Mr. President, Mr. Majority Leader, esteemed members of the City Council, distinguished guests, and my fellow residents of our great City of Providence
It is an honor to join with you this evening to present my proposed budget for Fiscal Year 2014.
Mr. President, members of this City Council, working together, we have made tremendous progress these past two years. We have weathered the storm, built a new foundation and now we are taking the next steps to build a stronger future for our city.
One year ago, as I stood before you to present the FY13 budget, Providences future was still uncertain. The budget I presented contained more than $40 million of assumptions regarding our tax-exempts, pension reform and increased state aid for public education that we needed to save our city.
At the time, I said I was optimistic we would achieve our budget goals. Others were less optimistic. Many said that we would not get all of Providences large tax-exempt colleges, universities and hospitals to contribute more. BUT WE DID.
Many believed we would not succeed in achieving meaningful pension reform. BUT WE DID.
Collectively, Providences large tax-exempts will contribute $8.2 million to the citys budget in the upcoming fiscal year. That is $6.3 million more than they were contributing a year ago. Providences landmark pension and healthcare reform that was finalized only weeks ago in state Superior Court will save another $18 million in next years budget.
The General Assembly, led by Speaker Fox and Senate President Paiva-Weed, and with the support of Governor Chafee, affirmed their commitment to education by accelerating the school funding formula.
In last year's budget we were able to hold the line on taxes by working together. We worked with Councilman Zurier and this honorable Council to expand the tax base without raising tax rates. We did all these things through a collaborative effort to strengthen our capital city. Tonight I present to you a $663 million FY14 budget that continues moving Providence forward. This budget increases our commitments to growing our economy, helping small businesses and creating jobs.
Despite the fiscal challenges we have faced, we remain committed to having strong schools, safe neighborhoods, solid infrastructure and good city services.
And this budget puts $4.5 million into the rainy day fund to continue replenishing our depleted reserves.
Public safety is a top priority for me as Mayor. This budget leverages federal aid and prepares for more police officers and firefighters to protect our community and keep us safe. Right now, a new, diverse class of recruits is training to become firefighters in our city. This will improve public safety. It will also save the City approximately $1 million a year by reducing overtime expenses in the Fire Department and put at least 50 public servants to work.
A few weeks ago, we kicked off a recruitment drive for the 67th Providence Police Academy. We have 18 more police officers in the budget for next year, being paid for with federal funds. We are looking for men and women who want to dedicate their lives to the noble profession of serving and protecting our community.
This budget also increases funding for our schools and supports our crucial work to improve public education. We have taken collective action to strengthen our schools by focusing on early childhood education, grade-level reading and after-school programs for our young people. Our work to improve public education has been recognized nationally with a series of awards, including the Bloomberg Philanthropies Mayors Challenge and an All America City Award for grade-level reading.
This budget invests in much needed road repairs as it is time to repave our crumbling roads. Included in this budget is $2.9 million in debt service on our $40 million road bond. Next week we will begin to rebuild and repair approximately 65 miles of roads in Providence, creating hundreds of jobs in the process. Embedded in the line items of this budget is a firm commitment to establishing the fiscal conditions needed to grow Providences economy.
As I said when I announced my economic development action plan last month, we have created two positions to staff a new unit in the Department of Inspections and Standards. This new unit will focus solely on reviewing and approving permit applications for smaller projects. These salaries and benefits will cost the city about $125,000 in total next year. Let me tell you what Providence gets in return.
Everyone has been talking for years about fixing the citys permitting process. We are going to fix it. Until now, plans for building projects, whether they are $75,000 projects or $50 million projects, have all been put in the same pile. We are going to change that by doing something that has not been done before.
Under our plan, someone who wants to open a bakery or an electronics store will be quickly reviewed by a separate team, rather than waiting in line behind a project that may take years. These smaller projects account for about 70 percent of all permit applications in the city. This change will allow us to process permits faster and get projects moving.
This budget also protects our priorities with level funding for vital city services and continued support for libraries, community centers and other important community resources.
Mr. President, I am sure you recall the work we accomplished to resolve the conflict that threatened to close our public library system. In this budget we begin to fulfill the agreement that saved our libraries, and allocate $200,000 towards the purchase of the community library buildings from Providence Public Library.
A Promise Kept
The budget has a 3.3 percent increase in spending. I want to be very clear about why expenses are increasing slightly.
Providences school budget is increasing $8 million. Providences public safety budget and the Citys pension and health care costs represent almost all of the remaining $12 million in increased spending next year. Increased spending in the School Department is being paid for by increased funding through the states education funding formula. This increase in school funding is both greatly needed and greatly appreciated.
We plan to use the funds for a number of things the most important being to hire new teachers and staff to work in our classrooms educating our children and helping them succeed.
Our budgeted pension and health care costs are increasing by $9 million in the coming year. And they will increase about 3.5 percent every year after that. For anyone wondering why pension and health care costs are increasing after we reformed the system to make it more affordable, here is the answer: They were going to increase much more than that. Without the pension reform agreement with our police, firefighters and retirees, pension and health care costs would have increased approximately $26 million in the coming fiscal year. We got almost all of the pension and healthcare savings originally expected when we took the difficult path of negotiating with our police, firefighters and retirees. Leaving a small percentage of savings on the table is a price we were willing to pay for the certainty of a negotiated solution to Providences pension problem. The alternative was a costly, high-stakes legal battle that could have resulted in bankruptcy for the city.
