EDITORIAL

On city's financial plight, numbers will tell the truth

Posted

Getting a clear financial picture in Warwick has not been an easy task. Even those with accounting degrees would likely have a difficult time piecing together the complex puzzle of shifting budgetary conditions that have developed in the past couple years without a calculator and some detailed notes in front of them.

Budget complexity in municipal finances is nothing new, and certainly is not unique to Warwick, but regardless Warwick has found itself in the spotlight on more than a few occasions due to the stark contrast between those who maintain the city is in poor financial condition, and those who project a more positive outlook – two distinct “sides” that have emerged out of the debate.

Those on the side that the city is in peril are people like former councilman and school committee member Bob Cushman, who has been shouting about looming financial disaster for years, and providing documentation to back it up. They also include people like current City Council President Steve Merolla, who has preached from his pulpit countless times in recent years about the unsustainability of provisions within collective bargaining agreements and how the city’s well will certainly run dry one day if no changes are made.

On the other side is Mayor Joseph Solomon, who despite calling the city’s state “perilous” in February, has been adamant since that cries of financial turmoil have been largely overblown, and that the city is on the comeback. He got some more ammunition for his argument with the recent upholding of the city’s ‘AA’ bond rating, which came with a glowing report attached that indicated the city’s financial situation was stable, provided the city continued to be aware of its growing liabilities.

The city council has taken an important step in ordering a five-year forecast of the city’s fiscal outlook which will, by the time of this publication, have been discussed publicly at last night’s council meeting. A look through the preliminary presentation of the report shows the results are not all sunshine and rainbows.

Perhaps the most crystallizing piece from the summary is the comparison that equated the city of Warwick to a family with a household income of $75,000 a year. That family would have about $15,000 in secured debt, which could be accurately accounted for. However, it would also have about $240,000 in unsecured debt akin to a high-interest credit card, with no certainty about how that debt can be realistically paid off.

These numbers reflect the city’s ballooning liability for healthcare and retirement benefits (to date, an approximately $840 million obligation), which truly sits at the center of this whole financial debate. Were the city to adequately fund just its healthcare benefits for retirees as they are currently written up, it would take $34 million a year – an impossible figure. As anyone who has experienced a high level of debt before, making minimum monthly payments on such a sum to get by – or to “pay as you go” as the report calls it – will only exacerbate the situation, as accrued interest in the long run will outpace the contributions, resulting in an ever-increasing principle.

There are no easy solutions to this problem, but ordering a realistic five-year projection and having honest conversations about what needs to be done is a start. It is for this reason that we also commend the Warwick School Department for taking the initiative to develop a five-year forecast of their own.

We hope, truly, that by developing such a plan, the city and schools can work collaboratively when budget time comes each year while working off the same exact financial data, so that there are no surprises and accusations of hiding numbers as has happened in the past. The fact that this process is occurring publicly is another win for taxpayers, as they are obviously the ones with a stake in the ultimate health of the city’s finances.

Truthfully, the only “side” anybody should be on in this matter is the side of the truth – as numbers do not have agendas or seek to satisfy anybody’s ego. Taxpayers deserve an accurate portrayal of the financial health of the place they call home, and we are tentatively hopeful that a more accurate picture of that health will give those in the position to make tough changes the confidence to put those reforms forth.

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