Dave Talan and William Ricci: In Providence, Keep the Water System, Fix the Pensions


The Providence Republican Party has come out against Mayor Jorge Elorza’s proposal to monetize the Providence water system.

The Mayor’s plan is designed to protect the city’s pension and health plan for retirees, which is an estimated $2,000,000,000 in debt (or $12,000 for every man, woman, and child in the city).  The Mayor’s plan is also designed to delay the city of Providence going into bankruptcy, at least until a new Mayor is in office.

We have 3 reasons for opposing the Mayor’s plan.

First, water bills would double for everybody in order to get back the $300,000,000 that the mayor hopes to get by monetizing the system.  We recall that city residents’ sewer bills doubled some years ago when the city sold the sewer system to the Narragansett Bay Commission.

Our water might become polluted.  We worry that a private entity might try to sell some of the watershed property around the Scituate Reservoir, to private developers to build houses.  The watershed land is what filters out pollutants, before they can reach our drinking water supply.  Remember the disaster in Flint Michigan, when a new water supply owner tried to save some money, and ended up poisoning the water supply.

The mayor’s plan does nothing to resolve the overall financial problem with the pensions and prevent the problem from reoccurring in the future.

We do agree with Mayor Elorza on one thing.  If we do nothing about the unfunded pension and retiree health plans, the city will definitely go bankrupt in the near future, and this would be a very bad thing for Providence residents.  The mayor has demanded that opponents of his plan should offer an alternative.  So, we offer the following ideas to cut costs, instead of raising taxes and fees.

Some retirees are making so much money that they would have to take a pay cut if they came out of retirement to go back to their old jobs. One retiree is actually collecting a quarter of a million dollars each and every year.  This is due to excessive cost-of-living adjustments (greater than the rate of inflation) given to employees during the Cianci administration. No retiree should collect more money than current workers doing their old job, and their pensions should be reduced accordingly.

No retiree should be able to collect a pension before the age of 60.  Now, some employees retire in their 40s, collect a pension immediately, and go to work in another job.  When Governor Raimondo reformed the state employees retirement system, she raised the minimum retirement age for all current and future employees. Providence needs to do the same.

The city should get out of the pension business entirely.  New employees should receive Individual Retirement Accounts (IRAs), which they own themselves.  The City of Cranston did something similar a few years ago.  Under Mayor Allan Fung, 401(k) retirement plans began in 2010 for the Teamsters Union, and in 2015 for the Laborers Union.  We should follow Cranston’s example.

The mayor of Providence has previously rejected these suggestions. He has said any changes to the union contracts are off the table due to a consent decree signed by his predecessor. And he has said that if the city goes bankrupt, an overseer might sell the water system anyway.

We have consulted with the top Rhode Island expert on municipal bankruptcies, Judge Robert Flanders, who managed the bankruptcy in Central Falls and advised other towns on restructuring to avoid a bankruptcy. We learned the following:  If the city were to go bankrupt, the absolute last thing that an overseer would do is to sell the city’s assets.  The first thing he would do is to force the unions to renegotiate contracts.

The threat of losing everything would be enough to force them to negotiate seriously. When Central Falls went bankrupt, retirees lost up to 60% of their pensions.  If Providence were to go bankrupt, retirees would probably lose everything.  (Changes in law since the Central Falls bankruptcy give first preference to bond holders, and retirees can only get what is left, if anything.)  This serious threat would be enough to bring them to the table.

We call on Mayor Elorza to abandon his quest to monetize our water system, and to consider instead our serious suggestions on how to reduce the size of our pension debt.

David Talan and William Ricci are the Co-Chairs of the Providence Republican City Committee.  They can be reached at DaveTalan@aol.com or ProvidenceRepublicans@gmail.com


Featured image: The Providence reservoir by air.

  • Christopher C. Reed

    Mashpaug Pond! pretty funny…

  • Rhett Hardwick

    I can think of no reason to resist bankruptcy, we should welcome it. “`It is an idea whose time has come”.
    As to the pensioners losing out to the bondholders, that is the way of things. The “secureds” are intended to win, it is built into the system. That is no secret. If that knowledge has been withheld from the pensioners, that is not the bondholders fault.

  • Rhett Hardwick

    I have no direct knowledge of the water system. If it is like almost all others, it is ancient and there has been a lot of “deferred maintenance”, being operated on a “fix it when it breaks” regime. I suspect any “buyer” would move to another system, vastly increasing costs. I am reminded of the federal injunction on the city of Boston, which resulted in the Massachusetts Water Resources Agency (MWRA, according to Howie Carr “Mostly We Ride Around”) In cities close into Boston, water bills approached tax bills.