Posted on February 6, 2012

Providence Mayor Says City Faces Bankruptcy Without Benefit Cuts, Higher PILOTs

At a news conference last week, Providence mayor Angel Taveras told those in attendance that the city, Rhode Island's largest, faced bankruptcy this year if retiree benefits aren't cut and nonprofits like Brown University do not contribute more to city coffers, the Associated Press reports.

The city's budget for the current fiscal year is $614 million, 4 percent less than last year, and it faces a shortfall of almost $30 million — even after layoffs, school closings, and fee increases generated some $80 million in additional revenue and savings. If the city doesn't close the gap soon, it will run out of money by June and, according to the mayor, could be taken over by a court-appointed receiver.

To prevent that from happening, Taveras said he would cut the retiree benefits of former city employees, six hundred of whom currently receive annual cost-of-living increases of between 5 percent and 6 percent, and ask tax-exempt institutions in the city such as hospitals and universities to increase the voluntary payments they make to the city in lieu of taxes (PILOTs). In the case of Brown, which owns property in Providence valued at more than $1 billion, the mayor wants the university, over the next ten years, to double the $4 million a year it currently pays. According to vice president of public affairs Marisa Quinn, the university's governing board has approved an increase of $2 million a year over five years and is considering additional payments.

With city retirees contesting the city's decision to switch them over to Medicare at age 65 and the state legislature short on funds as well as concrete proposals, the situation is grim — a fact not lost on Taveras. "Everyone must sacrifice or everyone will suffer the consequences," he said during his news conference. "We need everyone to be part of the solution."