City headed towards a fiscal cliff?

With over $680M in pension, healthcare liability, opinions differ on the implications

Posted 9/19/19

New actuarial reports analyzing the city of Warwick’s liabilities for active and retired employee healthcare and the city’s four pension plans have split officials and financial watchdogs into …

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City headed towards a fiscal cliff?

With over $680M in pension, healthcare liability, opinions differ on the implications


New actuarial reports analyzing the city of Warwick’s liabilities for active and retired employee healthcare and the city’s four pension plans have split officials and financial watchdogs into two specific camps regarding what these figures mean in regards to the financial health of the city, with one side warning of impending doom and the other insisting on a less drastic stance.

All told, according to the two reports, prepared by GRS Retirement Consulting and Danziger & Markhoff LLP, the city faces about $352 million in unfunded OPEB (other post-employment benefits, meaning healthcare for employees who are retired or who will retire) liability and $331 million in pension liability for the fiscal year than ended in June of 2018.

“I think it’s important that we all understand there is a fiscal cliff,” said City Council President Steve Merolla during the hearing for the report on Monday night. “We can ignore it and go over it, or try and fix it together. But if you don’t acknowledge there’s a cliff, you can’t address the problem. And the question is how soon do you get to the cliff?”

“It’s important to have these conversations. Knowing helps you keep these costs under control,” said Michael D’Amico, principal of D’Amico consulting who was brought in as an executive assistant/consultant to Mayor Joseph Solomon in July. “But it’s important not to be overly alarmist either.”

So, is Warwick barreling towards a fiscal cliff and flirting with receivership down the road, or are such claims merely misinterpreting the data and causing false alarm?

What the report means for OPEB

To simplify this complex topic as accurately as possible, we must first understand what an actuarial report seeks to determine and what that means in the scope of Warwick’s unique situation. First, let’s break down what the city’s total unfunded liability for OPEB is, and what that actually means.  

The important number outlined in the first sentence of this story – $352 million – is not to be interpreted as a bill that is due for the city to pay. It does not accrue interest like a large credit card bill would. Rather, as D’Amico explained, the figure is a cumulative, speculative figure that represents what the city would have to pay in order to satisfy the healthcare needs of every one of its 1,649 employees reflected in the report throughout the remainder of their lives. It is a number that spans 60 to 70 years’ worth of costs.

Obviously, it cannot be known for certain how much healthcare each of these employees will require, how long they will live or how much healthcare procedures will cost in year 2050 – so the report is inherently reliant on certain assumptions.

Most importantly, the report assumes that the trending cost of healthcare will decrease gradually over time from an average of 8 percent to an average of 5 percent year over year. Small deviations in this assumption create drastically different projections. For example, a one percent increase in that assumption turns the $352 million number into $406 million, while a 1 percent decrease in rates drops the projected net liability to $306 million.

While Merolla sees this assumption as problematic, stating on Wednesday that the school department recently experienced a 14 percent increase to health insurance and the municipal side has seen increases close to double digits in recent years, D’Amico sees it as a conservative estimate given the span of time encompassed by the report.

Another factor that generated disagreement between parties is the “discount rate” utilized within the calculation of the actuarial report. As D’Amico explained, federal standards that guide these reports mandate that municipalities assume a certain percentage of growth within funds set aside to build revenue towards paying down the overall healthcare liability, so that rating agencies and bond issuers can assess all municipalities on a level playing field based upon the same formula.

In this report’s case, it assumes Warwick is earning a 3 percent return on investment on funds set aside, which to Merolla and others, like council finance committee chairman Ed Ladouceur, is problematic for one very large reason – the city has set aside zero dollars to contribute towards its OPEB liability.

“When that 3 percent return doesn’t occur because I have no investments, what happens to my financial picture?” asked Ladouceur of Edward Echeverria, Senior Actuary at Danziger & Markhoff LLP, who presented the report for the city. “I don’t understand how that translates into an accurate financial picture.”

Merolla also argued that the true OPEB liability projection should reflect the fact that Warwick has no money set aside with which to earn a return. According to the report, if the discount rate were set at 0 percent, the unfunded liability would actually be about $90 million higher – totaling $442 million.

