February 13, 2012 – RI Future

February 13, 2012February 14, 2012

State of the City: Employees, retirees give first

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Providence Mayor Angel Taveras delivers the annual State of the City address.

As expected, Mayor Angel Taveras said the state of the city is not so good.

“Providence is in peril,” said the mayor of the capital city to lead into the annual State of the City speech. And, as he reiterated throughout his 20 minute address, it’s up to retirees and tax-exempt landowners to save it.

The city is still $22.5 million short of being fiscally solvent this year and – short of raising property taxes, which Taveras said was an option of absolute last resort – the only place left to turn is retiree benefits and the colleges and hospitals in the city. The retirees already pay taxes, the hospitals and colleges don’t.

Brown University is willing to pay more than the $2 million they already give to the city, and perhaps the big news of the speech was that a deal with Johnson and Wales is imminent.

“I am hopeful that this week we will announce a new agreement with Johnson & Wales University, reaffirming the University’s strong commitment to our city,” Taveras said.

No word on whether or not the six hospitals in the city are willing to step up.

“Our tax-exempts cannot stand quietly on the sidelines any longer,” he said. “If they refuse to compromise, we will hold them accountable by other means.”

The “other means” may be the legislative package the city prepared for the General Assembly. After his speech. Senator Rhoda Perry said the Providence caucus will begin to consider the package later this week.

Still, Taveras is looking for more from the retirees than he is from the tax-exempt institutions in the city. He is hoping to get $7.1 million from the nonprofits and promised to get at least twice that from retirees.

“This must stop now,” Taveras intoned. In the written version of his speech, distributed to members of the media, there was an exclamation mark, to drive the point home.

He was speaking about retirees who receive 5 and 6 percent annual increases to their pension benefits. We hear a lot about the unsustainable 5 and 6 percent increases, but what you rarely hear is that this accounts for only about 20 percent of retirees.

That said, the vast majority of the mayor’s speech was dedicated to thanking the municipal workers who have already sacrificed for the city. When Taveras inherited Providence’s fiscal woes, there was a $110 million structural deficit. He cut it to a fraction of that, in part, by shrinking the size of city payroll by some 200 employees.

We owe a debt of gratitude to our city workers from Laborers Local 1033 who keep this city running every day and were the first to agree to significant concessions to help the City,” Taveras said. He also thanked the police and fire unions, who made significant concessions in their contract negotiations.

While employees, retirees and nonprofits are being asked to help, there is one constituent group the mayor said he would like to avoid tapping into: the taxpayer. While he didn’t say a tax increase was off the table, he did call it “untenable.”

Update: An earlier version of this story indicated that Taveras wants retirees to contribute $8 million to help the city out of its deficit. In fact, that is only the health care portion of retiree benefits that Taveras hopes to save.

February 13, 2012February 13, 2012

Lock-em-up-unless-they’re-bankers Kilmartin

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Striking a vital blow against accountability, Attorney General Peter Kilmartin endorsed the “50-state” settlement on foreclosure fraud yesterday, led by the Iowa Attorney General, Tom Miller. The settlement essentially allows banks to skip away from the crimes they committed in the course of foreclosing on a few million people’s houses.

To recap: this settlement has been over a year in the making, and is intended to clean things up in the real estate market, absolving banks of responsibility for their misdeeds in exchange for money that will go to principal reduction, and also doing some short sales and refinancing and payoffs to unjustly foreclosed borrowers. These are good things, but there is a problem.

Nationally, we’re talking about $25 billion, which sounds like a lot, but last year JP Morgan’s bonus pool was around $10 billion. HUD Secretary Shaun Donovan says there is about $700 billion in negative equity in the country. Realistically, the program might help a million people, but there are 10.7 million mortgages underwater, and millions of people already foreclosed upon, also according to HUD.

