Scott MacKay Commentary: Providence Water and Elorza's Pension Finance Plan

May 4, 2018

Mayor Jorge Elorza
Credit RIPR

Providence is looking to solve a yawning employee pension problem by leveraging the water system that supplies drinking water to 60 percent of Rhode Island. RIPR political analyst Scott MacKay says this plan deserves more scrutiny.

It’s no secret that Providence’s city employee pension system faces a river of red ink that threatens the capital city’s financial future. Now comes a new report by State Treasurer Seth Magaziner that shows things are even worse than the experts thought.

The Providence pension system is financed at only about 26 percent of liabilities – a huge obstacle to putting the city on a sustainable financial footing. More than two of every $10 in Providence’s tax levy now goes towards pensions. As is often the case, this troubling status has its roots in the administrations of the rascal king mayor, the late Buddy Cianci.

Cianci was a master of buying the votes of unionized city employees with taxpayer dollars. It’s easy to see why he won endorsements and campaign contributions from unions –he gave away the store. Under his reign, retired firefighters were granted six percent annual cost of living increases in pensions. He was made aware of the coming pension avalanche in 1995, during his second tenure as mayor. The pension, Cianci was told, would need an increase from $19 million in annual contributions to $42 million.

The mayor’s answer: “The city will no longer exist if we have to come up with that kind of money.”

Records show that Cianci, the ultimate Providence cheerleader, failed to contribute the $88 million  owed to the retirement system from 1995 to 2002. So it’s no surprise that a mountain of pension liabilities now jeopardizes city finances and could slide  the city into receivership.

The day of reckoning is here and Mayor Jorge Elorza is trying to deal with it. His latest idea is one long talked about at city hall—trying to squeeze some money from the city’s greatest asset –the Scituate Reservoir- fueled water system that supplies drinking water to more than half the state.

The legislation Elorza is supporting would allow the Narragansett Bay Commission, which runs the sewer systems in Providence and surrounding communities, to take over the Providence water system. The measures would also prevent the Public Utilities Commission, the state regulators, from authority over the sale or lease of the water system.

The Providence Water Supply Board controls the reservoir and the piping systems that provide some of the nation’s best drinking water to Rhode Island communities. Begun in 1915, the reservoir flooded a natural bowl of the headwaters of the Pawtuxet River, creating the biggest freshwater body in the Ocean State.

It meant clean water for Providence  in an era of rapid population and industrial growth. This system has worked well for more than a century.

Providence built and has long maintained it, but city government gets nothing from this asset. This too, harks back to Cianci. In his first administration in 1980, Cianci tried to tap into the reservoir to bail Providence out of financial difficulty. But the General Assembly and then-Gov. Joe Garrahy stepped in and barred the city from using the water system as a revenue source.

While Senate President Dominick Ruggerio, who represents the city, appears poised to approve the merger of the bay commission and Providence water,  House Speaker Nick Mattiello of Cranston is opposed.

Providence deserves a fair return for the water it sells to other communities. But the city shouldn’t be allowed to use a precious public asset as a piggy bank to bail the pols out of decades of bad decisions.

John Simmons, director of the Rhode Island Public Expenditure Council, testified recently on Elorza’s plan. He cautions that the proposal needs more public vetting, particularly on the provision to strip  oversight from the PUC.

Back in the 1970s, Warwick’s finances were troubled by seriously underfunded pensions. At the time, the city put into place a long-term plan to shore things up. Every mayor and city council since has prudently financed the pensions. Mayor Scott Avedisian predicts that within a dozen years, Warwick won’t have any unfunded pension liabilities.

Would it really be fair to charge Warwick water customers more every time they turn on their faucets to subsidize Providence pensions?

Scott MacKay’s commentary can be heard every Monday on Rhode Island Public Radio at 6:45 and 8:45 and at 5:44 p.m. You can also follow his political reporting and analysis at the “On Politics” blog at RIPR.org