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Woonsocket Deficit Fix Hinges On Union Negotiations

Savings through concessions will be city's first, biggest hurdle in multi-faceted plan.

 

Editor's note: The total deficit figure comes from the $10 million cumulative deficit, combined with the $4.5 million the Budget Commission added to the School Department budget in 2012, Finance Director Thomas Bruce said, bringing it up to $66.9 million.

The City's $14.5 million deficit can be dispelled with union concessions, cost cutting and a "deficit reduction legislative package" including a smaller supplemental tax than proposed in 2012, said City Finance Director Thomas Bruce.

If most of those elements don't fall in place before June 30, the deadline for sending out tax bills, Woonsocket will find itself in the same boat as last year, when $12 million in state aid had to be advanced by the Budget Commission to keep the School Department afloat.

The Commission could do that, Bruce said, but it could also move the city straight into bankruptcy, robbing taxpayers, union leaders and elected officials of any control in the process. A receiver would get all the Budget Commission's work so far, he said, but would be under no obligation to follow their lead.

Of the tools in the Budget Commission's plan, the union negotiations have the power to make or break a solution, since they could account for more than half of the deficit. If negotiations don't deliver significant savings, "It's more likely that we will go into receivership," Bruce said.

Now, Bruce said a lesser supplemental tax (the exact amount of which relies on savings from other areas) is a less important part of the solution, one of four elements of a legislative deficit reduction package. The other three parts the city will send to the General Assembly are:

  • A bill raising the 8 percent reimbursement on subsidized housing to 15 percent.
  • Transfer of the municipal pension system into the state system.
  • Stretching the amortization of the pension liability from 5 to 30 years.

Bruce said the deficit can be solved without a supplemental tax (which would be permanently added to the base), though it would be more difficult. The deficit cannot be solved without the union concessions, he said.

With the Woonsocket Budget Commission's baseline 5-year projection, a comprehensive Excel document accounting for every element of the budget, it's clear what cuts in pensions, staffing and health care will do to the deficit, Bruce said. The document can instantly show the results of altered line items. The trick is to come up with a combination of changes that, along with a supplemental tax, will wipe out the red ink.  

During a Jan. 28 City Council Workshop, Council President and Commission member John Ward said there aren't many big areas to attack for savings.  "The only big drivers here are health care, pension COLA (Cost Of Living Allowance), and staffing," Ward said, according to audio of the meeting posted at MyWoonsocket.com

The city met with union leaders in the fall, but negotiations were put on hold while officials waited for the 5-year projection. With it, they have information that's reliable and accountable, clearly showing what union concessions will do to the city's financial situation. With that in hand, "Negotiation meetings can now continue," Bruce said.

One big item the city will need the unions' cooperation on is health care. To realize enough savings to fix the problem, Bruce said, the city will need to bring all its employees, including those represented by unions and retirees, under the same health care plan with Blue Cross.

That plan would include a deductible of $500 - $1,000 and a 20 percent co-pay. "That's very competitive to the private sector," Bruce said. 

Getting everyone under one plan will be crucial. "Healthcare savings potentially could repair more than half of the budget gap," Bruce said.  

But time is running out. "We cannot go on and on with negotiations," said Mayor Leo Fontaine, also a member of the Commission, during the Jan. 28 workshop. If the unions and the city can't work out a deal, "Then the commission is going to need to know that as soon as possible," to know whether to go into the "next step" - receivership.

