May 27, 2012
Special Meeting of the Woonsocket City Council
Once you start covering one of these civic stories, you have to seem them through, so here am I at tonight's special Sunday night meeting of the Woonsocket City Council, to discuss the aftermath of the General Assembly's tabling of the supplemental tax bill...
[7:02] Meeting called to order.
[7:03] Budget commission resolution is up first.
[7:04] Mayor Fontaine speaks 1st. Recounting the short-term cash-flow problems of the school dept. They should be able to get through one more pay period, with regularly scheduled state aid. After that, the well runs dry.
[7:06] $4.6M debt service payment is due on the city-side of the budget, in early July. General Assembly inaction endangers meeting that.
[7:07] Budget commission powers would enable an acceleration of state aid, that would reduce the short term fiscal stress on the city.
[7:08] Says Rep. Baldell-Hunt's assertion that a budget commission would be appointed under any circumstance is false.
[7:09] Assertion that false information was given to House and Senate leaders is also false. Mayor Fontaine was taken aback that such a comment was made.
[7:10] No state reps in attendance, by the way, as far I can tell.
[7:10] If the council passes the resolution, his office will support it.
[7:11] Councilman Moreau asks the city solicitor if he and councilman DuBois, as former employees, can vote on this resolution.
[7:12] City solicitor says since no specific benefit is specified, there's no conflict of interest to worry about.
[7:16] Councilman Jalette wants to be made Council President, so he can have the seat on the budget commission, if a budget a commission is appointed.
[7:18] Councilman Gendron says we're here tonight because of inappropriate actions by our General Assembly. Seven people who live in a city, overseeing a Mayor living in the city should be making these decisions. Not one of them was doing anything different then what they thought was best for this city. That security isn't there, if a budget commission is appointed.
[7:22] Councilman Beauchamp cites lack of communication as a problem, thinks at least 2 members of the Woonsocket GA delegation didn't really know what was going on.
[7:23] Councilman Moreau agrees with sentiments of Councilmen Gendron and Beauchamp. The City has an obligation to pay its debts to the people who are owed money.
[7:25] Councilman Brien is in total opposition to "any state interference". Says Woonsocket has significant shortages in cash flow, because the school department has been underfunded by $7M.
[7:27] Woonsocket should have known it was facing a fiscal tsunami at least a year ago. The cancer that has been affecting the city's fiscal well being is the police and fire pension fund. Suggests making something a Federal tax issue, to make it potentially sustainable.
[7:29] "We have repeatedly asked to negotiate with our unions" wrt the health plan. Nothing has happened. Cites fire overtime issue.
[7:30] Doesn't see a viable, ongoing plan. This supplemental is insufficient to fund current receivables. "There is no concrete plan other than a hope" other than Governor Chafee's municipal plan.
[7:32] Councilman Brien motions to amend the request for a budget commission, to a request for a receiver
[7:37] Councilman Jalette, I believe, is arguing that this amendment will prevent any supplemental tax, or any tax increase at all.
[7:39] Councilman Gendron asks if the emergency receiver provision of the fiscal stabilization really applies here.
[7:40] Amendment defeated on a voice vote.
[7:43] Council President Ward, back on the original subject. Without the supplemental tax, Woonsocket's ability to meet its short term needs go away. Budget commission powers to accelerate state funding mimic those of having tax anticipation notes. After that, options are things like not making payroll. "I don't think we should be breaking faith with our employees".
[7:45] This resolution is here, so we can get a budget commission to move cash more quickly.
[7:46] Resolution asking for a receiver doesn't obligate the state to do anything. State can declare an emergency at any time, if the state doesn't think there's not an emergency now, passing a resolution doesn't change that.
[7:47] If Woonsocket's GA delegation thinks there's a fiscal emergency justifying a receiver, they think Woonsocket's situation is more dire than the state's Director of revenue does.
[7:48] He will not step down a Council President to avoid the budget commission.
