News Column

West Warwick approves $86.3-million budget that addresses town's crippling pension debt

May 23, 2014

By Barbara Polichetti, The Providence Journal, R.I.



May 23--WEST WARWICK, R.I. -- Residents made it clear Thursday that they want their community to control its own financial destiny -- approving a budget that will stave off a state takeover by appropriating money to begin addressing the town's crippling pension debt.

Voters resoundingly approved a proposed $86.3-million budget that would result in a tax increase, but would ensure that for the first time in years the town was putting the proper annual contribution into its faltering pension plan for police, fire and municipal employees.

The troubled plan, which has been deemed to be in "critical" status by the state, was in danger of running out of money in 10 years if no corrective action was taken.

The situation is so serious that the pension debt caused the town's bond rating to drop below junk bond level and also prompted warnings from the state Department of Revenue, which said it would be forced to step in and take control of local finances (as it has in other communities) if West Warwick did not address the pension debt itself.

"I think this shows that voters support what we've been trying to accomplish," Town Manager Frederick Presley said of the 836-to-223 vote in favor of the budget.

If voters had rejected the budget, it would have been the demise of a financial recovery plan that town officials have worked months on and which included major concessions from unions and retirees.

"This has been a full-blown community effort," Councilman Brian Tucker said after the daylong voting at the town Civic Center ended.

"This is a win for the town and a day that West Warwick starts to rebuild."

The budget approved Thursday will result in a 2.9 percent property tax increase for homeowners and will be reflected in the bills that are mailed at the end of June.

The new tax rate for single-family and owner-occupied two-family homes will increase from $24.67 per $1,000 of assessed value to $25.39.

With the average single-family home in town assessed at $158,000, that increase would mean a tax bill hike of about $120, town officials have said.

Under the new budget the town will make the proper annual payment into its pension plan -- roughly $8 million -- for the first time in recent memory.

In order to make that payment -- which had initially been forecasted as being in excess of $10 million -- town officials worked for months to come up with agreements with all municipal employees and retirees that grant cost-savings concessions both in pension benefits and operating expenses.

Among other things, the agreements temporarily freeze cost-of-living increases for current and future retirees, freeze the salaries of police, fire and municipal employees for the next five years and implement health insurance concessions.

In all, the concessions represent an annual savings of about $5 million, and included the participation of teachers who are in the state retirement system and whose pensions were not imperiled by the town's failing pension plan.

Teachers made health insurance and other budget concessions in order to free up funds to go into the municipal pension plan, officials said.

Presley said that West Warwick is unique in that even its retirees agreed to suspend the cost-of-living increases they receive.

"Everybody came to the table and did their part," Presley said.

The budget approved Thursday is part of a five-year financial recovery plan for West Warwick that has been worked out in concert with the state Department of Revenue.

Future tax-rate increases are expected to be in the 2-percent range over the next few years under the plan, he said, but could be mitigated by an improving economy and local economic development.

Every annual budget will still need voter approval.

West Warwick has a multi-tiered tax rate structure and the budget approved Thursday will increase the rate for residential properties that are not owner occupied and have two to five units from $35.42 to $36.45 per $1,000 of assessed value.

The new rate for buildings with more than six units will be $36.28 and the new commercial tax rate will be $30.85.

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(c)2014 The Providence Journal (Providence, R.I.)

Visit The Providence Journal (Providence, R.I.) at www.projo.com

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Source: Providence Journal (RI)


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