WSJ: City used environmental bonds to plug deficit

The Wall Street Journal put it on the front of its Money and Investing section Friday: The familiar shape of Providence City Hall with a subheadline suggesting a bond deal last year skirted the law on using bonds to close deficits.

The city sold bonds earlier this year, ostensibly to pay for environmental improvements on city buildings, including City Hall.

But most of the money went to plug last year’s deficit — at a high cost. Of $35 million in bonds sold, $30 million went right into the budget hole.

The yearly payment for taxpayers is about $3.5 million for 15 years, meaning the $35 million will cost $52.5 million.

Nobody from the Taveras administration would comment Friday. While most believe the deal was engineered by former Mayor David Cicilline, Taveras made appointments to the building authority to insure the deal went through.

The deal was questionable enough that Lloyd Granoff, the head of the building authority, resigned. He told the Wall Street Journal this week, “This is just ridiculous. It is simply a way to cover up a budget deficit.”

The paper mistakenly said Providence City Hall was part of the collateral for the bond sale, but it was actually eight different Providence elementary schools that back the $35 million loan.

The only other city so far to use the so-called green bonds is Newark, N.J. But there, the city spent nearly one-third of the proceeds on building improvements.

Providence is spending less than 15 percent of the bonds on building upgrades, and none of that work has begun. 

Article source: http://www2.turnto10.com/news/2011/sep/09/wsj-city-used-environmental-bonds-plug-deficit-ar-730268/

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