Providence’s pension return tops state’s since ’11

Mayor Angel Taveras (left) and acting Director of Administration Larry Mancini (right). Photo by Dan McGowan/WPRI

PROVIDENCE, R.I. (WPRI) – The pension plan in Rhode Island’s capital city has outperformed the state’s fund since Democratic rivals Mayor Angel Taveras and Treasurer Gina Raimondo took office, the city’s longtime financial consultants said Thursday.

The analysis, conducted by Boston-based Wainwright Investment Counsel, shows Providence’s $284 million in investments earned a 10.9% return between 2011 and 2013, while the state pension fund earned a 9.2% return during the same time period.

For 2013 alone, the city earned a 19.6% return, compared with the state’s 14.1% return. Had the state’s $7.5 billion plan matched the city’s return, it would have brought in an extra $400 million, according to Eric Bertonazzi, a Wainwright representative.

“Performance is important and how you do is important. The level of risk you take is important and $400 million is a lot of money,” Taveras said during a meeting of the city’s Board of Investment Commissioners. The mayor serves as chairman of the board.

Taveras and Raimondo are two of the leading Democratic candidates for governor, along with newcomer Clay Pell. The mayor and treasurer have been locked in a political chess match over pension investments, with Taveras attempting to paint himself as a better fund manager than Raimondo, who has been criticized by union groups for having a cozy relationship with Wall Street.

During the meeting, Taveras specifically asked if the Wainwright’s three-year analysis began in January 2011, the month he and Raimondo took office. Taveras also stressed that the city’s financial consultant has been comparing Providence and the state’s pension performance “for many years.”

“The most important thing is that these pensions be there for people when they need them,” Taveras said. “The [investments] have consistently done pretty well.”

Bertonazzi also released data that shows Providence’s three-year pension fund return ranks in the top 10% compared with its peers around the country. He said the city’s 8.35% 10-year return rate is in the top 6% nationally. The comparison is based on Wainwright’s analysis of $1.5 trillion in pension investments.

Providence’s most recent most actuarial valuation states that the city pension fund was 31.4% funded as of July 1, 2013, but Raimondo campaign manager Eric Hyers said he believes that having a $1.2 billion liability and $284 million in assets means the city’s pension is only 24% funded.

“This unfixed pension crisis threatens the city’s financial security and the retirement security of thousands of city employees,” Hyers said.

David Ortiz, a spokesman for Taveras, said the $284 million cited by Hyers represents only “invested assets” and does not include “cash and receivables, which count for dollars in the system not currently invested.”

Hyers said Providence’s finances are still being compared to Detroit, which filed for bankruptcy last year. He also criticized Taveras for failing to attend “80% of investment board meetings in the first half of his term.”

“God help state retirees if the mayor were to bring his pension stewardship to the rest of the state,” Hyers said.

Both Taveras and Raimondo have reached settlements with public employee unions to avoid long and costly court battles over pensions.

In 2013, an R.I Superior Court judge approved a pension agreement between Providence and its unions that allowed the city to cap all pensions, suspend cost-of-living adjustments (COLAs) for a decade and eliminate 5% and 6% compounded COLAs for good while also moving retirees to Medicare. City officials said the settlement reduced Providence’s unfunded pension liability by $170 million.

On the state side, union members are currently voting on a settlement that would increase Rhode Island’s unfunded pension liability for state employees, teachers and some municipal workers by 5%, from $4.8 billion to $5.05 billion. In exchange, the unions would drop their lawsuits over Raimondo’s 2011 pension law, as well as suits challenging previous pension changes passed in 2009 and 2010.

The General Assembly would also have to approve those changes.

Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Twitter: @danmcgowan

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