Even with max tax, city faces $78 million deficit over 5 years

Cushman presents conclusions at library meeting

Posted

As a former city councilman and a school committee member, Bob Cushman has spent years trying to get people to listen to him as he warned about an impending fiscal doom hanging over Warwick – a cloud rooted in unsustainable retiree healthcare and pension costs.

He found a captive audience in the Warwick Public Library last Wednesday, as around 80 residents filled the main meeting room to attend the first meeting of the “Warwick Financial Crisis Committee,” a group of citizens concerned about the fiscal outlook of the city that was riled up about the recent revaluation, which they fear will price people out of their long-time home city.

“We are not in good shape in the city of Warwick,” Cushman said to begin the presentation, adding later that, “Today I’m not going to talk about the specific things we need to do to solve this problem. I just want you to be aware of this. I’ve said this stuff before, and I’ve gotten a lot of criticism. These are the numbers.”

The presentation broke down budgetary numbers from city records over the course of a 15-year period, and showed that, according to his data, the city is on track to rack up an approximately $78 million deficit over a five-year period – and that is assuming that the city raises the tax levy by the maximum allowable rate of 4 percent each of those years.

The presentation included a slide showing a breakdown of municipal spending since 2004. In 2004, approximately 19 percent of the city budget went to retiree expenses, while 57 percent went to active employee costs. Fifteen years later, retiree costs have jumped to 28 percent of the total budget, accounting for 43 percent of all cumulative new spending in that time frame – the same percentage of money spent on active employees over that stretch.

“We’re spending as much money for people that used to work for the city that performed services in the past than the employees who are currently performing services for us today,” Cushman said. “That’s a big problem.”

For better context, Cushman told the audience to imagine they ran a business where 43 cents of every dollar made had to go towards paying former employees that no longer work for that business.

“What would you do? You’d probably have to close up shop,” he said. “It wouldn’t be worth staying in business. That’s the problem we have right now in the city of Warwick with the city budget.”

Cushman pointed to multiple policies regarding pension and OPEB (other post-employment benefits) expenses that contributed to unsustainable retiree costs, including lifetime healthcare for city employees and their spouses after they retire with 30 years of service with no co-pay, annual 3-percent compounded cost-of-living adjustments (COLAs) for retired firefighters and police – among others, like a lifetime prescription drug plan for those aged 65-plus that has a $600 co-pay before going unlimited.

“We have very, very generous retirement plans in the city,” Cushman said. “In the next five years we have to pay $280 million for pensions and healthcare. That’s about $60 million a year, about 30 percent of the city budget for this.”

He mentioned how six people who recently retired from the fire department had contributed $750,000 into the fire pension system throughout their careers, and how those same six individuals will draw $10 million from the system over 20 years.

Cushman claimed that former mayor Scott Avedisian “hid a lot of this,” leading many people to believe that the city was in a much better financial position. He said city officials must be diligent in addressing these costs, otherwise they will only compound and get worse. He emphasized transparency and honesty as the most important factors in local governance moving forward.

“I’ve been at the budget hearings the last 10 to 15 years. I knew this was going on,” he said. “I’m not happy this is happening, but I’m not surprised that this happened… One of the things that we want? Transparency from our elected officials. Tell us the truth. Don’t hide the facts. We’re all adults in the room, and I think we can handle what the situation is.”

Cushman has faced backlash for his work before, once resulting in a publicized tiff with the fire department where members of the fire union allegedly contacted his employer in an attempt to get him fired. He emphasized at the meeting that none of his information was an attempt to personally single out any one person or entity within the city.

“I don’t want to be accused of attacking anybody. I’m not attacking anybody, I’m just stating the facts,” he said. “The changes are not going to be easy but they need to be made. We can’t afford this anymore if we want to have a sustainable city and if we don’t want to be taxed out of our homes.”

On schools

While Cushman didn’t let schools off the hook for their own fiscal problems, he pointed out that the schools do not face the same retiree expense problem faced by the city, likely he reasoned because school retirees do not enjoy lifetime healthcare benefits.

The school department’s primary driver of costs, as he showed in a chart, is active employee salaries and benefits, which accounts for about 73 percent of the school’s nearly $170 million budget.