Not only is the money not commensurate with the damage they caused, but it’s not going to be much help cleaning up, either. Kilmartin estimated Rhode Island would see “millions” from the settlement. The registrar of Essex County, Massachusetts, hardly the epicenter of the foreclosure epidemic, estimated last year that only 16% of the mortgages in his registry were valid, and of the rest, 27% were fraudulent. Over the past decade, the RI real estate market has been around $5 billion per year. Roughly similar numbers for the state of Rhode Island would have around a billion dollars in fraudulent mortgages per year, or around $8-10 billion total, give or take. It will take a lot more than a few million to clear all those titles and restore the damage done.

Why is the settlement so low? Maybe it’s because there hasn’t, until recently, been even a credible threat of prosecution for the crimes committed. Just to review, we’re talking about actual crimes — fraud, forgery, perjury — acts for which you or I would spend time in jail.

What’s also astonishing here is where this $25 billion will come from. It turns out that almost all of it will come from the owners of the securitized mortgages, the pension funds and other investors who bought these terrible bonds from the banks. Those owners will be dinged some of their interest payments, making their bonds even less valuable then they already are. It appears that most of the money will not come from the banks that caused the problem and profited so much from it. So much for even the simulacrum of accountability.

For everyone who thinks, “Oh, well, the banks were just foreclosing on people who didn’t pay their mortgage, anyway,” there is a big problem ahead. The bank’s self-invented mortgage registry (MERS) was not maintained, and was probably inadequate to the job it was assigned: keeping track of ownership. (Not to mention that it was probably an illegal enterprise in the first place, but put that aside for a moment.) This means that pretty much any property whose mortgage passed through MERS won’t be able to get a clear title. In turn this means a lot of claims on the title insurance companies, some of whom are likely to go under because of the mounting pile of claims. It also means time spent in court by people who can’t get a clear title to the property they own and money spent on lawyers to argue about them. Years from now, when you find yourself shelling out a few thousand dollars to clear the title to your house, you can comfort yourself in knowing that not only did none of the people who caused that problem have to pay any price at all, but most of them got rich doing it. What a country!

February 13, 2012February 13, 2012

Taveras to deliver State of the City speech tonight

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Everyone knows what the state of the city is. Providence Mayor Angel Taveras has already sounded the alarm loudly. But nonetheless, he’ll still deliver the annual speech tonight at 7 p.m. in the Council Chambers of City Hall.

The state of the city is, of course, disastrous. Rhode Island’s capital city is on the brink of bankruptcy and could literally run out of operating funds by June. Taveras, a progressive Democrat, has trimmed the deficit by shrinking the city staff and through tough contract negotiations with employees, but he’s still some $22 million in the hole.

Certainly in his speech tonight Taveras will reiterate that retired employees and tax-exempt non-profit landowners need to pony up in order for Providence to remain fiscally solvent, but it will be interesting to see which group he reserves the stronger rhetoric for.

To date, Taveras has had harsher words for the retirees, but there’s a reason for that. With them he has a lever by which he can compel the needed capital, namely receivership and the city’s new relationship with Bob ‘Scissor or Guillotine’ Flanders.

However, the real money is with the nonprofits.

Brown University already pays Providence more than $2.2 million a year. But the Ivy League school owns property that would be net $38 million if it weren’t exempt from paying property taxes and is sitting on an endowment of more than $2 billion and just approved another tuition increase. Brown can afford to pay the city more, and likely will. Same with Johnson and Wales. It’d be nice if RISD and PC would follow suit.

The hospitals, the other big tax exempt entities in the city, are another story. Together, the six profitable medical institutions in Providence own property that would be taxed at more than $44 million. They pay the city nothing.

And it’s not because they are hurting for cash. Lifespan, which runs four of those hospitals, paid its nine highest-earning executives more than $9 million in salary and bonuses. Their CEO alone made $2.9 million. And according to the nurses union at the hospitals, Lifespan has made $320 million in profits over the past six years.