But D’Amico said this interpretation was problematic. In addition to being the means by which municipalities are evenly compared for bonding purposes, he said that the discount rate is an important factor that tries to conservatively assume the rate of inflation within the speculative formula.

He reasoned that a dollar in 2018 is not going to be worth the same value in 2070, just as a dollar in 1950 was worth significantly more than a dollar is worth today. By assuming a modest 3 percent “discount” to factor in prospective inflation, he argues that the number becomes more accurate since a majority of the assumed costs – and the city’s spending power with its dollars – must be factored and calculated decades down the line, during a time when today’s dollars will go farther than they do now.

Paying as you go versus setting up a fund

Another area of disagreement regarding the city’s liabilities stems from the notion of setting aside money each year – as is done for the city’s pension plans – for prospective retiree healthcare costs, versus paying one premium every year and “paying as you go,” which the city currently does.

Merolla and those who believe the OPEB liability number indicates much larger trouble looming for Warwick cite the actuarial opinion, as presented by Echeverria, that Warwick should be dedicating $34 million each year for the next 20 years to pay off this total liability, for healthcare alone. The city currently allocates zero dollars per year towards long-term OPEB costs.

Objectively, the city pays a huge bill for healthcare for its employees. According to data gathered by former councilman and school committee member Bob Cushman – who helped establish the camp warning that the city is headed for financial disaster – the city’s net expense for healthcare for its employees (active and retired) has risen from about $12 million in 2004 to a proposed $22.3 million in FY2020.

The healthcare expense for retirees specifically has more than doubled from $4.8 million in 2004 to over $10.4 million as proposed for FY2020. As Merolla pointed out on Wednesday during a phone interview, the city now has more retired workers collecting benefits than it has active employees – a lot more, in fact, with a disparity of 711 active workers and 938 retired workers as of June 30, 2018, according to the report.

But D’Amico said he finds himself in the minority being of the belief that putting aside a separate pool of money for healthcare expenses could actually be detrimental for a municipality.

“Me personally, if I can pay $10 million per year in pay as you go, why would I not do that? Why would I choose to put away $35 [million]? It won’t save you money in the long run,” he said. D’Amico argued that the long-term OPEB costs should be viewed similarly to a mortgage assessment, where the overall cost of something looks overwhelmingly large, but is manageable in monthly installments over a long period of time.

D’Amico said that calculating any expense over a period of 60 to 70 years will look daunting, giving the example of projecting how much it would cost to run a police department for 70 years. “If I did the math, it would be scary. But we’re not forced to calculate that,” he said.

And that is an important point to note. Prior to the last year or so, municipalities did not have to report their overall OPEB liability. But now, under the Governmental Accounting Standard Board “GASB #75” reporting mandated requirements, municipalities like Warwick are seeing – for the first time – the total breadth of their promised benefits to all city employees, past and present, for the length of their lives.

However, D’Amico contends, merely seeing this number does not indicate that such liabilities are new, or any more of a cause for concern as he has seen.

“The problem hasn’t changed in the last 40 years, we just know it now and have it written down,” he said, adding that if somebody was forced to extrapolate retiree healthcare costs 30 years ago, the looming overall liability number would have been similarly daunting.

Healthcare handcuffing the city?

But Cushman argues that increasing healthcare expenses, along with the required pension contributions that must be made each year to keep on track with those plans (which in FY19 is projected to cost $33.8 million, and climbs to $39.4 million by 2023) equates to the city – which has historically and recently been forced to lean on rainy day funds and scale back projected infrastructure work in order to be able to fund the cash-strapped school department – running out of track in regards to being able to functionally run, as the costs will eventually envelope all other needs.

It’s an opinion that Merolla shares.

“We all want new schools, we all want new equipment, we want our roads repaved. We want our fields and recreational facilities to be improved. But we can’t do it because of the debt that’s been accumulated,” he said. “No one seems to grasp the severity of it.”

Backing up this point of view, Cushman showed another chart – which outlined that, of $61,237,885 in new city spending between 2004 and 2020, 86 percent of the money went to active and retired employee benefits (with retired employee benefits accounting for more than half). The 14 percent remaining ($8.3 million) has gone to everything else that makes the city run.
“We just inch closer and closer to the cliff every single year,” Cushman said on Tuesday.

