PROVIDENCE, R.I. (WPRI) – With the clock ticking down on the city’s opportunity to ask voters to approve a $40-million infrastructure bond, the Providence City Council Finance Committee on Thursday tabled discussions on the proposal for the second time this week.
The latest disagreement between the council and Elorza administration was not over who should control the money – the mayor’s office wants total authority and the council wants about $22 million divided into 15 ward accounts – but rather the council’s insistence that it hire a bond lawyer to vet the financial details of the proposal.
Traditionally the city solicitor’s office is tasked with bringing in bond counsel to offer advice on borrowing, but city treasurer James Lombardi – a City Council appointee – said he wants to go out to bid on that contract for the first time because he has concerns over the administration’s plan.
“I don’t trust some people in the administration or solicitor’s office to give me the proper advice,” Lombardi said Thursday.
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Lombardi’s harsh comments came after Jeff Dana, the city solicitor, told reporters the treasurer does not have the authority to hire bond counsel on his own. Dana said the City Council has the ability to hire an attorney in an advisory capacity – as it recently did for the ongoing fire department dispute – but that decision must be approved at a council meeting.
Lombardi said blocking him from hiring bond counsel would be a “complete breakdown” of the separation of powers protections laid out in the city charter.
“It’s like going to a closing and buying a house using the seller’s attorney,” he said. “This is what happens when you have decisions made by people with no government experience.”
For their part, the Elorza administration asked two bonding experts, Adam Krea from First Southwest and Karen Grande from Locke Lord, to attend Thursday’s meeting to answer any questions the committee had. But the committee quickly voted to continue the matter with little discussion.
“I think we were prepared tonight to have their questioned answered,” Tony Simon, the mayor’s chief of staff, said following the meeting. Simon said he expects talks to continue with the council in the coming days.
The council has said the administration’s proposed use of $20-million in bond anticipation notes (BANs) for 2017 rather than simply issuing a $40-million bond all at once is concerning. BANs are designed provide governments short-term financing before a larger bond is issued. In most cases, BANs are paid back using proceeds from the larger bond.
Under a financing timeline provided to the council last week, the administration said it would first seek a BAN that would allow the city to borrow $20 million at a projected interest rate of 2%. The note would close a year later, when the city would prepare a $40-million bond issue at a projected rate of 4.95%.
By first securing a BAN and then borrowing the full $40-million in 2018, administration officials say the city would not have to increase its annual debt-service payments because about $64-million in debt is slated to come off the city’s books over the next two fiscal years. A proposed repayment schedule on the $40-million bond shows the city would end up paying $63.6 million if the 20-year bond is paid off by 2038.
Records reviewed by WPRI.com show Providence had about $424 million in taxpayer-backed debt during the 2015-16 fiscal year, with about $88.6 million coming in the form of general obligation debt. If the city stopped borrowing altogether, it would be down to $100 million in total debt by 2025.
Aside from the financial details, the timeline for getting the bond question on the ballot is narrowing and a decision over how the money will be spent is still in question.
In order to make to Nov. 8 ballot, bond questions must be sent to the secretary of state’s office by Aug. 10. That gives city officials less than three weeks to get the ordinance approved by the Finance Committee and twice by the full City Council before having it certified by the local board of canvassers.
In a best-case scenario, the Finance Committee could schedule a meeting Monday for approval and the City Council could hold two special meetings next Wednesday and Friday to pass the ballot question, but no meetings were scheduled for next week as of Friday morning. The council traditionally takes the month of August off, but most members have indicated they are willing to meet on the bond question.
As far as spending goes, the council has said it wants $1.5-million set aside for each ward so individual members have the authority to approve construction projects in their neighborhood. The administration has said it is willing to promise an undetermined amount will be spent in each ward, but it opposes handing control to the council.
Technically, the administration and the council do not have to reach an agreement over how the money will be spent in order to place the question on the ballot. (The spending plan on a $50-million bond that voters approved in 2000 was not settled until 2001.)
Simon declined to rule out attempting to have the council approve the question without a spending plan in place, but said the administration would rather take a more transparent approach.