WOONSOCKET — A supplemental tax bill would be an unwelcome burden and a hardship to many city residents, but bankruptcy would certainly be worse.
That appears to have been the consensus among members of the City Council, who debated their options during a three-hour meeting last night.
For procedural reasons, they didn’t actually consider a supplemental tax proposal crafted by Finance Director Thomas M. Bruce, but they aired the pros and cons of supplemental taxes versus bankruptcy in anticipation of another public hearing on Monday at Woonsocket High School before taking up the measure on April 2.
Councilors spent much of the evening peppering State Revenue Director Rosemary Booth Gallogly with questions about what would happen to the city if it were to go broke.
It was the second time she and her boss, Gov. Lincoln Chafee, had attended a council meeting in recent weeks to address the subject of the city’s fiscal crisis.
“We find ourselves in now what appears to be an untenable situation,” Gallogly said at one point. “We can’t get out of this tax mess without there being shared sacrifice. Unfortunately, there are no easy answers.”
It was a standing room only crowd in Harris Hall last night, with perhaps 125 older residents, city employees and teachers in attendance. But for the most part, it was all council all the time, as members took turns voicing their views not just on the issue of insolvency, but on the causes and cures of the city’s financial woes. No comments were allowed from spectators, but some managed to get their two cents in anyway by steadfastly holding up hand-printed signs as members of the council spoke.
“No more taxes. Spend less, like the rest of us,” one said. “No more taxes, we’re mad as hell,” said another. Some passed out bumper stickers with the slogan, “It’s the spending, stupid.”
As explained by Bruce, the finance director, the city’s immediate dilemma is less about a $10 million deficit in the School Department, but more a looming cash crunch that could choke the city into insolvency by the first week of April. Gallogly said the state stands ready to help the city ease through that period by fast-tracking some $4 million in state school construction aid to the city on March 30, about four weeks earlier than normal.
Winning a round of applause, Chafee urged spectators to call legislators and ask them to support his proposals for financial reforms for distressed communities like Woonsocket, as well as an increase in the meals tax to finance new aid for schools.
But Bruce said the city needs to step in with a supplemental tax bill that would, in effect, make the net one-year increase in taxes 17.16 percent, including some 13 percent from a so-called fifth-quarter, supplemental bill. Though the final figures could be tweaked a bit, the supplemental rates for homes could be $3.13 per thousand, motor vehicles, $5.81. The measure is expected to raise at least $4.3 million in new revenue, but the city needs cash so fast it can’t wait for the tax revenue to come in; the city must borrow a similar amount from a bank immediately in anticipation of collecting the taxes.
The School Department currently has a ledger of unpaid vendor bills of roughly $5 million, and it’s growing, said Bruce. Some of those vendors are so strapped for cash owed to them by the city that they’ve laid off workers, he said.
“They need to get paid,” he said. “They are at risk of shutting down services to the school department.”
In a comment typical of those that came from the City Council, Councilman Robert Moreau said constituents have besieged him with pleas not to raise his taxes.
“I can’t afford another dime,” they say, according to Moreau. “Why can’t we just go bankrupt?”
But Moreau said that going bankrupt doesn’t mean taxpayers won’t see a supplemental tax bill. More likely, he said, they’ll see that and worse, only it won’t be the City Council doing it. It will be someone else – a court-appointed receiver, whose only concern is the bottom line.
“Somebody else is going to come in and possibly make it a whole lot worse,” he said.
Gallogly said the scenario might go something like this: In bankruptcy, a court-appointed receiver would have power that supersedes that of all sitting officials. That individual would have the authority to unilaterally levy new taxes, cut pensions, break existing contracts and impose any other cost-reduction measures deemed to be part of a reasonable debt elimination plan by a bankruptcy judge.
In Central Falls, the only other city to go into bankruptcy under a new law, some pensions were cut practically in half. City residents also faced a supplemental tax bill and significant public service cuts.
“It was not a pleasant experience,” she said. “But when the state intervenes it will do whatever is necessary to get the fiscal house in order.”
Mayor Fontaine says he couldn’t imagine what Woonsocket would be like if it were forced to close the Harris Library, the Museum of Work and Culture, or the Senior Center. Those things are important to city residents and elected officials, but a receiver might see them with a cooler, mathematical eye, he said.
“They may look at it as a matter of balancing the books,” he said.