This budget also keeps the promises we made to our police officers, firefighters, first responders, teachers and all other city employees whose sacrifices enabled us to keep Providence out of bankruptcy. When we asked our union employees to help us save the city from bankruptcy, they stepped up and agreed to take a pay cut and put off raises they were entitled to in their contracts. Our police officers agreed to go six years without raises.
Included in the budget are 3 percent raises for teachers, Local 1033 city workers and non-union employees, 3.5 percent raises for firefighters and 4 percent raises for police.
We cannot separate these raises from the savings we have achieved this fiscal year by renegotiating their labor contracts. The raises are built into restructured contracts that collectively save the city approximately $30 million next year. These raises were a promise we made as we successfully negotiated to save our city from bankruptcy.
I will not break my promise after bargaining in good faith. I will not sign a budget that breaks the promises we made together by agreeing to and ratifying these contracts.
We have made so much progress so quickly that it is easy to forget what a real possibility bankruptcy was just one year ago. Lets talk a moment about the road not taken. Without the labor agreements we renegotiated in 2011, we probably would not be here today talking about the FY14 budget. A fiscal overseer or receiver would be running Providence. And the impacts on homeowners, business owners and our entire city and state would be much worse. The cost alone of a receiver would be in the millions as we have learned from our neighbor to the north.
Tax Rates and State Aid
Last year, we were able to hold the line on raising any tax rates amid the worst crisis the city has faced in generations. This year, we are continuing the freeze on Providences commercial, tangible and car tax rates.
Providences commercial tax rate of $36.75 per thousand is one of the highest in the country. Just up the road, the tax rate for businesses in Boston is about 40 percent less than in Providence. Our commercial tax rate is about 51 percent higher than the national average.
Our citys commercial tax rate is acting as a barrier to economic growth and job creation in our city. An immediate business tax freeze is absolutely needed to guarantee consistency and stability for developers and create jobs in our city. The commercial rate in my FY14 budget is frozen at $36.75 per thousand. Providence also has the fourth highest tangible tax rate in the state, at $55.80 per thousand. And our $60 per thousand car tax is the highest in Rhode Island. The tangible and car tax rates remain frozen in my FY14 budget. We are seeking legislation from the General Assembly to make the tax process less confusing and less bureaucratic. Passage of that legislation will mean that from now on Providence will have two, simple residential tax rates: owner-occupied and non-owner occupied, without need for a homestead exemption.
We have increased the non-owner occupied residential tax rate in next years budget to $33.75 per thousand from effectively $27.11 per thousand. We have also increased the owner-occupied residential tax rate from effectively $15.95 per thousand to $19.50 per thousand. The average residential property value went down 13 percent this year in Providence. The average residential property will see a 6 percent increase in their tax bill.
For example, on a $150,000 home, that comes out to about $12 per month.
Based on current tax rates, Providences owner-occupied rate will rank 19th out of Rhode Islands 39 cities and towns.
I know that many homeowners work hard to balance their checkbooks. I recognize these increases are an additional burden but they are necessary in order to balance our Citys checkbook. I will continue doing everything in my power to grow our economy and expand our tax base, so that tax increases are limited in future years.
We are also requesting assistance from the State. Governor Chafee, Speaker Fox, Senate President Paiva Weed, the Providence delegation and the entire General Assembly have all been very supportive of Providence, as we have struggled to avoid financial catastrophe these past two years. We could not have emerged from the Category 5 fiscal hurricane without their help. I thank them for their support. Through hard work and shared sacrifice, we reduced Providences $110 million deficit to about $5 million. We are asking for a little more help. In the FY14 budget is the assumption of $5 million in state aid. This $5 million would eliminate Providences structural deficit and put our citys finances on a sustainable path.
A Responsible, Honest and Transparent Path Forward: This is what the FY14 budget says about Providence where we are in our efforts to come back from the brink of bankruptcy, and what we care about and commit our resources to as a city. We have made tremendous progress to stabilize our finances. We are on tight margins, like a family living paycheck to paycheck. Like a family that has endured the economic downturn of recent years, we look forward to brighter days.
As a community, we say that we care about educating our children. We want safe and secure neighborhoods, and we are going to honor our commitments to the brave men and women who provide us that safety and security. We are putting money away for tomorrow, so that we never have to face the threat of bankruptcy again.
Here are the facts: Our municipal government is smaller now, and will remain smaller next year, than it was when I took office. We are doing more with less.
Our landmark pension and healthcare reform agreement saves us $18 million next year and lowers our unfunded liability by about $170 million in the coming decades.
Increased investments in public education and public safety will help ensure that Providence is, and remains, a great place to run a business, own a home and raise a family. As difficult as it is to raise taxes, Providences owner-occupied residential property taxes are still very much in line with what others pay across the state.
We have come so far, but there is still more work to do. This budget represents Providence turning the corner.
Mr. President, Mr. Majority Leader, esteemed members of the City Council pass this budget. It is a responsible and honest path forward for Providence. It keeps our promises, and preserves the promise of a brighter future for our beloved city.