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No solution seen to money woes in Prov.

WPRI 12

Updated: Feb 11, 2012 4:37 PM

PROVIDENCE, R.I. (WPRI) — The Taveras administration acknowledged Saturday that Providence has no clear plan for closing the $22.5 million shortfall in the city budget, with less than five months before the end of the fiscal year and the possibility of bankruptcy looming.

"Since taking office the administration has worked to close the gap on a $110 million structural deficit that was identified," David Ortiz, spokesman for Providence Mayor Angel Taveras, told WPRI.com. "Despite how far we've come, there is a $22.5 million shortfall remaining that is not within our ability to fix without help."

"We are in conversations at the State House and with the City Council about the crisis that Providence is in, and at this point it's not entirely clear how we get into the next fiscal year without facing the possibility of a supplemental tax increase or bankruptcy," he said.

Ortiz's comments came less than 24 hours after the Rhode Island Supreme Court declined to intervene in a case that blocked the city from moving police and fire retirees to Medicare this fiscal year, costing the city at least $800,000 in potential savings. He spoke from City Hall, where Taveras and his aides were working on Monday's State of the City address.

Brown board backs discussions

Earlier this month, Taveras described Providence as being on "the brink of bankruptcy" thanks in large part to the Medicare ruling and his inability so far to convince the city's largest tax-exempt institutions to contribute an additional $7.1 million to the city budget.

The administration is projecting a $22.5 million deficit this year and a $30 million shortfall next year.

"The large tax-exempts need to be part of the solution to saving Providence," Ortiz said. "We will continue to look for savings that can be achieved in the current fiscal year." The $22.5 million deficit is caused by the Medicare issue, the lack of a deal with the tax-exempts, the failure to implement of an on-street parking program, and departments overspending.

Brown University President Ruth Simmons, who's been at loggerheads with Taveras since December over the school's payments to the city, said in a statement Saturday there are "now productive and positive discussions with the city and state leadership to determine the exact nature of the university’s contributions."

Brown's 54-member governing board, the Corporation, "considered various scenarios and options for assisting the city" during a regularly scheduled meeting this weekend and "strongly endorsed the continuation of discussions to identify as soon as possible a suitable plan," Simmons said. Taveras wants $4 million from Brown, while Brown wants to give $2 million.

Borrowing seen as last resort

Only a state-appointed municipal receiver can file for bankruptcy on behalf of a city or town, which means Taveras cannot do so in Providence without the explicit or tacit support of Gov. Lincoln Chafee, whose director of revenue decides whether to put a receiver in place as happened in Central Falls.

The Taveras administration has downplayed the possibility of borrowing money to close the budget gap, which is how his mayoral predecessor David Cicilline dealt with a shortfall in his final budget. But Ortiz didn't completely rule out the possibility.

"Tax-anticipation notes are essentially payday loans where we continue to kick the can down the road - unless we are addressing the core problems that are driving this crisis," he said. Taveras has singled out the city's $901 million unfunded pension liability, which ballooned after former Mayor Buddy Cianci agreed to 5% and 6% cost-of-living adjustments in 1991.

Ortiz pushed back at the idea that the mayor was too optimistic in his budgeting for this fiscal year and should cut current spending more or raise taxes further. He ticked off a number of steps taken to close the gap: 10% negotiated reductions in the cost of labor contracts, a decrease in personnel of roughly 200, and a large tax increase.

"The problems that Providence faces require shared sacrifice by everyone, and that's why the mayor has called on the largest tax-exempt institutions in the city and our retirees who receive 5% and 6% compounded raises every year to be part of the solution," Ortiz said.

"The mayor does not want to go back to the people who have already sacrificed so much and ask for even more when not everyone has stepped up," he added. "This budget is a reflection of that conviction."

Ted Nesi ( tnesi@wpri.com ) covers politics and the economy for WPRI.com and writes the Nesi's Notes blog. Follow him on Twitter: @tednesi

Tim White contributed to this report.

Copyright 2012 WPRI 12. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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