City of Providence: A Strategic Fiscal & Management Plan
In 2015, the City of Providence, Rhode Island, applied for technical assistance from the National Resource Network. In the application Mayor Jorge Elorza argued that the city’s economic future required a plan to put its fiscal house in order and address several critical challenges head on. After conducting a thorough, independent analysis, the Network agreed and began work on a plan to steady the city’s finances and increase its economic competiveness.
Providence is well positioned for economic development given the strength of its local anchor institutions and its relative recovery from the Great Recession (added population, decreased crime, booming urban neighborhoods). But, this momentum was hampered by the city’s fiscal instability, limiting its ability to make much-needed investments in education and infrastructure.
The Network pledged to develop a ten-year financial plan with the city, in hopes of providing short- and long-term strategies to help the city close its existing budget gaps while also making strategic investments in “what it takes” to be competitive for years to come.
The report’s baseline financial projection showed that, without corrective action, the city would face a $37 million budget gap by 2026, and would spend $176 million more than it can afford over the next 10 years. This gap was driven in large part by the city’s unfunded pension and OPEB liabilities, growing health benefit costs, decrease in state revenues, and the maintenance of high workforce costs.
To reverse this trend, the Network:
- Worked with five content-specific local stakeholder workgroups, including one dedicated to retiree benefits, to facilitate comparative analyses and alternative approaches to alter Providence’s economic and governmental trajectory;
- Developed a 10-year baseline financial projection for Providence;
- Partnered closely with Providence departments and leadership to identify cross-cutting opportunities for efficiency and enhanced outcomes;
- Worked with Providence’s actuary and benefits consultant to generate potential pension and OPEB restructuring ideas for consideration; and
- Identified more than 50 actions (e.g. reducing expenditures, increasing revenues, and evaluating certain assets and practices) that Providence can take in order to best achieve the long-term structural corrections that are needed.
For example, to generate additional revenue, Providence might consider increasing its collection rate of levied taxes, fees, fines, and other charges or striking a grand (local) bargain to move toward shared goals and visions with anchor institutions (blight reduction, capital investment, workforce development, etc.).
To reduce expenses, the city might increase the affordability and sustainability of its retiree benefits, reform its fire department operations, and/or reduce its expenditures by transferring specific functions to the State, a regional entity, or the private sector to allow for greater attention and funding for policy priorities.
To learn more about these strategies in detail – and to review the Network’s other recommendations – please see the attached report.
The Network’s engagement in Providence was led by Network consortium member PFM.
City of Providence: A Strategic Fiscal & Management PlanDownload