City's Financial Condition Improving
East Providence does not need to borrow as much money, and it's paying a lower interest rate, the budget commission told last week.
East Providence is in much better shape financially than it was a year ago.
The city needs to borrow less money and at a lower interest rate than in 2012, the East Providence Budget Commission was told at last week’s bi-weekly meeting by Malcom Moore, finance director.
“It doesn’t look like we’re going to need the school aid early,” Moore said. “We seem to be collecting more than we’ve budgeted.”
Getting state education aid earlier was necessary a year ago when the state Revenue Department-appointed budget commission got special legislation passed so East Providence could acquire its share about three months earlier.
The city still has a cash-flow problem because its fiscal year and tax year are not aligned yet as they will be in the future with approval given by voters at last November’s election to change the fiscal year.
To cover operating expenses, therefore, the city needs to borrow tax-anticipation notes (TANS). Moore said the city borrowed $10 million last Dec. 21 from Webster Bank at an interest rate of 3.35 percent. It will borrow up to $20 million at that same rate with the second half of the loan expected to be obtained in the second or third week of February.
Last year, Moore told the budget commission, the city had to borrow $22 million at an interest rate of 3.75 percent.
As a result of having to borrow less money and at a lower interest rate, Moore said, the city will save around $65,000 in interest this year -- a late Christmas gift to taxpayers.
A much larger savings of more than $994,000 for this fiscal year is forecast as a result of a 10 percent health savings. East Providence is working to get all of its union contracts on the exact same health plan -- which would involve higher deductibles and result in much lower premiums.
Getting everyone in the same pool for health insurance, said City Manager Peter Graczykowski, will mean lower premiums. Instead of 12 different pools, one pool of employees would result.
"The savings are based on the numbers provided by Park Row and Associates," he said.