Without tax, city looks for way to close budget gap

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Another city could be taken over by a receiver with the power to declare bankruptcy after the General Assembly adjourned early Wednesday without approving a tax increase that state and city officials say is critical to closing a massive budget shortfall.

A bill that would have imposed a 13 percent supplemental property tax on Woonsocket residents stalled in the House after hours of negotiations between members of the city’s delegation and independent Gov. Lincoln Chafee’s administration.

State Revenue Director Rosemary Booth Gallogly said the failure to authorize the tax could lead to sharp cuts to services or municipal layoffs in the struggling city, which has a $10 million schools deficit and is running out of cash.

William Sequino, chairman of the budget commission that oversees Woonsocket’s finances, said at a meeting that he will work with urgency to try to close the budget shortfall. He added no one wants to see another community go into receivership or be forced into bankruptcy like Central Falls.

“It’s going to have an impact on citizens. It’s going to have an impact on employees, on retirees. It’s going to have an impact on services. Ten million dollars is not that easy to make up. We already know we have a school department that has a proposed budget in the budget act that is less than what they’ve been spending,” Sequino told NBC 10 News.

Sequino said everything including salaries, pensions and health benefits will be on the table as the panel works to put a budget together without factoring in any revenue from the extra tax. He said cuts would affect the whole city of about 42,000 residents, not just the school department.

“We’re not ready to throw the towel in yet,” said Sequino, the town manager in East Greenwich. “The supplemental would have helped us greatly. We don’t have it, but that’s the hand we’ve been dealt.”

Woonsocket City Council President John Ward noted that Providence closed its $20 million-plus deficit and likely adverted bankruptcy based in part on anticipated concessions it negotiated with retirees and others.

“It’s hard to talk about a reduction in services in a city that’s cut services so significantly already. A third of our street lights are out. I saw an East Providence article about them cutting activities for children in the parks every year. We’ve cut that now for five years. That’s not even been part of our budget,” Ward said.

Ward said if there’s nowhere else to cut, he’ll propose a 10 percent across the board pay cut for all city workers, including teachers.

The City Council and Mayor Leo Fontaine asked the General Assembly to approve the supplemental tax, but Democratic state Reps. Lisa Baldelli-Hunt, Jon Brien and Robert Phillips blocked the legislation.

They were seeking a smaller increase and made other demands, initially including the removal of Fontaine and the City Council president from the state budget commission that now oversees Woonsocket finances.

“For them to sit there and put their own political agenda before the city’s needs and the taxpayers is unforgiveable,” said Michael Morin, president of the Woonsocket firefighters’ union.

But taxpayer James Cournoyer said it’s a good thing to put pressure on the budget commission to make structural changes that will avoid deficits in future years.

“As soon as you release the pressure, things don’t get done. And remember, pressure makes diamonds,” Cournoyer said.

Gallogly, while saying “no tax is a good tax,” accused the legislators of doing the city “no favors” by standing in the way of the tax increase.

“After many months of attempting to achieve consensus on a solution that would avoid fiscal collapse and additional state intervention, they failed to make the difficult yet necessary choice to protect the city and its residents in the long term,” she said in a statement.

Members of the House delegation blamed Chafee, with Brien calling their proposed 8.5 percent tax a reasonable compromise.

“We made it known that we would be willing to meet in the middle, but we would not go back to the original proposal for the $6.6 million tax levy,” Brien said in a statement. “We’re all very disappointed.”

Brien said he’s been told that not passing the full supplemental tax could lead the city into bankruptcy. But he said the delegation is looking out for the best interests of taxpayers.

“This is about our constituents,” he said. “If people want to make this out to be political then they themselves are being political. The governor’s office is looking at a balance sheet. We’re looking at people.”

The two state senators from Woonsocket supported the 13 percent tax.

A message was left Wednesday for Fontaine, a Republican whose office is non-partisan, according to the city’s charter.

Central Falls was taken over in 2010 by a receiver, who filed for bankruptcy on its behalf last August. Under state law, only a receiver has the authority to declare municipal bankruptcy. A receiver also may assume all the duties of the local municipal elected leadership.

Brien and Baldelli-Hunt have said they support a receiver.

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