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RIPEC report offers a sober warning for municipalities

April 2, 2012

A new Rhode Island Public Expenditure Council report confirms some widely held views about the plight of the state’s distressed cities and towns.

In particular, it finds that property taxes have increased across the state by just under 34 percent, or $560 million, since fiscal 2006. RIPEC basically attributes that hike to how 1) state aid to cities and towns has been cut; and 2) municipalities haven’t received flexibility to reduce their costs.

Central Falls receiver Robert Flanders has said he expects municipal bankruptcies to become more common.

Yet RIPEC warns municipalities to view chapter 9 bankruptcy as a last resort, in part since it doesn’t address such underlying factors as a community’s tax base or the practices that led to fiscal trouble in the first place.

Furthermore, the community may become less attractive to current and potential businesses and residents who, as a result, may choose not to locate in the municipality, further straining the community’s fiscal capacity.

The release of RIPEC’s report is timely for Governor Lincoln Chafee, who’s holding another strategy session with mayors this afternoon before speaking with reporters.

Other highlights from the study:

— As of the most recent information in 2009, Rhode Island property tax burden as a share of personal income was the fourth-highest in the country, and 141 percent of the national average.

— Single-family home prices in the state fell 27 percent between the market peak in 2006 and the last quarter of 2011. RIPEC predicts, “Housing prices are likely to continue to decline in Rhode Island.”

The conclusion of the RIPEC report warns, “Without substantive restructuring, loal governments will not be able to support current service levels in the coming years.

The parties subject to the restructuring effort — employees, retirees, vendors and debtors — may be served by local officials empowered to make modifications to these agreements, ideally through a collaborative process, rather than through bankruptcy, in which the primary goal is to make the community solvent.

2 Comments leave one →
  1. Mister Guy permalink
    April 2, 2012 9:58 pm

    “The section expressly provides that, absent agreement between the parties, the fiscal overseer, budget commission or receiver does not have the authority to alter any CBA as long as the CBA is in effect.”

    Amen to that…I’m sick & tired of hearing people that simply hate unions hold up bankruptcy as a panacea to sticking it to unions that have legally binding agreements in place. Cities & towns MUST confer with unions in good faith before trying to get rid of collective bargaining agreements, and those communities must *fully comply* with state labor law while proceeding through bankruptcy.

    Central Falls is a case study in at least two things. First, it’s a city that’s a special case, since it likely should have never existed in the first place…because it’s too small & poor. Second, the idea that unions, even ones that represent so-called “public safety” employees, in RI are unwilling to negotiate over COLAs & pension benefits is completely untrue.

    “Suspend school district busing of children who attend private or religious schools”

    This should have been done a long time ago. These schools can afford to bus their own kids.

    “Grant the municipal CEO approval of all school contracts and budgets, with line item veto”

    Is a line item veto constitutional in RI?

    “Elimination of, or cuts to, major state aid programs such as general revenue sharing and the motor vehicle excise tax reimbursement, while effective at helping the state resolve its budget crisis, were not accompanied by increased fiscal flexibility at the municipal level.”

    Exactly. You can’t cut state aid to cities & towns while, at the same time, artificially restricting the ability of localities to raise taxes to pay for the things that their residents want done. That’s simply not fair.


  1. Short takes from Chafee’s second “strategy session” with the mayors « On Politics

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