D’Amico argued that, from the point of pensions at least, the city is making its contributions each year and while the contributions must increase each year for the near future, once the city hits 2026 it should see these contributions peak and begin to go down as the overall liability falls.

But for Cushman and Merolla, this too is overly-reliant on assumptions – primarily that the city will be able to continue to contribute 2.75 percent increases in its contributions and that it will continue to earn 6.9 percent return on its investments when the historical return has actually been 6.6 since 1997.

“If we hit a recession, the whole plan this guy [Joe Newton, actuary from GRS who presented the pension report on Monday night] has laid out is nonsense,” Cushman said.

“That money goes up every year that we have to contribute. That money has to come from some place,” Merolla said on Monday in regards to pension contributions. “It’s great to say that if you stay on track, you’ll pay your retiree costs. It’s another thing to say where you’re going to get the money from. What are you going to cut to make ends meet?”

D’Amico didn’t try to diminish the importance of actuarial reports, but offered that they should be used as a negotiating tool for future collective bargaining agreements rather than something to be used as evidence of a looming financial disaster.

“I think it informs your future labor negotiations knowing what these liabilities are in the future, and that you have to be more mindful of making these promises to your future retirees now that we have a truer interpretation of what these numbers mean,” he said. “This is why it’s important to understand these numbers and not ignore them.”

In fact, throughout this complex issue, the need to restructure benefits packages through future contractual agreements seems to be one area of mutual agreement.

“You can’t solve this with revenue. It’s in the design of the plans,” Merolla said Monday. “At some point you’re going to reach a point where, if we can’t negotiate these changes, then somebody else will come in – another branch of government – and fix it for us.”


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Who should we believe? The Ivy League educated MBA or a 20 year city council member and hack lawyer. Tough dr idiom I guess.

Thursday, September 19, 2019


Thursday, September 19, 2019

I believe that if one group doesn't think this is "alarming" then I will get behind those that do because while it isn't a problem now, it is most certainly a problem for us as taxpayers in the future. We have to address it and change the structure. The longer we keep accepting that this is how things have always been done, the harder it will be to fix. I would like to look at other cities that have tackled the same problem and the solutions they came up with to address it. What worked? What didn't work? How do we think outside of the box?

Why is it always that people run on campaign promises that they will change this and that, only to get into office and continue to do the same old thing?

Thursday, September 19, 2019

How do rest of us get in on this pension gravy train?

Thursday, September 19, 2019

Kick the can as far as you can. Then file bankruptcy and fix it one fell swoop. Why bother with it now?

Thursday, September 19, 2019

While Cushman has done the city a service by raising the alarm, what we need is a plan and less alarm. He and Cote are causing municipal employees to grab retirement asap so they can get locked in at current benefits vs. hanging around while everyone talks of cutting benefits. They create a retirement panic.

Here's a plan. Have a smaller police department. Smaller fire department. (Fire will scream you can't do that but you can.) Have a smaller school department. Keep closing/consolidating schools and don't hire teachers as they retire.

Run the city bare bones. Make everyone do their jobs but cut out any fat. That's the way governments should be run.

Also, no more 75% pensions. If you have one, lucky you. But no more in the future.

Thursday, September 19, 2019

Where have you been for the last 20 years Mr president, like an ostrich your head was buried in the sand along with the Mayor.

Now that you want to run for Mayor its a problem, remember these are negotiated deals and can only be changed by dealing directly with retirees.

I would listen to the financial advice of the Ivy league consultant, not some moron like Cote or Cushman.

Thursday, September 19, 2019
double talk from a hired gun

“It’s important to have these conversations. Knowing helps you keep these costs under control,” said Michael D’Amico, principal of D’Amico consulting who was brought in as an executive assistant/consultant to Mayor Joseph Solomon in July.

So Mr. paid for hire gun, is this keeping costs under control?

"The healthcare expense for retirees specifically has more than doubled from $4.8 million in 2004 to over $10.4 million as proposed for FY2020".

"of $61,237,885 in new city spending between 2004 and 2020, 86 percent of the money went to active and retired employee benefits (with retired employee benefits accounting for more than half). The 14 percent remaining ($8.3 million) has gone to everything else that makes the city run".

