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Governor Lincoln D. Chafee Announces Initial Transition from East Providence Budget Commission back to City Control

Commission Has Made Numerous Improvements to City's Fiscal Stability

Providence, RI - Rhode Island Governor Lincoln D. Chafee and Department of Revenue (DOR) Director Rosemary Booth Gallogly today announced that, following a number of significant improvements in the financial health and stability of the city, the East Providence Budget Commission will begin the transition of control of the city back to its elected officials and administration. The Commission will provisionally delegate its authority under RIGL §45-9-6 to the City Manager, City Council, Superintendent, and/or School Committee as determined by City Charter and/or ordinance, until a final determination is made that the Commission is no longer necessary.

"The economic success of the State of Rhode Island as a whole depends upon the fiscal health of our cities and towns," Governor Chafee said. "That health was jeopardized by severe cuts in municipal aid during the recession. As Governor, I have made property tax relief a priority and have worked to reverse these years of cuts by mobilizing resources, assistance, and support for struggling municipalities. East Providence is a proud community, and I am encouraged that this collaborative, cooperative process has placed the city back on a path to financial stability."

"I also want to thank the Commission members, Michael O'Keefe, Steve Bannon, and Diane Brennan, city staff, Director Gallogly and Department of Revenue staff for all their hard work," Governor Chafee continued. "This progress would not have been possible without their efforts and expertise."

Additionally, Commission member Michael O'Keefe has ended his service, and will be replaced by Christy Healey, Deputy Director of the Department of Revenue.

"I want to sincerely thank Michael for his service to the City of East Providence," Directory Gallogly said. "He has remained with the Commission for 15 months – longer than he had originally pledged – and the city's finances and operations are certainly in a stronger condition because of his insight and expertise."

The City of East Providence has been under the control of the Budget Commission for 15 months. During that time, with the assistance of the Department of Revenue, the Budget Commission, and city staff have made many improvements to bring fiscal stability to the city, including:

· Stabilized the cash flow issues, including the elimination of multi-year operational deficit; and brought the accounts payable current, including payments to Bradley Hospital;

· Reduced the City's reliance on short-term borrowing to meet cash flow needs including issuing the lowest amount of Tax Anticipation Notes since FY 2003;

· Adopted a balanced five (5) year plan which fully funds the pension fund Annual Required Contribution (ARC) and the Other Post Employment Benefit (OPEB) liability.

· As part of the fiscal stability plan, adopted a revised FY2011-2012 budget that reduced division budgets by an average of 20% and built in the average personnel turnover rate of 2%; with such changes becoming a base for subsequent fiscal years.

· Created a budget reserve fund which was approved by the voters as a charter amendment. The budget reserve funds will provide for a rainy day fund equal to 10 percent (10%) and excess funds will flow into a pay-go capital account;

· Supported a charter amendment which was approved by the voters that permits the City to change its fiscal year to align with tax receipts in the future;

· Brought school expenditures for programs such as special education, athletics, and transportation in line with other similar communities;

· Stabilized the City's Moody's bond rating from Baa2 (negative) to Baa2 (stable) and Standard & Poor's general obligation rating from BB+ (negative / credit watch) to BB+ (positive / no credit watch) ;

· Secured financing for the Wastewater treatment plant upgrades and Tax Anticipation Notes;

· Secured financing through RIHEBC for school building safety improvements, saving approximately $150,000 annually as a result of a more favorable programmatic credit analysis by a national rating agency due to adoption of a statutory change relating to the timing of state aid payments;

· Successfully implemented the state's first income tax refund offset program for municipalities in conjunction with the State Division of Taxation resulting in recovery of $2.9 million in outstanding tax revenue in response to the City issued demand letters;

· Adopted resolutions to phase-out the fifteen percent (15%) homestead exemption and the three percent (3%) pre-payment discount;

· Conducted an audit of the homestead exemption to ensure that those homeowners receiving the exemption were actually entitled;

· Reviewed all tax exempt properties and brought properties not entitled to tax exemptions back on the tax rolls for additional revenue of approximately $500,000;

· Adopted a Funding Improvement Plan which reflects receipt of the Google settlement asset forfeiture equitable sharing funds for the Police portion of the unfunded liability, in accordance with the requirements of the Locally Administered Pension Plan Study Commission;

· Successfully negotiated five (5) year contracts for six (6) of the City's nine (9) unions (Teachers, Teachers Assistants, Educational Secretaries, Steelworkers A, Steelworkers B, and the East Providence Professional, Technical, and Managerial Employees Association) with negotiations ongoing with the three remaining unions (Police, Fire, and School Custodians).

· Substantially reduced the Other Post Employment Benefit liability for school and municipal employees by limiting coverage to one year post retirement;

· Standardized medical benefits for all employees, including a hybrid deductible plan with a graduated premium co-share based on salary for school and municipal staff as well as increased deductibles and co-pays; and, if ratified, a high deductible health plan with a Health Savings Account with a $2,000/$4,000 deductible for Police and Fire.

· Secured health plan rates reduction of over $120,000 by combining the experience pools for City and School employees, while changing the insurance year to coincide with the future fiscal year change.

· Consolidated the City and School Finance and Human Resources Departments;

· Moved school administrative personnel into City Hall to allow for the future sale of surplus property, streamlining of operations, and increased communication;

· Appointed an interim Superintendent of Schools for stability and continuing continuity of operations;

· Completed a screening process for the hiring of a new permanent Superintendent of Schools;

· Secured an Interim Human Resources Director, Purchasing Agent and Finance Director services to insure that key functions of government were properly staffed;

· Appointed permanent, consolidated Human Resources Director and Finance Director;

· Procured bids and awarded contracts for capital improvements, such as improvements to two (2) of the City's fire stations and sprinkler and fire alarm upgrades in City Hall.

· Authorized the City's participation in the regional sanitation bid, which will save the City over $325,000 annually once the biweekly, automated recycling collection is implemented.

· Approved the bid for a replacement Enterprise Resource Planning/Financial Management software to replace an outdated system, with the RFP yielding combined City and School actual to budget savings of over $350,000 the first year and $50,000 thereafter.

· Authorized the Street Light Management program with the annual savings of $150,000; and

· Adopted policies and procedures to provide increased transparency for purchases and personnel actions, thus assuring a continued culture of accountability.

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