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Municipal plan unlikely to impact Narragansett

March 27, 2012

Narragansett Town Hall

NARRAGANSETT—Governor Lincoln Chafee’s recently introduced legislative package to assist financially ailing municipalities may not have as much applicability to Narragansett, said Town Manager Grady Miller on Monday.

“I did a preliminary look, but we are still evaluating right now and waiting for additional analysis from the League of Rhode Island Cities and Towns,” said Miller. “The league does legislative analysis and shares that with cities and towns. They lobby on behalf of [municipalities] before the State legislature and legislative committees as well.”

“It doesn’t appear we will be impacted a whole lot by it, and we are around 63 or 64 percent funded,” he added. “If that were to drop and [Chafee’s legislation] was passed, it could very well affect us.”

Chafee’s municipal package creates a new designation, ‘Highly Distressed Community (HDC)’ for towns which are in serious fiscal jeopardy. Any town ranked in the lowest 20 percent of municipalities will be deemed as an HDC, according to four criteria: percent of tax levy to full value of property, per capita income, percent of personal income to full value of property, and per capita value of property.

The proposed municipal pension legislation also allows communities which are significantly underfunded with an option to suspend annual Cost Of Living Adjustments (COLAs), as long as certain conditions are achieved. A town’s independent municipal pension plan must be funded below 60 percent, and at least 50 percent of savings from COLA suspension must be reinvested into said town’s unfunded pension plan. A town must also provide findings, supported by actuarial research and numerical data, which deems COLA suspensions necessary.

Narragansett Finance Director Donald Goodrich thinks that the changes are good for targeted communities, such as Providence, which are in dire financial straits, but does not reflect a long-term solution for all municipalities in the state.

“My concern is that those of us who are not highly distressed today might be in two or three years,” said Goodrich. “The state should be looking more closely at relief for all of us. If we have a very bad market downturn, for example, we will all be in trouble, and quite frankly, three percent COLAs are not sustainable.”

“There are two ways to change things,” said Goodrich. “You can negotiate, or we get approval from the General Assembly to make unilateral changes, which will be contested by collective bargaining groups.”

“Our [collective bargaining] groups made progress this year,” he added.

“They have reduced the COLA for compounding at a certain level, agreed to pay more to retirees’ health care, and they are contributing more into the pension plan. We will know how much that helps, though, until we get our actuarial survey in June of this year.”

Goodrich expressed concern for the town’s unfunded Other Post-Employment Benefits fund, an issue which many communities must face but is not addressed in Chafee’s latest proposal. Narragansett has yet to make payment into the fund this year, and the town is running an $83 million deficit in OPEB expenses as of July 1, 2011.

“We basically have no assets set aside yet for our OPEB,” said Goodrich. “We are operating on a pay as you go basis and this is the first year. Anyway the state looks at it, we haven’t funded the $83 million, so that would probably put us at the top of the state’s list as far as unfunded OPEB goes.”

The municipal aid package proposed by Chafee also grants new powers to the Rhode Island Department of Education (RIDE) which would give it authority to review school district expenditures in order to make sure they are consistent with budgeted amounts. If a school district runs a budget deficit, RIDE must inform the Office of Municipal Finance, the Office of Auditor General, and a number of head officials, including the school superintendent, that state aid may be withheld from the municipality in question.

Narragansett Superintendent Katherine Sipala would welcome the oversight from RIDE, but does not see the Narragansett school system as having deficit issues in the near or long-term future.

“We are a well-organized school district,” said Sipala. “Many cities and towns in RI are in need of pension help, so it is not surprising that plans are being developed. Since this has just come out, and will probably be debated at the state legislative level, our opinions are probably not necessary right now.”

“We will obviously have to work with whatever is determined,” she added. “I would like to say, however, that the contracts negotiated by the Narragansett School Department have been very reasonable in terms of post-retirement benefits, better even than those negotiated by the town.”

Southern Rhode Island Newspapers
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