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SAVE PROVIDENCE: VOTE YES ON 1!

Yes on 1 | Vote si a la pregunta

ABOUT JUNE 7, 2022 SPECIAL ELECTION:

Over the last 10 years, Providence’s annual pension payment grew by 48%. At the same time, City revenues grew by only 15%. Required annual pension payments are growing faster than City revenues.

Without action, pension payments will take up more and more of the City’s budget – leaving less funding available for important City investments that make our neighborhoods better, like parks, recreation centers, and street and sidewalk repairs.

Providence can’t wait. We need to take action NOW to invest in our future.

 

 

Who supports this pension obligation bond?

  • Mayor Jorge Elorza and Council President John Igliozzi
  • Pension Working Group Co-chairs:
    • Michael DiBiase, Rhode Island Public Expenditure Council President & CEO
    • Laurie White, Greater Providence Chamber of Commerce President
    • Cliff Wood, Providence Foundation Executive Director
  • Senator Maryellen Goodwin
  • Representative Scott Slater
  • Pension Working Group Members:
    • Senator Sam Zurier
    • Councilwoman Helen Anthony
    • Councilman Pedro Espinal

 

In the special election on June 7th,2022, VOTE YES ON QUESTION 1!

There are many ways to vote in the special election. What’s your voting plan?

You may not be voting in the same location where you regularly vote. A complete list of voting locations is available for review.

 

WAYS TO VOTE

  • EMERGENCY VOTING
    Vote early at Providence City Hall
    NOW – June 6, 2022
    Monday-Friday8:30AM-4:30PM
    Deadline is Monday, June 6, 2022 at 4:00 PM

ON ELECTION DAY
Vote at your assigned polling location
Not sure of your polling location? Visit vote.sos.ri.gov!

Tuesday, June 7, 2022
7:00AM-8:00PM

Have questions? Call 3-1-1

 

COMMUNITY MEETINGS:

 

City officials were committed to making the resources available to Providence voters to get their questions answered before voting in the June 7 special election. Mayor Elorza, the Providence City Council and members of the Providence delegation hosted a series of community meetings throughout the City where they were available to answer questions:

 

PowerPoint Presentation discussed at community meetings can be found here.

“Despite the significant improvements to the city’s overall finances, the unfunded pension liability still looms as a ticking time bomb. Armed with the recommendations of the Pension Working Group, we are committed to finding a long-term fix to the city’s unsustainable yearly pension payments. I thank the members of the Pension Working Group for their recommendations, which have made the Pension Obligation Bond proposal stronger, and I thank the co-sponsors of the bill for advocating for our city’s future,” said Mayor Elorza.
“After several months studying this topic and educating the public, now is the time to take action to protect the financial health of our capital city. Together with my colleagues, I know we can address this challenge, protecting Providence’s finances and ensuring our civil servants’ pension benefits,” said Senator Goodwin (D-Dist. 1, Providence).
“As was clearly stated in the Pension Working Group report, we can no longer accept inaction. We have the recommendations of the Pension Working Group to guide us, and I look forward to continuing to work with Mayor Elorza and my colleagues in the General Assembly to pass this legislation and allow Providence to move forward with a Pension Obligation Bond,” said Representative Slater (D-Dist. 10, Providence).
“There’s no question the city needs to take immediate action to help stabilize our precarious pension system. The proposed pension obligation bond of up to $515 million, with financial guardrails in place, is a step in the right direction. To my fellow lawmakers at the statehouse, we now respectfully ask for your help in approving this legislation that will provide Providence and its taxpayers with the financial tools needed for long-term security,” said Council President Igliozzi.
“We’re proud to have partnered with the city on this essential work to better understand the options available to our city to address the unfunded pension liability. With Providence serving as Rhode Island’s economic center, we should all have an interest in addressing this significant liability and protecting the city’s financial outlook. We are glad to see our recommendations moving forward in order to protect the best interests of Providence workers, residents and the economy of the city,” said Co-chairs of the Pension Working Group Cliff Wood, Executive Director of the Providence Foundation; Laurie White, President of the Greater Providence Chamber of Commerce; and Michael DiBiase, President of Rhode Island Public Expenditure Council (RIPEC).
“The city’s fiscal stability is of critical importance to our hard-working union members, and we must take action to ensure that their pension benefits remain intact. We appreciate the dedication and research of the Pension Working Group and look forward to working with Mayor Elorza, Council President Igliozzi, Governor McKee and members of the General Assembly to take action and address this challenge head-on,” said Michael Imondi, President of the Providence Police Union, FOP Lodge #3; Derek Silva, President of the Providence Fire Union, IAFF Local 799; and Ronald Coia, Business Manager, Laborers’ Local Union 1033.

