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Law allows city to borrow for tax anticipation notes

January 27, 2012

PROVIDENCE — Gov. Lincoln Chafee on Friday signed into law legislation that allows Pawtucket to borrow $12.6 million in tax anticipation notes (TANS) and pay them back from next year’s budget.
The House passed its bill on Wednesday and the Senate voted its version Thursday, when each chamber also passed the other’s bill. All the votes were unanimous.
The measure allows Pawtucket to avoid a payless payday that had been looming for employees on the second week in February.
Last year Pawtucket borrowed $11.5 million in TANS and paid them back this year.
Administration director Antonio Pires told the House Finance Committee earlier this week that the borrowing is intended to keep the city in a positive cash flow position and keep it out of the sights of state overseers who might seek to take control of the city’s finances, as has happened in East Providence and Central Falls.
Pires said Mayor Donald Grebien will be calling on the city’s employee unions to “be true partners in reducing the structural deficit.” All three of the city’s labor contracts expire June 30.
“Once we are able to resolve the structural deficit,” Pires asserted, “the cash flow issue will begin to take care of itself over a period of time.
“This may not be the last time the city has to come before you for such an authorization,” he told lawmakers, “but hopefully next year it will be at a later date, perhaps for a lesser amount.”
Pires said the city usually borrows tax anticipation money from Bank of America, but that institution pulled out of such lending across the state in January.
Pawtucket is expected to pay about $172,000 in interest on the notes, depending on the rate it receives when the instruments are put out to bid, because it anticipates paying the notes off early, as it did last year. If the notes are not paid back until full term, the city could pay about $500,000 in interest.
Two weeks ago, the legislature approved legislation that allowed East Providence to get an advance on school aid funding it was already scheduled to receive to prevent it from running out of cash or having to borrow money at high interest rates because the city’s bond ratings had been lowered by Moody’s rating service.

 

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