Businesses support E.P. commission

THORNY ISSUE: Allan Gilmore, owner of Gilmore's Flower Shop, said that many business in East Providence are displeased with the city's treatment of its commercial tenants. / PBN PHOTO/DAVID LEVESQUE
THORNY ISSUE: Allan Gilmore, owner of Gilmore's Flower Shop, said that many business in East Providence are displeased with the city's treatment of its commercial tenants. / PBN PHOTO/DAVID LEVESQUE

It isn’t easy doing business in East Providence, says Allan Gilmore. He should know: His business has been there for 75 years.
He owns Gilmore’s Flower Shop, a family-operated concern on Taunton Avenue, opened by his father during the Great Depression in 1936. “City Hall has never had open arms when it comes to business. The problem in my case is the continuous increase of taxes puts a burden on my net profit at the end of the year. Any increase in my business goes to paying higher taxes,” he said. As an example, Gilmore said his parking lot was once assessed at $90,000. Within a three-year period that figure escalated to $214,000 last year.
Things are so bad that he’s started to hear rumors about some businesses investigating a five-year strategy to leave. “You hear about it in social circles, of people thinking of selling their business and property to get out of, not only East Providence, but the state,” he said.
With that in mind, he welcomes the financial commission appointed by Gov. Lincoln D. Chafee that’s taken on the task to straighten out the city’s budget and finances. “Someone has to come in here that isn’t obligated to special interests or by campaign promises and do what’s right. Tough decisions have to be made and no one in this city is willing to do it,” he said.
The city’s fiscal plight, which includes debt of more than $10 million in fiscal 2012, has clearly left many in the business community worried about their financial futures. But Gilmore and other business owners are hoping the commission can help the city follow the lead of Pawtucket and Central Falls, two other financially ailing communities working through budget woes.
In December, Moody’s downgraded East Providence’s general-obligation bond rating from Baa1 to Ba1, affecting approximately $22.4 million in outstanding debt. The downgrade reflects the recent appointment of a fiscal overseer and the budget commission by the state.
Conversely in Pawtucket, its neighbor to the north, Fitch Ratings upgraded the city’s outlook from “negative” to “stable,” last month, welcome news for city officials and business leaders.
Although the bond-ratings company did not raise the BBB- rating for the city’s $20 million in outstanding general-obligation bonds, Pawtucket is expected to have an operating surplus this fiscal year.
Like Fitch, Moody’s, another bond-rating company, had also given the city negative outlooks over the last two years. But now, with an affirmed bond rating and a stable outlook, city officials, businesses and community organizations hope it’s a sign of better days. Pawtucket has taken a variety of actions to attain a better financial status. The city and school department are working with the state to eliminate a $2.4 million deficit of school funds. The city’s debt levels are relatively low, and a reduction in its motor-vehicle exemption to the state minimum, along with recent statewide pension reform, has also helped.
Like East Providence, Pawtucket has experienced a significant deficit in school funds; increased costs of pension and other post-employment benefits; and a dependency on borrowing to maintain a consistent cash flow.
John C. Gregory, president of the Northern Rhode Island Chamber of Commerce, credits Pawtucket Mayor Donald R. Grebien for that city’s steps toward recovery. “A good place to start is in keeping the businesses you have, because psychologically, it has an immediate impact. He’s been proactive in meeting with companies like Hasbro Inc. that employ a lot of people. One of the most important things he’s accomplished was to balance the budget,” Gregory said.
William M. Kapos, president and CEO of Excellent Coffee on East Avenue agrees. “It’s great that Moody’s improved its rating of the city, especially when you look around at Central Falls and East Providence. I think the city is doing what it can,” he said.
To Pawtucket’s north, Central Falls received a Moody’s rating in December of Caa1 and a negative outlook based on $20.8 million of general-obligation debt. The city filed for bankruptcy Aug. 1, 2011, and ongoing proceedings could affect payment of the debt. The city still has a high unfunded pension liability, strained liquidity and a small tax base, but new agreements have been signed with unions to cut costs and stabilize the budget, and a tentative agreement on pension cuts has been reached with retirees. Things are getting better and the mood is picking up there, Gregory says.
Jerauld C. Adams owns Hemphill Mill off Clay Street in the city, and is responsible for 75 tenants. He also sits on the R.I. Economic Development Corporation’s board of directors as a representative of small businesses. “I think it’s very encouraging that things are straightening out. … I can’t say that everything is fine, but there’s a feeling of confidence that we’ve turned a corner,” Adams said. So far in East Providence, agreement on a course of action has been elusive.
Mayor Bruce Rogers and City Manager Peter Graczykowski have criticized the governor for appointing the commission, saying the state has taken away their authority and is making it difficult for them to do their jobs.
Laura McNamara, executive director of the East Providence Area Chamber of Commerce, thinks the commission is necessary. “We believe they will move the city forward with recommendations and decisions that will put East Providence’s future finances on a positive path,” she said.
However, she added the Chamber is also wary of the means by which that might be achieved, including measures such as residential and commercial tax increases to close the budget gap.
Like Gilmore, she too has also heard the rumors of businesses planning to leave. “What surprises me most is the number of businesspeople mentioning a five-year exit plan to leave East Providence and Rhode Island. Some have had businesses here for 25 years, and they are talking about selling their homes and businesses,“ she said, declining to identify any.
At its Dec. 29 meeting, financial commission Chairman Michael O’Keefe, a former state budget adviser and retired House of Representatives fiscal adviser, said the city has a cash flow problem. According to city Finance Director Ellen Eggeman, East Providence will run out of cash by the last week in January. The city is expected to receive $12.57 million in state education funds in April but is looking to state legislators to obtain the money as soon at possible in order to remain solvent.
Another immediate action being considered is to coordinate the tax collection period to match the fiscal year. This would eliminate the need for tax-anticipation notes, money borrowed by the city with interest, to cover expenses for a three-month collection gap, a common practice for the last 25 years.
Small-businessmen like Gilmore are concerned about the proposal because it would effectively result in two tax payments being due in March 2012. “Where are some of these businesses supposed to get that kind of money?” Gilmore said.
McNamara says the Chamber is optimistic the commission will get the city’s finances in the black, preventing the need to go into receivership. But she agrees with Gilmore on the tax plan.
“Businesses … want to see attention devoted to long-term solutions,” she said. •

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