PROVIDENCE — After huddling behind closed doors for two hours with mayors, town administrators and other municipal officials, Gov. Lincoln Chafee declared that 2012 “should be the year of the cities and towns.
“We can not have East Providences and Woonsockets and Coventrys and other towns being read about across the country in the Wall Street Journal and New York Times and other national publications that are going to be a detriment to the economy of Rhode Island,” the governor said. “We've got to address it.”
Chafee asserted that just by bringing the mayors together for a discussion of problems and possible solutions, “I think that is significant unto itself.”
In what had been billed as a Municipal Executives Strategy Session (MESS), several local leaders said they discussed issues with Chafee such as state aid, mandates and local pension problems that seemed to fall on deaf ears in previous administrations. They praised Chafee for taking the step of bringing them all together to discuss local finances.
“This is a sea change,” Providence Mayor Angel Tavares told reporters, “you have a governor who is a former mayor who understands that you can’t have a healthy state when cities and towns are not healthy, when they are not doing well. You can’t have a healthy body when your major organs are failing.”
Johnston Mayor Joseph Polisena agreed, saying, “This is truly historic. This was the first time since I’ve been in politics that we have a governor who gets it. If we don’t do something now and this turns into a study commission, it’s going to be too late for the state. Something has to be done now.
“We’re all in trouble,” Polisena said, pointing to Chafee beside him and adding, “and this guy gets it. The predecessor here blamed us for everything. We have a governor here who is not pointing the finger of blame, he wants to fix the problem. That means a lot to all of us.”
Avoiding the slide toward bankruptcy, which Central Falls has already taken and East Providence is riding now, with other communities lining up close behind them waiting for their turn, was an important focus of the meeting, Cumberland Mayor Daniel McKee said.
“Bankruptcies can drive property values down by 50 percent,” McKee said. “Unless you shore up the municipalities – and what we have seen is failed policy that came from a previous administration in terms of severe cuts to communities that are driving the communities to bankruptcy which is going to severely decrease their real estate values and the people who live in our state can not absorb a 50 percent reduction in their real estate values.
“Is it sensible to drive communities into bankruptcy when your house value could be decreased by 50 percent? Bankruptcies are not good for local communities; we have to find a way to gain control of those management issues and that’s what the mayor of Providence is asking for.”
McKee and other municipal leaders also advocated accelerating the phase-in of the state school aid formula, in which communities slated to get additional funding will see it increase gradually over seven years; districts who lose money under the formula will see it decrease over 10 years. “We have 80 percent of the state of Rhode Island waiting patiently for a fully funded school aid formula that would take about $111 million to fund,” McKee said. “If you can stave off reduction of 50 percent of the property values in your community, $111 million is not a lot of money to protect billions of dollars in property values.”
Chafee said trying to come up with that additional $111 million “is a goal,” but he would not commit to making it part of his 2013 budget, due to be presented to the legislature later this month.
The governor acknowledged that the state is partly to blame for the fiscal situation the cities and towns find themselves in.
“To frame the situation,” Chafee said, “in the last number of years, the cuts that have been made in aid to cities and towns have just resulted in cities and towns raising property taxes or making decisions on their (annual required pension contributions) that have put them in trouble. That’s why there’s a crisis. Decisions have been made in this room and in this building have resulted in a crisis in our cities and towns. We have to reverse that.”
Woonsocket Mayor Leo Fontaine seconded that notion, saying, “the discussion today is really the first step in recognizing the fallacy that you can continue to cut funding from cities and towns and expect everything to turn out well.
Woonsocket is one of those examples that has lost in the last three years more than $10 million, in the last four or five years upwards of $14 million.
“We’re down to 40 percent in staffing levels” from the early 1990s, he said.
In the year just past, Fontaine said, “for the first time in years we managed a surplus on the municipal side, the school department still ends up with a $2.7 million deficit which drags us down as a whole.
“What we are asking for,” he said, “are the tools and abilities to make management decisions without the downside of a receivership or bankruptcy. Let us fix the problems without having to stick a stigma of receivership or bankruptcy on us. The minute you talk about the possibility of bankruptcy, you get a headline, “Woonsocket is heading for bankruptcy,” bond rating agencies are viewing this on a daily basis.”
As more communities are considered for bankruptcy and receivership, “it affects property values in all the surrounding communities and it is not good for the state.”
“We want tools,” Tavares said. “Having the ability to suspend COLAs gives us a great opportunity to really put our system on firm financial footing. When we say we want tools, I’m not asking for the General Assembly or the governor to do anything other than give us the tools to do it ourselves. This is the time to make sure that we make these decisions and if (the unions) want to challenge it, let’s let the courts decide it.
“We expect legal challenges, we will fight them, I believe we will prevail,” Tavares said.
The mayors said Chafee showed them a framework for reforming locally administered pension funds, called “non-MERS” because they are not a part of the state-run Municipal Employees Retirement System. Chafee said it is similar, but not identical, to the proposal he made as part of the statewide pension reform that became law last November. He said it includes a suspension of COLAs (Cost Of Living Adjustments) and a provision that cities and towns can not negotiate benefits better than those in MERS and other provisions.
Warwick Mayor Scott Avedesian noted that the governor insisted that if the communities are allowed to suspend the COLAs, they can not just add that money to their budgets and spend it elsewhere, it would have to be put back into the pension funds to decrease their unfunded liabilities.
Chafee defended holding the meeting behind closed doors, saying that when he was a U.S. Senator, the president or secretary of defense would meet with members of Congress without the media in the room.