[7:49] He holds the state responsible for much of Woonsocket's fiscal situation.
[7:50] As City Council President, he will continue to look for ways to cut costs.
[7:51] On a budget commission, he would consult with the sitting City Council on all decisions.
[7:52] Part of the duty of a budget commission is to evaluate if a receiver is necessary. BC can do that by a simple majority vote, implication is that the BC is the proper route to receivership.
[7:53] Councilman Brien thinks that neither a budget commission request nor a receiver request is binding on the state.
[7:54] Councilman Brien suggests that the state should ignore the request for a BC, and advance Woonsocket the money to handle its cash flow problem. "We are more qualified" than the state is, to deal with its own problems.
[7:57] Councilman DuBois will support a budget commission.
[7:58] Councilman Jalette thinks that a receiver has an ability to negotiate with unions, that a budget commission or the regular government doesn't.
[7:59] Councilman Gendron says recent tax increases have been fueled by cuts from the state. Now putting the state in charge, after that, doesn't really make sense.
[8:00] Mayor Fontaine rebuts Councilman that receiver has no more power to negotiate than anyone else, save for the power to file for bankruptcy.
[8:02] Addressing Councilman Brien about school dept. funding: The agreed upon school budget had appropriate funding to meet its need, according to a doucmented performance audit.
[8:06] Advances the argument that the loss of state aid necessitates replacement, and "it's a little ironic" that it's the state that controls Woonsocket's future.
[8:07] If the state delegation really wanted to help Woonsocket, they should have accelerated the funding formula.
[8:08] The new funding formula also touched on pension funding issues, that have worked to Woonsocket's detriment.
[8:09] Once Woonsocket was an engine for the economy. When manufacturing was driven out of state and out of the country, Woonsocket's affordable housing became a magnet for people with large human services needs. That's an imbalance that needs to be corrected.
[8:10] Vote on the resolution calling for a the appointment of a budget commission.
[8:11] Resolution approved 5-2, Brien and Jalette against.
[8:13] Motion to adjourn. Accepted.
The background is this: Woonsocket's been trending downwards in just about every relevant metric for a while. That may be a result of taxation and other policies in the past, but as far as the city itself is concerned, it's kind of immaterial, at this point.
The question, therefore, is this: What mechanism best adjusts the city's structure to its new reality. The word "best" is the rub. I happen to think that learning from mistakes is critical, so the city ought to work through its problems, and I also believe the state-oversight route to be fraught with problems beyond the city's borders.
But that's the question, as it stands.
Posted by: Justin Katz at May 27, 2012 7:54 PMJustin,
You have hit the nail on the head: What mechanism best adjusts the city's structure to its new reality.
Given that this is not a new crisis ...the last one was "solved" with a Deficit Reduction Bond along with unkept promises of structural changes ...it is safe to assume that the current elected officials are unable or unwilling to do the things that are necessary to provide for affordable and sustainable "services".
Also, since the State has been involved and providing "oversight" and "guidance" for several years going back to before the Deficit Reduction Bond, it is clear that they are clue-less and of no value. Gee Rosemary, looks like you missed that Budget shortfall by about $10 million. Great job, great oversight. Keep up the good work.
A Budget Commission will be nothing more than a continuation of the status quo in as much as it will include the Mayor and Council President, with 3 others will little more power than the current Council has.
That leaves us with the only obvious choice being Receivership. After all, when one is out of cash and cannot pay their obligations when they come due, one is insolvent. And when one is insolvent, one goes into receivership. Painful and difficult, but necessary.
The sooner Woonsocket accepts their grim realities, the sooner they will begin to recover. They played the kick-the-can-down-the-road game as far as they can. It is now game over. They lost. And for that, they get a Receiver.
Posted by: Leo at May 27, 2012 10:15 PMThat wasn't really where I was going with that... Using receivership to fix the cascade of RI city/town problems is just a way to hit "undo" a few times and continue operation in essentially framework.
