East Providence has followed Central Falls down the path of fiscal disaster, finding itself with more than $10 million in debt as well as tens of millions of dollars in unfunded long-term liabilities.
Using the provisions of the Fiscal Stability Act of 2010, Gov. Lincoln D. Chafee appointed a fiscal overseer for the city in November, then in late December followed that up with appointing a five-member budget commission to oversee the city’s fiscal choices.
The next step, should East Providence’s administration (including elected and appointed leaders) and the commission not be able to set the city on a sustainable path, would be to appoint a receiver, who would be empowered to do whatever is necessary to fix the problem (think former R.I. Supreme Court Justice Robert G. Flanders Jr. putting Central Falls in bankruptcy as one example of potential actions).
East Providence Mayor Bruce Rogers has taken umbrage at the state’s intervention. His response indicates he is missing at least two important points:
• The state is involved because the city has shown itself incapable of solving the crisis by itself.
• Moody’s Investor Services downgraded the city’s bonds to three notches below investment grade, thus raising its borrowing costs.
By taking ever-more control of the city’s finances according to a proscribed path, the state is showing the markets that the situation is being dealt with, thus preventing contagion from infecting the rest of Rhode Island’s municipal debt. And, it is telling the city’s stakeholders that there are many difficult – but necessary – choices to be made in the near future. •
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