 

ABOUT THE PENSION WORKING GROUP:

In response to having one of the lowest funded pension plans in the nation and limited City-controlled options to address these challenges, Mayor Elorza, the Providence City Council, The Providence Foundation, The Greater Providence Chamber of Commerce, and the Rhode Island Public Expenditures Council convened a Pension Working Group of leaders from the public, private, and not-for-profit sectors to review the pension system, identify risks and benefits of meaningful options to stabilize the system, and provide recommendations to inform policy deliberations for stakeholders. The PWG submitted a detailed report, outlining the group’s findings, including a series of recommendations for how to most effectively address the City’s unfunded pension liability.

After much review, discussion, and deliberation, including reviews of differently sized transactions, the Pension Working Group included in the report that Providence should receive state legislative and city voter authorization to issue a pension obligation bond sized to deposit $500 million into the pension system if advantageous borrowing conditions and terms are met.

Currently, the City’s pension expenses are growing at over 5% while revenue is growing at 2%. The Working Group determined that while smaller or larger bond issues could result in positive benefits, the most efficient transaction size is one that deposits $500 million into the employee retirement system (ERS). This allows the City to best position itself to increase the funded status of the pension system and match associated POB debt repayment costs to the City’s conservative, realistic projection of revenues – and enhance budget sustainability. This proposal would lower the projected growth of pension expenses to 2%, matching the projected revenue growth and therefore fixing the long-term structural deficit.

ABOUT THE LEGISLATION:

On February 16, the City and General Assembly members announced the introduction of Senate Bill 2321 and House Bill 7499 to the Rhode Island General Assembly.

House Bill 7499 sponsors included Representatives Slater, Camille F.J. Vella-Wilkinson (D-Dist. 21, Warwick), Raymond A. Hull (D-Dist. 6, Providence), Gregg M. Amore (D-Dist. 65, East Providence), William W. O’Brien (D-Dist. 54, North Providence), Grace Diaz (D-Dist. 11, Providence), Anastasia P. Williams (D-Dist. 9, Providence), David Morales (D-Dist. 7, Providence), Carol Hagan-McEntee (D-Dist. 33, Narragansett, South Kingstown), Joshua J. Giraldo (D – District 56, Central Falls), Justine Caldwell (D – District 30 East Greenwich, West Greenwich), Charlene Lima (D – District 14 Cranston, Providence), Leonela Felix (D – District 61 , Pawtucket), Karen Alzate (D – District 60​​, Pawtucket), Edith H. Ajello (D – District 1​​, Providence), Marcia Ranglin-Vassell (D – District 5, Providence), Patricia A. Serpa (D – District 27 West Warwick, Coventry, Warwick), David A. Bennett (D – District 20 Cranston, Warwick), Jose F. Batista (D – District 12, Providence) and Brandon Potter (D – District 16, Cranston).

On May 26, the POB legislation passed out of the  House Finance Committee and on June 1, the POB legislation passed in the House overwhelmingly, 56-9.

