Providence

How One Mayor Pulled Back His City From Potential Bankruptcy

Providence’s mayor tamed his city’s money problems in just one term. Will that propel him to statewide office?

A view of the Providence City Hall, illuminated one night.
National Journal
Emily Badger
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Emily Badger
Dec. 16, 2013, 4 a.m.

This art­icle is part of a weeklong Amer­ica 360 series on Provid­ence.

PROVID­ENCE, R.I. — An­gel Taver­as had been in of­fice barely eight weeks when his chief of staff walked in with the news. Mi­chael D’Amico had just come from a somber meet­ing with the city’s mu­ni­cip­al fin­ance re­view pan­el. D’Amico sat in the an­cient couch in the may­or’s second-floor City Hall of­fice. The win­dow be­hind him looked out on Provid­ence’s “Su­per­man build­ing,” a city icon strik­ingly like the Daily Plan­et tower of com­ic-book fame, which was on its way to total va­cancy.

Hardly any­one in town foresaw the num­ber that D’Amico brought with him: Provid­ence was fa­cing a $110 mil­lion struc­tur­al de­fi­cit, a short­fall siz­able enough to bank­rupt the city in 2012.

“The num­ber it­self was sur­pris­ing,” D’Amico re­calls, “but the per­cent­age that that rep­res­en­ted was even more shock­ing.” Provid­ence was look­ing at a $600 mil­lion an­nu­al budget that would now de­mand con­ces­sions from every­one — the fire­fight­ers, po­lice, teach­ers, city uni­on em­ploy­ees, tax­pay­ers, re­tir­ees, and ma­jor com­munity in­sti­tu­tions.

Taver­as, a lanky former hous­ing-court judge with rim­less glasses, had been elec­ted may­or ex­pect­ing a de­fi­cit maybe half this size. But Provid­ence’s ad-libbed meas­ures dur­ing the re­ces­sion — spend­ing down re­serves to keep ser­vices go­ing and taxes low — were now about to catch up to the city shortly in­to his term. Well be­fore De­troit would set off a rash of mu­ni­cip­al bank­ruptcy fears two years later, Taver­as and Provid­ence would con­front a con­flu­ence of a po­ten­tial bank­ruptcy’s worst signs: un­fun­ded pen­sion ob­lig­a­tions, a dis­ap­pear­ing in­dus­tri­al base, a burst hous­ing bubble, and steep cuts in state aid.

“You go in­to sur­viv­al mode,” Taver­as says. “This is about mak­ing sure that the city is able to sur­vive.”

On the eve of 2014, Provid­ence no longer looks to be in im­min­ent danger. And Taver­as is run­ning on the story of the city’s turn­around in his bid to be­come Rhode Is­land’s first His­pan­ic gov­ernor. His nar­rat­ive is com­pel­ling: Taver­as grew up in Provid­ence the son of Domin­ic­an im­mig­rants. He likes to say that he went from Head Start to Har­vard be­fore com­ing back home. By in­her­it­ing the city at one of its low­est points, he can also now claim the mantle of the may­or who re­fused to let Rhode Is­land’s cap­it­al city fail even as ques­tions re­main about its long-term fisc­al chal­lenges.

The may­or’s of­fice was also a spring­board for Taver­as’s pre­de­cessor, Dav­id Ci­cil­line, who is now a U.S. con­gress­man rep­res­ent­ing Rhode Is­land. He was widely cri­ti­cized for ob­scur­ing the city’s true fin­ances when they came out on Taver­as’s time. Ci­cil­line’s con­gres­sion­al of­fice did not re­spond to re­quests for com­ment.

Part of Taver­as suc­cess in tam­ing the city’s de­fi­cit came from his de­mean­or, uni­on and non­profit lead­ers say. He does not yell. He did not stake out pub­lic de­mands of the uni­ons. His staff shared bad news with them privately first. Uni­on lead­ers were also in­vited to bring their own ac­count­ants to the city’s books.

“There had been hun­dreds and hun­dreds of art­icles and op­por­tun­it­ies where pre­vi­ous ad­min­is­tra­tions had gone after us, de­mon­ized us, gone after cer­tain be­ne­fits,” says Paul Doughty, the pres­id­ent of the loc­al fire­fight­ers uni­on, who fought for years with Ci­cil­line. “These guys had the chance to do that at a level nev­er seen be­fore, and they didn’t even touch it.”

