Keep the water system, fix Providence pensions


The Providence Republican Party has come out against Mayor Jorge Elorza’s proposal to monetize the Providence water system.

The mayor’s plan is designed to protect the city’s pension and health plan for retirees, which is an estimated $2,000,000,000 in debt (or $12,000 for every man, woman and child in the city). The mayor’s plan is also designed to delay the city of Providence going into bankruptcy, until a new mayor is in office.

We have three reasons for opposing the mayor’s plan.

Water bills would double for everybody, in order to get back the $300,000,000 that the mayor hopes to get by monetizing the system. We recall that city residents’ sewer bills doubled some years ago, when the city sold the sewer system to the Narragansett Bay Commission.

Our water might become polluted. We worry that a private entity might try to sell some of the watershed property around the Scituate Reservoir, to private developers to build houses. The watershed land is what filters out pollutants, before they can reach our drinking water supply. Remember the disaster in Flint, Michigan, when a new water supply owner tried to save some money and ended up poisoning the water supply.

The mayor’s plan does nothing to resolve the overall financial problem with the pensions, and prevent the problem from reoccurring in the future.

We do agree with Mayor Elorza on one thing. If we do nothing about the unfunded pension and health plans, the city will definitely go bankrupt in the near future, and this would be a very bad thing for Providence residents. The mayor has demanded that opponents of his plan should offer an alternative. So we offer the following ideas to cut costs, instead of raising taxes and fees.

Some retirees are making so much money, that they would have to take a pay cut, if they came out of retirement to go back to their old job. One retiree is actually collecting a quarter of a million dollars, each and every year. This is due to excessive cost-of-living adjustments (greater than the rate of inflation) given to employees during the Cianci administration. No retiree should collect more money than current workers doing their old job, and their pensions should be reduced accordingly.

No retiree should be able to collect a pension before the age of 60. Now, some employees retire in their 40s, collect a pension immediately, and go to work in another job. When Gov. Raimondo reformed the state employees retirement system, she raised the minimum retirement age for all current and future employees. Providence needs to do the same.

The city should get out of the pension business entirely. New employees should receive an Individual Retirement Account (IRA), which they own themselves. The city of Cranston did something similar a few years ago. Under Mayor Allan Fung, 401(k) retirement plans began in 2010 for the Teamsters Union and in 2015 for the Laborers Union. We should follow Cranston’s example.

The mayor has previously rejected these suggestions. He has said any changes to the union contracts are off the table, due to a consent decree signed by his predecessor. And he has said that if the city goes bankrupt, an overseer might sell the water system anyway.

We have consulted with the top Rhode Island expert on municipal bankruptcies, Judge Robert Flanders, who managed the bankruptcy in Central Falls, and advised other towns on restructuring to avoid a bankruptcy. We learned the following: If the city were to go bankrupt, the absolute last thing that an overseer would do is to sell the city’s assets. The first thing he would do is to force the unions to renegotiate contracts. The threat of losing everything would be enough to force them to negotiate seriously. When Central Falls went bankrupt, retirees lost up to 60 percent of their pensions. If Providence were to go bankrupt, retirees would probably lose everything. (Changes in law, since the Central Falls bankruptcy, give first preference to bond holders, and retirees can only get what is left, if anything.). This serious threat would be enough to bring them to the table.

We call on Mayor Elorza to abandon his quest to monetize our water system, and to consider instead our serious suggestions on how to reduce the size of our pension debt.

David Talan and William Ricci are the co-chairs of the Providence Republican City Committee. They can be reached at DaveTalan@aol.comor ProvidenceRepublicans@gmail.com.


4 comments on this story | Please log in to comment by clicking here
Please log in or register to add your comment
Patient Man

The Mayor apparently listened. Recently one of Mayor Elorza's aides said that without selling the Water Supply the city would be in bankruptcy in a decade. Warwick & Providence need to employ a multi-prong strategy.

Engage with creditors to reduce debt. Something Avedisian refused to do.

Commit to hold property taxes flat for 5-10-15 years dependent on meeting revenue goals. If goals aren't met then add scheduled, slight rate increases. This allows residents & prospective home buyers predictability in their life choices. The current idea of a decade of max tax increases will continue to kill growth.

Cut spending. Departments may have to cut personnel. This is always the hardest part, but if we can't afford certain services we can't afford it.

Make disabled employees work in another department instead of taking a disability pension. Just because an individual can't work at the DPW, PD or FD doesn't mean they can't continue in other vital city departments. Let's return these people to a productive level of engagement. Instead of being paid a pension these people will strengthen the Building Department by retraining to act as building, electrical, plumbing inspectors & regulatory expertise to help Warwick development accelerate. Floaters can move between departments during peak demand times. The tax department knows what I'm talking about.

Thursday, April 4

The authors are forgetting that retirees have contract rights and there is no incentive to 'negotiate' any reductions. Bankruptcy may be the only way for Providence to move forward.

Please don't compare Providence with Warwick. Most of Warwicks pensions are fully funded. It is the healthcare that is underfunded. Warwick is no where near bankruptcy. Providence is perilously close. Warwick has started to do things to make the city avoid Providence's mess. If they can get the teachers and fire department under control, there is a good chance for fiscal health.

Thursday, April 4

Sorry,, I forgot to mention that the city cannot get out of the 'pension business' altogther. The authors are ignorant of the fact that the pensions are funded by contributions from CURRENT workers. Moving to a 401K type plan would immediately bankrupt the pension system.

Thursday, April 4
Patient Man


Providence can move to a 401k system once they go bankrupt. Bankruptcy is the reason retirees could be forced to negotiate. The CF's retiree's got lucky they didn't have to wait until bond holders got paid. Of course Mayor Elorza lost any leverage he had when his spokesperson said bankruptcy was 10 years out.

Friday, April 5