult times and adjustments, and no finance department in place when I took over, which has resulted in delays [submitting fiscal audits].”

Solomon said the FY18 audit – which summarizes the city’s financial state from July 1, 2017, to June 30, 2018, and was due on Dec. 31, 2018 – is in the hands of the city’s auditing firm, BlumShapiro, but due to vacations within their staff, they haven’t been able to finalize the report by the city’s third deadline extension, which passed in June. They now have a final deadline extension of July 23.

“They assume that because of the delay, somebody is trying to hide something,” Solomon said of the audit. “But the truth will prevail, and those people will be proven wrong. The numbers are there.”

Solomon said that “the preliminary indication is the numbers are pretty good and that Warwick is on the right track, and it’s only going to get better next year.”

Solomon said he will continue to bargain in good faith with labor unions, and mentioned how the fire department is currently in arbitration with the city regarding its contract situation.

“We’ll continue to negotiate and as we go forward you will see changes,” he said. “Things cannot remain the way they’ve been because you want to be able to sustain.” He mentioned police and municipal workers being incorporated into the Tier 2 pension system as an example of a savings to taxpayers in the long run.

Solomon said that the people drumming up fear about the city’s financial condition were either seeking attention or were operating under false pretenses, such as the aforementioned five-year report, which included the assumption the city would draw $4 million from its free cash reserves. Solomon pointed out the city only drew $2.4 million.

He was firm in his stance against entertaining the thought of bankruptcy in Warwick’s future.

“Receivership is not in the glossary of terms as long as I’m mayor and I plan on being here for a while,” he continued. “I do not agree with any of that [talk about financial crisis]. I believe it’s inaccurate and ill advised. They’re running on rumors, emotions and not facts, and it’s unfair to shed a negative light on a great city such as Warwick.”

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Fiscally Responsible

Listening to Flanders talk was the most one sided piece of garbage I’ve ever seen. Who makes the most money in a receivership. FLANDERS. I’m glad smarter people don’t buy into this crap. The citizens won’t either. The Bobby, Bobby & Bobby circus won’t be around long.

Tuesday, July 2
justanidiot

da only thing is to raise taxes and to cut back on spending. easy peasy. the taxing payers mayer could even understnd this concept

Tuesday, July 2
PaulHuff

For once I agree with Mayor Soloman. Talks of receivership or even fiscal oversight is premature.

I'm also not surprised that Judge Flanders, who made a ton of money in C.F., would be ringing the bell for receivership. Does he need a new job since he lost the election? It seems disingenuous to me.

Tuesday, July 2
Reality bites

Flanders was fantastic - no punches thrown, just the facts, refreshing.

Thanks to the folks who put the meeting together. Citizens of Warwick you have the power to make change. Time to make some noise.

Tuesday, July 2
Jimmy

I have zero issue with finding financial solutions that work for everyone. I have a HUGE issue with intentionally drumming up fake talk about bankruptcy. The city is no where near that. And simply because a couple of Guys have a grudge against the city they want to steer it into receivership. Let’s see the audit first.

Tuesday, July 2
Patient Man

Why would Solomon be so positive about the cities finances? He hasn't seen the audit. I don't think Governor Raimondo's Department of Revenue will be in too much of a hurry to put any cities under a Fiscal Overseer during her tenure. She's paid for the FF's & teachers union loyalty this term. She's not going to put them in a situation where they don't support her run for the Senate (speculation sure is fun). If they're forced back to negotiate concessions they'll dump her like a hot rock.

Tuesday, July 2
Unilateral cuts

cut COLA's, eliminate lifetime healthcare, no more sick pay schemes, longevity removed, 90 sick days, close fire stations, merge departments, reduce teacher pay - reform sewer authority - all possible

WE WANT TO GO BANKRUPTED

WE WANT RECEIVERSHIP

GO GO GO -- HA HA HA

Tuesday, July 2
justanidiot

minimum wage fer all employees, keep maximum hours to the point where youse donts have to pay benefits, close more skuls, cut staff every office by halve, no more street lights, no more nuthin

Tuesday, July 2
Hepdog

Have to file bankruptcy or a flavor of. Without it, looking at max tax increases for at least a decade and all of that extra money going to retirees and current employees. Nothing for the road, sidewalks or much of anything else.

No way to run a city.

Tuesday, July 2
can't believe it

So let me understand this...Joe declares a state of emergency in February and now a few months later everything is fine. Does Joe think taxpayers memories are that short ?

The city is hemorrhaging cash. We can no longer afford free lifetime healthcare, Colas for pensions and prescription drug caps. Joe knows this.

Joe's campaign slogan was " we all know Joe" The problem is we don't know the NEW Joe. He is now following Scotty's playbook i.e. give the unions everything they want.

Warwick won't survive unless the old Joe returns.

