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
Add to Briefcase
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.

What We're Following See More »
Trump Tries to Walk Back Helsinki Comments
50 minutes ago
Russia Looks to Retaliate with Indictments of Its Own
1 hours ago

"Russia wants to charge former Ambassador Michael McFaul and several U.S. intelligence officials with financial crimes, Russian officials revealed Tuesday. Russian President Vladimir Putin broached the topic during his summit with President Trump, when he offered to allow Special Counsel Robert Mueller to attend the questioning of Russian spies accused of conducting cyberattacks against the Democratic Party in 2016. In exchange, Putin’s team wants to question McFaul and at least three National Security Agency officials in connection to a case involving Bill Browder, a hedge fund manager who has led an international effort to impose sanctions on Russian officials implicated in human rights abuses."

European Commission President to Visit White House
5 hours ago

With President Trump back from a trip in which he seemed to undermine European alliances while cozying up to Vladimir Putin, the White House has announced that European Commission President Jean-Claude Juncker will visit on July 25. According to a statement, the two "will focus on improving transatlantic trade and forging a stronger economic partnership."

IRS Relaxes Reporting Rules for Dark Money Groups
6 hours ago
House Launches Investigation Into VA Nursing Homes
6 hours ago

"The House Veterans Affairs Committee has launched an investigation into care at the VA’s 133 nursing homes after learning the agency had given almost half of them the lowest possible score in secret, internal rankings. The probe follows an investigation by The Boston Globe and USA TODAY that showed 60 VA nursing homes ... rated only one out of five stars for quality last year in the agency’s own ranking system." Internal documents revealed that "patients in more than two-thirds of VA nursing homes were more likely to suffer pain and serious bedsores than their private sector counterparts, and that "VA nursing homes scored worse than private nursing homes on a majority of key quality indicators, including rates of anti-psychotic drug prescription and decline in daily living skills."


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.