PROVIDENCE, R.I. (WPRI) – Nearly two years after he compared the city's financial condition to a Category 5 hurricane, Providence Mayor Angel Taveras will likely offer a more optimistic forecast Tuesday evening in his State of the City address.
During a prepared 30-minute speech in the council chambers at City Hall, Taveras is expected to highlight his efforts to return the city to firm financial footing and present a vision for the final two years of his first term that centers around economic development and improving the city's struggling schools.
Taveras, a Democrat, inherited a $110 million structural deficit upon taking office in 2011 and last year warned publicly that the city could be forced to file for bankruptcy after Superior Court Judge Sarah Taft-Carter ruled that he could not move retirees to Medicare to save money.
Taveras managed to finish the 2011-12 fiscal year with a deficit of only $15 million, and city officials say the structural deficit now stands at $4 million . He did so by raising taxes, closing schools, renegotiating union contracts, getting more money out of the city's major hospitals and universities, and striking a deal to reform the city's underfunded pension system.
In December, Moody's Investors Service singled out the pension settlement for providing "significant relief to the highly leveraged and fiscally stressed city." The deal freezes cost-of-living adjustments (COLAs) for 10 years, caps pensions and permanently eliminates all 5% and 6% compounded COLAs.
"Approval of this settlement marks another achievement by Providence in altering existing contractual agreements with active employees and retirees," Moody's analyst Tom Compton wrote. "We expect it to set a precedent that other struggling Rhode Island cities and towns can follow."
Still, the city has more work to do when it comes to taxes and improving the business climate, according to Gary Sasse, a fiscal advisor for the City Council who was director of revenue under former Gov. Donald Carcieri.
Sasse said Providence's commercial tax rate is the second-highest in the country , which serves as a barrier to recruiting new companies. Taveras is not expected to roll out any major economic policy initiatives during his speech and won't release his budget until the spring.
"There are very few mayors and councils in the country that can show this level of accomplishment," Sasse said. "But the city still faces fiscal challenges."
Moody's Compton noted that Providence used up its entire cash reserve during the final years of former Mayor David Cicilline's term as the city grappled with the Great Recession and major cuts in aid from state government. That gives Taveras "little room for error," Compton said.
Taveras's address comes amid growing speculation that he may run for governor in 2014, though he's said he plans to wait until late this year to make a decision about his political future. A WPRI 12 poll in September showed that Taveras and General Treasurer Gina Raimondo - a fellow Democrat and another likely candidate for governor – are the two most popular politicians in Rhode Island.
Ted Nesi contributed to this report.