In a crisis, all options must be on the table

Last week’s deal between Johnson & Wales University and the city of Providence to increase the payments the school makes in place of taxes was a good sign. More

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PBN Editorial

In a crisis, all options must be on the table

Posted 2/20/12

Last week’s deal between Johnson & Wales University and the city of Providence to increase the payments the school makes in place of taxes was a good sign.

Of course the deal helps the city close its still-significant fiscal 2012 deficit. But it also shows that Providence’s nonprofit, educational institutions and hospitals can and do understand that their help is needed in order for the city to remain a healthy, inviting place for people to live and businesses to invest in.

But the refigured payment in lieu of taxes was only the first step in Providence Mayor Angel Taveras’ challenging task. Of greater import is the issue of pensions, specifically the obligation of the city to continue to pay plan benefits that grow at a rate well in excess of the resources Providence can bring to bear. Thus, even if all of the city’s major tax-exempt institutions hit the targets that Mayor Taveras has set for them, the long-term, structural imbalance will still exist.

The mayor has been successful at revising labor contracts with current city employees and trimming the future obligations to them. But thanks to a quirk in Rhode Island law, he has not been able to negotiate with city retirees to bring their pensions toward a more sustainable path, because they are not represented by their previous unions. And the retirees seem in no hurry to come to the city’s rescue.

So far, only the bankruptcy declaration by Central Falls has allowed a municipal government to deal with its unsustainable long-term obligations. It’s a draconian solution, but if the city retirees don’t get onboard very soon, it may be the only solution left. •

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