Cushman echoed the fact, which the school department regularly points out, that since they were slashed 5 percent in total funding in 2011, schools have been essentially level-funded year after year, and are at the same funding level in 2019 as they were around 2010. He showed how, of $74 million in cumulative new property tax dollars made by the city between 2004 and 2019, 64 percent of those ($47.7 million) went to the city, with $26.3 million going to the schools.

Cushman also noted that the percentage split of the budget between the city side and school side shifted from a 60-40 split in favor of the schools in 2004, to 52-47 percent in 2019. To survive this reality, Cushman pointed out how the schools have consolidated buildings and cleaved employment by about 200 positions between 2011 and 2019.

Ladouceur cites a “spending problem”

Although he was unable to stay for Cushman’s presentation, Ward 5 Councilman and city council finance committee chairman Ed Ladouceur attended the meeting and had a short speaking portion of his own, taking time to answer questions from the attendees.

While only speaking on his own behalf, Ladouceur also pointed to employee benefits as being “not sustainable” and noted how as of June 2018 the city officially had more retirees collecting on their benefits than it had active employees working.

Additionally, Ladouceur pointed to spending trends in how the city awarded bids that contributed to other fiscal problems, trends that he says he and the finance committee have worked hard to correct since he was elected to the council in 2012.

“We don’t have a money problem,” he said. “We have a spending problem.”

Ladouceur noted how the finance committee now refuses to consider bids that don’t follow up with bidders, don’t provide accurate, current pricing information and don’t perform adequate due diligence.

“The city council has not been sitting on its hands,” he said, adding that they have enlisted the help of a CPA firm – YKSM of Providence – and a certified fraud examiner to look into issues pertaining to collective bargaining agreements entered by the city in previous years, many of which have come to light in recent months. However, he said he couldn’t comment further on the status of those inquiries.

An Access to Public Records Act (APRA) request from the Beacon recently came back with the city likewise claiming that no finalized reports regarding those analyses has been received.

Comments

18 comments on this story | Please log in to comment by clicking here
Please log in or register to add your comment
Can't believe it

Mr. Cushman must feel vindicated. For years he was subjected to the Avedisian attack machine.....Mark Carrulo, Dave Picozzi, Scott Small, Vella Wilkinson, Bill Lloyd and all the special interest groups in the City.

He said over a decade ago the City would collapse under the weight of Scottie's unsustainable giveaway pensions and healthcare. Isn't it ironic that all but a few of the self serving rats have jumped from Scottie's sinking ship.

Let's invite Carrulo and Picozzi back to a city council meeting so they can describe how the taxpayers will pay for their lavish pensions. Bet they don't have the guts to show.

Where is Scotty???? Why hasn't he been held accountable. It time for the taxpayers to stand up and say no more.

It's now time for Mayor Solomon and the city council to eliminated lifetime healthcare, slash pensions, stop pension COLAS and put the City Warwick on a sound fiscal path.

Tuesday, April 23
Daydreambeliever

Hi Rob missed you. Crash any funerals lately? Kill any animals lately?

Stop and Shop strike is over you can go stalking again!!!!

Is it me or is Cushman aging ? Wow!

Tuesday, April 23
PaulHuff

Hey Ladouceur....don’t give us lip service about spending when you and your council pals automatically rubber stamp 3% raises for all the unions. We’re not buying it.

Tuesday, April 23
wwkvoter

daydream we get it you hate rob cote (and decry funeral crashing but attack a good man's natural normal age, wow!). but if you were mayor how would you handle the fiscal situation? do you deny there is a problem? come on let's see what you got... give warwick a plan forward that works!

Tuesday, April 23
Warwick Voter

Rep Vella-Wilkinson is doing everything in her power to destroy this finances of this city for union votes. Taxpayers NEED to remember this come election time.

Wednesday, April 24
Daydreambeliever

I don't hate anyone that is not how I was raised. I dislike the man for his childish behavior towards anyone with his name calling, tormenting, stalking etc.

He can get his numbers and calculations but be respectful towards the common man or woman.

Wednesday, April 24
Hepdog

Soooo..fixing the roads is off the table for a decade or so?

Wednesday, April 24
wwkvoter

Road maintenance looks like it will be "patch and crumble" for the foreseeable future...

