1. Gina Raimondo made three big moves on pensions during her initial year as treasurer. The first was changing the plan’s investment and mortality forecasts, which triggered a huge increase in the official shortfall. In that she’s had plenty of company, as many other jurisdictions have been moving to more conservative assumptions. Her second move was securing passage of the Retirement Security Act, which slashed the shortfall by roughly $4 billion by restructuring the system. Last year’s settlement locked in nearly all those savings, and so far the system’s health has improved more quickly than expected; the next downturn, whenever it comes, will provide a crucial test of the law. Raimondo’s third move was her billion-dollar bet on hedge funds as a major new component of the state’s investment portfolio. Her successor, Seth Magaziner, delivered the verdict on that this week: “Some of them have performed very well. Most have not.” Raimondo has always argued the enormous fees charged by hedge funds would be worth it because their managers provide something unique. But Magaziner says that’s rarely been the case – returns have been lousy (4.85% overall, buoyed by a few standouts) and many of the funds have failed to actually serve as a “hedge” during volatile periods, instead heading south along with the rest of the market. Magaziner wasn’t subtle as he broke with Raimondo’s strategy this week, calling his new approach “Back to Basics.” The course correction vindicates many of those who’ve criticized Raimondo for embracing hedge funds. It also means responsibility for the pension fund’s future performance will rest squarely with Magaziner.
2. Treasurer Magaziner’s next big moment on pensions will come in the spring, when he’ll declare whether he thinks the fund’s assumed rate of return, currently set at 7.5%, should be lowered – which would force taxpayers to pony up significantly more money. Magaziner already says 7.5% is getting harder to defend, particularly the 2.75% inflation component (the remaining 4.75% is the expected real return on investments). If the State Retirement Board votes to lower the rate next spring, the impact on state and local budgets wouldn’t be felt until the 2019-20 fiscal year, but it could still be significant. Tim Duffy, the school committees’ lobbyist, is already alarmed. “If Magaziner drops it just 0.5% to 7%, it would, with adjustments for minimal inflation, be close to a $55 to $60 million hit for local government,” he told Tim White on Friday.
3. Treasurer Magaziner discusses his pension moves on this week’s Newsmakers.
4. Will House Majority Leader John DeSimone wage a write-in campaign to keep his seat after losing his primary to Marcia Ranglin-Vassell? Inquiring minds want to know. But he didn’t return a call Friday.
5. The Yes on 2 campaign to restore the Ethics Commission’s full power over lawmakers is starting out in an enviable position, with 78% of voters supporting the move in a poll they commissioned. But there are dissenters. The AFL-CIO endorsed every ballot question but the ethics one this week, with spokesman John Killoy saying the union’s top officials haven’t taken a position on it yet. Another influential labor leader, NEARI’s Bob Walsh, says he’s voting no due to concerns over freedom of speech for legislators and the commission’s past hostility toward unions. (Yes on 2’s John Marion argues that the Code of Ethics’ so-called “class exception” protects the legislative process.) Walsh says he’d be surprised to see unions spend money actively opposing the ethics question the way they did against the constitutional convention in 2014, adding: “I would be surprised if anyone spent any money against it anywhere, in all honesty.” But he noted there’s the possibility some voters will be confused by the ads on local airwaves attacking Question 2 in Massachusetts, which is a hotly contested proposal on charter schools.
6. Tim White takes a closer look at the blue RhodeWorks transparency signs being posted at bridge projects around the state, including the fact that there’s no sign yet at the costliest overdue, over-budget project: the Providence Viaduct. RIDOT Director Peter Alviti countered by noting his agency is already providing significantly more information than it used to: “We welcome the kind of questioning that you’re asking here. Think about the questions you’re able to sit here asking that you would’ve never been able to ask before.”
