Next Providence mayor expected to face big budget gap

PROVIDENCE, R.I. (WPRI) – The next mayor of Rhode Island’s capital city will enter office facing a shortfall of between $15 million and $24 million in his first budget, according to the City Council Ways and Means Committee’s chairman and vice-chairman.

In other words, the winner of the race between Democrat Jorge Elorza, Republican Daniel Harrop and independent Vincent A. “Buddy” Cianci Jr. will need to lay out tens of millions of dollars in either extra revenue or spending cuts early next year when they submit their first budget proposal to the City Council. The budget will cover the 2015-16 fiscal year, which starts July 1, 2015.

“It is the intent of the council to work with the next mayor to close the budgetary gap,” Ways and Means Committee Chairman David Salvatore told WPRI.com. “While I have demonstrated fiscal prudency, I fully anticipate eliminating the fiscal gap.”

Salvatore said he is expecting a budget gap of $17 million because of two factors: an increase in pension and medical obligations, both of which are tied to union contracts, and the absence of roughly $7 million in one-time revenue sources used to balance this year’s city budget.

On top of that, an additional projected hole of $6.6 million was created in the budget when the City Council recently passed an ordinance to reduce the tax rate on rental property owners starting in 2015-16. Salvatore said that ordinance, strongly opposed by outgoing Mayor Angel Taveras, would balloon the size of the budget gap to about $23.6 million.

The deficit projection from Salvatore is much higher than the one published last spring by the Taveras administration, which said the city’s budget shortfall was expected to be only $2.2 million in 2015-16. At the time, a Taveras spokeswoman said the deficit projection amounted to “essentially a balanced budget as it represents less than 0.5% of the budget.”

The new mayor will enter office in January, six months through a $678.4-million budget approved by the current City Council and Taveras. While the winner of the race will have to manage the current budget for six months, he will quickly get to work crafting his own tax-and-spending plan.

Councilman Luis Aponte, who served as vice-chairman of the Ways and Means Committee and is running for council president, said he believes the gap for the 2015-16 fiscal year budget will be somewhere between $15 million and $20 million. He said the next mayor will also need to closely monitor the existing budget, but acknowledged “there’s not a lot of easy decisions coming in the next 18 months.”

“That’s where leadership really demonstrates itself,” Aponte told WPRI.com. “It’s easy to lead when you’re flush.”

Neither Salvatore’s nor Aponte’s projections factor in any tax increase, changes from a state-mandated three-year property revaluation in 2015, or the possibility of additional revenues generated as the economy turns around from sources such as new building permits. Taveras, who ran unsuccessfully for governor this year, warned in July that the landlord tax break would leave the next mayor with no other choice but to raise taxes.

That ordinance would allow landlords who do not live in their homes to pay 160% of the city’s $19.25 per $1,000 of assessed value rate for owner-occupied homes beginning in the 2015-16 fiscal year, down from the 175% rate they currently pay. If tax rates remain the same next year, rental property owners would pay $30.80 per $1,000 of assessed value.

Among the one-time revenue sources used to balance this year’s budget that the next mayor won’t have available are $2.6 million from the sale of Urban League headquarters on Prairie Avenue; $1.4 million from the sale of the Flynn School; $2 million from a lease extension at Triggs Golf Course; and $500,000 from the naming rights to the downtown skating center.

David Ortiz, a spokesman for Elorza, pinned the city’s financial woes on Cianci, accusing him of committing to “pension giveaways and recklessness with taxpayer dollars.”

“Meeting Providence’s fiscal challenges will require an honest leader in the mayor’s office who has courage to make difficult budget decisions and is committed to standing with working families already struggling to make ends meet,” Elorza said. “As Mayor I will do whatever is required to keep Providence’s finances on firm ground. In the long run we must grow our economy and expand our tax base, and that will require an open and ethical government that encourages investment.”

Cianci, the former mayor, said he thinks Taveras should take action before he leaves office. He said the city should freeze all nonessential spending and hiring and look for quick ways to raise money, He suggested the city should consider a second tax sale on top of the one it hosts each year.

“The new mayor is going to have to come in an make up that money,” Cianci said. He said raising taxes is “not an option.”

Harrop suggested a different solution altogether. The Republican candidate has centered his campaign on placing Providence into receivership, a strategy he claims would eventually lead to reduced taxes and more money for additional police officers and school improvements.

“I do not intend to fulfill the contracts or other obligations prior administrations have gotten us into,” Harrop told WPRI.com. “Providence is insolvent. Mayor Taveras avoided receivership four years ago by reducing the police by 100, cutting ambulance runs, not doing basic repairs on schools so that Mike Solomon refers to them as ‘appalling’ and the school department refers to them as not warm, safe and dry.”

Ted Nesi contributed to this report.

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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