Providence needs a share to share in the financial success of Brown and Lifespan. If it doesn’t, no matter how much Taveras and Flanders are able to wrestle away from retirees, it won’t make the state of the city any less ruinous.

Note: The mayor’s office plans to live tweet his speech. The mayor tweets using @angel_taveras and you can follow the tweets and add your own using the hashtag #pvdsotc.

February 13, 2012February 13, 2012

RI Voters’ Poll: Seeking Major Changes In Marijuana Policy

A new poll of 714 Rhode Island Voters indicates overwhelming support for medical marijuana, compassion centers, and decriminalization of less than one ounce of the plant. The medical marijuana law, gone unused by Rep. Bob Watson (if he were to qualify) garnered support of 72%, including a whopping 82% of Dems, 61% GOP, and 57% of those beloved Seniors that every politician craves. Only 30% of people over 65 were opposed. With that support, it should be no surprise that support for the Compassion Centers (approved by the legislature three years ago) was equally high- and the poll suggests that Chaffee stands to gain some support if he were to stop Pot-Blocking the Compassion Centers. Half the voters said they would view the Governor more favorably, while only 19% would view him less favorably.

A meager 24% are opposed to making small amounts of marijuana punishable by only a fine, and apparently would rather pay to imprison someone over a bag of the most common illegal intoxicant, being used by millions of Americans every day. In contrast, 65% of RI voters would like to see the highly anticipated change in the law, and 58% would be more likely to vote for a politician who supported such a reform (24% said “less likely,” with 18% not sure). Political gurus: you know the score. Few have ever seen a bill with this much sponsorship and public support that has not become law. It appears the onus is upon Speaker Gordon Fox to assure all the votes are held, as few individuals other than he could keep this bill from reaching the Governor’s desk. It remains to be seen how many courageous people take to the hearing, saying things heard last year such as: ‘I’m a wife, a mother, I have a job, pay a mortgage, and I smoke pot.’ H 7092, sponsored by Rep. Edwards, has a list of co-sponsors that makes you search for the opposition. Minority Leader Newberry? Sponsor. Favorite Villain Rep. Palumbo? Sponsor. The aroma smells the same in the Senate, with S 2253. Stay tuned.

The more interesting proposition is one which gained the support of millions of voters in California on the first try: Full Regulation of Marijuana. Such a bill has gone to a hearing for the past two years; admittedly, the legislation may need to be more detailed, or empower the proper regulatory agency to oversee a several hundred million dollar economic development project that America has never seen. I could not find such a bill filed yet in the Assembly, but I may have overlooked it. The poll of voters, by the way, shakes out 52-41% in support. If this were projected numbers in an election, the front page would call it a “landslide.” Interestingly, the women are much less enthusiastic about Regulation despite being more supportive than men on the Compassion Centers. There was no difference in support among party lines, with the Independent/Other having lower support than the two dominant factions. On this question, the Over 65 crowd was the most out of step with everyone else, as they oppose Regulation 55-36%. I’m not sure if these numbers would be identical in 10 years, and age reflects our changing opinions, or if the idea of marijuana criminalization will go Bye Bye like Ms. American Pie.

One question that was not asked, that would be of interest, is support for the Good Samaritan Act. This bill (successful elsewhere) is basically designed to encourage one drug user to save the life of another. Studies and experience in the medical field has shown that drug overdose, a serious killer in America even when the newspaper is not so explicit, can often be prevented by the most unlikely hero, another user. However, faced with the fear of prison (and possibly being linked in with their death) the other user will flee rather than call 911 or administer naxalone. Under this bill, nobody is going to be charged with drug possession if the evidence arises when its a medical response. Surely a certain percentage of RI voters would rather see people dead or in jail, but I suspect that a vast majority would encourage people in tough times to choose life.

Life, Compassion, and Decriminalization- that is what the people are leaning towards. Don’t let the fear-mongering media fool you.