WOONSOCKET – Mayor Leo T. Fontaine says the Budget Commission may cut off collective bargaining with the city’s labor unions by April 1 if they do not signal a willingness to provide concessions as part of the five-year solvency plan.
The timing is critical because state lawmakers are saying they will embrace another key component of the plan – supplemental taxes – only if the unions are committed to sharing the burden. Fontaine says the commission wants to make sure there is enough time to pull all the pieces of the plan together in unison because “nobody wants to be the first one on the chopping block.”
“There’s not a whole lot of time at all,” Fontaine said. “We are going to have to request and require an answer from the unions one way or another.”
Fontaine’s comments were made to members of the Northern Rhode Island Chamber of Commerce at City Hall Tuesday in a “state of the city” address. About 25 people attended, including state lawmakers, small business owners, health care administrators, members of Fontaine’s staff and chamber executives.
The city’s best hope of avoiding receivership is executing every component of the five-year plan perfectly, said Fontaine.
But if the city and its major employees unions can’t come to terms on contractual concessions, the city won't automatically lapse into receivership, the mayor said. Some of the cuts could be imposed upon the unions without their consent.
Fontaine said such a move would likely trigger litigation, but it would also buy time to implement other components of the five-year plan and keep the city solvent.
Fontaine is a member of the state appointed Budget Commission seated by State Revenue Director Rosemary Booth Gallogly last May to deal with the city’s financial crisis. The commission says the city is on track to finish the fiscal year more than $23 million in the hole, but that solvency could be restored to the city’s treasury if it adopts an aggressive, multi-faceted program of cuts in pensions, retiree benefits and personnel costs, coupled with hikes in taxes and trash fees, by 2017.
“It is truly a difficult proposition to think that every facet of the five-year plan is going to fall flawlessly into place,” Fontaine said. “And yes, that means the possibility of receivership.”
A news blackout has been in place on the details of talks with the unions, but Fontaine told spectators some city workers believe they’ll take a less painful financial hit if the city goes into receivership than they would under a negotiated settlement with the city. He said they are emboldened by the example of Central Falls, where cuts fell more heavily on retiree pensions than on active employees.
“In Central Falls, they got raises,” Fontaine said. “Some of them are saying, ‘You know what? That might not be so bad.’”
Fontaine heaped the blame for the city’s financial condition squarely at the feet of the General Assembly. Between 2007 and 2012, Fontaine said state lawmakers approved budgets that reduced aid to the city by roughly $55.4 million, or an average of $7.9 million a year.
“Remember that figure,” Fontaine said as he mapped out the erosion of city finances on a whiteboard with a black marker. The state’s new funding formula for education says it just about matches the amount of money the Woonsocket Education Department needs to do all the things the state says it must do to properly educate its roughly 6,000 schoolchildren.
“Even though they know we’re under-funded by this $8 million they refuse to implement the formula because they don’t want to take the money away from richer communities,” Fontaine asserted.
The city has desperately tried to cut and borrow its way out of the crisis, but it’s all but exhausted those avenues. Fontaine said virtually every member of his administration wears more than one hat; the fire and police departments are running a combined 29 members short; and the city’s bond rating has descended into junk territory. City Hall is “empty as a result of the cuts we’ve had to do,” the mayor said.
But Fontaine wasn’t all doom and gloom, and at one point he suggested that receivership would not necessarily be the calamitous turn of events for the city that many assume.
He said that the real estate bust has created some of the most favorable investment conditions in the city in years. During the last few weeks, he said, outside investors have proposed some of the most significant rehabilitation and new construction projects he’s fielded since he became mayor in 2009.
Fontaine did not elaborate on the recent investment inquiries, but he said the parties involved don’t seem to care that the city is on the brink of receivership – they’re just looking at the bottom line. Low interest rates, slack demand for construction labor and cheap real estate in the city are conspiring to create conditions favorable for a turnaround.
“In the next six to twelve months a unique doorway is going to open up for us,” Fontaine predicted. “I hate to say it but we really don’t have anywhere to go but up.”