Wednesday, April 24
Hepdog

What a raw deal the young adults are getting. A decaying, overpriced city ruined by pandering politicians. They're getting stuck with all the bills and few of the brnefits .

Wednesday, April 24
Samuel

Daydreamer use your head. That isn't Cote it's Stacia posting

Wednesday, April 24
Honestinfo

Why are we not hearing from financial experts? This guy Cushman appears to be credible, but Cote should never be part of the conversation. Cote is a fruitcake and will never help improve the City.

Wednesday, April 24
Flexi Bull

Cushmans numbers are pretty accurate. But he paints a worse case scenario. Those numbers are if the city dies nothing. BIG SCARY NUMBERS. The city will do something and we will get out of this.

Post Script, Cote is not believable.

Wednesday, April 24
Patient Man

If there's a $78,000,000 deficit isn't the city bankrupt? Where do you cut $78,000,000.

Thursday, April 25
What's the plan

Definition: A financial forecast is a fiscal management tool that presents estimated information based on past, current, and projected financial conditions. This will help identify future revenue and expenditure trends that may have an immediate or long-term influence on government policies, strategic goals, or community services.

Flexi Bull, "The city will do something". Do you have some inside information, because as of right now we have not heard anything out of city hall on how this will be fixed except the following:

1) city will not ask to exceed the 4% max tax cap.

2) city will not seek supplemental tax increase

3) city is seeking 5% cut in non salary and benefit line items for a $750,000 savings

In the meantime the following facts are:

1) city and school structural deficits in the fiscal 2019 budget (ends June 30) is about $11 million

2) Mayor proclaimed the structural deficit for the 2020 fiscal year can be as high as $18 million

3) the city rainy day fund is not the $25 million reported by former Mayor Avedisian, but only $13 million

So when a max tax increase can only yield $8 to $9 million dollars and all the other constraints on raising more money have been rejected, what is the plan to fill the $10 plus million deficit in the 2019 budget which expires on June 30, and the 2020 deficit of $18 million.

Either city hall has dug up a pot of gold and there really is more money available or there is no plan to solve this problem.

Either way, its time to level with the citizens, and disclose what is the plan.

Thursday, April 25
Ben Dover

Cushman has presented the perfect storm...1.) Thoughtful people have seen and reacted. They have left or are leaving.

2.) Tax rates on the commercial side have already taken there toll...Don't take my word for it, open your own eyes...Look at the empty store fronts and buildings for sale or lease. 3.) As Bob has shown, pension and healthcare costs are not fixed in the truest sense of the word they are growing exponentially . 4.) High cost of living drives people out, as they leave a residential housing surplus turns to a glut. Prices are forced down which eventually means less revenue because the assessed value will fall in relation to comps...We, like most of this State are in a financial mess...

I have no easy solution. Politicians are want to put a bandage on a financial shotgun wound. I see no leaders only people who want to get re-elected by making promises they can't keep. That is how we got here. In outlying years, Chapter 9 becomes a real possibility. I started hearing this right after the credit union debacle from some brilliant finance and business people what we were in store for if things did not change. It is 28 years later and not much has changed. Thank you Mr. Cushman for trying to raise awareness...None are so blind as those who refuse to see.

Thursday, April 25
Patient Man

What's the plan

So could bankruptcy be a 2021-2022 situation?

Thursday, April 25
davebarry

Cushman has been proven right. He was attacked by the fire dept war machine. The unions are going to have to compromise or they won't have cushy pensions. I have a pension and want to keep it. They are slitting their own throats. The firemen got the speaker and president of the senate to publicly state that they felt bad that firemen had to work so many hours and wanted to be home with their kids. You don't have to be an investigative reporter to know that 99% of firemen have second careers as landscapers, plumbers, contractors, etc. That is why they are always swapping. Their four days off are spent at their other job. We can no longer afford what we have. The teachers have not been cut but we have 1/3rd less students than 10 years ago. Schools have begun closing but not fast enough. Old people on fixed budgets are screwed in this city. Within five years, their taxes will be so high they will have to move.

Friday, April 26
ChrisP

It's possible that Warwick can squeak by with a few years of 4% tax increases. Not ideal, but better than bankruptcy. Lot of cutting may be needed in the short run.

Monday, April 29