On Sunday Night’s Coalition Radio broadcast on WPRV (790 AM), host “PO Taxpayer” moderated a panel consisting of former Central Falls Receiver Robert Flanders, current Republican Providence Mayoral candidate Daniel Harrop, and Rhode Island government-finance watchdog Michael Riley; at one point the host called this “The Great Providence Bankruptcy/Pensions Summit” (tagline: “The politicians won’t touch it, but we will”). Over the course of the conversation, three topics relevant to the Rhode Island governor’s race, the Providence Mayor’s race, and the state’s General Assembly races meriting further consideration were raised.
The first issue was raised during Robert Flanders’ description of some of the details of the Rhode Island receivership process:
Robert Flanders: One peculiar thing about Rhode Island, peculiar in a sense that it’s different from other places, is Rhode Island has chosen to protect its bondholders through legislation. So, unlike Detroit and some of these places in California where the bondholders are in the crosshairs as much as the pensioners or even more so, as in the case of Detroit, because of the fear that making bondholders take a hit in a municipal bankruptcy would cause interest rate rises and therefore tax increases, Rhode Island decided to protect its bondholders through a statute. That means all of the cuts need to be borne by the other creditors and stakeholders rather than the bondholders in the bankruptcy context, and that is indeed what happened in Central Falls.
The law Judge Flanders is describing was written about at Anchor Rising here. A question of immediate significance, especially if receivership is a possibility for certain Rhode Island municipalities in the near term, is whether the candidates for Governor and General Assembly believe that the state’s Wall-Street-first law regarding municipal priorities, signed in 2011 by Governor Chafee, needs to be examined, modified or even possibly repealed?
The second issue was brought in during exchange between host PO Taxpayer and Providence Mayoral Candidate Daniel Harrop, directly referencing several other high-profile Rhode Island candidates:
PO Taxpayer: It would appear that Gina Raimondo, there’s a great possibility that she will be our next governor….Do you think that in a highly Democratic regime at the state level, there will be an appetite to promote bankruptcy, at any of these municipalities…
Daniel Harrop: I haven’t spoken with Mr. Healey, but I’ve spoken with both Ms Raimondo and Mayor Fung. They both understand the Providence situation very well. I don’t think either of them will object to us pushing ahead in that manner and in that fashion….
PT: So Gina unleashed as Treasurer sought aggressively to work out pension reforms. Gina unleashed as governor, no fears no qualms?
DH: I don’t think there will be any qualms with her moving ahead that way. I think she realizes that Providence has to get its house straightened out….We are looking at a 2 billion dollar problem with just our pension fund, never mind that we need a billion dollars in our schools just to make them safe.
Obviously, we know that Dan Harrop favors taking Providence into receivership as soon as possible, and the other two candidates for Providence Mayor, Buddy Cianci and Jorge Elorza, don’t support receivership for Providence at all, but what about the candidates for Rhode Island Governor, who if elected would become strongly involved in a receivership process? Do they plan to have their fiscal staffs look into putting Providence into receivership with any urgency? And do they consider it important to keep the public informed about the likelihood of a Providence receivership, or would they only inform the public in this area when it’s about to happen?
The final issue followed right from the second, via a question posed to Mike Riley, which he answered with the help of some historical research:
PO Taxpayer: Is it possible for Providence to go to the borrowing well, with this kind of cloud hanging over our head?
Mike Riley: Well, I don’t know if I’m breaking any news or not, but reading over the old investment meetings of Providence, Buddy Cianci on three separate occasions had strong fights with the Assembly about getting pension obligation bonds for Providence. I wouldn’t be surprised if he was thinking that way at all. I think that’s a very bad way out.
Especially since Rhode Island has never showed any particular immunity to the lure of short term fiscal fixes; the question here is whether a Mayor Cianci (or a Mayor Elorza) would consider using an instrument like a pension obligation bond to deal with the immediate financial crisis in Providence — and, if so, whether the current candidates for Governor and General Assembly would consider approving one for Providence, or for any other Rhode Island municipality?