8. Republican vice-presidential nominee Mike Pence will be in Newport next Saturday for a private campaign fundraiser, just a few days after his debate against Democrat Tim Kaine. GOP Chairman Brandon Bell’s name is on the invitation, but so far the rest of the local host committee has a lower profile, though their ranks could grow next week. They include Dee Cushing, who was a big fundraiser for Barry Hinckley’s U.S. Senate campaign and wrote recently, “Obama and the Democratic Party have annihilated our country. We must undo the damage.” Also on the list is David B. Ford, a former Goldman Sachs director who owns Miramar, one of the Newport mansions (bought in 2006 for $17.5 million); Rob Matheson, founder of the firm Earlyman; and Hal Pontez, who owns the Houston-based company HPI. Donald Trump’s campaign has a long way to go to match his predecessors’ fundraising in Rhode Island: he’s raised only $78,000 in the Ocean State, far behind the final hauls pulled in by Mitt Romney in 2012 ($630,000) or John McCain in 2008 ($305,000). As for Hillary Clinton, she’s raised almost $1.2 million this cycle in Rhode Island, 15 times more than Trump.
9. Our weekly dispatch from WPRI.com’s Dan McGowan: “It’s too soon to say whether Providence City Council President Luis Aponte will face criminal charges for allegedly using his campaign fund to cover personal expenses, but the initial legal defense his attorney – Artin Coloian – is offering up boils down to this: Yes, there are discrepancies in Aponte’s campaign account that may not be allowed by state law, and yes, the board believes there are thousands of dollars in expenditures that can’t be explained – because Aponte’s campaign records were shredded by his treasurer and ex-wife – but he has since reimbursed the entire account. It’s the ‘no harm, no foul’ argument. It’s worth noting that Coloian has experience with campaign finance issues. He helped state Rep. Joe Almeida negotiate a misdemeanor plea deal for similar violations last year and is currently representing City Councilman Kevin Jackson on his legal problems, which include using his campaign fund for personal expenses. But because he’s the council president, Aponte also faces a real perception problem. He is widely viewed by politicians at the State House as the go-to guy on all things City Hall, but he’s now got a cloud over his head as a time when no one wants to be associated with unethical activity. Keep an eye on how Mayor Elorza handles the Aponte situation. He’s been noticeably quiet so far.”
10. Speaking of Kevin Jackson, an effort to recall him from office is afoot.
11. Kim Kalunian has new details on the fight over Buddy Cianci’s estate.
12. Fun fact: a host of brand-name bar soaps – Kihel’s, Dove, Irish Spring – are manufactured at the Valley Queen Mill in West Warwick. It’s the home of Bradford Soap Works, a 140-year-old firm that employs roughly 250 people there. John Howland, whose family has owned Bradford since the 1960s and who retired as its CEO in May, offered some advice for state leaders on this week’s Executive Suite: “I think of the old adage ‘a bird in the hand’ – paying a little more attention to the companies that are here would pay great dividends, I think. Unfortunately, in Rhode Island we’ve had a tendency to try to hit the home run – and unfortunately that hasn’t been successful, and the repercussions of that not being successful have dragged down attempts at economic development. But my first and foremost and strongest message to the leadership of the state is, pay attention to the companies that are here. It’s a lot easier to keep a company if you care about it and if you understand what its needs are than it is to grab a company from some other state that’s desperately trying to keep it anyway.”
13. What’s going on at Nortek? The building-goods company, based in Rhode Island since Ralph Papitto founded it in 1967, was sold in July to the British buyout firm Melrose Industries Plc, and the transaction closed at the end of August. Since then, spokesmen for Nortek and Melrose have refused to answer emails asking about job cuts at the company’s downtown Providence headquarters. If Nortek is going to shrink its corporate presence, the impact could also be felt by Rhode Island nonprofits, which have benefited from its charitable efforts over the years.
