Two Rhode Island communities can use about $70 million forfeited by Google Inc. to fix their police pension shortfalls after the U.S. Department of Justice on Friday waived rules restricting how the money could be spent.
The news is a boon for the financially troubled city of East Providence and the town of North Providence, which face unfunded pension liabilities in the tens of millions of dollars.
Sen. Sheldon Whitehouse, who pushed U.S. Attorney General Eric Holder for the waiver, said using the money to relieve the pension burden was the highest and best use of the money.
“It is certainly a transformational financial moment,” Whitehouse said at a news conference. North Providence Mayor Charles Lombardi called it a monumental decision for both communities that would affect residents for years.
Police from those communities had helped a federal investigation into the search engine company’s distribution of ads for illegal prescription drug sales. Each community got a $60 million share when Google agreed to forfeit $500 million.
It was a windfall for both communities, which each have fewer than 50,000 residents.
But rules prescribed how the money could be spent, restricting it to uses such as law enforcement investigations, training and equipment. The communities asked the Department of Justice to waive those rules and instead allow them to use the money for pension shortfalls. Whitehouse said the Justice Department decided to grant the requests in what Holder told him was “an extraordinary exception to the customary rules.”
East Providence will be allowed to use $49.2 million, while North Providence may use $20.6 million.
In North Providence, the pension has a shortfall of $20 million to $22 million, said G. Richard Fossa, the mayor’s chief of staff.
“This won’t fully fund it, but very close to it. We’ll be 95 or 98 percent funded,” Fossa said.
East Providence was placed under state fiscal oversight in 2011 amid budget deficits and a bond-rating downgrade. The city’s pension system is only about 33 percent funded, with a liability of $105.8 million, according to state Revenue Director Rosemary Gallogly.
East Providence’s share of the money will cut the liability nearly in half – meaning the pension system will be nearly 60 percent funded, Gallogly said.
“It’s a game-changer,” she said.
The money will also save East Providence $2 million per year in pension contributions and North Providence $1 million annually.
Rep. Helio Melo, D-East Providence and chair of the House Finance Committee, compared the news to winning the lottery.
“It helps pay for the sins of the past,” he said.
The remaining money will have to be used according to the Justice Department’s usual restrictions. Both Lombardi and East Providence Mayor James Briden said they were considering how to use the money, with Lombardi saying they might use some of it for school security.