PROVIDENCE — Mayor Jorge Elorza’s retirement bond bill cleared its first major hurdle on Thursday, as lawmakers on the House Finance Committee voted in favor of allowing Providence to borrow $515 million in the hope of resolving its pension crisis.
The bill, which would authorize the city to issue the bond, is sponsored by six of the committee members – Representatives Scott Slater, Camille Vella-Wilkinson, Raymond Hull, Gregg Amore, William O’Brien and Grace Diaz – in addition representatives Anastasia Williams, Carlos Tobon, David Morales and Carol McEntee.
Rep. George Nardone said he opposed it. Representative Deborah Ruggiero, who supports the bill, said the city’s idea was “a much better proposition” than a much larger bond launched last year.
In a statement, Elorza told the Journal that “her team will not take anything for granted.”
“I plan to continue to engage General Assembly members over the coming weeks in both chambers to ensure they have all their questions answered and have the most up-to-date information before any votes are taken.” , Elorza said. “I’m confident that once they have all the information they need, they will agree that this is the best path forward for Providence to meaningfully solve our own retirement problem.”
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The vote comes two weeks after Treasurer General Seth Magaziner wrote a letter to lawmakers in which he urged the city to align its benefit structure with that of the state.
“This will improve financial sustainability and reduce long-term risk, while providing a fair and consistent landscape for public employees across the state,” he said.
Magaziner also wants safeguards to be put in place, such as the capping of authorized real interest at 4.5%. In the fall, the city was forecasting a rate of 4.39%, though it predicts it will actually be lower.
Additionally, Magaziner proposed limiting the term to 25 years, requiring no more than $150 million of the bond to be issued in a six-month period, and including a call option so that the city can refinance the bond at a lower interest rate if possible.
A superseding amendment to the bill establishes just a few of these measures – a purchase option and a maximum term of 25 years. However, it does stipulate a true interest cap of 4.9%, higher than Magaziner would have liked.
According to House spokesman Larry Berman, the amendment also strengthens language “about protection against future increases in city benefits” and requires the city to pay $10 million into a trust fund to other post-employment benefits.
Magaziner’s office said it was reviewing the amendment.
Last year, when Elorza proposed an $850 million pension bond, Magaziner criticized the idea as “a risky strategy with a mixed track record.”
However, this year, partly due to the reduced size of the proposal, some of Elorza’s initial criticisms came through. That includes Rhode Island Public Expenditure Council President and CEO Michael DiBiase, Sen. Sam Zurier and Councilwoman Helen Anthony, who sits on the council’s finance committee.