Judge dismisses Providence pension opt-out case

The perpetrator was sentenced in Providence in May.

PROVIDENCE, R.I. (WPRI) – In a long-awaited decision, a Rhode Island Superior Court judge has dismissed a lawsuit filed by a group Providence retirees who opted out of a 2013 pension settlement with the city.

The 95-page decision issued Thursday by Superior Court Judge Sarah Taft-Carter’s states that the retirees “failed to meet their burden of demonstrating their claims.” A bench trial ended in May 2016.

Taft-Carter dismissed both a challenge to the pension changes and related changes to retiree healthcare.

Known colloquially as the “opt-out case,” the lawsuit was filed in November 2013 by more than 60 former public employees who refused to support a settlement between the city, its municipal unions and retirees that froze 3% cost-of-living adjustments (COLAs) for 10 years, eliminated 5% and 6% COLAs forever and shifted how pensions are calculated. The deal also shifted retirees over the age of 65 to Medicare.

At the time, Mayor Angel Taveras made the case that the changes would save the city financial ruin, arguing that the unfunded pension liability would be reduced by $170 million. The city was represented during the trial by William Dolan, William Wray and Nicholas Nybo. Former city solicitor Jeff Padwa was also listed as an attorney in the decision.

The weeks-long trial included testimony from Taveras and his former director of administration Michael D’Amico as well as more than a dozen retirees who explained how the changes have had an adverse impact on their lives.

On the stand, Taveras told a now-familiar story.

He said D’Amico informed him that the city was facing a $110-million structural deficit on the afternoon of Feb. 25, 2011, hours before they were scheduled to attend the annual Providence Newspaper Guild Follies comedy show and less than two months after Taveras had been inaugurated. Taveras claimed D’Amico told him, “I can’t fix this.”

In the months that followed, Taveras requested more state aid, closed schools, raised taxes and convinced the city’s nonprofit colleges and hospitals to increase their payments in lieu of taxes by more than $6 million annually in addition to eventually reaching the settlement to alter retirement benefits for former city workers.

“I thought bankruptcy would be devastating to both the city of Providence and the state of Rhode Island,” Taveras, a Democrat who ran unsuccessfully for governor in 2014, said during the trial.

On the other side, retiree after retiree explained the difficulties they’ve faced since the changes.

Stephen T. Day, a former president of the firefighters’ union from 1988 until 1997, said his 3% COLA would add about $800 to his pension check by 2019, providing a boost to his finances and allowing him help his family and retire.

“That COLA is instrumental in keeping them in college,” Day said, referring to his two children. He also called the COLA “crucial” to deciding when he’ll leave his current job at a car dealership.

Day joined the fire department in 1980 and was elected to the union’s executive board in 1982. He was elected to the Providence Retirement Board in 1988, the same year he became president of the union. A year later, the board, which was comprised of six labor members and five members from the city, voted to approve 5% and 6% compounding COLAs to hundreds of retired and active public safety workers as well as 3% COLAs to members of Local 1033, the municipal employees union.

Following the vote, about 97 public safety employees retired with tax-free accidental disability pensions, including at least a dozen of the plaintiffs involved in the opt-out trial.

During his testimony, Day acknowledged that he negotiated several union contracts for his members. He recalled one contract where, with the city facing economic trouble, he convinced his members to give up a raise and vacation time in exchange for the city agreeing to not change any retirement benefits.

“Those were the sacred Holy Grail,” Day said.

The retirees were represented by Stephen Burke, Kevin Bowen and Thomas McAndrew. If the group had been successful, their pensions would have continued to grow, totaling more than $11 million over 10 years.

Taft-Carter was also the judge that approved the city’s settlement with the majority of its retirees. In her decision, she suggested the city “impaired” its contracts with its public employee unions, but didn’t breach those agreements, noting that the pension settlement includes a provision where COLAs will be reinstated and and the plaintiff will receive “equivalent healthcare coverage.” While she agreed that the retirees proved the existence of a contractual obligations, she found that the city had a “legitimate public purpose,” for making the changes, citing Providence perilous finances.

In a statement, Taveras, an attorney, said he was pleased Taft-Carter recognized the sacrifices “so many made to save Providence from bankruptcy.”

“In my last email (as Mayor) to city employees and residents (before I left office) I said: ‘When the lingering fog from the campaign season finally lifts we will look back and see that what emerged from those dark days were many of our city’s finest hours,'” he wrote. “The judge’s decision today recognizes the tremendous challenges we faced in 2011 and 2012, and the collaborative and unprecedented effort of all those involved.”

A spokesperson for Mayor Elorza said Taft-Carter’s decision “speaks for itself.”

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