The city in­stead gave each uni­on a tar­get for the sav­ings it needed, and then asked them to design their own paths to achieve it. When Taver­as pub­licly an­nounced the scale of the de­fi­cit in early March 2011, he also cut his own paycheck by 10 per­cent. That yiel­ded the un­in­spir­ing an­nu­al sav­ings of $12,500. But the ges­ture later al­lowed him to say that of all the sac­ri­fices the city de­man­ded, the largest salary cut was his own. 

The deals slowly rolled out over the next two years. The pub­lic-em­ploy­ees uni­on agreed to 1 per­cent pay cuts and waived raises. The fire­fight­ers came next, of­fer­ing lar­ger health care co-shares, and later pen­sions for new em­ploy­ees. The school day got longer for teach­ers. Sick days were re­duced. Dozens of pub­lic em­ploy­ees agreed to re­tire. One by one, the city’s sev­en largest tax-ex­empt non­profits agreed to make vol­un­tary pay­ments in­to the city’s cof­fers. Taver­as also en­ticed the City Coun­cil to raise prop­erty taxes by about 6 per­cent for the av­er­age homeown­er.

The last set­tle­ment came in April of this year, when a Su­per­i­or Court judge ap­proved the city’s pen­sion agree­ment with re­tir­ees. The deal re­duced the city’s pen­sion li­ab­il­ity by an es­tim­ated $170 mil­lion, and, cru­cially, it per­mits Provid­ence to shift its re­tir­ees older than 65 off of private in­sur­ance and onto Medi­care.

“Without hes­it­a­tion, if we lost that law­suit, we would have filed Chapter 9,” Taver­as says. “There was just no way to avoid it”¦. I didn’t have any­thing more that I could do.” That April set­tle­ment marks the last time any­one around City Hall re­calls dis­cuss­ing the pos­sib­il­ity of bank­ruptcy, and it was a wa­ter­shed for the city.

“He de­serves a lot of cred­it for the turn­around, be­cause he has a lead­er­ship style that worked very well,” says Dar­rell West, a long­time Provid­ence polit­ic­al ob­serv­er and former res­id­ent, who is now the dir­ect­or of Gov­ernance Stud­ies at the Brook­ings In­sti­tu­tion. “He was able to bring to­geth­er con­tend­ing parties on pen­sion re­form and pro­duce a deal that saved the city money without ali­en­at­ing valu­able work­ers. That’s something that’s very dif­fi­cult to do — and the state was not able to do that.”

Uni­ons are still chal­len­ging the state of Rhode Is­land’s broad­er pen­sion over­haul in court.

This fall, the rat­ings agency Stand­ard & Poor’s up­graded its out­look on Provid­ence’s debt from neg­at­ive to stable. Just last month, Taver­as an­nounced a tent­at­ive budget sur­plus of about $1 mil­lion dol­lars, money that will start to re­store the city’s rainy day fund.

Yet, there’s a case to be made that Provid­ence isn’t ready to let go of Taver­as. A mu­ni­cip­al de­fi­cit may be solved in three years, but the same can’t be true for the un­der­ly­ing dy­nam­ics that led to it. “You can’t ful­fill a broad vis­ion for eco­nom­ic de­vel­op­ment, for chan­ging the course of a city, in one or two terms,” says Hil­ary Sil­ver, dir­ect­or of the urb­an-stud­ies pro­gram at Brown Uni­versity.

John Sim­mons, the ex­ec­ut­ive dir­ect­or of the Rhode Is­land Pub­lic Ex­pendit­ure Coun­cil, cau­tions that ques­tions still linger about what will hap­pen in Provid­ence in 2014, in 2015, in 2016, should the broad­er eco­nomy start to un­ravel again. It will be tempt­ing for an­oth­er may­or to draw on whatever money Provid­ence tucks away now.

The city’s pro­spects are also closely tied to Rhode Is­land’s tra­ject­ory. If the state con­tin­ues to struggle, then the city will too — with aid dry­ing up and prob­lems passed down to loc­al gov­ern­ment.

Taver­as soun­ded up­beat, though, the week after news ran in the Provid­ence Journ­al that the city had ac­quired a sur­plus again. He also de­livered a key­note speech at Brown Uni­versity to a small con­fer­ence on the role of Latino polit­ics in this chan­ging state. His mes­sage soun­ded like a dry run of his pitch to the state: a pitch in which he em­phas­izes his Rhode Is­land up­bring­ing as well as his fisc­al chops.

“I want people to look back on my ten­ure as may­or and see that it was a time of great chal­lenges, great dif­fi­culties, but that we brought people to­geth­er, we faced them head on,” he said. “And were able to really solve a lot of our prob­lems.”

Still, it won’t be pos­sible to judge the core of his ar­gu­ment for sev­er­al more years — well after voters de­cide on their next gov­ernor.

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