Thursday, September 19, 2019
Warwick Taxpayer

It's time to put an end to the lifetime healthcare. Plain and simple.

Thursday, September 19, 2019


How do you make the fire dept smaller? I’d like to hear your plans. The call volume has gone up every year. It’s getting busier. The city solicitor didn’t even know how bare bones staffed the engines and ladder was until last month. You obviously have no idea the calls and needs of the city if you are demanding the dept be downsized. The fire department of yesterday is not the same as today. Haz-Mat, Technical rescue, Flammable Liquid task force, every Firefighter is a trained cardiac level EMT, dive team, etc.... Good luck downsizing.

Thursday, September 19, 2019
Ben Dover

No point in me rehashing what has been stated already...You either believe there is a problem or there is no problem...Somebody is right and someone is going to be radically wrong...My question for these high speed hired gun bean counters is simple...'Would you put a large part of your nest egg in long term Warwick or RI bonds?" Yand waes or no? Cautionary tale....I remember RISDIC and Studio 38 so call me a doubting Thomas....and suspicious.

Thursday, September 19, 2019

Can anyone imagine free healthcare for life? I imagine it's just like winning the lottery. That's why we don't hear boo from the unions. Nothing to see hear folks, quit yer bitchin and move along.

Thursday, September 19, 2019

EVERY employee goes into Medicare at 65. No one mentioned that.

Thursday, September 19, 2019
Taxed Enough

Warwickcitizen - "I would listen to the financial advice of the Ivy league consultant, not some moron like Cote or Cushman."

Funny how when Cote and Cushman hold a public meeting, the room is filled to capacity every time, and every form of media covers the meeting. The "Ivy League" consultant comes to a council meeting, and the room is empty. Wonder who people are really listening to?

BTW , at the 4:51:23 mark of the council meeting the "Ivy League" consultant states the healthcare plan is UNSUSTAINABLE.

Thursday, September 19, 2019

Hey Jimmy

The taxpayers pay for the city workers' Medicare and blue cross supplement. Police and fire also get dental coverage.

Time to rein in the ridiculous cost of the WFD. The taxpayers can't afford them any more.

Thursday, September 19, 2019

Not ALL city employees receive free healthcare for life. Anyone prior to 2000-2001 doesn't get this. Yes at 65 they go to Medicaid and the city pays a supplement.

If Cushman stayed long enough on the council would be relinquish his free healthcare? The answer is no and neither will Merolla, Ladocuer, Travis, Solomon and others former council members.

Start with them first then come to the employees !!!!!!!!

Thursday, September 19, 2019
Taxed Enough


You are so inept that you are not even aware that it was Cushman that put forth the ordinance to end lifetime healthcare for council members, and he never took healthcare from the city. This is yet another perfect example of how freaking dumb you city workers are. Skew the facts as much as you want to the dopes who believe your crap and still cant recite the alphabet. The people on the opposite end of the evolutionary scale know the truth.

Thursday, September 19, 2019

daydream is right - which one of these council members will officially put pension reform on the agenda? Answer: none. For those of you who disparage the people who brought this crisis to the public, shame on you. I don't see anyone going to the council meetings to see where your tax money is going. This is as much on the taxpayers as it is on the city. One could say the city doesn't make it easy by having having the meetings at 5pm. I agree. I also witness a lot of disorganization as if council members don't communicate at all with the departments heads until they get up to the podium. I get it, there's a lot of dead air during these meetings, they're long and very boring. But until everyone gets off their a** and starts participating, nothing will change. And why would it? After two decades of mismangement, Avedisian moved on to become the CEO of RIPTA and will line his pockets with another lucrative pension. Is he doing a good job? Who cares, this is Rhode Island... where cronyism and mediocracy thrive.

Thursday, September 19, 2019

Taxed Enough AKA STACIA. You aren’t a city resident anymore, please go back to mommy’s basement. RI Watch, lol you got thrown out of Warwick

Thursday, September 19, 2019

You beat me to it Dexter and thank you Stacia for continuing your foo!ish dribble.

The council gets paid and benefits Stacia always have always will for part time shitty work !!!!!!

