For better or for worse?

Solomon, Merolla disagree on what FY18 audit means

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Mayor Joseph Solomon and City Council President Steve Merolla once again find themselves on opposite sides regarding the city’s financial picture.

Solomon sees the recently released FY18 audit as a vindication of prudent financial practices and a sign that the city is headed in a more positive direction. Merolla sees the audit as confirmation that, if things don’t change in regards to pension and healthcare costs, the city is headed for financial disaster.

“You're going to have input from all sides,” Solomon said on Wednesday morning. “As far as I'm concerned, my eye is on the ball, I'm going forward and dealing with what I was dealt. [The city] is operating successfully and I feel that it didn't happen by accident.”

“The facts are still the same,” countered Merolla later on Wednesday afternoon. “We are not paying our bills. It's on a credit card and it keeps getting worse and worse every year.”

The “bills” Merolla is specifically referring to is the ARC (annual required contribution) payments to keep the city on track with funding its other post-employment benefits (OPEB), a line that encompasses healthcare costs for retired city employees. As of the FY18 audit, the city faces a net long-term OPEB debt of $405.8 million.

The city paid $13.4 million to continue funding its four pension accounts in 2018 – which amounts to an overall long-term liability of over $435.5 million. The ARC for the OPEB liability recently jumped from $21 million to $34 million per year due to a federal change in how municipalities must report revenue and expenses within budgets. Unlike the pension accounts, the city is currently allocating not a single penny towards the OPEB liability.

“If we don't start having dialogue about it…it's going to blow up,” Merolla said.

The city’s unrestricted fund balance – also know as the free cash or surplus account – improved by $104,000 in FY18, bringing the city’s surplus to about $22.6 million. This was a surprise to many, considering that Solomon predicted a much different picture in February during a State of the City address in which he predicted the surplus could be more in the neighborhood of $13-15 million.

This happened due to revenue coming in $2.88 million higher than expected and expenses coming in $1.16 million lower than expected, which made drawing $4.3 million from the surplus – as was originally budgeted – not necessary.

Solomon attributed this not merely to good fortune but due to proactive steps taken by his administration, such as not filling many of the 88 vacant city positions that occurred during FY18.

“Things that you see didn't happen by accident. It could have been much worse,” he said. “I'm happy that things fell into place the way they fell into place. Because again, we're heading in a positive direction. It's not because we're in neutral gliding. We're taking active steps on behalf of the taxpayers in the community to achieve what we've achieved. But it didn't happen by accident and surely it wasn't by prediction.”

But Merolla – who mentioned that he was scheduling a meeting with the city council’s auditing team, Marcum LLP, to go over the results from the FY18 audit – sees it differently.

“The bottom line is if you don't have enough money [in the fund balance] to pay one year of our ARC, that's all the need to know about where we're at financially,” he said.

Solomon, too, agrees that the city’s unrestricted fund balance is not where it needs to be.

“We're still under-funded in the rainy-day fund. We're still under-funded,” he said. “We're already authorized to go out for $40 million in school bonds. If your bond rating was to deteriorate and you kept going to the well, so to speak, and drawing down, it would appear you're not in a healthy financial status.”

It is also important to note that the FY18 audit comprises information as of June 30, 2018, from a budget that was assembled in May and June of 2017. More updated information will come from the FY19 audit, which is due to the Auditor General by December 31, 2019.

The city still has yet to release a report conducted by the Rhode Island Public Expenditure Council (RIPEC), which Solomon initiated shortly after taking office in May of 2018. Merolla, noting that the city’s legislative body is not the one who is tasked with creating five-year fiscal outlooks, has nonetheless docketed an item on the Aug. 19 meeting of the City Council to discuss conducting an updated five-year forecast.

Comments

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Hillsgrove Hal

The city's surplus includes more than the "free cash" fund that Mayor Solomon likes to talk about, so it's highly misleading to say that, because the money didn't specifically come out of the rainy day fund, everything's OK.

