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City faces possible loss of state aid

June 21, 2013

PAWTUCKET—“Disappointed” is the way that Mayor Donald Grebien said he felt after getting the news that Pawtucket stands to receive about $876,000 less under the House Finance Committee's budget plan than what it would have under the governor's original proposal.
In an interview with The Times, Grebien said that while the loss, mostly on the municipal side, is significant, it is something that he believes can be dealt with through cost-cutting and measures to increase revenue, rather than more painful actions like lay-offs or a supplemental property tax increase. However, the mayor's keen disappointment is due to the likelihood that the hard-won reserves that he and his financial team had been trying to build up in hopes of improving the city's bond rating will have to be tapped into. “We had finally started to see the light at the end of the tunnel,” said Grebien, of his administration's bond strategy.
Grebien noted that, particularly on the school side, there had been a strong effort made to clean up past deficit deduction plans. He said it will now be three years in a row with no deficit, which is important when it comes to how the city's bond performance is looked at by the rating agencies.
The state budget is still several steps away from being finalized. The $8.2 million proposal that was introduced and voted on Tuesday by the House Finance Committee is scheduled to be debated by the full House of Representatives this coming Tuesday. It will then be sent to the Senate and finally to the governor for his consideration.
In the new House version, financially troubled municipalities such as Pawtucket, Central Falls, Woonsocket, Providence and West Warwick received less in “distressed” aid than what Gov. Chafee had proposed in the budget that he submitted in January.
The biggest change resulted from House leaders taking about $2 million out of the $10 million ($5 million this year and $5 million next year) pool of money set aside for “distressed communities” and put this into a Payment in Lieu of Taxes (PILOT) program providing fiscal relief to communities through their non-profit organizations.
While some municipalities with a larger number of colleges, hospitals and other non-profits benefited from the change, Pawtucket's piece of this funding pool significantly decreased, dropping from a 14 percent share of the funding to about 1.2 percent. This revision accounted for the bulk of the $876,000 loss in municipal aid to Pawtucket.
Grebien noted that this loss to the city side is offset by an increase in state aid to the schools by approximately $800,000. He said that when you look at the city side and the school side, the amount of state aid evens out. However, what the governor had originally proposed in his budget would have provided an increase in both municipal aid and school aid to Pawtucket.
Grebien said he is still proud of the fact that his administration was able to craft an operating budget that did not require any property tax increase. Right now, he said he is optimistic that this loss of state aid can be absorbed through fiscal actions other than a supplemental tax increase for businesses and homeowners.
The mayor said that if this $867,000 loss of aid had to be passed on in the way of a supplemental tax increase, it would require about another 31 cents per $1,000 of assessed valuation. On the average single-family home valued at $135,000, this would mean an increase of about $50 a year. “But we're assuming, from the way we've handled the budget over the last few years, that a supplemental tax increase would be a last resort,” Grebien stated.
The mayor said that while the city will most definitely have to dip into its reserves account, it can't use up all of that money to balance the budget. He said there will have to be an analysis of where to cut costs and increase revenues. He also noted that the city is still in contract talks with all of its municipal unions.
Grebien noted that in budgeting, it all comes down to finding the right strategy. “My job as mayor is to make those financial decisions,” he stated.
Grebien further spoke of the importance of attracting new businesses and companies bringing jobs and revenue to Pawtucket, such as Tunstall America's new call center on Freight Street. He said the loss of state aid underscores the need for a more aggressive approach to economic development, and cited his recent efforts to do this, such as hiring a second communications person and having his director of administration, Tony Pires, take on more new business projects.
Grebien noted that Pawtucket's drop in anticipated state aid is “not as bad as other communities.” He said, “The disappointment is that in the last two years, we had finally started to see the state giving back to municipalities.”
Follow Donna Kirwan on Twitter@KirwanDonna

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