Numbers accurate, but Polisena calls debt report ‘political’

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Mayor Joseph Polisena told the Sun Rise in an interview last week that the Public Finance Management Board’s recent debt affordability study was “political,” and he additionally accused General Treasurer Seth Magaziner of “feathering his bed for his next move.”

Polisena did not dispute the figures found in the report, which found Johnston’s net pension and other post-employment benefits liabilities to be particularly high. The mayor said legacy costs inherited from previous administrations had set the town back, and that he continues to “chip away.”

Polisena repeatedly criticized Magaziner for what he called the treasurer’s silence on the so-called evergreen contract bill, which recently became law and extends benefits and wages for teachers and municipal workers as negotiations continue on new contracts. He said the legislation will make it more difficult to alleviate the OPEB and pension costs in the future.

“Maybe he can tell me how to do it now,” the mayor said. “Now that we’ve got lifetime contracts, I mean, no one’s going to say, ‘OK, we’ll give this back.’ Not anymore. Those days are over. It’s going to make it more difficult for us … I know his game. People like to grandstand, because they’re getting ready for the next step up from their positions.”

When asked for comment on Polisena’s remarks, Magaziner’s communications director Evan England only said the PFMB is required by state statute to produce the debt affordability study every two years.

“While it is often useful and necessary for public entities to take on debt to spread the cost of large capital projects across multiple budget cycles, the power to issue public debt must be exercised with care,” reads the report’s executive summary. “When a public entity issues long-term debt, it binds citizens to make debt service payments for many years in the future, through taxes fees, tolls or utility rate charges.”

It continues: “Sometimes even when public debt is not explicitly backed by taxpayer funds, taxpayers can find themselves liable for the cost of debt when the original revenue stream becomes insufficient to cover the cost of debt service.”

Two particular figures in the report showed trouble for Johnston.

The first was the overall debt plus net pension liability and OPEB liability to full assessed property value, which PFMB recommends stays below 9.2 percent. That number “compares total debt of the municipality and all overlapping jurisdictions, including revenue bonds, as well as total unfunded pension and OPEB liabilities, to assessed property value.” Johnston registered at 19.9 percent, which was fourth-worst in front of Woonsocket, Providence and Pawtucket.

Johnston fared worse in the governmental debt service plus pension actuarial determined contribution and OPEB required payment to governmental expenditures section. Aimed at comparing “the annual cost of total liabilities to the annual municipal budget,” Fitch Ratings recommends the percentage fall below 22.5 percent. PFMB writes in the report that 22.5 percent represents the midpoint between an “A” and “AA” bond rating.

Johnston was last of all municipalities measured in that category, joining only Central Falls, Warwick and Providence as other communities below that figure. According to the report, Johnston’s 30.3 percent is consistent with a “BBB” bond rating.

Polisena said he wasn’t surprised to see the statistics as they were presented, but added that the town has $5.5 million in its OPEB account right now and continues to funnel money toward it. He added that the town continues to pay its annual required contributions, and froze cost-of-living adjustments, or COLAs, for five years as part of a financial improvement plan.

“On the sixth year, there’s no more compounded COLAs,” Polisena said. “We’ve done that, which has helped. And what that does is in less than 20 years now, because we’ve been doing this for about three or four years, it’ll go up to 60 percent funding, and that’s what the state wants, and then four years later it could be 80 percent funding.”

Polisena continued to assail what he called the “lifetime contract” bill and Magaziner. He applauded Lt. Gov. Dan McKee for his opposition to the bill, before chiding Magaziner again.

“We’re chipping away, and as I said, it’s very difficult to take things away from people because it’s something that they negotiated,” the mayor said. “Seth Magaziner said nothing. I think he had a fiduciary responsibility to say, ‘Wait a minute. We’ve got these numbers. This is going to help,’ but you couldn’t find him with a search warrant, when it came to the lifetime contracts. Some politicians, they’re lining themselves up for their next gig, and they’re hypocrites. Some politicians.”

Polisena said he can’t imagine the figures becoming worse for Johnston, but again referenced the evergreen bill for making it “much more difficult to bring it down faster.”

He said he would like to take the liabilities percentage under 9 percent, but he said unforeseen economic circumstances could make it difficult to predict. He joked that, if he could, he would “buy about five lottery tickets and pick the winning numbers for all five lottery tickets.”

“It’s going to be a slower process to get it to an acceptable level,” Polisena said. “As I said, I didn’t create this. It was created, I have to deal with it, it’s my job. I got elected to deal with these problems. So we are dealing with them in the most cost-effective way possible – a way that’s not going to tie us up in litigation because it’s very difficult to take something from a contract once they have it.”

Polisena closed his interview saying that, while he again did not dispute the numbers, he believes that “a lot of this report is political.”

“I’ve been around a long time. I think that the general treasurer’s looking to get ready to run for a higher office,” he said. “As I said, if he cared about the taxpayers, he would’ve come out [against the evergreen contracts bill]. I’m not aware that he came out, not unless I couldn’t hear … He said nothing. Nothing. If he came out with us at press conferences, like the lieutenant governor was, it’d be a different story.”

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