East Providence Urged to Pad Pension, Benefit Liability

To boost the city's bond rating, R.I. Director of Revenue Rosemary Booth Gallogly recommended East Providence start aggressively funding both pension and Other Post Employment Benefits (OPEB) liability at Thursday's budget commission meeting.

East Providence is paying about $6.1 million a year to fund the pension liability's annual required contribution (ARC). The school department pays about $3.4 million a year; the city side pays about $2.7 million. To avoid deficits in the future, members urged city administrators to start paying more than the minimum ARC. 

"It's going to more than what you're paying now," said Michael O'Keefe, chairman of the commission.

Only a handful of communities are making strides to fund Other Post Employment Benefits (OPEB), said Gallogly. Collectively across the state, there is $3.5 billion in unfunded OPEB liability that has accumulated over 30 to 40 years, she said.

O'Keefe asked if a community trust could be set up to service clusters of municipalities; Gallogly said it was a possibility. So far, East Providence, like other municipalities, has not allocated money toward OPED liability; only within recent years has Rhode Island established a system to fund that liability.

"East Providence isn't alone," she said.

Collectively across the state, unfunded liability for locally administered pension plans has increased $200 million to $2.1 billion, according to 2010 statistics. 

City data including information regarding beneficiaries and realistic mortality rates will be imperative to the OPEB analysis. Configuring that data can be challenging, as it was when sorting out Central Falls' finances, said Gallogly.

"It's complicated stuff," she said. "When the state made progress, it was viewed as very positive [to the rating agencies.]"

O'Keefe also addressed the school department's ability to secure a $9 million bond, plus $800,000 to pay for , that will renovate the high school and quell Rhode Island Department of Health (DOH) concerns. He included a November letter from DOH that reports the high school is in . 

"We have to figure out this issue quickly," O'Keefe said.

Fiscal Overseer Maj. Steve Bannon asked if there was a backup plan should the city fail in securing bonds. 

"This has to work," said Interim Superintendent Edward Daft.

First Southwest, a finance firm, is expected to analyze the most cost-effective way for the school department to secure bonds.

At the end of the meeting, O'Keefe met with union department heads in private meeting.