The companion legislation in the Senate, Senate Bill 2321, sponsors include Senators Goodwin (D-Dist. 1, Providence), Ana Quezada (D-Dist. 2, Providence), Frank A. Ciccone, III (D-Dist. 7, Providence, North Providence), Tiara Mack (D-Dist. 6, Providence), Samuel W. Bell (D-Dist. 5, Providence), Samuel Zurier (D-Dist. 3, Providence), Jonathon Acosta (D-Dist. 16, Central Falls, Pawtucket), and Sandra Cano (D-Dist. 8, Pawtucket).

On June 6, the Senate Finance proposed a substitute to Senate Bill 2321 in the form of SB 2321A and, on the following day, recommended the passage of the legislation. On June 14, this amended legislation passed in the House by a vote tally of 33-5. The bill was signed into law by Governor McKee on June 22.

 

 

FREQUENCY ASKED QUESTIONS:

WHY A PENSION OBLIGATION BOND (POB)?
Providence is on an unsustainable path and doing nothing is not an option. Contributions have steadily increased by an average of nearly 5% per year, outpacing the growth of the City’s tax base.  Even with 100% pension payments for 10 years, Providence is only at 23.94% funding. There are risks involved with a POB, but they must be balanced with the risk of doing nothing.  Shifting payments to a more sustainable growth structure will allow the City to make more investments in current day infrastructure and programming for residents and businesses. There is broad alignment and support at the City level, and other options are extremely limited. Should the City experience historically-low borrowing costs over the course of the next five years and favorable market conditions, the City will be prepared to act with a recommendation to meaningfully address the pension crisis.

WHAT IS THE STATUS OF LEGISLATION?

On May 26, the POB legislation passed out of the  House Finance Committee and on June 1, the POB legislation passed in the House overwhelmingly, 56-9.

On June 6, the Senate Finance proposed a substitute to Senate Bill 2321 in the form of SB 2321A and, on the following day, recommended the passage of the legislation. On June 14, this amended legislation passed in the House by a vote tally of 33-5. The bill was signed into law by Governor McKee on June 22.

THE PENSION WORKING GROUP REPORT IS LONG. WHAT ARE THE MAJOR TAKEAWAYS?

  • Bankruptcy is not an option.
  • Providence should receive state legislative and city voter authorization to issue a pension obligation bond sized to deposit $500 million into the ERS if advantageous borrowing conditions and terms are met.
  • Current and future retiree liabilities are unsustainable. The City must continue to achieve reforms to active and retiree liabilities through collective bargaining.
  • Continue and expand strong fiscal stewardship.

HOW IS THIS DIFFERENT FROM THE WOONSOCKET POB?

The City of Woonsocket borrowed $90 million for its pension fund in 2002. Bond proceeds were invested during historically unfavorable market conditions and assumed a much higher rate of return (7.5%). Additionally, they borrowed at a much higher cost. Lastly, Woonsocket did not have a par-call option, as it did not exist in the market at that time. A par-call option would allow a City to buy back the debt and refinance without penalty. A par-call option is written into the Providence POB legislation.

HOW LARGE IS THE CITY’S PENSION LIABILITY?

We are on an unsustainable financial path with our pension fund, and it grows worse every year. Our pension system is currently 23% funded. The City’s pension payments are growing at over 5%, while revenue is growing at only 2%. Current pension costs consume 14.4% of the City’s general fund, and by 2035 it will be 21.4%.  Today Providence faces a $1.265 billion shortfall in our pension system as well as a $1.1 billion shortfall in retiree health benefits — making our system one of the most financially unstable in the nation.

CAN’T WE JUST CHANGE THE PENSIONS?
Many changes have been made to the pensions offered to current and future city employees. The challenge is not the benefits of current employees – 91% of the pension liability is for people already retired.

OKAY, CAN’T WE RENEGOTIATE THE PENSIONS RETIREES ARE RECEIVING?
The city has tried numerous times over several years to renegotiate the terms of the pensions awarded thirty years ago. The city was taken to court over this and lost, and then tried to get the decision overturned. Ultimately the RI Supreme Court ruled in favor of the rights of the retirees (You can read the court decisions here), so the city cannot change retiree pensions.