15. Veteran Rhode Island real-estate investor Steve Lewinstein now owns roughly 80% of Providence’s Wayland Square, including the building that houses Red Stripe, a recent purchase. Lewinstein talks about his career on this week’s Executive Suite, where he reflected on the challenge of development in Providence: “I’m a big believer that the consumer really kinds of run the show, so to speak, and therefore it starts with disposable income. And there’s no question that disposable income in Providence – like, say, compared to Boston – is much less. So there’s less money to spend and therefore rents have to be lower. But unfortunately the construction costs don’t change with what city you’re in, so as a result we find that the margins are smaller in Providence. And also the growth factor – we’ve just never really had the kind of growth that some of these other communities have had. And a lot of it has been, particularly in the office sector, a musical chairs kind of a thing.”
16. Did you know Bing Crosby and Raquel Welch both stayed at the Wayland Manor on Angell Street in Providence? That’s according to a 2002 Projo article, which also reported Bing owned horses in Narragansett. (He’s said to have spent some time at the old Narragansett Park race track.)
17. A bonus dispatch from WPRI.com’s Dan McGowan: “Those close to Mayor Elorza believe they scored a victory in the battle over the proposed expansion of the Achievement First charter school organization in Providence this week when the mayor secured veto power over some of the organization’s future plans. But it will be a few months before we’ll know whether he actually intends to block the additional schools. What is clear is that the so-called ‘super expansion’ of Achievement First is largely being pushed by Governor Raimondo’s office even though Elorza is chairman of the organization’s board. Elorza maintains he’s trying to balance the financial needs of the entire school district with the growth of Achievement First, but it won’t be easy for him to tell the governor and some bigwig donors who supported him in 2014 to back off.”
18. Another week, another bond upgrade for a community whose incumbent mayor is up for re-election in November. This time it’s Woonsocket, which got a two-notch upgrade from Moody’s to Ba3 – still “junk” status and still the lowest-rated city in Rhode Island, but an improvement. The analysts at Moody’s said they’re pleased a state-appointed financial adviser will remain in place until 2020, a hangover from the days of the city budget commission, and that the 2014-15 surplus was “better than projected.” But “very high” levels of poverty and municipal debt, plus the perennial problems of pension and retiree health liabilities, all remain concerns.
19. Congrats and best wishes to Liz Boardman, who announced this week she’s leaving as editor of The Independent to take a job at a paper in her native Iowa. The Independent has done some great work under Boardman’s leadership, so I asked for her thoughts on the importance of local news outlets. “Community journalism is the ‘boots on the ground’ of journalism,” she said. “Much of what we do is of interest to a narrow geographic area, so it’s easy to overlook, but it matters. In most cases, there is no one else shining a light on what is going on in the state’s smaller communities. I have found that most people who serve the towns in The Independent’s coverage area (South Kingstown, North Kingstown and Narragansett) are honest and well-intentioned, but that doesn’t mean they have all the answers. Shining a light isn’t always about the big scoop, it’s about fostering conversations about the kind of people we want to be and the kind of place we want to live in. It’s been a privilege to be a part of that work for the last 10 years.”
20. And another blow to community journalism in Rhode Island: Mark Schieldrop, who’s spent six years as an energetic editor and reporter at the Patch network’s Rhode Island websites, announced Friday he is no longer working for the news group. Mark’s solid on-the-ground coverage of various communities will be missed.
21. Happy birthday to David Cruise, Rhode Island politics lifer and current senior adviser to Governor Raimondo; he turned 60 on Friday.
23. Set your DVRs: This week on Newsmakers – General Treasurer Seth Magaziner. This week on Executive Suite – Stephen Lewinstein, real estate investor; Stu Benton, president/CEO, and John Howland, executive chairman, Bradford Soap Works. Watch Saturday at 10:30 p.m. or Sunday at 8 p.m. on myRITV (or Sunday at 6 a.m. on Fox). Catch both shows back-to-back on your radio Sundays at 6 p.m. on WPRO-AM 630 and WEAN-FM 99.7. And you can subscribe to both shows as iTunes podcasts – click here for Executive Suite and click here for Newsmakers. See you back here next Saturday morning.
This piece originally said Mark Schieldrop has worked at Patch for four years; he’s been there for six.