Posted by: Justin Katz at May 27, 2012 11:23 PMLove the live-blogging.
"Councilman Jalette wants to be made Council President, so he can have the seat on the budget commission, if a budget a commission is appointed."
How is the president of the council chosen in Woonsocket? Is it the highest vote-getter or by election (of the council)?
Justin,
Where were you going with your question: What mechanism best adjusts the city's structure to its new reality?
Receivership indeed hits the "undo" button ...it will undo the unaffordable promises that have been made, which in turn are breaking the backs of the municipalities and their taxpayers.
Receivership is the only, or should I say the most efficient, "mechanism" to adjust a city's structure to its new reality? And that reality is that it is out of money.
As Council President Ward repeatedly stated, their request for a Budget Commission is because they are out of cash. They want a BC in order to request an advance of state-aid, they won't be able to meet payroll because they are out of cash, they are out of cash, they are out of cash ...in other words, they are insolvent.
Time to bring in a Receiver to do what receivers do, which is to deal with and restructure insolvent entities. It is not complicated.
Posted by: Leo at May 28, 2012 9:07 AMMonique -
Under the Woonsocket Charter, the Council President is elected by the Council, generally at its first meeting in Dec. after the Nov. election.
I believe that in Woonsocket the post usually goes to the highest vote-getter, although in 2011 that was newly-elected Councillor Robert Moreau, who did not seek the position at that time.
Posted by: brassband at May 28, 2012 12:53 PM"Mayor Fontaine rebuts Councilman that receiver has no more power to negotiate than anyone else, save for the power to file for bankruptcy."
LOL. That's like saying an armed robber has no control over the victim-save for the ability to blow his brains out.
End the charade. Cut the pensions. Cut the health care. Bring on the dictator.
The time to "talk to the unions" has LONG since passed for RI's thoroughly broken and bankrupt cities.
Amen, Tommy Cranston!
Couldn't have said it better.
Posted by: Leo at May 28, 2012 2:46 PM"Unaffordable deals" aren't bolts of lightning; they're RI's main method of operation. It's not like a family that bought a property it couldn't afford and needs out; it's a family that budgets from abstract ideas about what it "needs" and spends the money from there, rather than beginning with what it can afford.
Receivership will pay off a bill or two (in the analogy), but the practices will remain.
And anybody who thinks the Central Falls experiment can be repeated is fooling himself. Already, they're striving to offload the major Central Falls cuts on the state retirement system. As it becomes clear what's happening, just watch as the powers who be find new ways to make sure that the bad deals get passed along to a more diffuse group (i.e., state taxpayers).
If you're willing to give up self-government in this emergency, just watch as self-government itself becomes the exception... mainly for the wealthy. And watch as that which is under the purview of the "dictator" expands, as well.
It's not time for an "undo." It's time for an apathetic public to prove that it deserves democracy.
Posted by: Justin Katz at May 28, 2012 3:26 PMWhy are people talking about Woonsocket like it is Central Falls? The municipal side had a surplus. This is 100% the education department. So why are people talking about things like cutting the pensions and cutting health benefits? All those things would have been fine and Woonsocket wouldn't be in this if the school department had simply stuck to its budget.
Posted by: Patrick at May 28, 2012 3:35 PMJustin,
No offense, but it was Democracy that got Central Falls into the mess they are in. Mayor Board-up Moreau and his incompetent Council were all duly elected via a democratic election.
Same as Woonsocket ...Mayor Fontaine, Council President Ward and the rest of their Council were all duly elected in democratic elections.
Unfortunately, they are wholly incompetent. They don't understand that when you run out of money, you are insolvent. And when you are insolvent, you go into receivership. And when you go into receivership, everyone takes a hair-cut, not just the Taxpayers, as is the normal course of action.
Will the sins of the past repeat? Perhaps.
But that is no reason not to hit the "reset" button via receivership so as to give them at least a fighting chance of rising from the ash heap.