The FY18 audit says the city's total reserves (not just the rainy day fund) went from $42.7 million in FY17 to $36.9 million in FY18, a difference of about $5.8 million.

And there's a note about a "fund balance drawdown" of $4.3 million, which includes $1.3 million set aside in FY17 and $3 million used as revenue for FY18.

So, the city used millions of dollars of reserve funds to balance the FY18 budget, despite what Solomon is trying to suggest.

And as far as "not filling many of the 88 vacant city positions that occurred during FY18," Solomon was mayor for 45 days of that fiscal year -- so he wants credit for, basically, doing nothing and/or following the decision that his predecessor made to leave those jobs empty.

Just more attempts to distract people.

Thursday, August 1
Ben Dover

For better or worse, what are we , getting married? I thought the taxpayers in this city and State were already married to the debt? After all this, how the hell are we better off? Here is an unscientific observation that flies in the face of what the queen of raimondi is telling us as well as Joe Solomon..."How can you have us believe things are better and there is 3.6% unemployment in this State with so many cars driving around between 9:00 to Noon every day? "

It flies in the face of economic logic with so many folks on the road during normal work hours...The can has once again been kicked down the road with no real solutions...You can't tax your way to prosperity. Good luck getting out of this jackpot.

Thursday, August 1
Louise

“The facts are still the same,” countered Merolla later on Wednesday afternoon. “We are not paying our bills. It's on a credit card and it keeps getting worse and worse every year.” Says Merolla. In the meantime Team Scotty continues to take victory laps like he “won”. Maybe he’ll run for Congress? Complete and total malfeasance as mayor didn’t stop Ciccilli now did it?

I only see the city going in a positive direction when the 24k gold free healthcare benefits get restructured. These benefits are unsustainable.

Thursday, August 1
Warwick_Resident1998

So Merolla has been on the council for as long as I can remember...and he wants to complain about contractual obligations? Pretty disingenuous.

Thursday, August 1
TPC

Merolla distancing himself for..... a mayoral run! Things that make you go hhhmmmm.

Thursday, August 1
Jimmy

I for one am not voting for any one currently in office. There are smart people in our community. 20 years plus this leadership is fully incompetent . Full of lies

Thursday, August 1
Jimmy

I for one am not voting for any one currently in office. There are smart people in our community. 20 years plus this leadership is fully incompetent . Full of lies

Thursday, August 1
wesofucked

the name says it all

Friday, August 2
disappointed

Has anyone else noticed how Joe has lost his stripes ? Joe's campaign slogan was "You all know Joe." The Joe we knew was fiscally conservative and not afraid to take on the unions. If Avedisian presented this audit, Joe would be screaming how bad the fiscal condition is in Warwick.

I have spoken to many others and they all feel the same...Joe is a big disappointment. Joe is repeating Avedisian's narrative i.e. everything is great. Hasn't Joe noticed we have a $1 billion in debt ?

Will the real Joe re-appear? Time is running out.

Friday, August 2
FastFred WARD 4

I,ll just keep my mouth close. Who going to pay the city back 25k for the ladder company we bought from Westerly. Well plus the 12k to get it loaded and ready . Now its dead. Great buy. 25yrs old sureeeeeeeeeeeeeeeee

Friday, August 2
wwkvoter

Lotta talk. What is the PLAN for the next ten years of paying INCREASING retirement costs? I want to hear less BS and a PLAN. And a PLAN that independent voices agree will likely work.

Saturday, August 3
Fed up

Another scum bag

https://turnto10.com/news/local/paramedic-charged-in-sexual-assaults-of-2-10-year-olds?fbclid=IwAR3i9FagOSVydU8pRvKj5DTLBdV0gey_0_UlBgmky_Cn1FgzPoRawnkCaR0

Saturday, August 10
Jimmy

Fed up, I agree 1 million % he’s a scumbag. What does that have to do with Warwick.

Monday, August 12