Nelson Aldrich February 01, 2013 at 01:30 PM
Woonsocket also needs to bring it's creditors (bondholders) to the table.Thanks to the clueless General Assembly that put bond ratings above all else,creditors will be off the hook. And for any non-believers out there...Woonsocket's bond rating is still pathetic and the Central Falls "bankruptcy" wasn't even a bankruptcy at all.I'd be willing to bet that there's a lot of politicians out there heavily invested in Muni debt.
Nelson Aldrich February 01, 2013 at 03:19 PM
Visa and Mastercard 1,Muni employees and Taxpayers 0.Woonsocket's so-called fiscal disaster simplified.
give me a break February 01, 2013 at 04:28 PM
with all the stores leaving you gonna need more than that to make up for the tax lost from these stores
Novan for Life February 01, 2013 at 04:38 PM
good luck trying to get those concessions from the unions theyve already given up alot for this city. send a reciever in here dumb and dumber have killed this city with ignorance and stalling.
Memere February 01, 2013 at 09:57 PM
It is not the Union employees that are getting life-time medical benefits for themselves and their spouse after they retire. It is the staff at city hall that is getting that benefit, or so I have been told by someone who used to work at City Hall. Perhaps the Mayor should look at his own staff before he asks the Unions for more money.
Still Hope February 01, 2013 at 09:59 PM
Nice try at your conspiracy theory. You are trying to imply these politicians hold some degree of intellect in order to manipulate the bond market as you suggest. The problem is that anyone that would subscribed to the pathetic rates of municipal bonds while the stock market and commodities are at their highest point EVER, suggests a less-than-savy investor. The point: our leaders are not as scheming as you might want them.
Still Hope February 01, 2013 at 10:11 PM
The plan is structured on 5 wishes: 1. Hope the Governor gives the city more $ 2. Hope the State absorb the City's pension plan 3. Hope the GA changes the law to allow extension on debt 4. Hope the unions take a pay cut 5. Hope the people take a supplemental tax hike How many of these wishes do you think will hold water? This is the same "plan" from 2 years ago. Talk, talk, talk. My name is Still Hope, but it sure is running low.
Still Hope February 01, 2013 at 10:12 PM
This, I feel is why they are saving another run at the supplemental tax. They want to have an ace in hole for when they fall short of commercial tax revenue.
Mew February 01, 2013 at 11:40 PM
None of these wishes will come true, and don't forget subsidize housing, they are doing very well in this city while we pay the big rents. I don' tthinkWoon. will survive the mess we are in, we do need new leadership, Mr. Fontaine and Ward are not good leaders. We need a whole new Administration. I just hope that the citizens of Woon Will remember this when the time comes for all to go out and vote.!!
Nelson Aldrich February 02, 2013 at 01:04 PM
Nice try at debunking my "conspiracy theory".If you don't think a politician is self serving (especially on what is now a risk free bet), you still have a lot to learn.
Still Hope February 02, 2013 at 09:49 PM
Politicians are indeed self serving. RI politicians, and most specifically those serving Woon, are business incompetent. Do some members push through liquor licenses for friends? Absolutely. Do some members put relatives in government jobs? Of course. Do the same people that loaned $100M for a video game during the worst economy ever, have the know how to secure their 6% gains in muni bonds? Not so sure.
RonW February 02, 2013 at 11:16 PM
Here is a simple question. What has The Budget Commission accomplished? Other than overruling The City Council.
Ken Schauer February 04, 2013 at 06:25 AM
Outsider observation... Higher wages yield higher city revenue. If the only hope he can see is by asking for union concessions, panhandling from the state and shirking responsibilities, maybe you need someone who can actually think in that position.
Nelson Aldrich February 04, 2013 at 02:17 PM
Sure they do...it was called Fiscal Stability Act and was passed in 2010.It made any kind of default on bonds essentially illegal.Bonds were never intended to be risk free investments (they're currently tax free). I say that some covered their bets under the guise of maintaining credit ratings.Ever hear of Celona,Martineau,McCauley (just to name a few)?That State House gang is corrupt.I know this is conjecture,but it's also food for thought.
Nelson Aldrich February 04, 2013 at 02:21 PM
Here's another one,are Fontaine and Ward collecting a commission stipend?To answer your question....nothing,except kicking the can down the road.
Keep Smiling February 13, 2013 at 06:24 PM
Oh my God!! Isn't the following what the mayor has been saying for over a YEAR? But time is running out. "We cannot go on and on with negotiations," said Mayor Leo Fontaine, also a member of the Commission, during the Jan. 28 workshop.

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