Tuesday, July 2
Fed up

There is a distinct possibility that Joe is Bi-Polar. Here are his quotes:

https://www.providencejournal.com/news/20190227/warwick-mayor-sounds-warning-about-citys-finances

“In the many years leading up to my being sworn into offices as mayor,” Solomon said, “our community had been led to believe that we were sailing along on calm, tranquil waters.

“Instead, the reality is that we have headed straight into a fiscal storm, without proper warning, preparedness or safeguards.”

Warwick’s reserves were publicly estimated at between $22 million and $25 million but the “rainy day fund” has only $13 million to $14 million.

The city’s liability for post-retirement employee benefits, previously understood to be about $141 million, is $352 million.

The administration, he said, has discovered five unauthorized contracts for $766,000 in services from vendors during a period of 15 months in 2017 and 2018.

https://www.providencejournal.com/opinion/20190305/editorial-warwick-faces-huge-deficit

Last week, Mayor Joseph Solomon, a Democrat, revealed that the city faces a deficit of up to $18.6 million in the budget year slated to begin July 1 — a steep number for a city of 80,000-plus residents.

Mr. Solomon, after all, was the City Council president before he was mayor. As a member of the council for 18 years, he played a role in approving public employee union contracts and passing budgets. To cry ignorance now is a ridiculous attempt to evade responsibility.

It is obvious that the next several years are going to be painful ones for Warwick taxpayers. As they endure higher taxes, they should make sure that city politicians revisit unsustainable spending and shift their approach to serving the common interest.

http://warwickonline.com/stories/state-of-city-perilous-says-mayor-solomon,140549

During an unprecedented Warwick “State of the City” address last week, Mayor Joseph Solomon delved into fiscal details that outlined a highly troubling reality facing the city, which includes a looming structural deficit upwards of $18.6 million this coming budget season, unresolved contracts with the fire department and growing expenses in the school department – none of which have immediately apparent answers.

“At this moment, the city is ailing, with a poor prognosis for the immediate future,” said Solomon

So in February we were in a fiscal crisis, per his words, now everything is rosy and fine. Just like the used car lot quotes: " I did nothing wrong". The mayor of Warwick is a lying used car salesman, not withstanding the obvious fact that he is dumb as a rock.

Tuesday, July 2
Jimmy

Stacia,

NO ONE GETS LIFETIME HEALTHCARE. They all go into Medicare at 65.

Tuesday, July 2
can't believe it

Jimmy

Stop spewing your false facts. In this years' budget the city paid $10.5 million for retiree healthcare. The city pays the employees' medicare and also provides a supplemental Blue Cross policy.

Retired police and fire also get dental coverage.

Do you homework Jimmy for a change.

Tuesday, July 2
Flo5582

But let’s all buy a lawn sign from Mr.Hall... that’ll really show the city how fed up we are. Can’t help but think this is another self-serving move by the always, self-serving Mr.Hall. This, as the signs are of course, in his signature colors, and they allow him to put forward his facade of being all about the city. As he totes his child around so he can appear as a devoted parent and staunch advocate for quality education. Laughable. I smell a 4th losing campaign!!!

Tuesday, July 2
Jimmy

It’s not blue cross for life as the ejits would leadvyou to believe. MEDICARE starts at 65 with a suplimemt plan for some. There is zero chance of bankruptcy.

Tuesday, July 2
DannyHall82

Oh Flo! Unfortunately for you people are displaying signs and the next batch of 50 signs will be in all different colors! Thankfully you’re not that agile to run out of a vehicle and steal one lol

Tuesday, July 2
Flo5582

Sometimes the truth cuts like a knife, doesn’t it Mr.Hall?

Yes of course, you are already one step ahead in ordering colors different than YOUR OWN! Sure, I believe that. Continuing to believe your own nonsense, I see. That’s you, the always devoted citizen of Warwick. The amazing parent who drives their child around to deliver signs, as you feed your ego at the same time. It must make you feel so important..way to go Mr.Hall

Tuesday, July 2
DannyHall82

Cuts like a Knife was a fantastic song by Bryan Adams!

Tuesday, July 2
Flo5582

So true Mr.Hall, music trivia suits much better than city and school politics.... you’ve shown us this 3 times indeed

Tuesday, July 2
warwick10

Close enough, Jimmy!

City pensions, healthcare, COLA's -cut now!

Wednesday, July 3
FastFred Ward 4

You don't want to go down that way. let see what happens.

Wednesday, July 3
Honestinfo

Robbie Robbie Robbie,

Could you just prove that you have one ounce of credibility. Where is the FBI?

Where is all of financial fraud? Where is the bankruptcy? It’s all in your warped

little mind.

Wednesday, July 3
Bubbaburger

Go ahead and cut everyrhing. Employee turnover alone will cost more. Hiring & retention already an issue. You'll have security guard quality cops and closet arsonist firemen.

