Elorza’s borrowing plan for the Providence pension system

by Ian Donnis
Posted 5/21/21

Back in January 2020 – before the pandemic was on the radar – Providence Mayor Jorge Elorza warned against complacency about the city’s underfunded pension.

At the same time, …

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Elorza’s borrowing plan for the Providence pension system


Back in January 2020 – before the pandemic was on the radar – Providence Mayor Jorge Elorza warned against complacency about the city’s underfunded pension.

At the same time, after his pitch for monetizing Providence’s water supply was DOA at the State House, Elorza outlined plans just for small tweaks to the pension system.

So why did the mayor wait more than a year – until last week – to unveil his proposal to shore up the pension system by borrowing $700 million?

“Mayor Elorza proposed the $704 million Pension Obligation Bond only after an extensive due diligence period and thorough analysis of the transaction by the City’s Finance Department and independent financial advisors,” Ben Smith, a spokesman for the mayor, said via email. “During this time, the City negotiated increased employee contributions from the Fraternal Order of Police Lodge #3, reducing the long-term pension liability by at least $25 million, and took advantage of historically low borrowing costs by issuing a $140 million bond for school improvements as well as a first-of-its-kind $24.75 million bond through the Providence Redevelopment Agency to capitalize the Providence Housing Trust Fund and stimulate affordable housing development. The City’s improved finances and track record of prudent debt management allowed for an increase in the size of the housing bond issue on the day of pricing, resulting in over $6 million additional program funding. Following these transactions and given the continuation of the current low-interest-rate environment, Mayor Elorza and the City’s finance team decided that this was a transaction that needed to be developed and explored.”

On the plus side – if everything goes right – this gambit could raise the pension’s funding level above 60 percent, from the current 22 percent, and avert a situation in which the cost of funding the pension would devour other city services. Plus, the cost of borrowing money is low now.

But the returns on Providence’s pension have been less than dazzling, and it remains unclear if the legislature will sign off on the mayor’s proposal. Elorza talked up the concept with House Speaker Joe Shekarchi when Kamala Harris was in town back on May 5, although a follow-up meeting has yet to take place. And while Senate Whip Maryellen Goodwin (D-Providence) said she plans to introduce related legislation, many questions remain.

Then there’s the context of how Elorza is among a field of Democrats expected to run for governor next year. Even if his latest pension pitch goes nowhere, the mayor can say he tried to do something.

As to how another looming gubernatorial candidate, General Treasurer Seth Magaziner, assesses Elorza’s borrowing plan, spokeswoman Rosie Hilmer tells me, “The treasurer has requested an in-depth briefing from the Providence administration on this plan, and will withhold judgement until that briefing occurs. Pension obligation bonds have a mixed track record, but the treasurer will be able to better evaluate the proposal once he has been fully briefed.”


Nine people were wounded in a shooting last Thursday in the Washington Park section of Providence, in what police say they believe is the largest shooting in the city’s history. The shootings underscore the widespread presence of guns, an uptick in gun violence in Rhode Island’s capital city, and what community leaders describe as a need for more opportunities for young people.

“Violence like this is not the disease, it is the symptom,” Harrison Tuttle, executive director of the BLM-RI PAC, said in a statement. “Communities in Providence and across America need investment in food, housing, healthcare, and jobs that will prevent violence in the first place. Poverty is a result of the crime. Without addressing the cause of poverty we cannot begin to address crime in our city. We must work together to create long-term solutions and not simply continue the cycle of crime and incarceration in communities that are hurting now more than ever.”


Former Fall River Mayor Jasiel Correia has been found guilty in 21 of the 24 counts against him.

As Ben Berkereports, “More than 30 witnesses testified during the four-week trial, which was the first high-profile case heard in Boston’s federal court since the coronavirus pandemic began. Collectively, the testimony offered a detailed account of Correia’s rise from 20-year-old shoe salesman to a mayor who made history two times over: in 2016, as the youngest mayor in Fall River’s history; and again in 2019, when Correia was recalled from office and re-elected to replace himself on the same ballot. Correia’s criminal trial opened with arguments about the management of SnoOwl, a company Correia founded shortly after graduating Providence College in 2013.”

Sentencing is slated for later this year.


Remember when Gov. Dan McKee put the kibosh on a fundraiser to be hosted by Jerry Zarrella, the co-chair of Donald Trump’s RI re-election campaign in 2020? The news broke two weeks ago Sunday, a long time in Rhode Island-news years.

Suffice it to say that despite some upset among local Trump supporters, this is not a big issue for most Rhode Islanders. McKee faces a political test in navigating the busy field gearing up for the September 2022 Democratic gubernatorial primary, and Trump supporters will not decide that contest.

Still, the start and stop of the Zarrella fundraiser did not go unnoticed by RI’s donor class, and it raises the specter of potential unforced errors on the way to next year’s election season. Then again, McKee has good timing, as evidenced by how the state will have $324 million more than expected to complete the next budget.

Ian Donnis is the political reporter for The Public’s Radio. He can be reached at idonnis@ripr.org. Follow him on Twitter (@IanDon). Read the full version of this column at thepublicsradio.org.


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