It's looking bleak for Providence
The lights are going out in Providence. With the city’s critical financial troubles front and center at the moment – receivership possibly looming by June – the fact that Bank of America has decided to abandon the city’s flagship skyscraper for more modern office space elsewhere downtown, which could mean that the building’s lights could go off next year, is a foreboding backdrop to the current situation. Providence is in serious straits and it’s not inconceivable that bankruptcy will result, despite all the painful measures that have and will be taken to try to avert such a thing from happening.
That’s because $22.5 million is a lot of money to gather in, and do so in a relatively short period of time, from sources that don’t want to part with it. These sources include tax-exempt universities and health care institutions and the city’s employee retirees. The $22.5 million deficit is what remains from the original $110 million operating deficit that Mayor Angel Taveras inherited.
Having raised property taxes, slashed salaries, closed schools, renegotiated labor contracts with current workers, and made an attempt at moving city retirees from Blue Cross to Medicare at age 65 – presently blocked by a superior court judge’s injunction – Providence doesn’t have too many places left to turn for relief. A possible option to institute another supplemental tax on Providence property owners is acknowledged as being one more tax too much. And an appeal to the state’s Supreme Court to hear the city’s case for moving its retirees to Medicare was rejected because it has not yet had a trial at the Superior Court level.
So the city is targeting its retirees’ COLA payments and trying to persuade its nine colleges and non-profit hospitals to step up to the plate to save the city. It will have better luck with the colleges (Johnson & Wales University has already agreed to triple its payments to the city over the next decade and hopeful talks are again under way with Brown), because RI Hospital, Women & Infants, Rogers Williams Hospital and St. Joseph Health Services are not doing very well financially in their own right and each has to provide uncompensated care that costs millions every year.
Providence is trying to organize a sit-down with as many of its retirees as it can, in the same fashion that Central Falls receiver Robert Flanders did in Central Falls, to negotiate a cutback if not temporary elimination of their COLA payments, which are totally unsustainable in their present compounded 5- to 6-percent annual installments. The city is also asking the General Assembly to provide enabling legislation to allow for a suspension of the payments, despite an obvious court challenge to follow, and Governor Chafee has pledged to push for such legislation. Former state employees and teachers no longer receive COLA payments as a result of pension reform and may not again for some time, and it’s not only Providence that needs such relief, for sister cities like Cranston and Warwick are also desperate for a legislative remedy. Providence, in fact, may do it on its own, through an extraordinary ordinance.
But it’s the retiree health care situation that could sink the city, despite tax-exempt institutions’ agreeing to provide more money to the city and even suspension of COLA payments. The court calendar could doom the city by forcing it to run out of time. And with legislators already being asked to provide $2.6 million to Central Falls retirees to keep them out of the poor house for the next five years, there may be no appetite to provide an even bigger – much bigger – amount in millions of dollars to rescue Providence.
That’s why we have the mayor using the dreaded word “bankrupt” and the phrase “facing a black hole” in describing the situation. And that’s also why he and the City Council have had discussions with Bob Flanders and with a lawyer from the Brown Rudnick law firm who specializes in bankruptcy and creditors’ rights to better understand the steps to receivership and possible eventual declaration.
If Providence is forced to declare bankruptcy, it will mark the second state capital to do so in the past six months. Let us hope Providence does not follow Harrisburg, Pa., down that path. A bankrupt capital city run by a receiver next year will look even bleaker with the lights off in the city’s tallest building.