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Grebien discusses municipal reform plan

March 20, 2012

PAWTUCKET — On Thursday, Pawtucket Mayor Donald Grebien stood with his fellow leaders from nine other Rhode Island communities as Gov. Lincoln Chafee outlined proposed legislation aimed at reforming municipal pension plans and providing fiscal relief to cash-strapped cities and towns.
The governor had chosen Pawtucket, which falls under the category of “highly distressed communities” according to drafted criteria, as the location for the press conference announcing his plan, and Grebien was the first of several mayors to take to the podium and voice his support.
Grebien acknowledged that the governor's legislative package is not “one size fits all” and also noted that the final shape that the proposed legislation may ultimately take will depend on the “give and take of the political and legislative process.” Yet, Grebien spoke of the importance of the state helping cities and towns, which have suffered more than $190 million in local aid from 2006 to 2010. During that period, he said, Pawtucket alone lost $21 million in state aid.
“That heavy financial burden has fallen directly on our taxpayers, at a time they can least afford to pay it,” said Grebien, in his speech. “It's time for the state to step up to play a greater role in its support for cities and towns.”
This week, Grebien spoke to The Times about the the governor's proposals, which include seven pieces of legislation designed to help cities and towns. The main one, and by far the most controversial when it comes to municipal unions, would allow communities with severely underfunded pension plans to suspend cost-of-living increases (COLAs) to retirees. The proposal is designed to mirror the Municipal Employee Retirement System (MERS) bill.
Grebien said that for Pawtucket, the ability to suspend the annual COLA payments is the most important part of the governor's reform package. “That means the most to the city as far as dollars and cents go,” he said. He added that last year, he testified at the State House on this topic along with Providence Mayor Angel Taveras, Cranston Mayor Alan Fung, and Chafee's Director of Administration Richard Licht.
Grebien said that in Pawtucket, the only municipal employes not in the MERS system are the police and fire department workers, who belong to a private pension system. While every community would be different, in Pawtucket, the suspension of the COLA payments translates to about $2.3 million a year. Under the governor's plan, at least 50 percent of the savings that result from the suspended COLAs must go back into the pension fund. So, said Grebien, working on a figure of about $1.15 million, at least $1 million or more could go back into the city budget.

Grebien said this infusion of money into the public safety pension fund would take it from the present state of being 30 percent funded to 42 to 44 percent funded. He noted that this would be a substantial improvement, even though it is clearly not near the 80 percent funding level that is recommended. “We must also make structural changes and increase revenue in other areas, but the suspension of the COLAs would mean more to us than anything,” Grebien noted.
Grebien said he had not yet formally heard from the police and fire union leaders since the governor's press conference. However, he said that “This is not new to Pawtucket's men and women in public safety. From Pawtucket's perspective, a lot of what's in there (the governor's proposal) is what we will be looking for anyway from contract negotiations.”
Grebien noted that going into fiscal year 2013 (which begins on July 1), there are still serious concerns about the city's budget. As an example, he said that even if the city went to the maximum cap of a 4 percent property tax increase, this would only generate about $3.8 million in new revenue. He said the city is already looking at about $2 million in increased costs just on pensions alone, which would leave only about $1.5 million for all of the other operating expenses in Pawtucket.
The other bills headed to the General Assembly would allow communities like Pawtucket, which fit the designation as “highly distressed,” to cut costs by being able to opt out of numerous state mandates and by other measures that could affect existing collective bargaining agreements. Woonsocket, Providence and West Warwick are also considered “highly distressed communities” under the proposed criteria.
Grebien said that if this enabling legislation is approved, communities with the “highly distressed” designation could pick and choose from 14 provisions that would provide relief from state mandates that increase their costs and place a burden on the property taxpayer. A requirement, however, is that the city or town council must pass an ordinance for any of these changes.
Grebien noted that the 14 provisions came about as the result of a survey conducted last year by the state Department of Revenue in which cities and towns were asked to prioritize the state mandates based on the dollars expended. He said that some of the provisions would mean more in savings to some communities than in others, and he hasn't yet fully analyzed the specific dollar amounts for Pawtucket in all of the categories.
For example, the mayor said that the city spends some $300,000 a year on bus monitors and a similar amount on providing bus transportation to parochial school students, but noted that there would also be consequences in eliminating services like these that would have to be weighed.
Grebien added that of these 14 suggested provisions, Pawtucket is already doing three: the City Council will be overseeing and approving municipal contracts (voters approved this last fall), city workers participate in the Statewide Purchasing System, and there has been a reduction in accidental disability pensions for firefighters to a maximum of 66 2/3 percent from the 100 percent allowed under current law (city officials will be seeking this same concession from the police as well).
If all of the governor's proposals for the COLA payment suspensions and the 14 provisions from state mandates were approved by the legislature and taken as a whole, Grebien said they could potentially mean as much as $6 million or more in savings for the city. However, he noted that the anticipated costs of legal fees for arbitration from the public safety unions would obviously offset this savings figure.

 

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