Thursday, September 19, 2019

Let me get this straight....Solomon hires D'Amico from Providence (another political payoff) and he knows how to solve Warwick's fiscal mess. I so sick of Providence being held up as the paragon of fiscal stability. What a joke. D'Amico doesn't live in Warwick, hasn't heard Solomon over the years on the council berate Avedisian for his reckless union giveaways and yet he has all the answers.

Why doesn't D'Amico visit with senior to hear how their taxes went up 10 , 15 and 20% this year and explain to them how these ridiculous city worker benefits are manageable. D'Amico doesn't have a clue.

Solomon has completely changed since assuming the corner office. Joe use to be concerned about the debt of the city but now he is blinded by political ambition. Joe is now seen arm and arm with Vella-Wilkinson that joke of a city councilor.She was nothing but a union stooge. I often heard people are judged by the company the keep so Joe if the shoe fits wear it.

Thank you Councilman Merolla for being the adult in the room. You could have easily let this pending fiscal calamity fester but you took it upon yourself to say the solution to the problem can't wait. The taxpayers owe you a debt of gratitude.

Friday, September 20, 2019


Your not a taxpayer either. You sold your house and moved into moms basement or Charlestown right?

Friday, September 20, 2019
hard to believe

Daydreambeliever I need for you to confirm this statement. "Not ALL city employees receive free healthcare for life. Anyone prior to 2000-2001 doesn't get this".

Are you saying the bulk of the hundreds of millions of dollars in unfunded retiree healthcare occurred within the last 20 years?

If that is true, as more new employees get hired into the system under these same or marginally reduced benefits, what is the liability going to grow to in the next 5 to 10 more years? And more important how much larger will the minimum required annual payments grow to?

also I would like DiMico to use a better analogy then the mortgage payment where annual payments reduce the principal each year. That is not what is occurring in Warwick.

What would he say if after the home owner made thousands of dollars in payments each year, that the mortgage principal continued to increased each year by thousands of dollars?

That's the correct analogy to equate to what is happening in Warwick.

Under this scenario, that home owner is going to have to pay higher and higher annual mortgage payments while sinking deeper and deeper into debt. As he makes these payments, all other areas that need revenue, for example the leaky roof or the 20 year old car, or college funds for his kids, will not be funded since he wii have little to no disposal income left to meet these needs.

The homeowner at some point in the near future will be overwhelmed in spiraling debt payments (fiscal crisis) to a point he will have to declare bankruptcy and restructure the debt resulting in many creditors (retired and active employees taking a sever hair cut in future benefit payments) being paid pennies on the dollar.

Friday, September 20, 2019

Taxed enough, i think if my memory is correct, yourself Cushman and Cote all ran for office and lost, you have no credibility.

Again i ask where was the Current Council President and Mayor the last 20 years ??? These negotiated contracts were all approved by the council.

Friday, September 20, 2019


I guess I have to weigh in now that my name has been mentioned. To the uneducated displaced basement dweller who calls himself Malcontents in the above post. I , Cote did not run for office. This statement shows how incredibly un-informed you are and is just another of the thousands of examples of misinformation on postings on this web site, from people who lack basic educational skills such as mathematics, reading, writing, etc.. But then again, we can thank the Warwick School system for that one cant we?

For all of the other people with fake names on this rag, that don't attend council meetings, that don't have the skill set to extrapolate financial matters, just go to the city council link below and scroll to the 4:50:00 mark in the video and hear the truth from the horses mouth. That's the opposite end of where most of your banter comes from.

But everything is rosy in Warwick. King Solomon is our savior. Used car lying sack of crap salesman. Joe, both you and your son are a disgrace to the city. By the way Joe, why did you black out the windows of the mayor's car? Who are you keeping company with, and where are you going that you dont want to be seen? Just askin'.

Friday, September 20, 2019

“Me personally, if I can pay $10 million per year in pay as you go, why would I not do that? Why would I choose to put away $35 [million]? It won’t save you money in the long run,” he said. D’Amico argued that the long-term OPEB costs should be viewed similarly to a mortgage assessment, where the overall cost of something looks overwhelmingly large, but is manageable in monthly installments over a long period of time.

This head scratcher proves that Warwick is getting zero benefit from its so-called "financial adviser," Mr. D'Amico.