There is currently a freeze in place that prevents any cost of living increases for retirees, but that freeze expires in 2023.

HOW DID THE CITY ENGAGE THE PUBLIC IN THE PROCESS?

Since launching the City’s Pension Working Group in July 2021, the City has been hard at work to understand, review and recommend a path forward to meaningfully address the City’s long-term financial challenges. Mayor Elorza and City Council engaged various stakeholders through one-on-one meetings, community meetings and convenings to engage in productive conversations and recommendations over a ten month period, ultimately helping to shape the pension obligation bond legislation proposed today.

WHAT HAPPENS NEXT?
The City received overwhelming authorization from the RI General Assembly and overwhelming approval in the special referendum election scheduled for Providence voters on June 7 (passed by 70%). The City now has five years to advance the transaction. If historically-low borrowing costs over the course of the next five years and favorable market conditions occur once again, the City Council must approve the bond borrowing authority and the City could close on a bond. If all three of these approvals happen and market conditions make sense, the City Council and Administration would work with a team of financial consultants to re-amortize the City’s payment schedule and issue a bond.

HOW IS THIS LEGISLATION NOT A PROVIDENCE BAILOUT?

This is not a bailout.  Rather, Providence is seeking authorization to address one of its most pressing financial challenges, a severely underfunded pension. Without corrective action, the large and growing unfunded Employee Retiree System liability will threaten the retirement security of plan members as well as pushing the City closer to the edge of fiscal instability and precluding the ability to provide sufficient services and services.

WHY DOESN’T THE CITY JUST FILE FOR BANKRUPTCY?

Bankruptcy is not an option as bankruptcy protection is not available to the City. Providence has maintained stable and prudent fiscal positions and is not, nor will be in the near-term, insolvent. Today, the City can pay its current bills, its fiscal outlook is improving and it has closed historical deficits.

HAS ANYONE ELSE DONE A POB AT THIS SIZE?

Yes. One recent example of a municipality who took advantage of current market rates is Quincy, Massachusetts. In June 2021, Quincy approved a $475 million 30-year bond to pay down the city’s pension obligation. For context, the City of Quincy had a fiscal year 2022 budget of $345 million.

ISN’T THIS RISKY?

Any major financial endeavor involves some risk, but the high cost of doing nothing is extremely clear. There are also some guardrails in place to limit risk. The SUB-A POB legislation:

    • Matches City’s revenue growth and annual pension payments. Currently, the City’s pension expenses are growing at over 5% while revenue is growing at only 2%. This POB would lower the projected growth of pension expenses to 2%, matching the projected revenue growth and therefore fixing the long-term structural deficit.
    • Allows Providence voters to be heard. A special referendum election is scheduled for June 7, where Providence voters will be asked if they support the City in pursuing a pension obligation bond.
    • Includes protections. Legislation includes guardrails endorsed by the Pension Working Group to ensure the City does not take on a bigger financial liability than it can handle.
      • No annual pension payments will be less than today’s payment and no bond payments can be deferred.
      • Union employee benefits are capped to ensure benefit costs do not exceed the City’s ability to pay in the future
      • A 10 year par call, enabling the city to refinance the debt.
      • A 4.9% interest rate cap.
    • Is non-binding. This proposal does not bind the City to issue a POB if market conditions are not favorable.
    • Is a lower amount vs. last year’s proposal. Last year’s proposal requested authorization to borrow $704 million. This legislation requests $515 million.
    • Includes a $10 million payment towards OPEB (Other Post Employment Benefits) upon transaction completion. Helps to address the City’s healthcare liability.

HOW DID THE CITY’S PENSION SYSTEM REACH THIS POINT?
In the 1990s and 2000s, the City failed to make 100% of annual pension payments, and provided retirement benefits that exceeded what the City could afford. While there have been efforts to address the situation, nothing has made a significant enough impact to permanently address the problems. The pension system is just 23.94% funded and the Unfunded Liability (UAL), or debt, totals $1.248 billion as of 6/30/21.