The unveiling of a draft report outlining Warwick’s looming financial peril, which was received by City Council President Steve Merolla last July and not released to the full city council or to the public, has surfaced and caused ongoing attention surrounding the city’s fiscal health to intensify.

The draft (meaning non-finalized) report, prepared by the council’s accounting firm YKSM at the request of Merolla, was revealed through a report by The Boston Globe on Friday, and showed how the city could be facing a $52.8 million deficit in five years, and as high as a $130.6 million deficit if the city does not utilize $3.8 million in reserves each year and adequately funds its other post-employment benefits (OPEB) liabilities to city retirees.

The Globe reported that Merolla did not share the draft with Mayor Joseph Solomon or with the full council, but that he may have shared the information with council finance committee chairman Ed Ladouceur.

In February of 2019, The Beacon requested through an Access to Public Records Act (APRA) request any preliminary reports regarding the city’s finances that were requested by the city council or the mayor’s office. The Beacon was told in April that “A final report from YKSM has not been received by the city,” and – through a different APRA request regarding the council’s audit of the fire department – that preliminary reports of such type were not subject to public disclosure.

The obvious question, which has landed Merolla at the center of significant media attention, is why did he choose to not share the draft report? The question is especially important considering, at the same time the draft was presented to him, the council was considering adopting new contracts for the city’s police and municipal workers that included contractual raises for the next three years – contracts he ultimately voted against ratifying, in part, because the benefits included were unsustainable and should be revisited.

Merolla said on Friday during a phone interview that he commissioned (approved last winter by the city council) the report as a means of attempted due diligence at a time of significant overturn in the city’s finance department, but that the draft was not specific enough to make any difference or warrant being released, as it included a large margin of error in terms of the actual projected deficit.

“If I had released a report with an over 100 percent margin of error, I would have been laughed out of the place,” he said.

Merolla reasoned that the projection made several assumptions that would not ultimately come to fruition, including an expectation that the city would be on the hook for about $5 million to cover the school department's deficit for the current year. That didn’t happen, as a mediator ruled in their favor that the schools would have to fund that deficit from one of their pension plans. A proposed Caruolo Action suit against the city also did not occur, as the school committee agreed to take the threat off the table to resume negotiations.

“To say it wasn't an issue would be completely inaccurate,” he said, saying that mediation decision amounts to a $25 million swing in funding over the course of five years that doesn’t need to be born by the city, and adding that the city was hit with another unexpected cost of $2.6 million in firefighter pension costs after that arbitration ruling went against the city earlier this year.

Merolla said that he voted against the aforementioned municipal contracts using information that was more reliable than the draft report, including the prior year’s audit. He said releasing the speculative draft report would only have served to further confuse the situation.

“I'm damned if I do and damned if I don't,” he said. “If I release it and it's wildly inaccurate, they're going to say that you lied and issued a report you knew was incomplete. I can't win either way…If I thought that document would have lent any credibility to the argument, I would have used it. I had the audit and the actuary reports, I didn’t need a document that confused the issue.”

Merolla said that the city council is not tasked with assessing five-year financial reports, and that he was only trying to garner more clarity by commissioning one of his own due to the fact that the city’s finance director, Bruce Keiser, along with two members in the budget office, all retired or left soon after Avedisian left and Solomon assumed mayoral duties.

He said that he believes people are trying to “make hay” with the accusations that he hid the report from being released, and that he expects the full report to be completed with more accurate information by June 30.

Merolla said it doesn’t compute that he would try to withhold information regarding the city’s financial health when Solomon has already gone on record describing the city’s severe monetary challenges ahead.

“We wouldn’t have called for, the first time in the history of the city, a state of the city address to issue all of our concerns about why we're concerned with the budget and hide documents to bolster that opinion. It doesn’t make sense,” he said. “If it was completed, that would have been the first thing we brought up.”