Btw what happened with Flanders BFF Gayle Corrigan? A year or so ago East Greenwich was supposedly bankrupt but now she's gone all is fine again. We know she didn't fix anything. Can anyone explain EG to everyone? Too many yelling fire in a theater?

Wednesday, July 3
DannyHall82

So True Stacia...but I did crack over 44% unlike yourself lol. I’m pretty sure you had a hard time making it into the 30s. Don’t worry, I’m not spending my energy campaigning anymore. I’m waiting for that day you decide to run again so I can finally show that video of you slicing campaign signs in half all over social media!!!!! You think it’s easy keeping that gem of a video private?

Wednesday, July 3
Flo5582

Sounds like you have lots of time on your hands....maybe dedicating some of that time to find a hobby would help

Wednesday, July 3
Hillsgrove Hal

Fed up, Solomon reminds me of the Police Squad movie where Frank Drebbin is standing in front of a huge explosion and telling everyone "Nothing to see here! Everything's fine!"

Solomon absolutely said in February that the city was on the brink of financial disaster and blamed it all on Avedisian, expecting everyone to forget that Solomon was on the council for 20 years.

And now, with an audit still not released, two years of major tax increases, and a looming school lawsuit, everything's just fine?!

What we're witnessing is on-the-job training for the mayor's office, just when we could use the experienced, knowledgeable mayor that Solomon claimed he would be.

Wednesday, July 3
Cat

I want to work for BlumShapiro. They have 6 month vacations!

Wednesday, July 3
Jimmy

Here a suggestion, WAIT FOR THE AUDIT. Too many idiots speaking before we know the truth.

Wednesday, July 3
justanidiot

speaks for yoursef jimmy i mays be an idiot but i am not stoopid

Wednesday, July 3
The Raven lives!

what happen to Creekee? Maybe never left? new alias? former mayor? Hal? Jimmy?

a mystery that might never get resolved!

Wednesday, July 3
Where is Crickee?

Crickee was the best commenter, great insightful and informative posts. I dont think CR is back under a new name because none of the posts have the same style or even depth of their posts. Former mayor? Not on your life. CR's post were way too good for that to be possible.

Saturday, July 6
Hillsgrove Hal

The Raven lives, I'm responding because you included me in your earlier comment.

I've only been commenting on this website since February, so I don't know who you're talking about.

I'd also suggest you avoid trying to identify people on this website. While it may be fun, it doesn't add anything to the debate.

We have a city in financial turmoil, a mayor who seems to care more about controlling the message than fixing the problems, and a city council who aren't doing anything that even resembles leadership.

Trying to figure out who's writing on a website isn't nearly as important as those issues, I'd suggest.

Monday, July 8
Ranting Roger

Any see that new ladder truck (well 25 years old) being towed down Greenwich Ave and a giant oil slick that followed it. King Solomon touted that as a steal. Doing more with less. Certainly are doing more work with less trucks. How much will a new engine cost? 40k? Asking for a friend.

Monday, July 8
Close a fire station

we don't need more equipment. close a station. 300 homes eliminated and schools around airport closed. It's time to restructure fire department resources around the city. $260K annually per fire fighter is too much.

Monday, July 8
Patient Man

I spoke with a neighbor at a party July 4th. She told me as soon as she's allowed to move out of state he's gone. she has custody of her son but can't move without her ex husbands sign off. I think she said 4 years. She's born & bred Rhode Islander but she's going to Charlotte. All of her family have already left. She's the last of her family in RI. Whether you're an Avidisian apologist, Joe Solomon supporter, taxpayer advocate, firefighter, DPW, cop, teacher, child advocate, taxpayer, Beacon publisher, elderly person living in assisted living who votes for politicians because they buy you a spaghetti dinner, we have to recognize we're doing something wrong. Rhode Island & Warwick are going in the wrong direction. If you don't realize that you're an idiot. No offense justanidiot

Monday, July 8
The Raven lives!

Creekie raven was a big time former mayor supporter. Most likely because they were either part of the administration or a close personnel friend.

Knew way too much insider information to be just a regular commentator. Probably retired with a huge pension. So why all of a sudden would he leave this page? Did he take his big fat city pension and leave the state?

I don't think so. I think he is still on the page commenting away whenever someone says something bad about the former mayor and trying to deflect all the give aways the former used to stay in power and destroy the city.

Tuesday, July 9
Hillsgrove Hal

The Raven lives, thanks for the explanation. As I have said repeatedly, I think Solomon and the council are as responsible as Avedisian is for the current financial mess. Right now it's their responsibility to address it, though, because they are all currently in office, and they are failing miserably at it so far.

I'll say this about your stories: They are... creative, to say the least.

Tuesday, July 9