State Budget Commission Moves East Providence Closer to Financial Takeover

State officials appointed a budget commission to oversee the city’s finances after Moody’s Investors Services again last week. The move is considered another step closer to East Providence being placed in a state of receivership.

The five-member group will include Mr. Graczykowski and Mayor Bruce Rogers along with three appointments made by State Director of Revenue Rosemary Booth Gallogly – Major Bannon, former Budget Officer and House Fiscal Advisor Michael O’Keefe and Diane L. Brennan, City of Warwick Financial Report Analyst.

According to Moody's, one of the main reasons for the downgrade was the appointment of a by the State of Rhode Island.

“Since the lower bond rating may result in a more difficult and expensive access to capital, the state has listed concerns about the cash flow as one of the reasons for its progressive fiscal oversight of East Providence,” said City Manager Peter Graczykowski. “This is despite the fact that the city has already secured initial tax anticipation note in question, our immediate efforts to work with lenders to issue the remaining notes, and our ongoing effort to transition the fiscal year and tax collections to the same period.”

Graczykowski said although a fiscal year change is a city charter modification that cannot be implemented until after the November 2012 presidential election, he will be asking council members to make immediate changes to the tax collection schedule starting March 2012 to improve the cash flow.

State officials are also concerned with the unfunded liability of the local public safety pension plan.

According to the city officials, an appointed budget commission is a hasty move since state officials said the city has 120 days after the fiscal overseer was appointed to balance books. Maj. Bannon has been monitoring the city's fiscal progress for approximately 30 days.

“Although we have agreed to work with the state-appointed fiscal overseer,” said Mayor Rogers, “It is the employees of the city and schools who have managed to reduce the current fiscal year deficit in the schools unrestricted fund from $7.25 to $1.18 million."

Mayor Rogers said he disagrees with the state's decision and said East Providence officials are prepared to take legal action if the commission is implemented before the 120-day period is over, noting the state's influence was a factor in the second bond rating downgrade.

"We do not appreciate being put in the unenviable position where outsiders, who are bureaucrats not duly elected as our Constitution states, are being paid by the local East Providence taxpayers, to make painful decisions about cuts in essential services without full understanding of their impact and significance, and without the input of people of the city," he said.