Trading Water for a Fix

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With his criticism of Democrat Governor Gina Raimondo for appointing Democrat Senate President Dominick Ruggerio’s son, Charles, to the Narragansett Bay Commission, Republican Mayor of Cranston Allan Fung has drawn attention back to the City of Providence’s perennial effort to turn its big water asset into a one-time payment, largely to infuse the city’s pension system with cash.

The immediate controversy is that Ruggerio, the younger, works in multiple roles as a lawyer for the city, but his appointment is most significant as a flash point to illustrate how government works, in Rhode Island.  The city has been after this for years.  In 2013, it took the form of an objectionable regional water authority.  Now, the strategy is to bring in the quasi-public Narragansett Bay Commission.

In every case, the goal appears to have been to come up with some excuse to saddle taxpayers and/or ratepayers with the additional burden of that one-time payment to the city.

Making matters worse is the general evidence that thinking about pension funds in this way is a mistake.  Just after the turn of the century, for example, the City of Woonsocket took on debt with the calculation that its investment returns would exceed the interest, and it could get its pension system on track.  That didn’t work out so well.

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The Providence deal is different, of course, and would require a more thorough review prior to decisive pronouncements, but the impression one gets is that the primary difference is that the Woonsocket deal saddled the same people who owed the pension debt with the bond debt, while Providence is looking for somebody else to take on the new debt. Of course, Providence will also have offloaded an asset as a one-time part of the deal.



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