Providence, R.I. mayor touts budget as he runs for governor

April 29 Tue Apr 29, 2014 6:53pm EDT

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April 29 (Reuters) - The mayor of Providence, Rhode Island, proposed a slight increase in city spending on Tuesday in a farewell budget message that he is likely to tout on the campaign trail as he runs for governor this year.

Mayor Angel Taveras, a Democrat, proposed a $678.4 million budget for fiscal 2015 that would grow spending by 2.4 percent, a modest increase but a strong point of recovery for a city that many thought just two years ago would fall into bankruptcy.

The city won pension concessions in 2012 from its labor unions that have put Providence on track to save at least $392 million over the next 25 years, he said. Taveras also struck deals with the city's big universities and nonprofits, including Brown University, for payments to the city in lieu of property taxes, which they do not have to pay.

"This budget is not balanced with gimmicks. It does not borrow to plug budget holes. It is balanced with discipline," Taveras told the City Council on Tuesday evening in prepared remarks. "It keeps our promises to union employees who came to the table during Providence's darkest hours and agreed to forego pay increases."

Providence was not the only Rhode Island city facing a fiscal crisis.

The tiny city of Central Falls filed for bankruptcy in August 2011. When it emerged about a year later, bondholders had remained whole while retirees saw their already small pensions cut by up to 55 percent. The case pressured retirees' groups and unions around the state to consider giving up more benefits rather than face steeper cuts in a Chapter 9 municipal bankruptcy.

Even so, Taveras' budget message seemed tailor-made to challenge his main rival for the Democratic gubernatorial primary in September, Gina Raimondo. Raimondo, the state treasurer and a former venture capitalist, spearheaded Rhode Island's sweeping pension reforms in 2011.

Those reforms were hailed by many public pension analysts for their aggressive approach to reining in costs and reducing unfunded liabilities. They also led to lawsuits by public sector unions.

The state reached a settlement that would have ended all the litigation, but members of a police union rejected the deal and mediation failed earlier this month. The state now is on track to begin a potentially costly trial in September.

Raimondo and Taveras were in a statistical tie in an April 10 poll from Brown University. About 30 percent said they would vote for Raimondo in the Democratic primary, and about 26 percent said they would choose Taveras. More than 35 percent were undecided. (Reporting by Hilary Russ)

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