The failure to put aside money each year into an OPEB trust fund will assure that the daunting future OPEB costs will come down in one fell swoop, hitting the city with an "overwhelmingly large" obligation, to use his own phrase. How does one afford a down payment on a house purchase, the ability to retire, to cover the cost of a child's college education? Very simple: you start saving early on so that you have funds to draw on when the expenses come due. Mr. D"Amico seems to take a bury one's head in the sand, "what me worry" attitude to the whole issue. I pity the citizens of Warwick (especially their children and grandchildren, who will face the bills) if the city follows the quackish financial advice of Mr. D'Amico.

Friday, September 20, 2019

close all da skuls and give each student 15 grand a year to go to a private skul. day would gets a bester education and the city wood save money.

Friday, September 20, 2019

Why is it the Warwick squad, comparable to the congressional squad in intelligence levels, you know the "watch group members" we all know who they are of course, just move away. I believe one has already but still likes to complain. It's a life long conquest of heart ache. You will never beat a union, nor has the federal gov't been able to do so. Why? Unions were developed to protect the rights of employees against the likes of those who don't believe in fair labor. Skilled professionals protected and properly compensated.

With that said, just like the squad the biases are so obvious. Favortism of school employees versus municiple employees. The squad has no problem with a large school budget, no problem at all. In fact, would like to throw more money at it with declining results.

Yet the crucial departments of police and fire, which actually generate money by fines and rescue runs are critized. Those men and women are highly trained and educated and sacrafice their lives to serve others. The ptsd alone of witnessing death and destruction. The missed family times from working shift work. I would love to see the squad do those jobs for a week let alone 30 years+

What people don't realize is the services that they get in Warwick are outstanding compared to other towns that pay much higher taxes for far less services. Try living in a town where you are paying thousands a year in taxes and have no garbage or yard waste pick up, no fire dept or rescues only a volunteer service, a well and septic to deal with, no public events to enjoy, no senior center etc...

Now large cities have to have full time police and fire there is no way around it. But you want to get rid of garbage pick up and your yard waste luxury you'll have to hire a private garbage pick up usually at the cost of $500 a year for 1 barrel and no heavy pick up and no leaf pick up.

Don't want city water? Drill a well in your yard and deal with that cost! Sewer, well blame Save the Bay. They don't want your poo going into the bay, no way around it.

Why do council people get "free" health care but want to complain about retirees who have worked 20, 30 years?

Nothing wrong with pay as you go. It's called inflation and cost of living.

I don't hear any one complain about the cost of the libraries. Most people use the internet and everyone has a cell phone with the internet even the low income and retired folks. Nope it's just the constant attack on mainly the fire dept. and certain city workers. Not much gets said about the police which is interesting. Both protect just in different ways. So is this just another bias by the squad?

Why the difference in numbers from the squad and city hired outside opinions? Well probably because numbers don't lie but it all is how you compute those numbers. Stats can be manipulated simply by changing certain variables such as time frames for example.

I see around the city constant new businesses being built or taking over vacant spots. Look at the old bennys wildes corner another huge strip mall going in. Or, the new restaurant on airport rd, or the new health facilities. What's that squad? Oh revenue increases. But, those businesses need police and fire protection. Having stellar protection saves on insurance policies both residential and business alike.

Sunday, September 22, 2019
Scotty Redux

Joe is sounding more and more like Scotty everyday. Joe is now using Scotty terms eg. doom and gloom, Warwick's unfunded benefits are manageable etc. When will Joe use the term "haters" to describe anyone who questions him ?

I waiting for Joe to have his bosom buddy, Vella-Wikinson, attend a council meeting so she can call anyone who questions Warwick's fiscal condition as "hobbyist." She is such a disgrace.

I guess when we voted for Joe, we didn't know the real one.

Sunday, September 22, 2019

This entire article is based on a report of the fiscal year that ended 15 months ago. The most recent fiscal year ended 3 months ago. I would like to see a narrative based on current information, not ancient history.

Monday, September 23, 2019

Late information constitutes a form of disinformation. Some may wonder what the city is doing with now 3-month old financial information. Apparently not ready for public release.

Monday, September 23, 2019