Is it Time for the State to Cut Funding to Woonsocket?
A couple of loud fiscal alarm bells sounded in Woonsocket over the last ten days as we were all glued to convention coverage and moose-burgers. A week ago Friday, Fitch Ratings downgraded Woonsocket’s General Obligation Bonds. Courtesy iStockAnalyst:
In the course of routine surveillance, Fitch Ratings has downgraded the rating on Woonsocket, RI’s approximately $119 million of outstanding general obligation (GO) bonds to ‘A-‘ from ‘A’. The Rating Outlook has been revised to Negative from Stable.
And on Tuesday, Richard Lepine, the only financial professional on the Woonsocket Pension Board, quit. From the Valley Breeze.
… he neither agreed with the direction of the fund nor does he believe others sharing authority over the fund are listening to his warnings.
As of June 30 of this year, the pension fund for retired police and fire personnel was an estimated $12 million short of the approximate $90 million value it was required to maintain by state law, or face payments back into it to keep it fully funded.
The shortfall meant an estimated $16 million loss from the previous year as the stock market tumbled, but an actuarial “smoothing method” for the fund meant it was only $2.1 million “short” and still had time to catch up before the city would be on the hook for much larger payments a few years down the road, according to the city’s actuary, Dennis Jacobs.
Estimates based on the new mortality tables the city will likely be required to use now have the fund short of full funding by about $17 million, and could require more significant payments.
Lepine said in his letter that the city should start making larger payments than the required $500,000 installments recommended by Jacobs based on the $2.1 million figure, and agreed to by other board members, to avoid an even more significant shortfall down the road.
“My 21 years of experience as an investment adviser leaves me with little confidence that these proposed minimal payments will be nearly enough to solve our funding shortfall, and that the greater risk to the city is that the unfunded liability may grow over the next few years to a perilous and unmanageable figure,” Lepine said in his letter …
“Smoothing method”? Is that a euphemism for “Do nothing and hope it all goes away”?
In his editorial this week, the Valley Breeze’s Tom Ward does not mince words.
The money is running out much faster than it should, and it’s clear that Mayor Menard is angry with Lepine for blowing the whistle on this mess to the City Council. Every city retiree who depends on those funds owes Lepine a debt of gratitude for speaking the truth.
The bottom line is that Menard is smart enough to know there’s a problem, but likely was hoping to paper over the shortage of money that wouldn’t come to light until after she left office. Let the next poor slob clean up her mess.
An honorable mayor would thank Lepine. Instead, he’s made an outcast. That’s Menard’s “my way or the highway” style of leadership. The truth be damned – protect the boss at all costs.
Too late. I urge the City Council to keep a close eye on the mess a compliant Pension Board doesn’t care to address.
These developments follow upon the damning audit released in March. And of course, all of this follows upon the colorful tenure of Mayor Susan Menard (yes, she’s still in office; she changed her mind), whose dubious fiscal methods include but are by no means limited to no-bid motorcycles, no bid copy machines, hidden cameras, campaign contributions from the (prior) city auditor and the expenditure of legal fees on an ultimately unsuccessful bid to prevent the City Council from questioning city employees. [As to the last item, why has she been so anxious to keep them silent?]
Oh, and Woonsocket’s 2006 School Superintendent made the Providence Journal’s list of 100 highest paid municipal employees: Ms. Maureen Macera was the third highest paid muncipal employee in the state that year.
I point out such little items because Rhode Island taxpayers are the source for seventy five cents of every budget dollar spent in Woonsocket. Tom Ward is correct that the City Council needs to keep an eye on the Pension Board. But as the guardian of our hard earned tax dollars, the Rhode Island General Assembly needs to start looking much more closely at Woonsocket City Hall. Regardless of whatever hidden cameras may be set up.