Without receivership, without restructuring and a reset, there ain't no way that the Anchor will be Rising again.
Posted by: Leo at May 28, 2012 6:08 PMPatrick,
You are wrong. The municipal side is running a deficit too. Did you watch the hearings at House Finance?
But even if you were correct, what difference does it make? The city, which includes the school dept, is insolvent.
In Central Falls, it "was just" the municipal side, as the state controlled the school. But a receiver was still necessary.
The answer does not change ...the taxpayers are still on the hook. With a receiver, the hook is smaller.
Posted by: Leo at May 28, 2012 8:00 PMThe idea that running out of money places you into some kind of magical state called "receivership" 1) is not true and 2) was actually the attitude of the Central Falls city council, during version 1.0 of their receivership. Turns out declaring receviership didn't automatically solve any problems, and the state came up with version 2.0.
Version 2.0 of the CF receivership involved a big, front loaded tax-increase, and then a plan for annual 4% tax-increases for five years after that, adding up to a 30%-to-35% tax increase in total, at least. Plus as Justin mentioned above, there seems to be some assumptions of additional state aid coming in. The idea that suspending democracy has anything to do with figuring out how much spending will fit under a tax-increase plan is a non-sequitur. An elected council could take a city or town to bankruptcy court, under an appropriate law, just as easily as a receiver could.
But I will make note that "hitting a reset button" is becoming the new euphemism for figuring how much spending a big tax increase plan by unaccountable officials can accomodate. There's lots of progressives that might ultimately buy into that.
Patrick,
Actually, Woonsocket is an excellent example of how not-OK Rhode Island municipalities are.
In 2003, the city borrowed $90,000,000 to make its pension system fully funded. Even before the crash, in 2007, it had only grown to $94,137,191. That's less than 5% over FIVE years, when the actuarial assumptions required 8.25% compounding EACH year. Not surprisingly, since then, things have gotten worse. As of July 1, 2011, the plan stood at $61,980,287, which is a 34% decrease over four years.
Put differently, in less than 10 years, the pension has gone from 100% funded to less than 60% funded. (At least they had the wherewithal to adjust their assumption last July... but only to 7.5%. As I understand it, the agreement with the pension bond was that the city had to cover any investment losses, and it has not done so. (Put differently, it has no surplus but is essentially borrowing from its pension fund by not paying into it, which borrowed from a bond in the first place.)
Meanwhile, the city is losing residents and employment fast, and its median household income has FALLEN since 2000.
The pension bond was a "reset" just like receivership is. What's needed is for people to begin electing local officials with the political will to set things right and keep them there. Otherwise, every step, even one as dramatic as receivership, is like a temporary, one-time fix.
Posted by: Justin Katz at May 28, 2012 10:32 PMOh, and the city's other post-employment benefit (OPEB) liability may be in even worse condition.
Posted by: Justin Katz at May 28, 2012 10:33 PM(Thank you, Brassband.)
"Oh, and the city's other post-employment benefit (OPEB) liability may be in even worse condition."
And they're not the only municipality in that condition.
But as the ProJo reports today, the G.A. is not sure they want to allow even the worst cases to suspend their pension COLA's. Apparently, the G.A. is convinced that there's a money tree someplace that will take care of all of this.
"Legislative leaders are hinting that pieces of Chafee's "municipal reform and relief" package will emerge, but they've been mum about the more controversial measures, such as a bill would let cities and towns suspend cost-of-living increases to retirees."
news.providencejournal.com/breaking-news/2012/05/governor-awaits.html
Well said, Justin. It is simplistic to think a receiver will come in and fix everything, especially given the union power and money in the RI court and GA. Central Falls serves as a good example--they had a receiver who instituted many changes--changes that the people and pandering leadership of CF are trying to undo!
These issues require leaders with both drive and long-term vision; leaders who can convince the majority of the necessity for accountability, responsibility, sacrifice and fiscal restraint. But after 40 years of the opposite, it'll take time....